Q3 2025 Earnings Summary
- Robust Organic ARR Growth: The company is consistently adding $38 million in organic net new ARR (constant currency) this quarter—up from a typical average of around $30 million—which underpins strong, sustainable revenue growth and supports its target of reaching $1 billion ARR by FY '26.
- Integrated, Resilient Platform Offering: The platform is designed with built-in security and cross-functional capabilities—such as automated Active Directory recovery and integrations with partners like CrowdStrike’s Falcon—that uniquely position it to address increasing cyber threats and drive broader market adoption.
- High Customer Retention and Expansion Opportunities: With term license renewals consistently achieving 105–110% net retention rates and SaaS net retention at 127%, the strong customer stickiness and cross-sell potential signal a compelling long-term growth trend.
- Margin Pressure from Growth Investments: Increased investments in new product innovations, higher commissions, bonuses, and dilutive acquisitions (e.g., the [Cuneo] acquisition) are pressuring operating margins, potentially limiting profitability despite revenue growth.
- Foreign Exchange Volatility: The shift from a FX tailwind in Q2 to a significant headwind in Q3—with a reported 3-point headwind compared to a 1-point tailwind—raises concerns about future revenue stability and forecast reliability.
- Slower Adoption and Market Ramp for New Cloud Offerings: Although the company is expanding its cloud and SaaS product suite, executives noted that customer adoption takes time and is contingent on fitting into existing buying cycles, which might delay expected revenue gains.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +21% (from $216.80M to $262.63M) | Revenue increased by 21% driven by strong subscription performance and geographic expansion—with Americas contributing $155.44M and International $107.20M—building on previous period momentum where revenue was lower. |
Subscription Revenue | +39% (from $114.20M to $158.32M) | A robust shift to subscription offerings led to a 39% increase, reflecting greater adoption and pricing power compared to Q3 2024’s base; this indicates the company improved its subscription model performance significantly over the previous period. |
Perpetual License Revenue | +10% (from $14.90M to $16.42M) | Despite focusing on subscriptions, there was a modest 10% growth in perpetual license revenue—suggesting that niche customer demand still exists, albeit at a much slower pace compared to the rapid expansion seen in subscription revenue. |
Operating Income | -35% (from $21.05M to $13.62M) | Operating income declined by about 35%, attributable to higher operating expenses and increased investments to accelerate growth, which offset the higher revenue base from the previous period despite robust top-line performance. |
Net Income | -35% (from $17.14M to $11.02M) | Net income fell in tandem with operating income, reflecting increased cost pressures and investments that eroded profit margins compared to Q3 2024, even as revenue improved. |
Operating Cash Flow |
| A sharp decline exceeding 60% indicates that the high operating cash flow of the previous period was undermined by rising costs, alterations in working capital, and potential delays in cash collections despite higher revenues. |
Cash and Cash Equivalents | -22% (from $312,754K to $243,575K) | Cash reserves dropped by 22%, primarily due to increased financing outflows such as larger stock repurchases and other cash uses, reducing the levels maintained in the prior period. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Subscription Revenue | Q4 2025 | $143 - $147 (27% YoY growth at midpoint) | $160 - $164 (35% YoY growth at midpoint) | raised |
Total Revenue | Q4 2025 | $243 - $247 (13% YoY growth at midpoint) | $260 - $264 (18% YoY growth at midpoint) | raised |
Consolidated Gross Margins | Q4 2025 | 81% - 82% | 81% - 82% | no change |
Non-GAAP EBIT Margins | Q4 2025 | 20% - 21% | 20% - 21% | no change |
Diluted Share Count | Q4 2025 | ~45 million | ~45 million | no change |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
ARR Growth and Recurring Revenue Expansion | ARR was growing at 15–20% with subscription and SaaS numbers showing strong momentum in Q4 2024, Q1 and Q2 2025 | Q3 2025 featured ARR growth of 18% (21% constant) with subscription ARR up 29% and SaaS ARR up 71% | Accelerating growth with an increasingly SaaS‐focused revenue mix. |
Cyber Resiliency | Previous calls emphasized Active Directory recovery automation, autonomous recovery bundles and customer demand across Q1, Q2 2025 and Q4 2024 | Q3 2025 deepened the focus with innovations like automated AD recovery, Kumi Backtrack and an integrated platform with Cloud REWIND backed by strong partner feedback | Enhanced innovation and strengthened capabilities, reinforcing its key role in the company’s portfolio. |
Acquisition Integration | Q1 and Q2 2025 discussed integration of Appranix and Clumio, with early customer adoption and modest financial impact, while Q4 2024 focused on Appranix’s timeline | Q3 2025 reported progress integrating acquisitions such as Clio and Apranix with slight margin dilution and noted risks from FX headwinds | Ongoing integration with new strategic acquisitions; benefits are emerging despite short‐term headwinds. |
Margin Pressure from Growth Investments | Q4 2024 mentioned flat margin guidance and event costs; Q2 2025 highlighted investments that grew operating expenses while maintaining profitability; minimal focus in Q1 2025 | Q3 2025 emphasized dilution from acquisitions (e.g. Cuneo, Calumo) and increased operating expense pressures, though overall margins remain healthy (rule of 42%) | Heightened emphasis on near-term margin pressure amid aggressive growth investments, balanced by robust revenue gains. |
Hybrid Cloud and Multi-Environment Offerings | Q1 and Q2 2025 underscored a cloud-first, hybrid approach with unified platforms and multi-cloud capabilities; Q4 2024 highlighted a resilient cloud platform | Q3 2025 reiterated the Commvault Cloud Platform’s broad coverage with enhanced features and partnerships across AWS, Google, Azure and Oracle | Consistent focus with continuous enhancements, strengthening cross-environment capabilities. |
Customer Retention and Cross-Sell Dynamics | Prior discussions in Q4 2024, Q1 and Q2 2025 showed SaaS net dollar retention rates around 123%–127% and growing cross-sell footprints (from about 25% to 33% of customers) | Q3 2025 maintained a 127% retention rate with notable cross-sell success in new product areas (e.g. Cloud REWIND) | Stable strong retention with gradual improvements in cross-sell and product expansion. |
Foreign Exchange Volatility | Q4 2024 noted modest headwinds affecting SaaS ARR, while Q2 2025 experienced a 1% FX benefit; Q1 2025 did not mention FX | Q3 2025 highlighted pronounced FX headwinds impacting free cash flow and causing a swing from previous tailwinds | Growing FX volatility emerges as a concern, shifting from a slight benefit earlier to headwinds. |
Subscription Revenue Volatility | Q1 2025 explained sequential dips due to a smaller renewal pool, SaaS recognition timing and shorter term deals; Q2 2025 noted ARR fluctuations | Q3 2025 did not specifically label volatility even as it reported strong subscription revenue growth | Initial structural volatility factors appear to be normalizing, with robust growth overshadowing short-term fluctuations. |
Strategic Partnerships and Market Expansion | Q4 2024, Q1 and Q2 2025 detailed active partnerships with AWS, Dell, Pure Storage and geographic expansion (e.g. government and Asia Pacific) | Q3 2025 did not explicitly emphasize partnerships, though discussions of integrated capabilities and broad market positioning were present | Less explicit focus in Q3 as the narrative shifts toward operational metrics, but underlying expansion strategies remain. |
Diminishing Tailwinds from Mature Revenue Sources | In Q4 2024, mature segments like the perpetual business and customer support were noted as flat or slightly declining, reducing their positive tailwinds | Q3 2025 did not mention this topic | The topic has dropped from discussion, reflecting a strategic shift away from mature revenue sources toward recurring, subscription-based growth. |
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Fiscal Targets
Q: What are fiscal '26 revenue and ARR targets?
A: Management expects $1 billion ARR and $330 million SaaS ARR by fiscal '26, tracking ahead with organic net new ARR near $38 million per quarter. -
Operating Margins
Q: What margin impact from recent acquisitions?
A: They noted a dilution of roughly 1–2 percentage points for 2–3 quarters driven by deals like Cuneo, balanced by strong execution. -
ARR Composition
Q: Is the reported $38M ARR fully organic?
A: It’s organic net new ARR on a constant currency basis, with an additional $24 million contribution from acquisitions. -
Constant Currency ARR
Q: What is the ARR growth at constant currency?
A: Guidance reflects an acceleration averaging about $30 million new ARR each quarter at constant currency. -
Term License Renewal
Q: How are term license renewals performing?
A: Renewals remain solid with a net revenue retention of approximately 105%–110%, supported by cyber resilience add-ons. -
SaaS Growth
Q: What drove the surge in new SaaS customers?
A: New subscription customers jumped to about 1,000 this quarter, partly from an added 200 via Clunie, building on a previous run rate of 600. -
Cross-Sell
Q: What fraction of customers use multiple SaaS products?
A: Roughly 30% of customers now deploy 2+ SaaS solutions, indicating significant upsell potential. -
FX Impact
Q: How did FX swings affect the ARR guidance?
A: A notable FX swing of around 4–5 points altered the guide, yet overall net new ARR remains near $38 million. -
Seasonality
Q: Is Q4 expected to be seasonally stronger?
A: Despite typical second-half strength, active pipeline and renewals suggest Q4 net new ARR will be similar to Q3. -
Cloud Opportunities
Q: What greenfield opportunities exist for cloud-native protection?
A: Management is broadening its cloud strategy through deep partnerships with AWS and Google to secure all workloads. -
Partner Ecosystem
Q: How is the partner ecosystem impacting revenue?
A: Alliances with major partners are steadily ramping, accelerating marketplace transactions over time. -
Module Expansion
Q: Will additional SaaS modules be introduced organically?
A: Yes; the platform will expand its integrated security features, including clean room and enhanced Active Directory capabilities. -
Consolidation
Q: Is further consolidation part of the growth plan?
A: While strategic acquisitions remain on the agenda, organic growth is targeting around 17%, ensuring sustainability. -
Growth Drivers
Q: Are growth drivers external or internally driven?
A: Growth is a blend of persistent cyber threats and strong internal execution, both fueling demand. -
Renewal Pipeline
Q: How robust is the term license renewal pipeline?
A: Renewals are very healthy, strengthened by added cyber resilience features and comprehensive customer support. -
European Growth
Q: How did European revenue perform this quarter?
A: Europe delivered a robust quarter with steady performance and no major changes from prior assumptions. -
SaaS Security
Q: How integral are built-in security modules in SaaS?
A: The platform embeds security via features like clean room, Active Directory, and airgap, ensuring resilient protection.