Commvault's SaaS Soars, Net Income Dips Amid Rising Costs

TL;DR

**CVLT's SaaS growth is impressive, but rising costs are eating into quarterly profits, making the $900M debt raise a high-stakes bet on future expansion.**

AI Summary

Commvault Systems, Inc. (CVLT) reported a mixed financial performance for the three and six months ended September 30, 2025. Total revenues increased by 18.4% to $276.188 million for the three months ended September 30, 2025, up from $233.278 million in the prior year, and by 21.9% to $558.166 million for the six months, compared to $457.950 million in 2024. This growth was primarily driven by a significant increase in Software-as-a-service (SaaS) revenue, which surged 61.3% to $80.018 million for the quarter and 63.4% to $152.463 million for the six months. Despite revenue growth, net income decreased by 5.4% to $14.730 million for the three months ended September 30, 2025, from $15.565 million in 2024, largely due to increased operating expenses, particularly sales and marketing, which rose 19.9% to $122.240 million. However, net income for the six months increased by 12.1% to $38.226 million. The company issued $900 million in 0% convertible senior notes due 2030 in September 2025, significantly boosting cash and cash equivalents to $1.063 billion from $302.103 million at March 31, 2025. A key risk highlighted is the significant revenue concentration with Partner A, accounting for 31% of total revenues for the quarter.

Why It Matters

Commvault's strong SaaS growth signals a successful pivot towards recurring revenue models, which is generally positive for long-term investor confidence and valuation multiples in the competitive data protection market. However, the quarterly net income decline, despite robust revenue, indicates potential margin pressures from increased operating expenses, particularly in sales and marketing, which could impact profitability. The issuance of $900 million in convertible notes provides substantial liquidity but also introduces new debt obligations and potential dilution for existing shareholders. Investors should monitor how CVLT leverages this capital to fuel growth and manage its cost structure, especially given the significant reliance on key partners like Partner A for revenue distribution.

Risk Assessment

Risk Level: medium — The company faces a medium risk level due to significant revenue concentration, with Partner A accounting for 31% of total revenues for the three months ended September 30, 2025, and 26% of total accounts receivable. This reliance on a single partner creates vulnerability. Additionally, while cash and cash equivalents surged to $1.063 billion, the issuance of $900 million in convertible senior notes due 2030 introduces substantial debt, increasing financial leverage and potential future dilution.

Analyst Insight

Investors should closely monitor Commvault's operating expense management and the effectiveness of its sales and marketing investments in driving profitable growth. Evaluate the impact of the $900 million convertible notes on future earnings per share and debt servicing capabilities. Consider the implications of the high revenue concentration with Partner A on long-term stability and diversification strategies.

Financial Highlights

debt To Equity

N/A

revenue

$276.188M

operating Margin

N/A

total Assets

N/A

total Debt

N/A

net Income

$14.730M

eps

$0.33

gross Margin

N/A

cash Position

$1.063B

revenue Growth

+18.4%

Revenue Breakdown

Key Numbers

• $276.188M — Total Revenues (Increased 18.4% for the three months ended September 30, 2025, compared to $233.278M in 2024.)
• $14.730M — Net Income (Decreased 5.4% for the three months ended September 30, 2025, from $15.565M in 2024.)
• $80.018M — Software-as-a-service (SaaS) Revenue (Increased 61.3% for the three months ended September 30, 2025.)
• $1.063B — Cash and Cash Equivalents (Increased from $302.103M at March 31, 2025, primarily due to convertible notes issuance.)
• $900M — Convertible Senior Notes (Aggregate principal amount issued in September 2025, due 2030.)
• 31% — Revenue Concentration (Percentage of total revenues from Partner A for the three months ended September 30, 2025.)
• $122.240M — Sales and Marketing Expenses (Increased 19.9% for the three months ended September 30, 2025.)
• $0.33 — Diluted Net Income Per Common Share (For the three months ended September 30, 2025, down from $0.35 in 2024.)

Key Players & Entities

• COMMVAULT SYSTEMS INC (company) — registrant
• Partner A (company) — significant distribution partner, 31% of Q3 2025 revenue
• Partner B (company) — significant distribution partner, 12% of Q3 2025 revenue
• The Nasdaq Stock Market (regulator) — exchange where common stock is registered
• Appranix, Inc. (company) — acquired company with contingent consideration
• FASB (regulator) — Financial Accounting Standards Board

FAQ

Risk Factors

• Revenue Concentration with Partner A [high — financial]: Partner A accounted for 31% of total revenues for the three months ended September 30, 2025, and 32% for the six months. This concentration poses a significant risk if the relationship with Partner A deteriorates or if their business needs change.
• Dependence on Resellers [medium — financial]: The company relies heavily on value-added resellers, systems integrators, and corporate resellers for marketing and distribution. This indirect sales model can introduce risks related to partner performance, channel conflict, and market access.
• Cybersecurity Threats [high — operational]: Commvault's core business is providing cyber resiliency and data protection against threats like ransomware. The company itself is subject to these threats, and a significant breach could damage its reputation and operational capabilities.
• Convertible Senior Notes Dilution Risk [medium — financial]: The issuance of $900 million in 0% convertible senior notes due 2030 introduces potential future dilution to existing shareholders if the notes are converted. The fair value of these notes was $927.090 million as of September 30, 2025.

Industry Context

Commvault operates in the competitive data protection and cyber resiliency market, which is increasingly driven by cloud adoption and the rise of sophisticated cyber threats like ransomware. The shift towards SaaS models is a significant trend, as evidenced by Commvault's strong SaaS revenue growth. Companies in this space are investing heavily in R&D and sales to capture market share in hybrid and multi-cloud environments.

Regulatory Implications

As a publicly traded company, Commvault must adhere to SEC reporting requirements, including timely and accurate financial disclosures. The company also faces potential regulatory scrutiny related to data privacy and security, especially given the nature of its services. The adoption of new accounting standards, such as ASU No. 2023-09 for income tax disclosures, requires ongoing compliance efforts.

What Investors Should Do

1. Monitor Partner A's revenue contribution and any changes in the relationship.
2. Analyze the profitability impact of increased Sales and Marketing expenses.
3. Evaluate the long-term implications of the convertible debt issuance.
4. Assess the growth sustainability of the SaaS segment.

Key Dates

• 2025-09-30: End of Second Quarter Fiscal Year 2026 — Reporting period for the unaudited consolidated financial statements.
• 2025-09-01: Issuance of $900 million 0% Convertible Senior Notes — Significantly increased cash reserves and introduced potential future dilution.
• 2025-04-01: Beginning of Fiscal Year 2026 — Start of the fiscal year for which the current 10-Q provides interim results.
• 2025-03-31: End of Fiscal Year 2025 — Balance sheet reflects financial position at the end of the prior fiscal year, showing $302.103 million in cash.

Glossary

SaaS

Software-as-a-Service, a software distribution model where a third-party provider hosts applications and makes them available to customers over the Internet. (Key growth driver for Commvault, with revenue increasing 61.3% year-over-year for the quarter.)

Convertible Senior Notes

A type of bond that can be converted into a predetermined amount of the issuer's equity at certain times during the bond's life. (Commvault issued $900 million, significantly impacting its cash position and introducing potential future share dilution.)

Resellers

Third-party companies that market and distribute products and services on behalf of the original vendor. (Commvault relies heavily on resellers for its go-to-market strategy, making partner relationships critical.)

Cyber Resiliency

The ability of an organization to anticipate, withstand, recover from, and adapt to adverse conditions, stresses, attacks, or compromises on cyber-resources. (This is Commvault's core value proposition to its customers, highlighting the importance of its data protection and recovery solutions.)

Year-Over-Year Comparison

Commvault Systems Inc. reported a mixed financial performance compared to the prior year. Total revenues saw a healthy increase of 18.4% for the quarter, driven significantly by a 61.3% surge in SaaS revenue. However, net income experienced a slight decline of 5.4% due to a 19.9% rise in operating expenses, particularly sales and marketing. A notable development is the issuance of $900 million in convertible senior notes, which substantially increased the company's cash position from $302.103 million to $1.063 billion. A key risk remains the high revenue concentration with Partner A, although its share slightly decreased from 37% to 31% year-over-year for the quarter.

Key Financial Figures

• $0.01 — ange on which registered Common Stock, $0.01 par value per share CVLT The Nasdaq Sto

Filing Documents

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– FINANCIAL INFORMATION

Part I – FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements Unaudited Consolidated Balance Sheets as of September 30, 2025 and March 31, 2025 1 Unaudited Consolidated Statements of Operations for the three and six months ended September 30, 2025 and 2024 2 Unaudited Consolidated Statements of Comprehensive Income for the three and six months ended September 30, 2025 and 2024 3 Unaudited Consolidated Statements of Stockholders' Equity for the three and six months ended September 30, 2025 and 2024 4 Unaudited Consolidated Statements of Cash Flows for the six months ended September 30, 2025 and 2024 6

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 24

Quantitative and Qualitative Disclosures about Market Risk

Item 3. Quantitative and Qualitative Disclosures about Market Risk 36

Controls and Procedures

Item 4. Controls and Procedures 36

– OTHER INFORMATION

Part II – OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 38

Risk Factors

Item 1A. Risk Factors 38

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 39

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 39

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 39

Other Information

Item 5. Other Information 39

Exhibits

Item 6. Exhibits 40

SIGNATURES

SIGNATURES 41 2 Table of Contents Commvault Systems, Inc. Consolidated Balance Sheets (In thousands, except per share data) (Unaudited) September 30, 2025 March 31, 2025 ASSETS Current assets: Cash and cash equivalents $ 1,063,555 $ 302,103 Trade accounts receivable, net 234,806 251,995 Assets held for sale — 34,770 Other current assets 54,602 46,189 Total current assets 1,352,963 635,057 Deferred tax assets, net 151,936 133,378 Property and equipment, net 9,740 8,294 Operating lease assets 28,952 10,124 Deferred commissions cost 85,156 79,309 Intangible assets, net 22,226 20,737 Goodwill 210,316 185,255 Other assets 55,639 46,112 Total assets $ 1,916,928 $ 1,118,266 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 359 $ 373 Accrued liabilities 106,486 147,133 Current portion of operating lease liabilities 5,523 4,614 Deferred revenue 422,947 402,930 Total current liabilities 535,315 555,050 Convertible notes, net 878,927 — Deferred revenue, less current portion 252,608 223,282 Deferred tax liabilities 1,504 1,384 Long-term operating lease liabilities 24,038 6,338 Other liabilities 14,076 7,090 Commitments and contingencies (Note 8) Stockholders' equity: Preferred stock, $ 0.01 par value: 50,000 shares authorized, no shares issued and outstanding — — Common stock, $ 0.01 par value: 250,000 shares authorized, 44,051 shares and 44,104 shares issued and outstanding at September 30, 2025 and March 31, 2025, respectively 440 441 Additional paid-in capital 1,459,729 1,474,377 Accumulated deficit ( 1,234,594 ) ( 1,134,063 ) Accumulated other comprehensive loss ( 15,115 ) ( 15,633 ) Total stockholders' equity 210,460 325,122 Total liabilities and stockholders' equity $ 1,916,928 $ 1,118,266 See accompanying unaudited notes to consolidated financial statements 1 Table of Contents Commvault Systems, Inc. Consolidated Statements of Operations (In thousands, except per share data) (Unaudite

Notes to Consolidated Financial Statements - Unaudited

Notes to Consolidated Financial Statements - Unaudited (In thousands, except per share data) 1. Basis of Presentation Commvault Systems, Inc. and its subsidiaries ("Commvault," "we," "us," "our," or the "Company") aims to provide its customers cyber resiliency by protecting and recovering their data and cloud-native applications in a world of increasing cyber threats and attacks, including ransomware. We provide products and services across many types of environments, including on-premise, hybrid and multi-cloud. Our offerings are delivered via self-managed software, software-as-a-service ("SaaS"), integrated appliances, or managed by partners. Customers use our Commvault Cloud platform to help protect themselves from threats like ransomware and recover their data efficiently. The consolidated financial statements of Commvault as of September 30, 2025 and for the three and six months ended September 30, 2025 and 2024 are unaudited, and in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods. Accordingly, they do not include all the information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements and should be read in conjunction with the financial statements and notes in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025. The results reported in these financial statements should not necessarily be taken as indicative of results that may be expected for the entire fiscal year. The preparation of financial statements and related disclosures in conformity with GAAP requires management to make judgments and estimates that affect the amounts reported in our consolidated financial statements and the accompanying notes. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances

Notes to Consolidated Financial Statements - Unaudited (continued)

Notes to Consolidated Financial Statements - Unaudited (continued) (In thousands, except per share data) Recently Issued Accounting Standards Not Yet Adopted Standard Description Effective Date Effect on the Consolidated Financial Statements (or Other Significant Matters) ASU No. 2023-09 (Topic 740): Income Taxes In December 2023, the FASB issued a new standard to improve income tax disclosures. The standard requires greater disaggregated information about a reporting entity's effective tax rate reconciliation as well as information on income taxes paid. This standard will be effective for us for our annual period beginning April 1, 2025. This standard will result in additional annual tax disclosures and is not expected to have a significant impact on our results of operations, cash flows, or financial condition. ASU No. 2024-03 (Subtopic 220-40): Disaggregation of Income Statement Expenses In November 2024, the FASB issued a new standard to improve income statement expense disclosures. The standard requires greater disaggregated information on certain expense captions, as well as disclosures about selling expenses. This standard will be effective for us for our annual period beginning April 1, 2027 and interim periods beginning April 1, 2028, with early adoption permitted. We are currently evaluating the impact of this standard on our consolidated financial statements and disclosures. Concentration of Credit Risk We grant credit to customers in a wide variety of industries worldwide and generally do not require collateral. Credit losses relating to these customers have historically been minimal. We rely significantly on our value-added resellers, systems integrators and corporate resellers, which we collectively refer to as resellers, for the marketing and distribution of our products and services. Further, we have non-exclusive distribution agreements with certain partners who enable a more efficient and effective distribution channel for our solutions

Notes to Consolidated Financial Statements - Unaudited (continued)

Notes to Consolidated Financial Statements - Unaudited (continued) (In thousands, except per share data) Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for such asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, we use the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable: Level 1 — Observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2 — Inputs other than Level 1, that are observable for the asset or liability, either directly or indirectly; and Level 3 — Unobservable inputs that are supported by little or no market activity and that require the reporting entity to develop its own assumptions. The carrying amounts of our cash, cash equivalents, accounts receivable and accounts payable approximate their fair values due to the short-term maturity of these instruments. We held an investment in equity securities of $ 6,076 as of September 30, 2025, which was valued using the measurement alternative as permitted under ASC 321, Investments - Equity Securities. This investment is included in other assets in the accompanying consolidated balance sheets. There were no financial assets or liabilities measured at fair value on a recurring basis as of September 30, 2025. The following table summarizes the composition of our financial liabilities measured at fair value as of March 31, 2025: Level 1 Level 2 Level 3 Total Contingent consideration $ — $ — $ 873 $ 873 Based on the actual achievement of certain financial metrics as of June 30, 2025, the contingent conside

Notes to Consolidated Financial Statements - Unaudited (continued)

Notes to Consolidated Financial Statements - Unaudited (continued) (In thousands, except per share data) Goodwill and Intangible Assets Goodwill is recorded when the consideration paid for an acquisition exceeds the fair value of net tangible and intangible assets acquired. The carrying value of goodwill is tested for impairment on an annual basis on January 1, or more often if an event occurs or circumstances change that would more likely than not reduce the fair value of its carrying amount. For the purpose of impairment testing, we have a single reporting unit. We have elected to first assess the qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test. If the qualitative assessment indicates that it is more likely than not that the fair value is less than the carrying amount, a quantitative goodwill impairment test is performed. If the fair value exceeds the carrying amount, no further analysis is required; otherwise, an impairment loss is recognized for the amount by which the carrying value of goodwill exceeds its fair value. Our finite-lived purchased intangible assets consist of developed technology and customer relationships acquired through business acquisitions. Developed technology is generally valued using income-based approaches, such as the relief from royalty or multi-period excess earnings methods, and typically has an economic life of five years . Customer relationships are valued using similar income-based methods and have an economic life of ten years . All of our intangible assets are amortized on a straight-line basis over their respective useful lives, as we believe this method most closely reflects the pattern in which the economic benefits of the assets will be consumed. Impairment losses are recognized if the carrying amount of an intangible

Notes to Consolidated Financial Statements - Unaudited (continued)

Notes to Consolidated Financial Statements - Unaudited (continued) (In thousands, except per share data) 3. Revenue We generate

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