Commvault’s retiring CEO Bob Hammer said the data protection vendor’s ongoing transition will produce long-term gains, although they will likely follow short-term pains.
Commvault unveiled a series of product and management changes in recent months, following a letter from unhappy investor Elliott Management last April highly critical of Commvault management. The changes, under the banner of Commvault Advance, included Hammer’s announced retirement pending hiring of a replacement, two new board members and a simplifying of its product line from 20 products to four.
The early results have had no positive impact on Commvault’s financials. Its product revenue of $75.1 million last quarter was flat from a year ago. Services revenue increased 11% and its overall revenue of $176.2 million ticked up six percent but came in $1.74 million lower than Wall Street consensus. Commvault also lowered its forecast for this month and the overall year during its earnings report Tuesday. It now expects revenue of $179 million this quarter and from $745 million to $750 million for the year. Financial analysts expected revenue forecasts of $182.5 million for the quarter and $770 million for the year.
Commvault lost $8.6 million last quarter, although $11.4 million of that came from restructuring and other one-time expenses.
“We still have much work to do to translate what we have done into better, more predictable revenue growth,” Hammer said on Commvault’s earnings call. “This transformation we’re going through is massive. When you’re in the middle and you’re moving hundreds of people around to different functions and different roles within the company, and you’re expanding your partnership engagement, you go through a period of disruption. But fundamentally, we feel we put a plan together and we’re executing that plan, and we feel really good about it.”
Hammer said Commvault Advance had three objectives: to simplify the business, drive improved and consistent revenue growth, and improve profitability. He said the product changes were Phase One of Commvault Advance, with cost reductions planned for Phase 2. Commvault reduced its workforce by six percent last quarter, finishing with 2,679 employees. That was a greater cut than its four percent reduction goal.
Commvault hired a search firm in May to find and interview CEO candidates to replace Hammer, who is stepping down after leading the company for 20 years. Hammer said he is personally involved with the search, but added there is no timetable for hiring a replacement.
Elliott called for a complete review of Commvault’s management in its April letter. Elliott, which owns more than 10% of Commvault stock, outlined plans for changes including four new board members. Last week Commvault added Martha Bejar and Chuck Moran to the board, replacing long-time directors Robert Kurimsky and Armando Geday.
Hammer said Commvault’s HyperScale scale-out storage appliance is a key to its revenue growth but HyperScale has not had significant revenue since its late 2017 launch. He admitted competitors such as Veeam – which said its bookings grew 20% year-over-year last quarter – and relative newcomers Rubrik and Cohesity have put pressure on Commvault. But Hammer added he expects HyperScale and new partnerships with Cisco, IBM, Hewlett Packard Enterprise, Microsoft and AWS to help Commvault’s competitive position.
“All the chips are on the table now,” Hammer said. “Now, it’s just [a matter of] pure execution. We’re going to start taking the pole position relative to these new upstarts, technologically. This is all opportunity now, it’s just how high up that is, because the elements are in place now.”