Commvault Systems Inc (CVLT) 2021 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Commvault Quarter 1 Fiscal Year 2021 Earnings Conference Call.

(Operator Instructions) Please be advised that today's conference is being recorded.

(Operator Instructions)

I would now like to welcome one of your speakers for today, Mr. Michael Melnyk, Director of Investor Relations.

Please go ahead, sir.

Good morning, and thanks for dialing in today for our call to discuss our fiscal first quarter 2021 earnings results.

Before we begin, I'd like to remind everyone that the statements made during this call, including in the question-and-answer session at the end of the call, may include forward-looking statements, including statements regarding financial projections and future performance.

All the statements that relate to our beliefs, plans, expectations or intentions regarding the future are pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are based on our current expectations.

Actual results may differ materially due to risks and uncertainties, such as competitive factors, difficulties and delays inherent with development, manufacturing, marketing and sale of software products and related services and general economic conditions.

For a discussion of these and other risks and uncertainties affecting our business, please see the risk factors contained in our annual report on Form 10-K and our most recently quarterly report on Form 10-Q and in our other SEC filings and in the cautionary statement contained in our press release and on our website.

The company undertakes no responsibility to update the information in this conference call under any circumstance.

In addition, the development and timing of any product release as well as features or functionality remain at our sole discretion.

Our press release related to today's announcement was issued over the wire services earlier this morning and has also been furnished to the SEC as an 8-K filing.

The press release is also available on our Investor Relations website.

On this conference call, we will refer to non-GAAP financial measures.

A reconciliation between the non-GAAP and GAAP measures can be found on our website.

This conference call is being recorded, and a replay is available for the webcast.

An archive of today's webcast will be available on our website following the call.

With me on the call this morning are Sanjay Mirchandani, President and Chief Executive Officer of Commvault; and Brian Carolan, Chief Financial Officer of Commvault.

Sanjay and Brian will each share opening remarks and commentary before we open the call for Q&A.

Now I'll turn the call over to Sanjay.

Good morning, and thank you, Mike.

Thank you all for joining us today to discuss our fiscal first quarter results.

Over the past several quarters, we've spoken about the need to simplify everything we do, deliver our best-in-class portfolio and confidently and crisply execute our plans internally and through our partner ecosystem.

During Q1, we successfully started our first subscription renewal cycle.

We received the largest PO in our history an 8-figure subscription deal.

We hit an all-time high in average enterprise deal size.

We posted a record dollar contribution from 7-figure deals, and we signed a multiyear agreement with Microsoft.

I'm proud to say that companies are increasingly using our technology to help them move into the cloud.

This is further validated last week, when Gartner named us as a leader in the 2020 Magic Quadrant for backup and recovery solutions.

And Commvault was the first vendor to ever score highest in all 3 categories of their accompanying critical capabilities report: the public cloud, virtual and physical environments.

As we previously discussed, enterprises are grappling with more infrastructure applications and complexity than ever before, especially when compounded with nonstop security threats and rapid change we've all experienced, especially over the past few months.

To tackle the complexity head on, we unveiled our intelligent data management vision at our future-ready event last week, which is composed of 3 critical elements: first, our portfolio; second, our partnerships; and third, our executional excellence initiatives.

Let's discuss each one by one, starting with our portfolio.

We never stop innovating.

It is core to who we are, and it gives us a critical edge in a very competitive industry.

At future-ready, we unveiled our newly expanded and revitalized portfolio to empower organizations to reduce this complexity reigning the data fragmentation and accelerate their cloud journeys.

It includes a new stand-alone Commvault backup and recovery product and a new Commvault disaster recovery product or both can be bundled together as a complete data protection offering.

We also introduced Commvault Hyperscale X, the next-generation of our hyperscale product, which brings together the best of Commvault data protection with Hedvig storage management.

This is a significant achievement.

And Hedvig now has enhanced support for containerized workloads and is integrated for Kubernetes deployments to help DevOps professionals accelerate their application journey.

We believe these capabilities are unmatched in the industry, and they enable our customers to accelerate their digital transformations in today's remote world using tools that are low touch, light touch, use AI and machine learning to automate workflows and are available with flexible cloud-based pricing.

But products alone aren't enough, our partners are critical in bringing value to our customers.

In Q1 of '21, we signed a strategic multiyear partnership with Microsoft, focused on offering our Metallic SaaS with Azure.

We'll be working closely on go to market, engineering and sales activities to unlock more joint opportunities.

We also had strong contributions and interest from our partner ecosystem.

To further the momentum, we recently launched a simplified and well-received partner program, which brings me to the third initiative, executional excellence.

Our go-to-market teams are gaining momentum and leaving no stone unturned.

Our ability to deliver complex solutions, mostly remotely is now mainstream for us.

Looking ahead, we believe our enhanced portfolio and ability to upsell and cross-sell our solutions will enable us to land new customers and maximize customer lifetime value.

While we have work to do, we're optimistic about our return to predictable and sustainable growth.

With that, let me turn it over to Brian for -- to provide some financial highlights and our Q2 '21 outlook.

Brian?

Thanks, Sanjay, and good morning, everyone.

Before discussing our outlook, I'll briefly recap our results.

Total revenue was approximately $173 million, up 7% year-over-year.

Software and products revenue increased 20% year-over-year to $76.6 million, an all-time first quarter record.

Software revenue growth was driven by a significant increase in large enterprise deals and a successful initial subscription renewal effort.

Software transactions over $100,000 increased 41% year-over-year to approximately $56 million.

These large deals represented 73% of software revenue in the current quarter compared to 62% a year ago.

The number of these transactions increased approximately 5% year-over-year, and the average deal size exceeded $400,000, approximately 35% higher year-over-year.

The increase in large software transactions was driven by an all-time record contribution from 7-figure deals.

This included the largest ever purchase order in company history, a subscription transaction with an 8-figure total contract value, in addition to 2 other very large deals.

While we are pleased with our ability to close these large deals, they influenced the contribution mix from subscription and recurring revenue as well as the average deal size and should not be considered a baseline for the next few quarters.

Fiscal first quarter services revenue was approximately $96 million, declining 2% year-over-year.

The decline was primarily due to COVID-related restrictions, which impacted on-site professional services.

In addition, maintenance revenue growth was impacted by the strategic transition of legacy perpetual customers to subscription licensing arrangements.

These conversions benefit us over the longer term because of the associated opportunity to drive lifetime value with an active customer.

Let me now discuss our continued transition to a more recurring revenue-based model.

As you know, prior to FY '18, we primarily sold perpetual contracts.

At that time, subscription and usage-based utility contracts accounted for less than 10% of our software and products revenue.

Recurring revenue, which includes subscription software and maintenance, represented approximately 50% of total revenue.

Beginning in FY '18, we introduced subscription-based pricing that align to our customers' workloads and purchasing preferences.

FY '21 marks the first year of our subscription renewal cycle.

This opportunity represents a positive inflection point for our business.

We expect the upcoming renewal cycle to serve as a revenue tailwind in FY '21 and beyond.

As Sanjay described, the announcements that we made at future-ready represent an important streamlining of our product, packaging and pricing strategy.

We expect this evolution will continue to result in even more subscription-based recurring revenue over time.

In order to best report and measure our business consistent with the way customers consume our products and services, we will be increasingly focused on the following 3 operating metrics: subscription as a percentage of software and products revenue, recurring revenue as a percentage of total revenue and annual recurring revenue, or ARR.

Now I'll take a moment to discuss each of these metrics.

In Q1 FY '21, subscription revenue represented approximately 69% of total software revenue versus less than 10% in FY '17.

We added approximately 200 subscription customers in the quarter, and our subscription net dollar retention rate was above 100%, exceeding our initial expectations.

Our total recurring revenue increased 24% year-over-year to $141 million and represented 82% of total revenue in the quarter.

This compares to approximately 50% in FY '17.

This quarter, we are also introducing annual recurring revenue, or ARR.

We define ARR as the annualized value of Commvault's recurring revenue streams at a point in time.

Going forward, ARR will replace ACV because we believe it is a better measure of our recurring revenue streams.

As of June 30, 2020, our ARR increased 9% year-over-year to approximately $472 million.

Now I'll discuss expenses and profitability.

During the quarter, we remained disciplined on expenses.

Q1 FY '21 expenses, including both cost of sales and operating expenses declined 4% year-over-year to $138 million, resulting in an EBIT of $32.5 million and an EBIT margin of 18.8%.

Both EBIT dollars and EBIT margins approximately doubled year-over-year.

We note that Q1 FY '21 benefited from approximately $12 million of temporary and COVID-related expense reductions.

We expect approximately half of these reductions to repeat in Q2, while the balance of these temporary reductions are likely to return to near prior levels, as business normalizes.

Our focus on prudent cost management continues.

Now I'll discuss our financial outlook for Q2 FY '21.

For the second quarter of FY '21, we expect total revenue of approximately $164 million.

We expect software and products revenue to be at least flat year-over-year or $69 million.

Please note that the subscription renewal opportunity in Q2 FY '21 is the lowest of the year.

In addition, the SME segment remains challenged and COVID continues to create overall macro uncertainty.

That said, we believe our renewals, enhanced product and pricing strategy and refined go-to-market motion should more meaningfully contribute to results in the second half of the year.

Beginning in Q2 FY '21 with the integration of Hedvig into our new HyperScale X platform.

We expect to see a reduction of certain third-party royalties to benefit gross margins by approximately 100 basis points for the balance of the fiscal year.

As noted, we also expect that some of the temporary cost reductions we saw in Q1 will begin to normalize.

As a result, we expect OpEx to modestly increase sequentially.

We will remain disciplined in aligning our underlying operating expense base to current revenue levels, and we have identified other potential cost-saving actions.

With that, we expect Q2 FY '21 EBIT margins to be approximately 13%.

Lastly, our projected share count for Q2 is approximately 47 million shares.

Now I'll turn the call back over to Sanjay for some closing remarks.

Sanjay?

Thanks, Brian.

Before questions, I'll take a moment to reaffirm our focus on portfolio partnerships and executional excellence.

First, I believe portfolio advancements like HyperScale X demonstrate our commitment to innovation and bring immense value to our customers.

Second, our strategic partnerships and endorsements from marquee customers like McDonald's and John Hopkins reaffirms our ability to provide the flexibility and choice customers need.

And last, with our expanded portfolio, impressive partner ecosystem and executional excellence, we believe we can grow the top line while increasing our efficiency.

Our performance this past quarter is a solid indication of where we expect to take Commvault next.

Mike, let's open it up for questions.

(Operator Instructions) Your first question comes from the line of Jason Ader from William Blair.

Ask a little bit about some of the large deals, in particular, the 8-figure deal.

Could you give us a little bit more color on maybe the vertical and exactly what type of project it was?

What were they trying to do?

Was it a competitive displacement?

Or was it a renewal?

And then just to clarify, that this was a -- that there was a large chunk of this that was recognized upfront because of 606.

So it was financial services.

It was a competitive displacement.

It was -- well, we had a small footprint in the account.

And the customer had a very unique use case that required our activate product speech to come in and sort of show what we could do from a data optimization point of view.

And then, obviously, they wanted to make sure they protected all that.

So it was an activated-led and data protection followed piece of business.

And the bulk of that -- a lot of that was done with a partner and done remotely.

Yes.

Jason, this is Brian here.

Just to add some additional color to that.

It was actually a deal that was sourced and closed within quarter.

So we did not pull it in from future quarters.

We're pleased to see that we could do that in this current environment.

And then secondly, you also asked about the recognition of it, the software component was recognized in quarter -- in fiscal Q1.

Okay.

Great.

And then I guess, give us a sense of having a quarter like this where you have a lot -- you had a lot of large deals closed.

I mean, pretty impressive numbers on deal size, et cetera.

What do you attribute that to?

I mean we're in a pandemic.

I wouldn't expect, I guess, customers to be doing very large projects like that.

We've certainly heard of many instances of customers downsizing deals and only spending exactly what they need right now.

But give us just some sense from all the different deals that closed, is there some common themes and anything that can help us understand why these deals happen when they did?

So I'll simplify it.

And I think that once the COVID -- the implications of COVID became real, data protection came back on the agenda for customers because with mass data fragmentation, remote workers, no access to data centers, data protection business continuity bubbles up to the top as being important.

And so I think once the first shift -- structural shift, if you would, of saying, okay, we're going to -- this is the new world order happened then as part of the reprioritization process, data protection did bubble up to the top.

And that's how I look at it.

And Brian, anything you want to add to that?

And I think we benefited from a good start to our subscription renewal opportunity.

And I would say that incumbency right now with existing customers is critical.

So we're able to really make sure that we're taking good care of them, and they're coming through us in a lot of cases as well.

So we'll pay...

And the other 2 very large deals that you cited were those renewals?

Yes.

Yes.

(Operator Instructions) Your next question comes from the line of Aaron Rakes.

Congratulations on the solid quarter.

I want to kind of dive a little bit more into the subscription opportunity.

Is there -- as we think about the contributions of that opportunity.

How -- is there a way to frame for us how we should think about the base of subscription opportunity that you're executing on through the course of this year?

Any kind of framework of how large that could be or what that base of business looks like?

And then also on that topic, you talked a little bit or mentioned in the prepared remarks about cross-sell, upsell opportunities.

What have you seen so far?

How do we think about that in the context of going after those subscription opportunities?

This is Sanjay, Aaron.

So I'll take the latter part of your question first, and I'll let Brian tackle the first part.

Overall, with subscription, as we talk to our customers on a more classic land, expand, renew sort of cycle, we are sharing things like our new DR product that was just released, activate, which allows them to do more with the data they have, Metallic for remote branches and Office 365 type scenarios.

So we have an opportunity with the portfolio now, early days, but we have an opportunity with the portfolio to really take more to our customers as they go -- as they sort of evolve in the life cycle of, what we're calling, intelligent data management.

Aaron, it's Brian here.

So just to touch on the subscription opportunity.

You've been following us for several years now.

We've been on this journey.

And it's reassuring to see that what was a headwind for us is now starting to become a tailwind.

We, in last fiscal year, about 40% of our software and products revenue was from subscription-based pricing models.

This past quarter was almost 7%.

We think that the majority of our software and products revenue is going to continue to go towards subscription.

So we're happy with that.

We think that's a great opportunity for us, both near and long term.

Also the renewal opportunity that we spoke about on prior earnings calls, represents about a $50 million software opportunity for the year.

The majority of that's in the second half.

Q2, specifically, is the low point of the year in terms of the opportunities.

That's why we're being a little bit more cautious with that, but we're off to a really good start.

As I mentioned, we had our net retention rate was above 100%.

We're pleased with that start for the year.

And we're seeing opportunities now with our new product launch increased cross-sell, upsell opportunities that will come as the year unfolds in time.

Perfect.

And then just as a real quick follow-up.

On the cloud side of the business, can you talk a bit more about the strategic alignment with Microsoft?

When do we think that, that starts to kick in from an incremental revenue contribution perspective with Metallic?

And then I think in the past, you've talked a little bit about how much data you've managed into the public cloud arena.

Can you just give us an update how that's progressed?

So, Aaron, the way we look at it is, this is -- we -- this is not our first relationship with Microsoft.

We've had a multiyear successful partnership with them.

This one's focused on Saas, Azure, Metallic.

And it's -- again, it's a multiyear -- our ambition it's a multiyear.

So I think we'll start seeing traction as we build out the plans later in the year and beyond.

On the -- we're excited about that.

I think it's a very nice alignment.

The technology and the engineering is -- we've made some commitments to really make sure that we work tightly together for customers and solutioning, go-to-market, all elements of the relationship.

But there's work to do and to make it real.

On the number that we've shared historically, it's -- we were getting out internally that it's gotten to the point where billions and billion surfs, so maybe we don't release it.

But we're -- I would say to you that well over at exabyte, it has been written based on what we have by reporting, and it's growing roughly 15% quarter-on-quarter.

And that's a healthy clip.

That tells you our place in the public cloud for customers and data.

So that's where we're going.

And you saw what Gartner said in their critical capabilities list across virtual, physical and cloud, we're #1.

(Operator Instructions) Your next question comes from the line of Alex Kurtz from KeyBanc Capital Market.

Yes.

Just back to the renewal opportunity, given what you thought was 8-figure deal, I guess the high-level question is the move to subscription, has this helped you improve the competitive nature of these larger deals?

I guess, are you able to see better win rates with deals over, say, $0.5 million because of the move to subscription?

And I guess, how does that impact your view on future renewal opportunities and the size there?

So large deals move to subscription and how this changes the competitive nature in these larger opportunities?

Alex, it's Brian here.

Let's try to unpack that in a couple of different categories.

So yes, I mean, the renewals, the opportunity that it creates is really refreshing to see.

So we've been at this for a while.

It's our first year of inflection.

It's a positive inflection point for us as a company.

And we're off to a good start.

Again, a lot of this is going to be weighted towards the second half of the year.

But it opens up the conversations with the customers, more importantly.

And when we go in there, we're not just selling more data protection, we've got a wider array of a product portfolio to offer to them.

So that's a reassuring thing for us.

I won't get into exact things about win rates, but I will say that this gives us more options in terms of their workloads, whether they're moving to the cloud, whether they're distributed data fragmentation, we help them pull that all in.

And sometimes, they prefer a subscription model to do that, and often we lead with that.

So the choice, we offer them.

Do you want to...

On the subscription renewable piece, it's our first year.

We've had 1 quarter under our belt.

It's -- we've gotten ourselves ready.

But it's -- these are interesting times.

So we're just making sure we stay focused and conservative.

Any comments on it...

To follow-up that $50 million mark, Brian, has that number changed much since you started talking about last fiscal year or is it roughly about the same?

It does not.

It's basically stayed in that range.

Your next question comes from the line of James Fish from Piper Sandler.

Congrats on the quarter guys, and appreciate the additional ARR disclosure.

I just wanted to double-click on the average deal size record and get more color there.

What caused the large 7-figure deals record, meaning was it kind of upsell related?

Or was it cross-sell and bundling efforts?

Just wanting to understand a little bit more around that greater than $400,000 marking in terms of what drove it?

Yes.

James, it's Brian here.

So a couple of different things.

We did enter the quarter with some large renewals already in hand.

We disclosed that on the last earnings call that spilled over from Q4 into Q1.

But then we followed that up with some really large 7-figure deals that were sourced and closed.

The largest one that we talked about, it was sourced and closed within quarter.

So it's a testament to the fact that when you have a customer and you're the incumbent and you have the solutions to offer, and they are not happy with their other competitive solutions that they have in place, we're able to displace that.

So that drove the need.

And also the new product offering specifically of activate really resonating with that customer and help drive the deal.

And yes, I'd add that I would add -- it's Sanjay, James.

That I've been talking now for, what, 4, 5 quarters on execution simplifying and really getting focused on execution, our go-to-market teams, our partnership models, they're kind of hitting this right now instead of did what we said we would -- what we were hoping we would do.

So coming -- that's helping us.

And keep in mind, James, I mean, a lot of these -- a lot of the sales leadership is only here for less than a year, in many cases, like 9 months.

So again, to Sanjay's point, that leadership is starting to show up in the field in the form of knocking down these enterprise, 7-figure deals.

Yes.

No, agree.

It was good execution.

And if I can just sneak in 2 quick ones for you.

So last week, you hosted future-ready, I guess, what was the main feedback from the product launches in terms of what was really of interest with customers?

Obviously, you had a bunch of new announcements, just curious as to which one generated the most interest?

And then just understanding it is becoming more integrated, like with HyperScale X, but what was Hedvig's contribution this quarter?

So I can't pick a favorite child.

So I'm going to say that the feedback broadly on the portfolio and bringing the pieces together made a lot of sense to the folks that follow us both in the industry as well as customers.

And so the sense is that the life cycle of simplifying technologies so that they can -- and making it more granular, so they could work with pieces of it, all of it, some of it really was appreciated.

The -- I'd say that they -- you asked about Hedvig and we've been reasonably quiet at work integrating Hedvig into the core.

And when I say that, this is sort of the vision we put out when we acquired it -- acquired Hedvig, which is bringing the best storage management capabilities and coupling it with what we're best known for in data protection and bringing customers a true scale-out capability that is next generation.

And so -- and it's super, super simple to use.

We've really focused on simplification as a core.

Hedvig as a stand-alone is -- customers are looking at it, using it, kicking the tires with it.

And now we've really enhanced our -- we always had it, but now we've really enhanced our container capabilities in the product with Kubernetes' support and automation, backup capabilities inside of Hedvig file system.

So that we're really giving DevOps and DevOps customers a DevOps native way of sort of doing this.

So by and large, depending on the audience, it was well received, and what was really well received was the simplification of the portfolio in the use case.

And James, just to add one more point in terms of, hopefully, pick up in the script where I said that we do have a cost avoidance, that's not insignificant with the introduction of the HyperScale X and the underlying Hedvig technology behind that, it helped us to reduce our cost of sales moving forward by about 100 basis points.

It's not insignificant.

So that was another component of this launch.

(Operator Instructions) Your next question comes from Brent Thill from Jefferies.

This is Joe on for Brent.

I really appreciate all the description and color.

It's really helpful.

In regards to Americas software, it grew significantly while the rest of the world seemed to decline.

Is that due to most of the renewal base seen in the U.S.?

Or is there other reasons for that?

That was true.

Absolutely, the large portion of the renewals are in the Americas as well as the largest PO that we were able to pull in was from the Americas as well.

Yes.

So that's just a really good fact for us coming out of this.

Yes, good execution in the U.S. And I think in EMEA, we saw -- we still saw a little bit of the COVID the tail end of the COVID impact, the first phase that we -- so -- and they're more exposed to sort of medium-sized businesses in Europe.

Okay.

Awesome.

And then there's different puts and takes because of COVID, right?

I mean -- thank you for highlighting a $12 million benefit from COVID on expenses.

But you grew nicely for the first time in a few quarters.

And then now your declining -- you're guiding for a slight decline in revenue growth next year, but then on the bottom line, it's improved.

So just can you help us think how you're thinking about this business longer-term for the year or the next year or 2 as far as revenue growth and profitability?

Yes.

So in terms of software revenue, my comment was at least flat year-over-year, and that's really the driving force for us.

We have to acknowledge that total revenue is slightly down year-over-year.

We are at an inflection point for the quarter.

As we said, we're still in the COVID uncertainty right now.

Our renewal opportunity is not as large.

In fact, it's much less than it was in Q1.

We think that SME, the small and mid-enterprise, is particularly impacted by the COVID uncertainty.

So I think there's some weakness there.

Having said that, we're optimistic about the second half of this fiscal year and a return to growth.

We're going to have the larger subscription renewal opportunity.

We'll have more quarters under our belt in terms of our overall wet aging and experience and maturity.

And we also have the new products and pricing strategies that we just unveiled.

So the combination of all those things and hopefully, we come out of this whole COVID uncertainty by that point in time, but we are poised to return to growth.

That's our objective.

Awesome.

And if I could sneak in a quick one.

So you've highlighted the $50 million opportunity from '18.

Any sense of how big the opportunity is from '19?

We did not -- it's going to be up.

We will get into that on future quarters in terms of unpacking that opportunity.

And your next question comes from the line of Eric Martinuzzi from Lake Street Capital.

My congratulations as well on the Q1.

I was just curious, going back to the guidance for the first quarter, the midpoint being at about $153 million and then the execution of $173 million, what -- can you help me kind of parse out that $20 million of upside versus where you were when you gave the guide?

Eric, it's Brian here.

So obviously, the large deal that we discussed, right, that was sourced and closed in quarter, we do not have visibility into that at that point in time.

I think that we were also being slightly cautious back in early May, right in the middle of the COVID crisis.

We didn't want to get over our SKUs in terms of the assumption on funnel close rates and our maintenance renewal opportunities as well as our subscription renewal opportunities.

So we're pleased with all that.

And I'd rather be in this position, explaining that than the other way.

Yes.

We agree on that point.

And then for the current quarter outlook, you talked about, again, referencing Q1, the 69% of software business kind of subscription as a percentage of software.

Can you give me insight as to kind of what you're targeting script as a percent of software for the current quarter?

So we'll get into more specifics on that.

We unveil kind of longer-term guidance during the year.

I wouldn't expect that to be the baseline for this quarter.

That's pretty happy at 69%.

Having said that, I mean, it should be north of 50% easily.

(Operator Instructions) We have a question from Jack Andrews from Needham.

I was wondering, just given all the new product offerings that you're unveiling, where are you in terms of educating the channel on some of these new capabilities?

It's an ongoing thing, Jack.

We -- it's Sanjay here.

We've unveiled them last week.

We -- and we're in the throws of getting the channel up to speed enabled, getting ready to sell it.

So that's the activity that's well underway.

Okay.

And then just as a follow-up, when we think about the introduction of products like HyperScale X and some of the new capabilities around backup versus disaster recovery.

Is this, generally speaking, requiring you to engage with a different type of buyer in organizations?

No, no.

If you take disaster recovery and our data protection products like HyperScale X, the buyers tend to be similar.

Where we do have to talk to a newer kind of buyers, the more DevOps capabilities with, say, Hedvig or the SaaS, the cloud business unit, some companies have that for Office 365-type backup.

So just more on the fringes, but by and large, the buyers are the same.

And your last question comes from Srini Nandury from Summit Insights.

Sanjay, in layman terms, can you explain to us what Hedvig bought to Commvault?

And what problem did it solve for you?

And what are the use cases for the HyperScale solution you recently launched?

Okay.

Let's unpack that.

So the Hedvig as a product is what I like to call the next-generation software-defined storage system.

So it was built for -- it's multiprotocol.

And so when I say multi-protocol that's virtual machines, it does containers, it does optic storage, so on and so forth.

So in 1 software layer, you can do multiple types of applications.

What it brought to us was that rich capability, which we've now enhanced our appliance, our HyperScale appliance with that level of software-defined storage below it.

So it gives us a rich set of enhanced capabilities and scale out on the health of the system, on cloud capabilities.

There's a lot that we bring into it, so in and of itself.

So that's how it's helped us integrate.

And then the entire stack, right, that we present as part of HyperScaler is tightly integrated, is super simplified for customers.

In a few clicks, you're up and running and doing complex data protection use cases on its own.

We've also enhanced with the latest release of Hedvig, a lot for Kubernetes and container capabilities that DevOps-type engineers can use to build the next-generation containerized applications.

So it's all of that.

I hope that was the right level.

Ladies and gentlemen, this concludes today's conference call.

Thank you for joining.

You may now disconnect.