Commvault Systems Inc (CVLT) 2016 Q2 法說會逐字稿

Good morning ladies and gentlemen and welcome to CommVault's second fiscal quarter 2016 earnings call.

At this time all participants are in a listen-only mode.

Following today's presentation instructions will be given for the question-and-answer session.

At this time for opening remarks and introductions I would like to turn the call over to Mr. Michael Picariello, Director of Investor Relations.

Please go ahead sir.

Good morning.

Thanks for dialing in today for our second [first] quarter 2016 earnings call.

With me on the call are Bob Hammer, Chairman, President & Chief Executive Officer; Al Bunte, Chief Operating Officer; and Brian Carolan, Chief Financial Officer.

Before we begin, I'd like to remind everyone that 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 projection of future performance.

All of these statements that relate to our beliefs, plans, expectations or intentions regarding the future are made 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 a number of risks and uncertainties such as competitive factors, difficulties and delays inherent in the 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 in Form10-K; and in our most recent quarterly report in form 10-Q; and 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 any features or functionality remain at our sole discretion.

Our earnings press release was issued over the wire services earlier today 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 provide non-GAAP financial results.

The reconciliation between the non-GAAP and GAAP measures can be found on Table 4 accompanying the press release and posted on our website.

This conference call is also being recorded for replay and is being webcast.

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

I will now turn the call over to our CEO and President, Bob Hammer.

Thank you Mike.

Good morning, everyone, and thanks for joining fiscal second quarter FY16 earnings call.

The headlines for the quarter were we had nominal sequential revenue growth for the quarter.

Our sales teams, particularly in the Americas, executed well given the funnel we had going into the quarter.

Solid execution across the business combined with careful management of expenses enabled us to achieve better-than-expected earnings per share.

The sales funnel grew significantly during the quarter driven primarily by improvement in large enterprise deals in the Americas.

As a result we now have a larger funnel which puts us in a better position to achieve our expected second-half FY16 improvements in revenues and earnings.

We have added substantial staff sales capacity in the Americas under a strength and management team of structure which should be sufficient to meet our FY16 objectives.

The next generation of our market-leading solution portfolio, including our data platform, was released on October 20, putting us in a much stronger competitive position and increasing our available market.

I will discuss this release in more detail later on in the call.

We continue to make progress on our transformation and have now built the foundation to accelerate revenue and earnings growth.

Let me briefly summarize our Q2 financial results.

Total revenues were up 1% sequentially.

Software revenues were up 2% sequentially.

EBIT margin was 7.7%.

EPS was $0.15 per share.

We repurchased approximately $35 million of our common stock since the last earnings call.

We will remain opportunistic with stock repurchases.

We ended the quarter with approximately $400 million of cash and short-term investments.

Let me now provide you an update on our business transformation that we call CommVault Next.

Our transformation is been driven by changes in the market which have significantly impacted CommVault and have resulted in our making the required fundamental changes to our business and organizational structure.

We initiated CommVault Next a couple of years ago in anticipation of many of those changes.

The objective of CommVault Next is to return CommVault to solid revenue and earnings growth in an environment driven by secular disruptions caused primarily by the shift of the cloud and fast environments.

Our transformation goals were to reestablish near-term revenue earnings on minimum and the longer-term revenue and earnings on minimum based on strategically positioning of CommVault.

To successfully execute this transformation, we made the following fundamental changes.

We've implemented across-the-board organizational changes.

We restructured and restaffed the sales organization, mainly in the Americas.

We improved better positioning of our V10 products.

We enhanced our core platform.

We implemented new pricing and packaging.

We introduced new products and services, expanded distribution and forged new strategic alliances.

I am pleased to say that we made solid progress in all aspects and all elements of these changes.

These efforts have resulted in the significant growth in the funnel in Q2 which has positioned us to have, as expected, a stronger second-half FY16 versus our first half.

We believe we now have the foundation in place for a much improved FY17.

Achieving our FY17 license revenue growth objectives will be dependent in large part on the successful market adoption of solutions based on our new CommVault data platform.

It is also important to note that most of the major investments tied to our CommVault Next transformation our now behind us.

I will now address our current FY16 financial outlook.

As we stated last quarter, it was going to take us to the end of Q2 FY16 for our new V10 products, in combination with added sales capacity and improved distribution, to increase our funnels to the levels that were required to drive substantial software license revenue growth.

We are now seeing those funnels improving and our confidence has increase that we will see licensed revenue momentum begin to build in the December quarter and continue through the end of the fiscal year.

We are also managing operating expenses to ensure that going forward we achieve both our revenue growth objectives and concurrently achieve substantial operating margin expansion.

More specifically, we should see sequential license revenue improvement in Q3 and in Q4 2016 based on an increase of enterprise deals in the funnel for both the Americas and EMEA.

We believe that Q3 total revenues will be up sequentially.

Our funnels indicate that good year-on-year comparisons on licensed revenue growth are possible in the March 2016 quarter.

We expects positive growth trends to continue through FY17.

We believe FY16 total revenue will be slightly down in comparison to FY15 levels due to the slow start to the year.

Brian will discuss more details on software services revenue growth rates as well as operating margins later on in the call.

In summary, the combination of an improving near-term outlook and the establishment of the strategic foundation for long-term growth has put us on a much firmer position to drive both near-term and longer-term revenue and earnings growth.

We also believe that we are better positioned to have market trends acting as a catalyst for our business growth as opposed to headwinds.

We believe the success of our CommVault Next program and the launch of our next generation software portfolio including the common data platform have helped strengthen our competitive position, increase our available market and made it easier for partners to sell and for customers to buy CommVault solutions.

We now need to achieve our second half FY16 financial objectives and we need to validate that we can sustain momentum in the business with revenues generated by our Next generation platform and stand-alone solutions.

While we still have a lot of work to do, we are now on a firmer foundation to achieve our financial objectives for the second half of FY16 and achieve solid revenue and earnings growth in FY17.

I will now turn the call over to Brian.

Thanks Bob and good morning, everyone.

I will now cover some key financial highlights for the second quarter of FY16.

The strengthening of the US dollar compared to certain foreign currencies had significant impact on the year-over-year results for the quarter.

Foreign currency movements had a minimal impact on sequential constant currency basis.

I will state our as-reported non-GAAP results first and also state the year-over-year results on a constant currency basis.

Second quarter total revenues were $140.7 million representing an increase of 1% sequentially and a decrease of 7% over the prior-year period.

Total revenues were down 1% year over year on a constant-currency basis.

We reported software revenue of $57.6 million which was up 2% sequentially and down 17% from the prior-year period.

Software revenue was down 12% year over year on a constant-currency basis.

Revenue from enterprise deals, which we defined as deals over $100,000 in software revenue in a given quarter, represented 49% of total software revenue.

The number of enterprise deals decreased 6% sequentially.

Our average enterprise deal size was approximately $269,000 during the current quarter up from approximately $250,000 in Q1 2016, an increase of 7%.

Americas, EMEA and APAC represented 63%, 26% and 11% of total software revenue, respectively, for the quarter.

On a sequential growth basis, Americas' software revenue increased 16% while EMEA and APAC declined 14% and 20% respectively.

The revenue mix for the quarter was split 41% software and 59% services.

Please remember that services revenue is a combination of both maintenance and support revenue and professional services revenue.

Services revenue for Q2 was $83.2 million, an increase of 1% sequentially and 2% year over year.

Services revenue was up 8% year over year on a constant currency basis.

Our maintenance and support renewal rates remained strong.

We added approximately 400 new customers in the quarter; our historical customer count now totals approximately 22,000 customers.

For the quarter revenue transacted through Arrow was approximately 39% of total revenue increasing 2% year over year and 11% sequentially.

Let me provide you an update on our pricing models.

Our software licenses typically provide for a perpetual rate to use our software and are typically sold on a per-terabyte capacity basis on a per-copy basis or as a solution set.

During the quarter ended September 30th of approximately 77% of software license revenue was sold on a per-terabyte capacity basis.

This is up from 72% in Q1 2016.

This sequential percentage increase was driven by fewer add-on purchases under our legacy agents and options pricing model.

We anticipate that capacity-based licenses will continue to account for the majority of our software license revenue for the foreseeable future.

However we expected that our capacity-based license sales, as a percentage of total license revenue, will decline as sales of our stand-alone solution sets continue to ramp.

Sales of our stand-alone solution sets continued to perform well and had more than 2x drag of sales of other software solutions.

These solution sets are generally sold on a per-unit basis and can be individually deployed or combined as part of a comprehensive data protection and information management solution.

This continued improvement reflects the overall transformation work we have been doing in pricing and packaging, new solution offerings, enhanced marketing and demand generation and our new business unit structure.

We've had particularly good success with sales of our stand-alone virtualization solution sets with approximately half of these being sales to new customers.

Now moving onto gross margins, operating expenses and EBIT margins.

Gross margins were 85.6% for the quarter.

Total operating expenses were $107.2 million for the quarter, up approximately 3% year over year and flat sequentially.

Sales and marketing expenses, as a percentage of total revenues, were 56% in the current quarter which was down from 57% in the first quarter.

Operating margins were 7.7% for the quarter resulting in operating income or EBIT of $10.9 million.

EBIT margins were approximately 8.5% on a year-over-year constant currency basis.

Net income for the quarter was $6.8 million and EPS was $0.15 based on a diluted weighted average share count of approximately $46.6 million shares.

EPS was approximately $0.17 on a year-over-year constant currency basis.

We added 74 net employees in fiscal Q2 and ended the quarter with 2,379 employees.

The majority of our hires were customer-facing resources.

We expect the pace of hiring to slow in the second half of the fiscal year.

Interest expense on the revolving credit facility was nominal in the quarter.

While there have been no borrowings on our credit facilities, we do incur interest expense related to the commitment fee.

We anticipate that we will have no net interest income in FY16.

I would now like to spend a few minutes discussing our anticipated revenue and EBIT margin outlook.

We believe that significant funnel growth and added sales capacity will have a positive impact on our second half of FY16 financial performance and be the primary drivers to demonstrate sequential revenue growth for fiscal Q3 and Q4.

Overall, for full-year FY16, we believe that current Street consensus for total revenue is reasonable.

From a revenue mix perspective, for the remainder of FY16, we expect that sequential quarterly services revenue will be flat to slightly up for Q3 and Q4 as a result of both our declining software revenue in recent quarters and our ongoing realignment of our maintenance pricing to be competitive with the market.

As a result, our projected Q3 and Q4 increase in sequential total revenue will be largely driven by increased software revenue.

It is important to note, while we expect our latest platform release to drive some incremental revenue in the second half of FY16, we will see the full impact in FY17.

We expect FY16 annual operating margins to be approximately 9.5%.

We anticipate operating margins to improve sequentially as the year progresses especially as the top-line growth rate increases.

We will continue to make strategic and prudent investments tied to achieving our revenue and earnings growth objectives.

We continue to be focused on improving the productivity of our resources through sales, employee enablement, retention and redeployment.

Our objective is to improve both our near-term and longer-term operating margins from current rates.

Our return to higher earnings growth rates requires a balancing act of controlling expenses while at the same time making the necessary investments to achieve our key revenue growth objectives.

Our revenue and margin outlook assumes current FX exchange rates.

Let me now comment on tax rates and share count.

We will continue to use a non-GAAP tax rate of 37% for FY16 which approximates and anticipates long-term tax rate.

Cash taxes paid in FY16 are projected to be less compared to FY15 based on current estimates of taxable income.

Over the long-term we expect our cash tax rate to align with our non-GAAP tax rate.

For FY16 we anticipate that our annual diluted weighted average share count will be approximately 46.5 million to 47.5 million shares.

Now moving onto our balance sheet and cash flows.

As of September 30th, our cash and short-term investments balance was approximately $400 million.

Approximately one-third of this balance is outside the US

Free cash flow, which we define as cash flow from operations less capital expenditures not associated with our new headquarters, was $8.1 million compared to $31.1 million in the prior-year period.

The year-over-year decline was a result of both lower EBIT and deferred revenue.

Since our last earnings call on July 28th, we have repurchased approximately $34.6 million or 965,000 shares of our common stock at an average cost of $35.84 per share.

As disclosed in our earnings release issued this morning, our Board of Directors has increased the amount available for share repurchases to $150 million and extended the program for another year through March 2017.

We will remain opportunistic with stock repurchases.

I wanted to comment briefly on the recent equity grants to made to some of our executive officers and certain other senior-level employees.

We have made a few changes to our equity compensation program based on both feedback from our stockholders and current trends in the industry.

These changes incorporate more performance-based elements into our equity compensation in addition to our historical approach of granting time-based equity awards.

The result is that a portion of the FY16 equity grants we recently made are now tied to the achievement of annual total stockholder return metrics and will vest over a three-year period.

In FY17, we expect to incorporate additional performance-based RSU grants tied to our financial performance.

We believe that including performance-based equity compensation into our program aligns with our pay-for-performance compensation strategy and ties together the long-term interest of our management team with those of our stockholders.

Let me now touch on deferred revenue and DSO.

As of September 30th, 2015, our deferred revenue balance was approximately $224.4 million, which is an increase of $5.6 million or 3% over the prior-year period and down 3% sequentially.

On a constant-currency basis, deferred revenue was up 9% year over year.

Please remember the vast majority of our deferred revenue is maintenance and support revenue, not software revenue.

As of September 30th, 2015, our deferred software revenue balance represented less than 1% of total deferred revenue.

For the quarter, our days sales outstanding, or DSO, was 59 days which is down from 69 days in Q1 FY16 and down from 62 days in the prior-year quarter.

That concludes the financial highlights.

I will now turn the call back over to Bob.

Thank you, Brian.

I want to next discuss the market megatrends we are addressing with our CommVault Next transformation and their impact on our new software portfolio and the new Common data platform that were announced last week.

Megatrends such as the movement to the cloud and increasing demands for innovative business analytics, new requirements for security and compliance, anywhere computing, the explosive growth of data and the increasing demand for open new infrastructures, hypervisors, databases and new technologies in storage and networks have drastically disrupted and reshaped the IT industry and data management.

As part of our announcements last Tuesday, we highlighted in some detail a series of emerging customer needs that grew out of the megatrends shaping our industry.

Our in-depth understanding of the key and emerging customer needs has resonated well with the industry analysts, customers and partners that we have spoken with and has shaped the direction of CommVault Next into the development of our next generation solutions portfolio.

I provided a perspective earlier in the call on our CommVault Next transformation and how it enabled us to build a new strategic foundation and how it positions us well to meet the needs of our customers in this rapidly changing environment.

Now I'd like to spend a few minutes on the release of our software.

We've been working diligently over the past two years on the 11th version of our data platform and integrated solution portfolio to ensure CommVault innovation would be distinguished in the market for the breadth of our solutions and the depth of our innovation.

The new software will be seamlessly upgradeable on a like-a-like basis for existing CommVault version 8 through version 10 customers and will be easier to consume for our new customers a wide range of use cases and across a broad choice of hardware platforms.

Given our insights into the market trends that we are changing the needs of customers, we began efforts to transform our value proposition with an open CommVault data platform which includes a framework of three layers.

A data indexing layer; orchestration and operational layer; and a virtual storage layer.

This framework provides a platform where data could be written to, stored, uniquely secured, easily understood and ingested without having to move it.

This framework is tightly interfaced to leading applications, storage devices, and specialized machines like medical devices.

It can reside in the cloud, on premise, new infrastructures or on a mobile device and it can be used with data management, compliance collaboration, legal, business analytics and process orchestration and reporting.

CommVault's new solutions portfolio includes a broad range of innovations all designed to drive additional business insight and value for customers that redefine the market in key areas such as an open standards-based approach through the unprecedented openness and scale of the platform.

CommVault now gives customers and third-party software partners the ability to write their applications directly to the CommVault data program this allows information tasks to define data governance policies for all data from the moment of its inception through its life cycle.

It enables disruption.

Our new platform provides a common foundation that makes it seamless and easy for customers to move from legacy environments to newer more modern disruptive technologies.

It enables a move to the cloud; provides a bridge from legacy to transitional hybrids to true exploitation of public cloud; simplifies the migration of business critical workloads to and from the cloud; and the management of data in the cloud.

This requires advanced data management and comprehensive security for use cases such as compliance, legal, disaster recovery and business analytics.

It redefines archive; transforms inaccessible digital landfills into directly accessible active data sets through familiar user interfaces such as Outlook, File Explorer and mobile.

It enables governance throughout the data lifecycle, applies active data governance when the data is created based on its content and context rather than applying methodologies only after the data is created.

It includes a new data transport.

We are introducing an innovative new data transport capability that combines the best features of block and file transport.

It enables more data to be transported to and from the cloud at much higher efficiency.

In improves network throughput performance, reduces storage requirements and dramatically improves RPO and RTO speed.

It embeds end-to-end security which is built in.

Security is fully integrated for data in all locations with management, audit and compliance monitoring and reporting.

Powerful orchestration is built-in.

The new version speeds time to value, consolidates point solutions, shifts resources from low to high value through faster business process execution and increased automation.

It includes total federated search-- across all data live inversion in all locations across structured and unstructured data.

Our new platform architecture will also be able to support the new emerging web-scale models based on converged open compute storage infrastructure deployed in the cloud model.

The new CommVault release leap-frogged point solution vendors in capabilities and functionality while also showcasing the performance, security compliance and economics benefits of the holistic data management strategy across multiple customer use cases.

We are also using the new functionality of the platform to develop highly differentiated vertical solutions.

The first customized health care solution will be released later this fiscal year.

And importantly, the new software portfolio and common data platform extends our ability to truly partner with leading technology providers in the cloud like Microsoft and AWS and infrastructure partners like Nutanix, Pure, HDS, NetApp and the OpenStack Consortium.

In summary, our next generation software and the CommVault data platform fundamentally redefines data protection, archive and cloud data solutions where everything is application aware.

Authentication and encryption, data security is essential.

Backup windows are significantly reduced.

Instant recovery is the standard.

Data is accessible natively from all live inversion locations.

Disaster recovery is automated and infrastructure resources are optimized and orchestrated.

The new product innovations and latest solutions released enable CommVault to be best positioned as the market leader to help customers of all sizes transition from traditional to modern hyper-converged infrastructures, consume new technologies and fully explore the true exploration of the cloud for business workloads.

Please note the development and timing of any product release as well as any of its features and functionality remain at our sole discretion.

Everybody realizes there has been seismic changes in the competitive market.

I will make a few brief comments on the current wave of M&A activity in our market.

I will not comment on the merits or downsides of the strategies of the particular companies or deals involved.

When I talk with customers, they tell me they will be looking to protect themselves from potential technology changes and the risk inherent in these market movements all while seeking a solid predictable and safe strategy to manage their data.

All of this opens doors for CommVault as a trusted independent vendor focused solely on data protection and information management, a safe harbor for customers in the midst of all this market change and consolidation.

In addition, the openness of our next generation platform combined with the broad, leading stand-alone solution portfolio makes CommVault uniquely positioned to reduce the risk and to assist customers through planned changes from the move to new technology like the cloud and modern new IT infrastructures.

It also helps them to minimize the risk associated with unplanned changes from industry consolidation and makes CommVault a smart choice for strategic industry partners who may see the technology relationships changing as these market disruptions play out.

In closing, we are very excited about the next generation of our data platform and its introduction last week in the market.

Analysts, early customer and partner reactions has been very encouraging and a real validation of our strategy and innovation.

Many share our view that the common data platform is revolutionary and well-timed to address the trends shaping our industry and customer requirements.

We have made good progress on our transformation as a result of momentus building and we have positioned CommVault for better financial results in the second half of FY16.

We have built that foundation for CommVault to generate both revenue and finance growth in FY17.

As I said earlier, there is still much work to be done.

We now need to achieve our second-half FY16 financial objectives and we need to validate that we can sustain momentum in the business with revenue generated our Next generation platform and product line.

The executive team here is confident and highly focused on achieving both of those objectives.

We clearly are in a stronger position to shape our own destiny today than we were six months ago.

I will now turn the call over to Michael.

Thanks Bob.

Operator, can we please open the line for questions?

(Operator Instructions)

Our first question is from Joel Fishbein with BTIG.

Bob, one for you and Brian, a follow-up for you.

Bob, can you talk a little bit about the partnerships you have had with Microsoft and some of the other big guys and how they are progressing?

Along with that, people are also worried that there would be some pause in spending with the next generation of Simpana coming out.

But it sounds like that's not the case considering what you are seeing in the pipeline.

The next generation is really a catalyst for growth versus a pause.

Because, as I mentioned in the call, most enterprise customers, in fact almost all, are looking to start to move to the cloud for different of their use cases or workloads.

Or move to new infrastructures whether it is hyperconverged.

Or, we're seeing a significant uptick in customers looking to move to web scale infrastructures, which we are well-positioned to do.

So customers understanding that we're leading the industry both from a platform standpoint and now from a standalone standpoint, that gives them confidence to work with us even if they are first implementing our version 10 software.

We don't see that as a pause, we see that as a positive catalyst to increase momentum.

In regards to partnerships, we've been increasingly leveraging our capability particularly to move to the cloud to expand our alliances, certainly with Microsoft.

What we offer a Cloud provider like Microsoft is a seamless, as I said earlier -- we provide the seamless data layer of indexing and orchestration and storage for customers to write their data to.

So as they are migrating from their legacy on premise infrastructure, to say something like Azure, we provide a common management layer for them to do so.

You've got to deploy data into the cloud and have a common platform for compliance, for legal, for setting policies and data protection and makes it seamless for the customer and makes it a lot easier for the customer to move to Azure.

And as a result, Microsoft has been supporting us extremely well in the marketplace.

And it's not only Microsoft.

We are seeing that from the other cloud vendors as well.

As customers move to new infrastructures like hyper converged or to new software platforms based on flash, we have expanded our alliances with companies like Nutanix and Pure.

As we move in to the healthcare arena, there will be a whole series of additional partners.

And there are other partnerships as a result of development of this platform I haven't talked about that we will be announcing over the next couple of quarters.

Brian, just a quick follow-up on the deferred line.

There was a decline in the deferred revenue.

Can you walk us through what that is?

Sure.

God question.

I think you know that the deferred line, the vast majority of that is maintenance and support revenue.

So from a business standpoint, we are still experiencing very high attach rates to our software sales.

We also are experiencing high strong renewal rates as well.

So this sequential decline in deferred revenue is driven by a couple of things.

One is it has more to do with the trailing fourth-quarter software growth, which has been down in recent quarters.

Secondly, there is an FX impact to it, especially on a sequential basis.

And, also, we had less multi-year renewals showing up this past quarter, meaning fiscal Q2.

On the flip side, we believe that we should see sequential growth in that line for the remainder of FY16 based on our higher software revenue growth expectations.

And also fiscal Q3 and fiscal Q4 tend to be large maintenance and support renewal quarters for us so we should see a rebound sequentially.

Can you quantify the FX impact?

I think it's around $2 million, $2.5 million.

Thank you so much.

Our next question is from Jason Ader from William Blair.

Thank you.

First, for Brian, I wanted to see if you could give us any quantitative metrics on the growth in the funnel.

And then for Bob, a lot of features in the new platform and you went through them pretty comprehensively.

Can you give us a sense from the beta customers what two or three features are the most impactful and the most needle moving?

And then also Bob, just on the public cloud business, you haven't talked about that in a bit.

I'm wondering how significant that is now as a percentage of the software revenue and what kind of growth you are seeing in that area?

Jason, it's Brian.

I'll answer first.

We won't give you anything exact on the funnel growth metrics, but we will say that it was significant what we saw in Q2.

Those trends, the early trends seem to be continuing into fiscal Q3 and I will say it's the best funnel growth we've seen in quite some time.

Okay, thanks.

Bob?

Jason, I will provide a summary on what is resonating in the market and I will let Al jump in, as well.

In broad scope, the new platform is resonating.

It seems we are the only one that has got this unique platform with the key three elements and they are not trivial.

When you combine your indexing capability and your orchestration capability and now you've got basically a universal storage layer across all the different repositories.

That is unique in the market.

People have tried to do that but there is nobody else out there that has done it.

So it is not just the support we're getting from Microsoft.

Like I say, there are other cloud providers out there who understand that and how important that is for a customer to holistically manage their data across these different repositories and I will let Al expand on that.

That is one.

And just data protection alone, when you move and how we are grabbing data on the right.

So you are either eliminating or you're reducing your backup windows to zero.

You are adding a much more efficient transport and able to move data across the network a lot more efficiently and, as we said, dramatically improve RTO and RTO time.

And the fact that everything is a live copy; there is no longer any restore.

These copies are production ready all the time no matter where the data resides is really resonating well with our customers.

From the archives standpoint, the fact you can very efficiently and cost effectively now have an active archive.

And when we mean active archive, you have ability for that application to get to a production-ready copy simply and easily, again, no matter where it resides and make sure that there is secure access for that copy.

And then when you get to automation and orchestration, and I'll let Al expand on this, for things like disaster recovery or depth test.

And we're doing that with high automation and new simplified user interfaces.

Those kinds of things are really resonating well out there and the platform is now open.

It is no longer proprietary, and you can access data with standard [bury] tools So those are some of the major areas of new functionality that are resonating well with our customers.

Al, why don't you take a second here.

Thanks, Bob.

Bob had it pretty well nailed, Jason.

Particularly enterprise customers, they come in these days and they are particularly interested in what I call holistic data management.

That doesn't mean backup everything.

That doesn't mean protect everything.

It means manage, encrypt and secure and make end-user accessible most of the data in your organization.

It turns out about one-third of the data really needs protection and backup, the Tier 0, Tier 1, even Tier 2 applications out there.

But people are more and more interested in the broader needs of data types out there, number 1. As Bob said, particularly in the protection quadrant as we think about the so-called live services, many of the things we have done with replication.

Many of the things we've done with, as Bob said, live access really, really resonates.

It is more a recovery solution set than our traditional protection or even backup capabilities.

Those are still there and they are combined to get an optimal RTO RPO capability and, again, that really resonates.

As Bob said the orchestration element gets a lot of attention from our service providers, as well as from customers.

It is one thing to manage the data set particularly in the cloud, but it's another thing altogether to tie it to compute platforms, applications, current versions, et cetera and that all takes a fairly high degree of orchestration, and there is a lot of demand for that kind of capability.

And then lastly, again, for Bob, the active archive has stretched out to a broader concept here.

From archive, we traditionally thought of back-up data sets that we're now subbing out for infrequent use into edition archive.

That is there as well and that is still popular but now we have added the idea to bring a lot of different data types into the content store, the platform, without backing it up primarily for the interest of management, accessibility, search, classification, et cetera.

So those are the big ones; I hope I remembered them all.

There are 50-some million lines there, James, and I can't remember them all.

There was one other that has resonated with almost every one of our beta customers.

And that is, since we do all of that and we can manage data where it lives without moving it, whether it is on a machine or it's in a social network or it's in a database somewhere.

So we can go out and understand and index that data without moving it.

And when customers figured out we can do all of that plus we have context in all of the other day-lag stores, is that now becomes the perfect platform for business analytics across the sphere, say Microsoft's the I-engine.

Or potentially downstream, you can see Watson or some of these other more sophisticated business analytics capabilities, plus our own.

And we've built a number of BI-type applications for customers and to do things that they couldn't do before.

The other thing that platform provides, that is both on the data and logs, since we have built in log analytics as well, you can tie real-time to historical and trend and provide more comprehensive business analytics capabilities than that could without a platform like this.

So that gives you some idea why there is a lot of excitement out there and why this is so unique in the market.

And Bob, just to wrap up this discussion, that was very helpful.

Would you look at this as more of a, you had a few features that you needed to add that some of the other players in the market have had and, therefore, this is a catch-up to the platform, given the changes in the market, the cloud, live copy, et cetera.

Or are you massively differentiated now versus the competition?

How do we think about your competitive position relative to some of the other players out there?

Two years ago, a lot of companies have gotten disrupted.

And I said on this call two years ago we had to change fundamentally everything we're doing.

So, first of all, as I said in the call, you have to be relevant and provide highly differentiated value both in the cloud and for fast types of applications.

You have got to start there.

So that required fundamental architectural changes to the platform to enable that to happen.

So some of this is leapfrog.

The other objective was, to your point -- there were innovative competitors coming into the market on a standalone basis that developed some pretty unique positions.

So our objective was one, leapfrog the whole platform.

And two, make sure relative to any standalone competitor that's out there, I don't care whether they are in webscale or they're in next generation data protection, or they're in active archive, it really didn't matter -- they are in DibDib -- to make sure our that our platform, and as a standalone, we were clearly, highly differentiated and best-in-class.

So what you've got emerging here is the best platform.

And as we shape our stand-alone products, you will have the best stand-alone products and the most innovative in the industry all integrated and linked to the best platform in the industry.

Those were clearly our objectives.

That's what we are doing and then you take that and expand that into unique solutions for vertical markets like healthcare, which I think we spent a lot of time on the call, but there is a massive amount of technology in that solutions set and that is pretty broad and that is coming out in the March quarter.

Now you start to reposition the whole company and become a lot more relevant and we have all these disruptive both technological changes as well as, as I mentioned, the changes being driven by M&A.

So that succinctly sums it up for you.

Our next question is from Brent Bracelin from Pacific Crest Securities.

Thank you, one for Bob and a follow-up for Brian.

Bob, on version 11 can you let us know when the.

1 release is coming?

Is that kind of first-half of calendar 2016?

And then, as you think about a traditional upgrade cycle, this clearly sounds like there's a lot of value you are adding; it's unique.

It seems that will also be implemented in a longer time fashion than a typical upgrade.

So walk us through when that .1 release is and how long the implementation cycle could be as you get customers trying to upgrade from V10 to V11.

So let's be clear that the product is GA as we speak.

We just, as is typical with CommVault, we don't release it to the open market until we go through a couple months of cycle; we call it control release.

So the product is available today.

The broader general release will be December, and as Al puts it, and he can open this up, it's coming out in surges.

The version .1 is available as we speak.

.2 with a whole bunch of other additional enhancements is actually going to be available to the market very early in 2016.

The .3 will be available later on in the March quarter or early in the June quarter.

So we are moving extremely fast with a massive amount of technology and moving to the market and the reason Al and the team has broken this up into, he calls them, surges is because there is just so much technology coming out that just getting the messaging right and the monetization and the marketing.

Right around this, we had to break it up, so Al can give you a little bit more color here, but this is just the beginning.

That really nails it, Brent.

I've even gotten feedback, by the way, that all the press releases and all the public announcements we've done over even the last week or so that people are just getting them read now.

So a lot of information out there; a lot of messaging; a lot of content.

And as Bob said, the feedback is really good.

He nailed it in terms of we are RTM at this point.

We've move it in to an early controlled release mode for several months here, and we will let out the clutch in January.

Not only upgrade but full availability.

And one other point is, even though this is a big piece of code, it is extremely easy and manageable to upgrade.

We've done lots of things on that through the years, as you probably know.

This can be run part V10, part new-release, all kinds of variations on that.

It is all automated.

It deals with change management, hybrid environments and cloud and not cloud, et cetera.

That is a really slick part of this whole new release, Brent.

Very helpful.

Brian, just a quick follow-up for you.

You talked about having the best funnel growth in years.

If I look back, your revenue has been below consensus.

I know you don't guide, but revenue has been below consensus six out of the last eight quarters.

As you think about this funnel relative to now a major new release, what is the risk relative to closing the funnel as you think about all that customers have to digest here?

And also layering on top of change and maintenance pricing, how should we think about the conversion of that best funnel growth in years?

There is always risk involved, however I would say that the funnel where we see it today puts us in a better position to achieve those objectives in the second half for sequential growth both Q3 and Q4.

And we are comfortable with the current Street total for consensus revenue for the year.

Fair enough, thank you.

Brian is right; we took a number of steps, and we put a plan together to get momentum back into the business.

One was V10 and disaggregating the platform in stand-alone products.

Second, we had to restaff and restructure the Americas which was a massive task.

You put those two together and we put a plan together for a substantial growth in the second-half of 2016.

There was risk attached to that.

What we have now is validation that we achieved both of those objectives and we got the required funnel growth now to achieve our second-half FY16 objectives.

We are not saying it's going to be better than what we said before, but this was a pretty significant shift between the first half and second half.

There's a growth of both top and bottom line, and now we are in a position to achieve that, which is really gratifying for this whole team here.

And we can start building momentum on top of this, but, as he said, you've still got to convert that funnel.

And, as I said on the call, we still have to deliver that top and bottom line.

Since our track record hasn't exactly been stellar in doing that we -- until we do it, there is still risk attached to it.

But I can tell you this is a substantial uptick in our ability, just in terms of the number of accounts we have in front of us and where these accounts are in the closing cycle.

So, it looks pretty good but, as we said on the call, we've still got work to do.

And we generally plan for conservative growth rate by the way.

Our next question is from Abhey Lamba from Mizuho Securities.

Thanks.

Continuing on the topic of funnel, when can we see some sort of a hockey stick from the substantial code that you're talking about?

Is this something we're looking for the second half of FY17 or can it happen earlier than that?

Well, If you look at the numbers between the first half of 2016, the second half, that is a hockey stick.

No matter how you look at it is a big hockey stick in what we need to accomplish in the December and March quarters.

Obviously, if we do that, and then we continue to build funnel and you start to leverage the impact of version 11, then you have got a new company sitting here.

But the hockey stick starts right now.

Brian, when we are talking about maintenance price, the alignment has it cycled through the entire install base or will it be a headwind for a few more quarters?

Also was it a factor in your deferred revenue sequential decline over the last couple of quarters?

Good questions.

We have been at this a while at the enterprise segment of the market, so I think I've been talking about this for a few quarters now.

That incorporates most of our revenue base and we've been systematically going after those customers and restructuring where appropriate.

We will now take it down to a mid- to smaller-end.

So this is a lower percentage of the overall base in terms of dollars but most of that work is in front of us.

So if you listened to what I was saying is that this is going to flatten out.

It will become flat to very slightly up on the services line for the remainder of this fiscal year.

And we would expect that to continue into the early part of next year if not throughout FY17.

So most of our growth over the next couple of quarters is going to come from the software line.

Our next question is from Andrew Nowinski from Piper Jaffray.

Good morning guys.

Congratulations on the progress you made so far.

I appreciate the call on the indexing orchestration and data in the public cloud.

Can you walk us through the revenue and pricing dynamics in the hybrid environment, and how you were selling capacity-based licensing to customers that might move data to Azure and how you monetize that?

Those are really good questions, Andrew.

If I wanted to be flip, I could say building it is one thing.

Monetizing it and selling it is a completely different story.

So, to keep it simple, on the monetization on wave, one of this, it is, and I will let Al expand on it, certainly the next generation data protection for the live copy, the new data transport and things like that, that are relevant both on premise and in the cloud and have massive use of both functionality and cost-saving benefits.

That is where early the biggest monetization is and it is right in our wheelhouse.

Second, you can monetize archive and there's big benefits to the customers there.

It is a much more expanded use case then we had with our for-archive solution.

Third is, as we start to move out on standalones and start to combine very sophisticated orchestration and management of data in the cloud, the rifle shot there to start is DR, but you can take DR and move to depth test.

So what Al and the team are trying to do here is to take the massive amount of technology and move it into I called easy to understand monetizeable chunks and build it out from there.

On top of that, from there, I can assure you that for many large enterprises when you start to look at this platform that's holistic across these different repositories, it is resonating really well and those are your big megadeals either for your commercial accounts or your big cloud providers.

The whole of remonetization, repricing, moving from perpetual to subscription models, those kinds of things, that is all part of the evolution as we move forward here.

So, Al--

That's really good, Bob.

I think that nails it all.

I think the important thing to remember, Andrew, is we are trying not to confuse our partners and our marketplace.

As Bob said, we're pretty clear on where we want to take this eventually, but we have such a huge part of our base and monetization today tied around CLA bundles, if you will, that we will be somewhat careful on moving away from that, like a real hard right turn there.

So Bob laid it out really carefully.

Al just made a good point.

Our older pricing models are not going away.

We are giving customers alternatives, but we are not eliminating those other models that the market is used to from our price books.

(Operator Instructions)

The next question is from Srini Nandury with Summit Research.

Thank you for taking my call.

I was wondering you guys have all these different pricing models and then you have all these solution bundles and now you also have this new upgrade.

So, have you heard anything from your customers saying that, okay, well, now we have this upgrade cycle coming and we have bought all this software, but is it a product that we use or that we don't use?

So is there some pressure on your pricing to come down so that people think of buying only the solution bundles they want to use?

I will just keep that simple.

We work closely with our installed base to make sure they are aligned with the market and that they are getting full value from the software they purchase from us and we make adjustments accordingly.

So that's an ongoing process that we manage.

The answer is, do customers ask those questions?

Yes.

And do we work with them to resolve issues as they arise?

The answer is yes to that, as well.

In fact, Bob, we even have an assessment program where we go in with our services team and we're starting to hear that.

Are they really utilizing the features they have?

Are they operating it correctly?

And almost always we find room for improvement.

We take that seriously.

Not so much are they not using things, but are they getting the full value out of what they bought.

So that's part of our core DNA here.

Our next question is from Aaron Rakers with Stifel.

Can you hear me?

How are you?

I have one question and one follow-up.

On the first question, as you see the pipeline funnel build and you look to see the closure rates of that, I'm curious if you could talk to the sales capacity that you have in place relative to say a year ago and talk a little bit about where you stand?

I think the last couple of quarters you've had some attrition challenges, just stabilizing the sales force and what kind of capacity you now have in place to drive those closures of that funnel going forward?

In general, we have enough capacity in place today to achieve our second-half FY16 and Q1 FY17 objectives.

That's already in place.

To give you a perspective on that, we actually had negative sales capacity in the Americas from the early winter through early spring of last year.

One of the reasons our software declined is because, as we were going through the restructuring, we were not hiring and we had, to your point Aaron, high attrition.

Now what we have, particularly in the Americas, is we are basically -- I think we said pretty clearly, we have clearly -- we had massive hiring there.

The difference is we went from negative sales capacity to let's say, substantial new capacity that's already in place and our attrition is down.

The combination of that plus the moves we made in our product and our distribution in the Americas, in particular, we had traumatic funnel growth.

It is that combination.

So that is already in place.

What needs to happen now is the point that we made earlier, we have got to convert that funnel and we have got to deliver the revenue and earnings associated with it.

And then, now we have to build, and we have time to do this, but aggressively start to build and reposition our value proposition in the market V11.

But we're doing that with wind to our back and with our products are aligned with the way the market is moving versus the other way around.

It is substantially different.

The strategy we embarked on was expensive and it had a lot of risks associated with it.

Now we're seeing our step points and our foundation, everything is becoming a lot clearer.

And now we can start to manage the business the way we did for the first seven years, after it went public, on top of a much firmer foundation.

I don't want to minimize the amount of work we have to do in front of us either, but we are certainly in a much stronger position to do it now.

And then as a quick follow-up Brian, if I can, as you look out longer-term and you have everything in place and now you start to execute on the model from a revenue-growth perspective, how do you think about the longer-term operating profitability or operating margin that you think this Company should be generating?

Our goal has always been to have a balanced strategy, as well as top-line revenue and earnings growth over time.

So, as we said, we believe that we are going to improve sequentially both top line and on an EBIT margin perspective for the remainder of this year, and our goal is to continue to expand that.

The goal is to get back into the mid- 20s and those are the models that we have laid out, we're talking about mid-20s operating margin.

What Brian indicated earlier, now we're in a fine line of balance, and how you balance your OpEx growth against driving enough topline to get that operating margin expansion?

And it is pretty tricky.

Right now we are really controlling OpEx and trying to drive base revenue growth.

It is not easy.

But we've got this place created now that we have got a set point and a foundation.

Now we can start managing it the way we did seven or eight years ago, but we can tell you this is not an easy exercise.

Right now it is pretty well screwed down and we want to get this momentum going and then we'll incrementally build on that.

That is how we built the Company in the first place.

So that's where we are.

But, yes, mid-20s operating margins is doable.

That is downstream over a few years, it will take us a few years to do that.

The other point that makes it a bit more difficult, Aaron, is that your maintenance revenue growth does not catch up for four or five quarters because you've had basically a flat license revenue growth going back.

What our shareholders and what you guys look at near-term is the acceleration and license revenue growth, because the maintenance line will catch up.

So that is what we are focused on.

Licensed revenue growth in a controlled expense environment.

That is basically where we are.

Our next question is from Greg McDowell from JMP Securities.

Thanks very much.

Just one quick question that has to do with your capital allocation strategy.

It looks like you started repurchasing shares again and increased the size of the program.

Part one of the question is how opportunistic do you plan to be in taking advantage of the depressed share price?

And part two of that question is really any update on M&A and putting some of that capital to work.

Thank you.

Clearly investing in CommVault stock is a good thing.

And we are on a path now for growth.

We will be opportunistic.

We want to maintain a strong balance sheet and we want to make sure one of the places we can get a return is buying our own stock and we will balance that.

From an acquisition standpoint to be clear, we don't plan to have any major acquisition in the near future.

But, as we said in the last call, there could be some very small selective tuck in acquisition related to our verticalization.

If we make those, those will be those will be high return-type high leverage transactions where there is really good strategic fit.

I can tell you from past experience, and Al and I have not been acquisitive, but at our last company we didn't miss one, meaning we made them and they were all extremely successful and they were are all kind of tuck-in acquisitions that worked with high payback.

And that would be our strategy going forward.

Nothing major, but you could see a tuck in acquisition going forward here tied to our verticalization.

Our next question is from Michael Turits with Raymond James.

Good to see a stabilization in the quarter.

One clarification, Bob did you say you're looking for year-over-year license growth in fiscal fourth-quarter 2016, the March quarter?

Yes, but Brian said there is definite potential for good year-on-year licensed revenue growth in the March quarter.

Okay.

Do you have any thoughts, or just directionally on operating margins in FY17?

Should we be thinking of a flat operating percentage year, or up a little bit in the general direction?

We have got -- we haven't had a plan, but we want to refine that a bit.

We will definitely give you more color on the next earnings call, but clearly the objective as we said on the call is to achieve both good solid licensed revenue growth with good solid operating margin expansion in FY17, and we will give you more color on that on the next call.

That is what our goals are.

Okay.

That's good.

Thanks guys.

Our next question is from Rajesh Ghai from Macquarie Research.

Thanks, congratulations on the launch of the new platform.

Be confident that the technology is very compelling.

My question is really around what I see as a potential headwind created by some of your younger competitors.

Cobalt is of course legacy.

How do you address that perception, which I believe could be the most important headwind going forward?

How do you see your restaffed and restructured sales force at this point?

Are they ready to take this new platform and make it a success?

One, I'm really confident in the sales team.

It's just up to us to arm them well with clear messaging and educate them.

But as far as the capability of that team, it is outstanding.

I have tremendous confidence in it.

In regard to repositioning the company.

It starts with if we have actually more innovative products than almost any of these startups and we have the ability to tie those stand-alone solutions and fully integrate them into the world's best data platform.

We clearly have a technology advantage versus these startups.

Now getting that -- my former statements, it may take us three or four months to get all the elements so that there is no question that the best in class, whether it is [GOY] or anything else, or whether it is traditional or whether it's web scale.

Across-the-board we are confident in where we are technically.

Chris Powell and the marketing team is working really hard to make sure that the market understands that and we reposition our image from what was CommVault to CommVault Next and move us off this legacy.

But it starts with if you have got the best technology out there, and it's recognized by customers and analysts, and you have it validated in the market, and you now have revenue momentum tied to it, and then you work on the repositioning from a marketing standpoint, there is a lot of work going into that, our position will shift.

The reason we are feeling good about it is it always starts with a product and value prop, and now we are ahead of the curve versus behind it and it makes that job easier.

But to your point, it is a key issue.

It is being addressed and it's an issue we understand and agree with that needs to be addressed.

One additional point, Rajesh, is the legacy doesn't always have a negative connotation.

It could be positive, particularly in our enterprise environment.

By that I mean, as we are working with these guys on newer products or newer feature sets or functions, let's say migrating a pile of data, it's usually our history of being able to deal with big scale dynamically and our flexible architecture that even though we haven't proven the specific solution, big customers are willing to go with us on the approach just simply because of our legacy.

So, again, it works for us and I don't mean to talk around it, because you and Bob are right on it is an image issue, but it does work for us particularly in enterprise.

Al is making a good point.

We have got now, if not the best, one of the best enterprise sales forces in the world right now in our industry.

And that's sales, SEs, our whole solution architect and PS organization.

The start-ups do not have that, so we come in and work with the customer to define a solution, we can come in a lot more comprehensively than most of the startups.

Not only do we have that going for us, but now we have leading technology and solutions to go along with it, and we are broadening out our alliance partnerships that align with these trends in the market to bring in more horsepower from a stronger set of alliance partners, as well.

Our next question is from Brad Zelnick with Jefferies.

Thanks for fitting me in.

It's very exciting to hear all the developments around the Next-Gen platform.

It's a pretty exciting time for CommVault.

My question -- following up on an earlier question around deferred revenue and your response completely makes sense.

We can see the FX impact and, obviously, the license being depressed eventually hits that line, too.

But it also brings to question the maintenance pricing realignment and renewal rates.

Can you give us an update on how that's going and how the pricing realignment is being received by the market, and also let us know that the renewal rates are still healthy and doing well?

Brad, it's Brian.

One other aspect, I think I mentioned, was less multi-year renewals that showed up in this past quarter and that is just a function of whether or not companies want to spend that budget or not on a multi-year basis, so that was another factor to the sequential decline.

In terms of the maintenance pricing, I would say that a lot of it is behind us at the enterprise level.

Again, at the mid- to lower-end of the market we still have a lot more to roll out.

That will be happening over the next couple quarters.

It ends up being a smaller percentage of the overall tide in terms of the maintenance support revenue, but probably touches a lot more customers.

So, there is some risk attached to it, but we actually think it is going to be a catalyst for growth beyond the transition, and we do think that the maintenance support revenue line will flatten out over the next few quarters.

And then once you see a continued rebound in the topline software growth, the maintenance should then follow from there and you will see a rebound in that line as well.

Our next question is from Ittai Kidron with Oppenheimer.

Thanks, good to see the numbers stabilizing.

I have a couple questions.

First with regards to the funnel, can you give us some color on how much of the funnel is already focused on version 11 versus version 10?

I'm just trying to get a sense of how much mind share you have had with customers and again the potential risk and slowing down deal momentum.

The second thing regarding your sales force, I think you made a comment on the call that you now intend to start slowing down your hiring going forward.

Just a year ago this was a very big issue for you and you couldn't hire fast enough.

My question is if you have such high confidence in the new platform and a return to strong growth on software, why slow down the hiring?

Why not keep going forward?

Although it might hurt again margins for Q2, it certainly should lend itself too much better revenue growth in the fourth quarter timeframe.

So why slow it down?

Your point is well taken.

We have had a very aggressive investment strategy here now for two years.

The slow growth, by the way, is primarily V10.

There is some V11, but this is primarily a V10 funnel growth.

So the issue -- yes, we could continue to accelerate hiring, and that would be logical, but at some time in all these businesses you have got to realign yourself for a profit expansion and cash flow expansion for lots of reasons.

One, this company has got a lot of potential to create a lot of shareholder value going forward and the way that is done, you can say as a public company, you have got to do it both top and bottom line.

And, at some point, you have got to bite the bullet and get those disciplines back in place, and we think this.

This is our time.

Now, as we move forward, when we validate and we're going to hit these numbers, because the funnel looks really good, and we are not understating that; it does look extremely promising.

And we validate that we take this technology, which we've gotten a lot of feedback, but we get the kind of traction we think we're going to get in the market, we will start on a controlled basis expanding hiring again later on in the fiscal year.

We are just bringing it down and we're just bringing it under control, and now we want hard validation that we can execute, convert that funnel and hard validation that we can move V11 into the market at the kind of rates that we need to move into and get our sales teams and channel partners, customers educated on this.

If we do all that, you will see us selectively start to expand our hiring again.

We are running a private equity company in a public market.

That's what we're doing.

Our next question is from Eric Martinuzzi with Lake Street Capital.

I'm wondering, you have got growth forecast sequential for the next couple of quarters.

From an international perspective, in other words, rest of the world, what are the risks to executing that in the rest of the world over the next couple of quarters?

EMEA looks quite good, primarily because they have got their large deals that are teed up and a good solid funnel for the next two quarters in EMEA and the US.

APAC for Q3 is okay, not great, but we are doing a lot of restructuring right now in APAC, by the way.

So the foundation for that outlook is primarily in the US and EMEA.

We just hired, by the way, a very strong new leader in APAC and we will be restaffing and restructuring that and positioning them for strong FY17.

So that is on going as we speak, and we are committed to that investment.

And we've got some good things going on in APAC as well, but the primary drivers for the large growth over the next two quarters is both the US and EMEA.

Thank you.

Our next question is from Siti Panigrahi from Credit Suisse.

Thanks for taking my question.

Bob, you talked about particular and the shift to cloud, and when it comes to cloud, how to enable AWS is a big problem that exists Now they talked about focusing now on Enterprise.

And you also talked about how you've positioned against Azure, but one question you keep getting is how come all these is going to leverage and how you're going to monetize the data risk trend.

Could you give some color on that?

Yes, I think what we are saying is that we can do things with data across an enterprise and leverage that AWS platform and the tools to be quite -- . As they build tools, we integrate them.

But any enterprise, if you're going to manage compliance, legal and business analytics, just doing it in AWS, particularly as the companies are migrating, you can't get control, an orderable control, of those kind of functions and doing it in silos.

And by putting our platform in -- if we install that in AWS on a virtual basis, whether the app is up there, or it's on premise, you are writing to our virtual storage layer.

So all of the indexing, attributes, access and securitization, even though you're leveraging -- maybe less functionality there, it becomes holistic and common across that.

The other thing that these platforms can't do, we've had a lot of discussion with Microsoft on this and some of the others on this, is they can't manage data were data lives.

So, if you are dealing with machines or you're dealing with basic Duke structures that may be sitting in somebody else's cloud or some on premise Web scale environment, you're not going to be wanting to move all that data back up to AWS.

It is expensive and unnecessary.

We can go out, auto-discover it, not move it, take the relevant information for business analytics and then if you want to wrap it up into a longer-term data set you can take the selected items and move them into AWS.

We don't compete with AWS or Azure; we complement those big repositories.

And, again, whether the data is being migrated there or the application and data resides there, we can holistically manage that across an enterprise.

So to us, it is a big enabler versus -- it now becomes a big enabler versus a headwind.

I don't know if that is clear to you, but when we are talking to the customers, that is what they like about what we just accomplished.

I'm not showing any further questions.

This does conclude the call.

Thank you for participating.