FinanceLooker

Excrept from filing document 2025-03-31

As of September 30 2024 the last business day of the registrant s most recently completed second fiscal quarter the aggregate market value of voting and non voting common stock held by non affiliates of the registrant based upon the closing price of the common stock as reported by The Nasdaq Stock Market was approximately 6 7 billion
Information required by Part III of Form 10 K Items 10 11 12 13 and 14 is incorporated by reference to portions of the registrant s definitive Proxy Statement for its 2025 Annual Meeting of Stockholders the Proxy Statement which is expected to be filed not later than 120 days after the registrant s fiscal year ended March 31 2025 Except as expressly incorporated by reference the Proxy Statement shall not be deemed to be part of this Annual Report on Form 10 K
The discussion throughout this Annual Report on Form 10 K contains forward looking statements In some cases you can identify these statements by our use of forward looking words such as may will should anticipate estimate expect plan believe predict potential project intend could feel or similar expressions In particular statements regarding our plans strategies prospects and expectations regarding our business are forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended the Exchange Act You should be aware that these statements and any other forward looking statements in this document reflect only our expectations and are not guarantees of performance These statements involve risks uncertainties and assumptions Many of these risks uncertainties and assumptions are beyond our control and may cause actual results and performance to differ materially from our expectations Important factors that could cause our actual results to be materially different from our expectations include the risks and uncertainties set forth under the heading Risk Factors Accordingly you should not place undue reliance on the forward looking statements contained in this Annual Report on Form 10 K These forward looking statements speak only as of the date on which the statements were made We undertake no obligation to update or revise publicly any forward looking statements whether as a result of new information future events or otherwise except as required by law
Commvault Systems Inc aims to provide its customers cyber resiliency by protecting and recovering their data and cloud native applications in a world of increasing cyber threats and attacks including ransomware We provide products and services across many types of environments including on premises hybrid and multi cloud Our offerings are delivered via self managed software software as a service SaaS integrated appliances or managed by partners
With Commvault Cloud customers have access to business critical capabilities such as layered defenses to detect and minimize the impact of bad actors automation to verify clean recovery points and cloud native capabilities to dedupe scale and as necessary recover data and cloud applications to remain in a state of continuous business Our comprehensive solutions address the critical aspects of modern cyber resiliency from data protection to data recovery data governance and compliance in a flexible and scalable platform Commvault was incorporated in Delaware in 1996
Commvault helps customers protect their data and be cyber resilient in hybrid multi cloud and cloud native environments Commvault delivers a portfolio of products and services to effectively protect quickly capture intelligence and rapidly recover from cyber incidents Our solutions create an intuitive cyber resilience experience across customer managed enterprise software and SaaS delivered cloud native solutions that mitigate data sprawl facilitate cloud adoption and help customers modernize and transform their enterprise IT environment
We do this by offering unified visibility and management across the entire hybrid enterprise so our customers can protect and recover data from any location to any location Our Commvault Cloud offerings are organized in the following packages Operational Recovery Autonomous Recovery and Cyber Recovery
includes Commvault s leading backup and recovery capabilities which can be utilized across hybrid enterprise workloads This solution can be delivered as customer managed software as SaaS or a mix of the two to meet the requirements of hybrid enterprises worldwide It is designed to meet the needs of any size business protecting workloads across all locations including hybrid and multi cloud environments physical servers virtual machines VMs applications and databases endpoint devices and cloud applications Operational Recovery provides backup verifiable recovery and cost optimized cloud workload mobility helping to ensure data availability and granular recovery even across multiple clouds
aims to reduce recovery time downtime and costs by bringing automation and validation to Operational Recovery Designed for automated disaster and cyber recovery use cases Autonomous Recovery can deliver backup replication and disaster recovery for all workloads on premises in the cloud across multiple clouds and in hybrid environments It provides trusted recovery of data and applications VMs and containers along with verifiable recoverability of replicas cost optimized cloud data mobility and resilience Organizations can automatically failover applications to a secondary site in the event of a data incident and continue running without interruption
offers the most comprehensive set of Commvault Cloud capabilities Building on Operational and Autonomous Recovery Solutions Cyber Recovery adds data backup and data validation capabilities which help organizations scan for risks remediate issues identify compromises in the backup data and recover clean data at scale This includes threat scanning to hunt for threats within backup data and cyber deception and threat detection to provide early warning of attacks This enables organizations to minimize the impact of attacks and aims towards a fast recovery after a cyber incident
is a cyber resilience offering Traditional isolated on premises cleanrooms can be expensive to build and maintain and incident response plans often go untested increasing an organization s risk and recovery time objectives Our Cleanroom Recovery solution empowers organizations to be ready to recover by providing a clean isolated and on demand recovery location in the cloud as well as the ability to regularly and proactively test their incident response plans and recover quickly
is an intuitive easy to deploy and scale out integrated data protection solution to support enterprises transformations from legacy scale up infrastructures to the hybrid cloud container and virtualized environments Its flexible architecture allows customers to get up and running quickly and scale while delivering comprehensive data protection for a vast array of workloads including containers VMs and databases from a single extensible platform With HyperScale X customers can leverage the Commvault portfolio giving them access to the features functions and industry leading integration with applications databases public cloud environments hypervisors operating systems NAS systems and primary storage arrays wherever the data resides It is available as a fully integrated appliance or as a reference architecture depending on an organization s requirements
is the easy button to adopt secure and scalable cloud storage in minutes supporting an organization s hybrid cloud strategy without the need for additional cloud expertise It is an integrated air gapped cloud storage target that enables IT organizations to efficiently adopt cloud storage for Operational Recovery HyperScale X or SaaS to ease digital transformation reduce risks and scale This minimizes IT complexities and allows customers to easily store isolate and protect data while providing the foundation for predictable costs and reduced overhead
capabilities which can be procured as an add on product facilitates efficient compliance and protects relevant legal data from alteration It provides built in reporting auditing and logging so data is not modified or deleted for legal and compliance purposes It is designed to reduce the time and costs spent between IT and legal departments to expedite discovery and review
integrates automated cloud native application recovery and rebuild capabilities to help customers quickly restore an organization s entire cloud application and data environment By combining data recovery with cloud native application and infrastructure rebuild automation Cloud Rewind can help customers get back to business within minutes after a cloud services outage or ransomware attack
uses automation to rapidly revert objects and datasets stored in Amazon Simple Storage Service Amazon S3 to a specific point and time Being able to revert to a specific point and time can be very useful across a variety of recovery use cases including bringing back data before it was accidentally deleted before an application started sending incorrect or corrupt data or before a cybercriminal encrypted the objects and demanded a ransom
We offer global customer support from physical locations around the world which allows us to provide 24 7 support Our customers have access to support staff available by phone for first responses and to manage resolutions and to an online support database for help with troubleshooting and operational questions Additionally we leverage Arlie our artificial intelligence AI powered assistant within the Commvault Cloud platform to enhance support with real time actionable insights This advanced AI capability is designed for faster resolutions and an even more responsive support experience Our cloud based support system creates a virtual global support center to address customer needs We have designed our support infrastructure to scale with the increasing globalization of our customers We have also developed and maintain a knowledge library of storage systems and software products to further enable our support organization to quickly and effectively resolve customer problems
Our support engineers have extensive knowledge of complex applications servers and networks We proactively take ownership of the customer s problem and provide bug fixes and updates as part of our commitment to enhancing performance and functionality
We offer various Customer Success options for our software and SaaS customers including Enterprise Success Program ESP offerings Our Customer Success offerings provide resources focused on proactively helping our customers achieve their goals and are aligned to their business initiatives Our ESP offerings provide additional industry technical experts who provide strategic guidance and advice so our enterprise customers achieve their cyber resiliency objectives
Our technical consultants guide customers so their data protection environments are designed for optimal results configured quickly and easy to maintain We offer architecture design implementation automation and orchestration data migration and health assessment services In addition we offer customers staff augmentation options via resident support engineers to assist with rapid expert deployment and operation of the Commvault portfolio
Commvault Readiness Solutions provide the resources and expertise to quickly accelerate returning to normal business operations through the proper design implementation administration and support of our customers data protection and cyber resilience environment
We offer training content for learners at all levels with basic intermediate and expert certifications available We also provide a selection of self paced online content for our products in our On Demand Learning Library
We provide results oriented data protection and cyber resilience services to customers worldwide Commvault experts provide secure reliable and cost effective remote monitoring and management of our customers data protection environment
Our current customer base spans thousands of organizations across a variety of sizes including large global enterprise companies and small or mid sized businesses and government agencies We support customers in a range of industries including banking insurance and financial services government healthcare pharmaceuticals and medical services technology legal manufacturing utilities and energy
An important element of Commvault s strategy is to establish partnerships that support development marketing selling and implementation of our solutions We believe that strategic and technology based relationships with industry leaders are fundamental to our success We have forged numerous relationships with software hardware cloud and cybersecurity partners to enhance our combined capabilities help our customers advance business critical security resilience and cloud initiatives and create the optimal combination of data and information management applications We believe this approach enhances our ability to expand our product offerings and customer base and to enter new markets We have established the following types of strategic relationships
We maintain strategic sales marketing and technology relationships with industry leaders so that our products are integrated with supported by and add value to our partners portfolios Collaboration with these market leaders allows us to provide solutions that enable our customers to improve data and information management efficiency We also maintain relationships with a broad range of industry operating system application and infrastructure vendors to verify and demonstrate the interoperability of our portfolio with their equipment and technologies We believe these partnerships enhance our position in the market and serve as an accelerator to sales
To broaden our market coverage we work closely with our global original equipment manufacturer OEM partners investing significant time and resources to deliver joint solutions incorporating Commvault solutions These partners team with our technical engineering marketing and sales force to enhance integration tuning operational management implementation and vision for solutions that are designed to meet current and future data protection and cyber resilience needs Our alliance managers work directly with global OEM partners to design deliver and support field activities that make it easier for customers to locate learn about and purchase these differentiated solutions
Additionally we have a non exclusive distribution agreement with Arrow Enterprise Computing Solutions Inc Arrow a subsidiary of Arrow Electronics Inc Arrow s primary role is to enable a more efficient and effective distribution channel for our products and services by managing our reseller partners and leveraging their own industry experience Sales generated through our distribution agreement with Arrow accounted for approximately 35 of our total revenues in fiscal 2025 and 36 in fiscal 2024
As companies of all sizes and markets rapidly adopt cloud infrastructures for cost efficiencies speed and agility we remain committed to these strategic relationships to address this growing trend Customers looking to move IT operations to the cloud depend on service providers to migrate manage and protect their data and cloud infrastructures We partner with a broad ecosystem of managed service providers and cloud partners to effectively deliver data protection as a service solutions based on Commvault solutions across geographies vertical markets and offerings
We sell our solutions via marketplace offerings which enable customers to purchase our solutions through online platforms such as AWS Google Microsoft or Oracle The marketplace allows us to publish an offer which an end user can then purchase directly or with the assistance of a partner
Commvault has continued to expand integrations with leading cybersecurity and AI partners These integrations can play a key role in helping joint customers advance cyber resilience from identifying potential threats or anomalies to understanding where sensitive data exists to accelerating clean recoveries These bi directional integrations also empower customers to use their preferred security data protection and cyber recovery solutions Security operations teams can leverage these integrations to help better understand risks and threats defend against them and recover with confidence
The data protection and cyber resilience market is intensely competitive and highly fragmented The principal competitive factors in our industry include product functionality performance integration platform coverage scalability price global sales infrastructure technical support branding and reputation The ability of major system vendors to bundle solutions is also a significant competitive factor in our industry
Our primary competitors in the data protection software applications market each of which has one or more products that compete with a part of or our entire product suite include Cohesity Druva Rubrik and Veeam
Some of our competitors have greater financial resources and may have the ability to offer their products at lower prices than ours In addition some have greater name recognition longer operating histories substantially larger technical sales marketing and other global resources and larger installed customer base with broader product offerings As a result these competitors can devote greater resources to the development promotion sale and support of their products than we can Refer to our Risk Factors below
We have a variety of marketing programs designed to create brand awareness and market recognition for our product offerings and sales lead generation Our marketing efforts include sales campaigns webinars active participation at trade shows virtualized cyberattack simulation training sessions technical conferences and seminars advertising content development and distribution public relations social media industry analyst relations publication of technical and educational articles in industry journals sales training and preparation of competitive analyses In addition our strategic partners augment our marketing and sales campaigns through seminars trade shows joint public relations and advertising campaigns Our customers and strategic partners provide references and recommendations that we often feature in external marketing activities
Our research and development organization is responsible for the design development testing and certification of our cyber resilience platform and solutions Our engineering efforts support product development across all major operating systems databases applications hyperscalers and network storage devices A substantial amount of our development effort goes into certification integration and support of our solutions to ensure interoperability with our strategic partners solutions We have also made substantial investments in the automation of our product test and quality assurance laboratories
We believe our solutions are a major differentiator versus our competitors portfolios Our Commvault Cloud platform aims to deliver best in class cyber resilience with the fastest recovery across on premises hybrid and multi cloud environments Our solutions unique features drive the performance scale TCO benefits and interoperability of our offerings Such features include encryption indexing and immutable recovery Additional options enable content search and auditing features to support data discovery and compliance Our success and ability to compete depend on our continued development and protection of our solutions We rely primarily on a combination of trade secrets patents and copyrights as well as contractual provisions to establish and protect our intellectual property rights
We patent our technical infrastructure and key usability and design concepts Our product s unique capabilities are covered by a robust portfolio of patents worldwide Areas such as cyber resilience data protection transformation insights and compliance and governance including our SaaS and HyperScale X solutions are core to our competitive advantage More than 1 500 patents have been issued to Commvault globally as a result of our strategic patenting We also have established proprietary trademark rights in markets across the globe and Commvault owns over 200 worldwide trademark registrations and pending registration applications Refer to our Risk Factors below
The global legal environment of technology businesses is evolving rapidly and is often unclear These topics include data privacy and security pricing advertising taxation economic sanctions content regulation and intellectual property ownership and infringement
We are subject to several local state federal and foreign laws and regulations regarding data privacy and security Regulators around the world have adopted or proposed limitations on or requirements regarding the collection distribution use security and storage of personal information payment card information or other confidential information of individuals and the U S Federal Trade Commission and many state attorneys general are applying federal and state consumer protection laws to impose standards on the online collection use and dissemination of data In the event of a security breach these laws may subject us to incident response notice and remediation costs Failure to safeguard data adequately or to destroy data securely could subject us to regulatory investigations or enforcement actions under applicable data privacy and security unfair practices or consumer protection laws The scope and interpretation of these laws could change and the associated burdens and our compliance costs could increase in the future
We are also subject to global laws and regulations that govern or restrict our business and activities in certain countries and with certain persons including the U S Commerce Department s Export Administration Regulations and economic and trade sanctions regulations maintained by the Office of Foreign Assets Control as well as anti bribery and anti corruption laws and regulations including the Foreign Corrupt Practices Act and the U K Bribery Act Refer to our Risk Factors below
Commvault aims to unlock potential in data customers and our people To accomplish that our people are empowered to drive innovation and help our customers by inspiring one another and working to make what s already great even greater whether that is product process or team As of March 31 2025 we had approximately 3 300 employees worldwide of which 37 were in the United States and 63 were located internationally
We remain committed to providing people with opportunities and resources that enable them to work successfully and creatively while also investing in their professional and personal development Throughout fiscal 2025 our employees partners and customers participated in over 1 400 training programs totaling more than 260 000 hours
At Commvault we believe that a culture of community and belonging and a workforce encompassing a broad range of talents and perspectives is a business requirement that helps us compete in the marketplace The broad range of perspectives in our workforce not only drives our ability to hire the best most qualified talent and to be a best in class cyber resilience organization but also uphold our value in the marketplace by leading as an employer of choice
We continue to be committed to securing the best talent with a concerted effort to expound on and build a broad pipeline of candidates We are committed to providing an environment that fosters career growth investing in the development creativity and aspirational needs of all employees
Commvault values its people and their contribution to our company In return for their contribution we are committed to providing a corporate culture that is focused on the health safety and well being of our employees We take a holistic approach to health and wellness to support the dynamic aspects of our employees lives including their physical social emotional family and financial well being We operate in accordance with applicable safety laws and procedures to ensure we provide a safe work environment for all
has served as our President and Chief Executive Officer CEO since February 2019 Prior to joining Commvault Mr Mirchandani served from September 2016 to January 2019 as the Chief Executive Officer of Puppet Inc Puppet an Oregon based IT automation company Mr Mirchandani joined Puppet in May 2016 as President and Chief Operating Officer Mr Mirchandani brings a wealth of international business experience through his diverse well rounded career in technology Before joining Puppet from October 2013 to April 2016 Mr Mirchandani served as Corporate Senior Vice President and General Manager of Asia Pacific and Japan at VMware Inc and from June 2006 to October 2013 Mr Mirchandani held various senior leadership positions at EMC Corporation including Chief Information Officer and leader of the Global Centers of Excellence Prior to that Mr Mirchandani held various positions at Microsoft Corporation and Arthur Andersen LLP Mr Mirchandani has a Master of Business Administration degree from the University of Pittsburgh and a bachelor s degree in mathematics from Drew University
has served as our Chief Financial Officer CFO since August 2024 Prior to joining Commvault Ms DiRico served as Senior Vice President General Manager International at Toast Inc Toast Ms DiRico who was integral to Toast s initial public offering in 2021 served in a series of leadership positions within Toast since May 2016 including Senior Vice President Head of Finance and Chief of Staff Prior to that Ms DiRico served in finance leadership positions with Nuance Communications from 2014 to 2016 She obtained her Masters of Business Administration from Simmons College and Bachelor of Business Administration from the University of Miami
has served as our Chief Commercial Officer CCO since August 2024 Prior to his current role Mr Merrill served as our CFO from June 2022 to July 2024 and as our Chief of Business Operations from April 2021 until June 2022 He also held the position of Vice President of Operations from April 2019 through March 2021 and from December 2012 to March 2019 served as Chief Accounting Officer Prior to joining Commvault Mr Merrill held accounting management positions with several publicly traded companies Mr Merrill began his career with Arthur Anderson LLP in its audit practice Mr Merrill obtained his bachelor s degree in accounting from Elizabethtown College
Our website is located at www commvault com On the Investor Relations section of the website we post filings as soon as reasonably practicable after they are electronically filed with or furnished to the U S Securities and Exchange Commission SEC including our Annual Reports on Form 10 K our quarterly reports on Form 10 Q our current reports on Form 8 K our definitive proxy statements and any amendments to those reports or statements filed or furnished pursuant to Section 13 a or 15 d of the Exchange Act All such filings are available on the Investor Relations portion of our website free of charge The contents of our website are not incorporated by reference into this Annual Report on Form 10 K or in any other report statement or document we file with the SEC
You should consider each of the following factors as well as the other information in this Annual Report in evaluating our business and our prospects The risks and uncertainties described below are not the only ones we face Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also impair our business operations If any of the following risks actually occur our business and financial results could be harmed In that case the trading price of our common stock could decline You should also refer to the other information set forth in this Annual Report including our financial statements and the related notes
Our industry is intensely competitive and many of our competitors have greater financial technical and sales and marketing resources and larger installed customer bases which could enable them to compete more effectively than we do
The cyber resiliency market is intensely competitive highly fragmented and characterized by rapidly changing technology and evolving standards changing customer requirements and frequent new product introductions Competitors vary in size and in the scope and breadth of the products and services offered We must continually innovate to maintain our market position
The principal competitive factors in our industry include product functionality and integration platform coverage ability to invest and scale price worldwide sales infrastructure global technical support brand recognition and reputation If we are unable to address these factors our competitive position could weaken and we could experience a decline in revenues that could adversely affect our business
It is also costly and time consuming to change cyber resilience systems Most of our new customers previously adopted cyber resilience systems which gives an incumbent competitor an advantage in retaining a customer because the incumbent already understands the network infrastructure user demands and information technology needs of the customer and because some customers are reluctant to invest the time and money necessary to change vendors There are complexities involved in transitioning from traditional on premises solutions to cloud based services including customer adoption rates and the need for scalable infrastructure Commvault has substantially completed the transition from a perpetual licensing model to a subscription based model delivered through either term based licenses or SaaS whereas certain of our competitors are already fully cloud native
New competitors entering our markets may have a negative impact on our competitive positioning As we enter new markets we expect to encounter new competitors Many of our existing competitors are broadening their product breadth and scope We expect increased competition from OEMs including those we partner with and from systems and network management companies especially those that have historically focused on the mainframe computer market and have been making acquisitions and broadening their efforts to include cyber resilience products We expect that competition will increase as a result of future industry consolidation Increased competition could harm our business by causing among other things price reductions of our products reduced profitability and loss of market share Additionally attracting and retaining skilled professionals is a common challenge in the cyber resilience space due to the intensely competitive nature of the industry
We rely on indirect sales channels such as value added resellers systems integrators corporate resellers distributors OEMs and marketplaces for the distribution of our solutions and the failure of these channels to effectively sell our solutions could have a material adverse effect on our revenues and results of operations
We rely significantly on our value added resellers systems integrators and corporate resellers which we collectively refer to as resellers for the marketing and distribution of our products and services Resellers are our most significant distribution channel However our agreements with resellers are generally not exclusive are generally renewable annually typically do not contain minimum sales requirements and in many cases may be terminated by either party without cause Many of our resellers carry data protection and cyber resilience solutions that compete with ours These resellers may give a higher priority to other software or SaaS applications including those of our competitors or may not continue to carry data protection and cyber resilience solutions If a number of resellers were to discontinue or reduce the sales of our products or were to promote our competitors products in lieu of our own it could have a material adverse effect on our future revenues Events or occurrences of this nature could seriously harm our sales and results of operations If we fail to manage our resellers successfully there may
be conflicts between resellers or they could fail to perform as we anticipate including required compliance with the terms and conditions of our agreement either of which could reduce our sales or impact our reputation in the market In addition we expect that a portion of our sales growth will depend upon our ability to identify and attract new resellers Our competitors also use reseller arrangements and may be more successful in attracting resellers and could enter into exclusive relationships with resellers that make it difficult to expand our reseller network Any failure on our part to maintain and or expand our network of resellers could impair our ability to grow revenues in the future
Further we have a non exclusive distribution agreement with Arrow pursuant to which Arrow s primary role is to enable a more efficient and effective distribution channel for our solutions by managing our resellers and leveraging their own industry experience Arrow accounted for approximately 35 36 and 37 of our total revenues for the years ended March 31 2025 2024 and 2023 respectively If Arrow were to discontinue or reduce the sales of our solutions or if our agreement with Arrow was terminated and if we were unable to take back the management of our reseller channel or find another distributor to replace Arrow there could be a material adverse effect on our future business
Our OEMs sell and integrate our solutions which represents a material portion of our revenues We have no control over the shipping dates or volumes of systems these OEMs sell and they have no obligation to sell systems incorporating our solutions They also have no obligation to recommend or offer our solutions exclusively or at all They have no minimum sales requirements and can terminate our relationship at any time These OEMs also could choose to develop their own data protection and cyber resilience solutions Our OEM partners compete with one another If one of our OEM partners views our arrangement with another OEM as competing it may decide to stop doing business with us Any material decrease in the volume of sales generated by OEMs could have a material adverse effect on our revenues and results of operations in the future
We also sell our solutions via marketplace offerings which enable customers to purchase our solutions through online platforms typically hosted by a cloud provider The marketplace allows us to publish an offer which an end user can then purchase directly or through the assistance of a partner Similar to our resellers and OEMs marketplace providers have no obligation to sell or recommend our solutions or offer our solutions exclusively or at all Failure to effectively compete in the marketplace could have a material adverse effect on our revenues and results of operations in the future
If the cost for maintenance and support agreements or our term based subscription licenses and SaaS arrangements with our customers is not competitive in the market or if our customers do not renew their agreements either at all or on terms that are less favorable to us our business and financial performance might be adversely impacted
Most of our support and maintenance agreements are for a one year term and thereafter we pursue renewal thereof Historically such renewals have represented a significant portion of our total revenues If our customers do not renew their annual maintenance and support agreements either at all or on terms that are less favorable to us our business and financial performance might be adversely impacted
Additionally a significant amount of our revenues are from term based software license and SaaS arrangements Those arrangements are typically one to three years in duration If at the end of the initial term customers elect to not renew or they renew on terms that are less favorable to us our business and financial performance might be adversely impacted
As a global company we have become increasingly subject to the risks arising from adverse changes in domestic and global economic and political conditions Uncertainty in the macroeconomic environment and associated global economic conditions have in the past resulted in and may continue to result in volatility in credit equity debt and foreign currency markets The U S government has and continues to make significant additional changes in U S trade policy and may continue to take future actions that could negatively impact U S trade In addition the U S government and certain foreign governments have recently announced new or increased tariffs on imported goods and additional tariffs or increases in tariffs could be assessed in the future The future actions of the U S administration and foreign governments with respect to tariffs or other international trade agreements and policies remain unclear A trade war or other governmental action related to tariffs or international trade agreements or policies has the potential to disrupt our international operations and or the United States or global economy or certain sectors thereof and thus could negatively impact our financial performance or business
These global economic conditions can result in slower economic activity decreased consumer confidence reduced corporate profits and capital spending inflation adverse business conditions and liquidity concerns There has also been increased volatility in foreign exchange markets These factors make it difficult for our customers our vendors and us to accurately forecast and plan future business activities These factors could cause customers to slow or defer spending on our solutions which would delay and lengthen sales cycles and negatively affect our results of operations If such conditions deteriorate or if the pace of economic recovery is slower or more uneven our results of operations could be adversely affected we may not be able to sustain the growth rates we have experienced recently and we could fail to meet the expectations of stock analysts and investors which could cause the price of our common stock to decline
We continue to invest in our business internationally where there may be significant risks with overseas investments and growth prospects Increased volatility or declines in the credit equity debt and foreign currency markets in these regions could cause delays in or cancellations of orders Deterioration of economic conditions in the countries in which we do business could also cause slower or impaired collections on accounts receivable
Our outstanding accounts receivables are generally not secured Our standard terms and conditions permit payment within a specified number of days following the receipt of our solution Volatile economic conditions including those related to the ongoing Russia Ukraine conflict the conflicts in the Middle East and the global response to the conflicts economic downturns tariffs or the imposition of new tariffs trade wars barriers or restrictions or threats of such actions supply chain disruptions or the financial instability of banking institutions could result in our customers and partners facing liquidity concerns leading to them not being able to satisfy their payment obligations to us which would have a material adverse effect on our financial condition operating results and cash flows
In addition a significant percentage of our revenue is from subscription or term based arrangements In these arrangements our customers may pay for solutions over a period of several years Due to the potential for extended period of collection we may be exposed to more significant credit risk
We develop solutions that interoperate with certain products operating systems and hardware developed by others and if the developers of those operating systems and hardware do not cooperate with us or we are unable to devote the necessary resources so that our solutions interoperate with those systems our development efforts may be delayed or foreclosed and our business and results of operations may be adversely affected
Our solutions operate primarily on the Windows UNIX Linux and Novell Netware operating systems used in conjunction with Microsoft SQL and on hardware devices of numerous manufacturers Our reliance on such hardware components exposes us to potential supply chain disruption which can delay product deliveries and adversely affect customer satisfaction When new or updated versions of these operating systems solution applications and hardware devices are introduced it is often necessary for us to develop updated versions of our solution applications so that they interoperate properly with these systems and devices We may not accomplish these development efforts quickly or cost effectively and it is not clear what the relative growth rates of these operating systems and hardware will be
Potential or existing customers particularly government customers and larger enterprise customers generally commit significant resources to an evaluation of available solutions and require us to expend substantial time effort and money educating them as to the value of our solutions Sales often require an extensive education and marketing effort
We could expend significant funds and resources during a sales cycle and ultimately fail to win the customer Our sales cycle for all of our products and services is subject to significant risks and delays over which we have little or no control including our customers budgetary constraints the timing of our customers budget cycles and approval processes our customers willingness to replace their current solutions our need to educate
If our sales cycles lengthen unexpectedly they could adversely affect the timing of our revenues or increase costs which may cause fluctuations in our quarterly revenues and results of operations Finally if we are unsuccessful in closing sales of our solutions after spending significant funds and management resources our operating margins and results of operations could be adversely impacted and the price of our common stock could decline
Demand for data protection and cyber resilience solutions is linked to growth in the amount of data generated and stored demand for data retention and management whether as a result of regulatory requirements or otherwise demand for and adoption of new backup devices and networking technologies and ability to respond to and recover from cyber incidents in a secure environment Because our solutions are concentrated within the data protection and cyber resiliency market if the demand for backup and data protection solutions devices declines our sales profitability and financial condition would be materially adversely affected
Furthermore the data protection and cyber resiliency market is dynamic and evolving Our future financial performance will depend in large part on continued growth in the number of organizations adopting data protection and cyber resilience solutions for their environments The market for data protection and cyber resilience solutions may not continue to grow at historic rates or at all If this market fails to grow or grows more slowly than we currently anticipate our sales and profitability could be adversely affected
In order to deliver our SaaS offerings via a cloud based deployment we have made and will continue to make capital investments and incur substantial costs to implement and maintain this business model In addition as we look to deliver new or different cloud based services we are making significant technology investments to deliver new capabilities and advance our software to deliver cloud native customer experiences Our revenues related to SaaS offerings have increased in recent years If there is a reduction in demand for these services caused by a lack of customer acceptance technological challenges weakening economic or political conditions including as a result of tariffs or the imposition of new tariffs trade wars barriers or restrictions or threats of such actions security or privacy concerns inability to properly manage such services competing technologies and products decreases in corporate spending or otherwise our financial results and competitive position could suffer If these investments do not yield the expected return or we are unable to decrease the cost of delivering our cloud services our gross margins overall financial results business model and competitive position could suffer
We sell a backup appliance which integrates our solution with hardware If we fail to accurately predict manufacturing requirements and manage our supply chain we could incur additional costs or experience manufacturing delays that could harm our business
We generally provide forecasts of our requirements to our supply chain partners on a rolling basis If our forecast exceeds our actual requirements a supply chain partner may assess additional charges or we may incur costs for excess inventory they hold each of which could negatively affect our gross margins If our forecast is less than our actual requirements the applicable supply chain partner may have insufficient time or components to produce or fulfill our solutions requirements which could delay or interrupt manufacturing of our products or fulfillment of orders for our solutions and result in delays in shipments customer dissatisfaction and deferral or loss of revenue If we fail to accurately predict our requirements we may be unable to fulfill those orders or we may be required to record charges for excess inventory Any of the foregoing could adversely affect our business financial condition or results of operations
Our complex solutions may contain undetected errors or failures especially when they are made generally available or new versions are released Despite extensive testing by us and customers we have discovered errors in our solutions in the past and will do so in the future As a result of past discovered errors we experienced delays and lost revenues while we corrected those solutions In addition customers in the past have brought to our
attention bugs in our software created by the customers unique operating environments which are often characterized by a wide variety of both standard and non standard configurations that make pre release testing very difficult and time consuming Although we have been able to fix these bugs in the past we may not always be able to do so Our solutions may also be subject to intentional attacks by viruses that seek to take advantage of these bugs errors or other weaknesses Any of these events may result in the loss of or delay in market acceptance of our solutions or damage to our reputation which would seriously harm our sales results of operations and financial condition
Our products are deployed by our customers and partners in a wide variety of IT infrastructures including large scale complex technology environments and we believe our future success will depend at least in part on our ability to support such deployments Implementations of our products may be technically complicated and it may not be easy to maximize the value of our products without proper implementation training and support Some of our customers have experienced difficulties implementing our products in the past and may experience implementation difficulties in the future If our customers and partners are unable to implement our products successfully perceptions of our products may be impaired our reputation and brand may suffer or customers may choose not to renew their subscriptions or purchase additional products from us
Any failure by customers or partners to appropriately implement our products could result in customer dissatisfaction impact the perceived reliability of our products result in negative press coverage negatively affect our reputation and harm our business financial condition and results of operations
Developing software and technology is expensive and the investment in product development may involve a long payback cycle Our research and development expenses were 146 3 million or 15 of our total revenues in fiscal 2025 132 3 million or 16 of our total revenues in fiscal 2024 and 141 8 million or 18 of our total revenues in fiscal 2023 We believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position However we may not recognize significant revenues from these investments for several years if at all
Our ability to sell our solutions is highly dependent on the quality of our customer support and professional services and failure to offer high quality customer support and professional services would have a material adverse effect on our sales and results of operations
Our services include the assessment and design of solutions to meet our customers storage management requirements and the efficient installation and deployment of our software applications based on specified business objectives Further once our software applications are deployed our customers depend on us to resolve issues relating to our software applications A high level of service is critical for the successful marketing and sale of our software If we or our partners do not effectively install or deploy our applications or succeed in helping our customers quickly resolve post deployment issues it would adversely affect our ability to sell software products to existing customers and could harm our reputation with prospective customers As a result our failure to maintain high quality support and professional services would have a material adverse effect on our sales of software applications and results of operations
In fiscal 2024 we initiated a restructuring plan to enhance customer satisfaction optimize operational efficiency and align our customer experience functions with our strategic goals This plan was completed in fiscal 2025 We cannot guarantee the restructuring plan will achieve its intended results Risks associated with this restructuring plan also include additional unexpected costs adverse effects on employee morale and the failure to meet operation and growth targets due to the loss of key employees any of which may impair our ability to achieve anticipated results of operations or otherwise harm our business
Sales to global federal state and local governmental agencies account for a portion of our revenue and we may in the future increase sales to government entities This customer base experiences budgetary constraints or shifts in spending priorities regularly which may adversely affect sales of our solutions to government entities Selling to government entities can be highly competitive expensive and time consuming often requiring significant upfront time and expense without any assurance that we will successfully sell our solutions Government entities may require contract terms that differ from our standard terms and conditions including termination rights favorable for the customer audit rights and maintenance of certain security clearances for facilities and employees which can entail administrative time and effort resulting in costs and delays Engagements with government contracts involve stringent compliance requirements and the potential for increased scrutiny which could adversely impact operational flexibility
Government demand for our solutions may be more volatile as they are affected by stringent regulations public sector budgetary cycles funding authorizations and the potential for funding reductions or delays making the time to close such transactions more difficult to predict The current presidential administration intends to reduce overall government spending and has introduced the Department of Government Efficiency to operationalize this priority a decline in government spending could negatively impact our revenues and profitability
We have had and could have changes in senior management which could be disruptive to management and operations of the Company and could have a material effect on our business operating results and financial conditions Turnover at the senior management level may create instability within the Company which could impede the Company s day to day operations Such instability could impede our ability to fully implement our business plan and growth strategy which would harm our business and prospects
We rely on our key personnel to execute our existing business operations and identify and pursue new growth opportunities The loss of key employees could result in significant disruptions to our business and the integration and training of replacement personnel could be costly time consuming cause additional disruptions to our business and be unsuccessful
Acquisitions involve a number of risks including diversion of management s attention ability to finance the acquisition on attractive terms failure to retain key personnel or valuable customers legal liabilities the need to amortize acquired intangible assets and intellectual property ownership and infringement risks any of which could have a material adverse effect on our business results of operations financial condition and cash flows Any additional future acquisitions may also result in the incurrence of indebtedness or the issuance of additional equity securities
We could also experience financial or other setbacks if transactions encounter unanticipated problems including problems related to governmental approval execution integration or underperformance relative to prior expectations Acquisitions may not result in long term benefits to us or we may not be able to further develop the acquired business in the manner we anticipated
Following the completion of acquisitions we may have to rely on the seller to provide administrative and other support including financial reporting and internal controls and other transition services to the acquired business for a period of time There can be no assurance that the seller will do so in a manner that is acceptable to us
We are preparing to migrate a significant amount of customers from Red Hat environments and any disruption delay or failure in executing this transition effectively could have a material adverse impact on our business operations and customer relationships
Any delays or issues in the execution of this migration may expose us to financial and operational risks Additionally ongoing support and coordination during the transition may result in higher operating costs If we are unable to successfully complete the migration our operations and reputation could be materially adversely affected
We have a 100 million revolving credit facility As of March 31 2025 there were no borrowings under the credit facility If we were to borrow substantially against this facility the indebtedness could have adverse consequences including requiring us to devote a portion of our cash flow from operations to payments of indebtedness which would reduce the availability of cash flow to fund working capital requirements capital expenditures and other general purposes limiting our flexibility in planning for or reacting to general adverse economic conditions or changes in our business and the industry in which we operate in placing us at a competitive disadvantage compared to our competitors that have less debt and limiting our ability to fund potential acquisitions
The credit facility also contains financial maintenance covenants including a leverage ratio and interest coverage ratio and customary events of defaults Failure to comply with these covenants could result in an event of default which if not cured or waived could accelerate our repayment obligations For further discussion on our revolving credit facility see Note 17 of the notes to the consolidated financial statements
Our India operations are a key factor to our success We believe that our significant presence in India provides certain important advantages for our business such as direct access to a large pool of skilled professionals and assistance in growing our business internationally However it also creates certain risks that we must effectively manage As of March 31 2025 approximately 39 of our employees were located in India Wage costs differentiate depending on regions throughout the world Wages in India are increasing at a faster rate than in the many other countries including the United States These increases could result in us incurring increased costs for technical professionals and reduced margins There is intense competition in India for skilled technical professionals and we expect such competition to increase As a result we may be unable to cost effectively retain our current employee base in India or hire additional new talent In addition India has experienced significant inflation low growth in gross domestic product and shortages of foreign exchange India also has experienced civil unrest and has been involved in conflicts with neighboring countries The occurrence of any of these circumstances could result in disruptions to our India operations which if continued for an extended period of time could have a material adverse effect on our business
In recent years India s government has adopted policies that are designed to promote foreign investment including significant tax incentives relaxation of regulatory restrictions liberalized import and export duties and preferential rules on foreign investment and repatriations These policies may not continue If we are unable to effectively manage any of the foregoing risks related to our India operations our development efforts could be impaired our growth could be slowed and our results of operations could be negatively impacted
We derive almost half of our revenues from international markets Our international sales are generally denominated in foreign currencies and this revenue and related cash flow could be materially affected by currency fluctuations Our primary exposure is to fluctuations in exchange rates for the U S dollar versus the Euro and to a lesser extent the Australian dollar British pound sterling Canadian dollar Chinese yuan Indian rupee Korean won and Singapore dollar Changes in currency exchange rates could adversely affect our reported revenues and could require us to reduce our prices to remain competitive in foreign markets which could also have a material adverse effect on our results of operations An unfavorable change in the exchange rate of foreign currencies against the
In recent fiscal years we have selectively hedged our exposure to changes in foreign currency exchange rates on the balance sheet In the future we may enter into additional foreign currency based hedging contracts to reduce our exposure to significant fluctuations in currency exchange rates on the balance sheet although there can be no assurances that we will do so However as our international operations grow or if dramatic fluctuations in foreign currency exchange rates continue or increase or if our hedging strategies become ineffective the effect of changes in the foreign currency exchange rates could become material to revenue operating expenses and income
We have significant sales and services operations outside the United States and derive a substantial portion of our revenues from these operations We generated approximately 46 and 48 of our revenues from outside the United States in fiscal 2025 and fiscal 2024 respectively International revenue increased 15 in fiscal 2025 compared to fiscal 2024 Expansion of our international operations has and is expected to require a significant amount of attention from our management and substantial financial resources and might require us to add qualified management in these markets
In addition to facing risks similar to the risks faced by our domestic operations our international operations are also subject to risks related to the differing legal political social and regulatory requirements and economic conditions of many countries including
foreign countries may impose additional withholding taxes or otherwise tax our foreign income impose tariffs or adopt other restrictions on foreign trade or investment including currency exchange controls
imposition of or unexpected adverse changes in foreign laws or regulatory requirements including those pertaining to sanctions export restrictions privacy and data protection trade and employment restrictions and intellectual property protections
greater risk of a failure of our employees and partners to comply with both U S and foreign laws including antitrust regulations the U S Foreign Corrupt Practices Act the U K Bribery Act of 2010 and any trade regulations ensuring fair trade practices
Our business in emerging markets requires us to respond to rapid changes in market conditions in those markets Our overall success in international markets depends in part upon our ability to succeed in differing legal regulatory economic social and political conditions We may not continue to succeed in developing and implementing policies and strategies that will be effective in each location where we do business The occurrence of any of the foregoing factors may have a material adverse effect on our business and results of operations
IT system failures network disruptions cybersecurity incidents and breaches of data security could disrupt our operations by causing delays or cancellation of customer orders impeding the delivery of our solutions negatively affecting customer support or professional services preventing the processing of transactions and reporting of financial results and disturbing our enterprise resource planning system IT system failures network disruptions cybersecurity incidents and breaches of data security could also result in the unintentional disclosure of customer or our information as well as damage our reputation There can be no assurance that a system failure network disruption cybersecurity incident or data security breach will not have a material adverse effect on our financial condition and operating results Cybersecurity breaches or incidents and other exploited security vulnerabilities could subject us to significant costs and third party liabilities result in improper disclosure of data and violations of applicable privacy and other laws require us to change our business practices cause us to incur significant remediation costs lead to loss of customer confidence in or decreased use of our products and services damage our reputation divert the attention of management from the operation of our business result in significant compensation or contractual penalties from us to our customers and their business partners as a result of losses to or claims by them or expose us to litigation regulatory investigations and significant fines and penalties
Bad actors regularly attempt to gain unauthorized access to our IT systems and many such attempts are increasingly sophisticated and difficult to detect These attempts which might be related to industrial corporate or other espionage criminal hackers or nation state and nation state supported actors include trying to covertly introduce malware or ransomware to our environments impersonating authorized users as well as other intrusions from nation state actors and nation state supported actors In particular cyber attacks including those from organized criminal threat actors nation states and nation state supported actors are prevalent and severe and could lead to significant interruptions delays or outages in our operations disruptions in our services loss of data loss of income significant extra expense to restore data or systems reputational loss and the diversion of funds Cybercriminals are leveraging artificial intelligence AI to develop more sophisticated and targeted attacks making detection and prevention increasingly challenging resulting in heightened risks of security breaches and incidents As cyberattacks including AI driven threats become increasingly sophisticated there is an omnipresent need to enhance security measures to protect our systems and data
Third party service providers that we may rely on to back up and process our confidential information may also be subject to similar threats Such threats could result in the misappropriation theft misuse disclosure loss or destruction of the technology intellectual property or the proprietary confidential or personal information of us or our employees customers licensees suppliers or partners as well as damage to or disruptions in our IT systems These threats are constantly evolving increasing the difficulty of successfully defending against them or implementing adequate preventative measures We seek to detect and investigate all cybersecurity breaches or incidents and to prevent their recurrence but attempts to gain unauthorized access to our IT systems or other attacks may be successful and in some cases we might be unaware of an incident or its magnitude and effects
Additionally due to political uncertainty our third party service providers are vulnerable to heightened risks of cybersecurity incidents and security and privacy breaches and incidents caused or initiated by nation state or affiliated actors including attacks that could materially disrupt our systems operations and services or impact our customers systems operations and services For example in February and April 2025 Microsoft notified the Company about unauthorized activity within our Azure environment by a suspected nation state threat actor As part of the ongoing investigation regarding this activity the Company immediately activated its incident response plan issued security advisories and implemented several advanced security measures including enhanced rotation of credentials and strengthened security monitoring among other proactive measures Similarly supply chain attacks have increased in frequency and severity and there have been high profile incidents of third party service providers causing widespread disruptions to their customers infrastructure due to errors in their SaaS offerings We cannot guarantee that third parties and infrastructure in our supply chain have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our Commvault Cloud platform systems and network or the systems and networks of third parties that support us and our business Moreover we may have limited remedies against third party providers in the event of a service disruption
In addition any failure to successfully implement new information systems and technologies or improvements or upgrades to existing information systems and technologies in a timely manner could adversely impact our business internal controls results of operations reputation and financial condition
There are significant risks involved in utilizing AI and no assurance can be provided that such usage will enhance our business or assist our business in being more efficient or profitable Known risks currently include accuracy bias toxicity intellectual property infringement or misappropriation data privacy and cybersecurity and data provenance In addition AI may have errors or inadequacies that are not easily detectable For example certain AI may utilize historical data in its analytics To the extent that such historical data is not indicative of the current or future conditions or models fail to filter biases in the underlying data or collection methods such AI usage may lead us to make determinations on behalf of our business recommendations to our clients or developments to our products and services in each case that may have an adverse effect on our business and financial results If AI models are incorrectly designed or the data used to train them is overbroad incomplete inadequate or biased in some way our use may inadvertently reduce our efficiency or cause unintentional or unexpected outputs that are incorrect do not match our business goals do not comply with our policies or interfere with the performance of our products and services business and reputation
AI is a complex and rapidly evolving regulatory landscape The use of AI may increase intellectual property cybersecurity and data protection operational and technological risks and our related efforts may result in new or enhanced governmental or regulatory scrutiny litigation ethical concerns or other complications that could adversely affect our business reputation or financial results or subject us to legal liability In particular technologies underlying AI and their use cases are subject to a variety of laws including intellectual property cybersecurity and data protection consumer protection and equal opportunity laws If we do not have sufficient rights to use the data on which these models rely we may incur liability through the violation of such laws third party privacy or other rights or contracts to which we are a party Changes in laws rules directives and regulations may adversely affect the ability of our business to develop and use AI
We market our own products as containing AI features Some of our customers especially those in highly regulated industries may be reluctant or unwilling to adopt such AI features which could reduce or delay customer adoption
Our success depends on our technology partners We rely on Microsoft s products and services including Azure and other third parties to support certain of our products services customers and business operations Any errors disruptions performance problems cybersecurity incidents or failures in such third parties operational infrastructure could adversely affect our business brand financial conditions and results of operations
We rely on the technology infrastructure and software applications including software as a service offerings of certain third parties such as Microsoft Azure in order to host or operate certain of our products services and operational infrastructure We do not have control over such third parties operations Therefore we depend on these third parties to protect their infrastructure and operations against damage or interruption from cybersecurity incidents natural disasters power or telecommunications failures criminal acts and similar events
If any of these third parties experience errors disruptions cybersecurity incidents or other performance deficiencies if their products and services are updated such that our products and services become incompatible if their products and services fail or become unavailable due to extended outages interruptions defects or otherwise or if they are no longer available on commercially reasonable terms or prices or at all such events may cause errors or failures in our products and services damages to our reputation or brand or decline to our revenue and margins As a result we could be exposed to legal or contractual liability our expenses could increase our ability to manage our operations could be interrupted and our operational processes could be impaired until equivalent services or technology if available are identified procured and implemented all of which may take significant time and resources increase our costs and could adversely affect our business
Many of these third party providers impose limitations on their liability for such errors disruptions defects performance deficiencies or failures Any renegotiation or renewal of our agreements with these third parties or a new agreement with another provider may be on terms that are significantly less favorable to us than our current agreements Microsoft and other cloud platform providers may furthermore introduce functionality that competes with our products and services as a result of an acquisition or their own development
If we fail to adapt and respond effectively to rapidly changing technology evolving industry standards changing regulations or to changing customer needs requirements or preferences our products may become less competitive
Our ability to attract new users and customers and increase revenue from existing customers depends in large part on our ability to enhance improve and differentiate our products increase adoption and usage of our products and introduce new products and capabilities The market in which we compete is subject to rapid technological change evolving industry standards and changing regulations as well as changing customer needs requirements and preferences The success of our business will depend in part on our ability to adapt and respond effectively to these changes on a timely basis If we are unable to enhance our products and keep pace with rapid technological change or if new technologies emerge that are able to deliver competitive products at lower prices more efficiently more conveniently or more securely than our products our business financial condition and results of operations could be adversely affected
From time to time we may become involved in various legal proceedings relating to matters incidental to the ordinary course of our business including intellectual property commercial product liability employment class action whistleblower and other litigation and claims and governmental and other regulatory investigations and proceedings Such matters can be time consuming divert management s attention and resources and cause us to incur significant expenses Furthermore because litigation is inherently uncertain there can be no assurance that the results of any of these actions will not have a material adverse effect on our business results of operations or financial condition
We are subject to several local state federal and foreign laws and regulations regarding privacy and data protection and any actual or perceived failure by us to comply with such laws and regulations could adversely affect our business
We are currently subject and may become further subject to local state federal and foreign laws and regulations regarding the privacy and protection of personal data or other potentially sensitive information In the United States federal state and local governments have enacted numerous data privacy security laws including data breach notification laws data privacy laws consumer protection laws and other similar laws For example the California Consumer Privacy Act of 2018 as amended by the California Privacy Rights Act of 2020 collectively the CCPA imposes obligations on certain businesses to provide specific disclosures in privacy notices and grants California residents certain rights related to their personal data The CCPA imposes statutory fines for noncompliance up to 7 500 per violation Other states have enacted or proposed similar laws These developments may increase legal risk and compliance costs for us and our customers
Governments worldwide are implementing more stringent data protection regulations requiring companies to invest heavily in compliance mechanisms to avoid substantial fines and reputational damage Outside the United States an increasing number of laws regulations and industry standards govern data privacy and security For example the European Union s E U General Data Protection Regulation E U GDPR and the Digital Operational Resilience Act DORA and the United Kingdom s U K GDPR U K GDPR impose strict requirements for processing the personal data of individuals Violations of these obligations carry significant potential consequences For example under the E U GDPR government regulators may impose temporary or definitive bans on processing as well as fines of up to 20 million or 4 of the annual global revenue whichever is greater Additionally new and emerging data privacy regimes may be applicable in Asia including India s Digital Personal Data Protection Act China s Personal Information Protection Law Japan s Act on the Protection of Personal Information and Singapore s Personal Data Protection Act Countries are enacting stricter data localization requirements compelling companies to store data within specific jurisdictions which complicates global operations and increases compliance costs
In addition as a technology provider our customers expect us to demonstrate compliance with current data privacy laws and further make contractual commitments and implement processes to enable the customer to comply with their own obligations under data privacy laws and our actual or perceived inability to do so may adversely impact sales of our products and services particularly to customers in highly regulated industries
Our actual or perceived failure to comply with laws regulations contractual commitments or other actual or asserted obligations including certain industry standards regarding personal information or other confidential information of individuals could lead to costly legal action brand and reputational damage significant liability inability to process data and decreased demand for our services which could adversely affect our business In addition any security breach that results in the release of or unauthorized access to personal information or other confidential information of individuals could subject us to incident response notice and remediation costs Failure to safeguard data adequately or to destroy data securely could subject us to regulatory investigations or enforcement actions under applicable data security unfair practices or consumer protection laws which could have an adverse effect on our business financial condition or operating results The scope and interpretation of these laws could change and the associated burdens and our compliance costs could increase in the future
The tax regimes in which we are subject or under which we operate are constantly facing changes in tax laws regulations or rulings or changes in interpretations of existing laws and regulations and could materially affect our financial position and results of operations In addition our tax obligations and effective tax rate in the jurisdictions in which we conduct business could increase in the future including as a result of the Base Erosion and Profit Shifting BEPS Project that is being led by the Organization for Economic Co operation and Development OECD commonly referred to as BEPS 2 0 Due to our international business activities these types of changes to the taxation of our activities could increase our worldwide effective tax rate the amount of taxes imposed on our business and our compliance costs and harm our financial position We continue to monitor the impact of new global and U S legislation on our effective tax rate
We are a U S based multinational company subject to tax in multiple U S and foreign tax jurisdictions Our results of operations would be adversely affected to the extent that our geographical mix of income becomes more weighted toward jurisdictions with higher tax rates and would be favorably affected to the extent the relative geographic mix shifts to lower tax jurisdictions Any change in our mix of earnings is dependent upon many factors and is therefore difficult to predict
The process of determining our anticipated tax liabilities involves many calculations and estimates that are inherently complex and make the ultimate tax obligation determination uncertain As part of the process of preparing our consolidated financial statements we are required to estimate our income taxes in each of the jurisdictions in which we operate prior to the completion and filing of tax returns for such periods These estimates involve complex issues require extended periods of time to resolve and require us to make judgments such as anticipating the outcomes of audits with tax authorities and the positions that we will take on tax returns prior to our actually preparing the returns In the normal course of business we are subject to examination by taxing authorities throughout the world The final determination of tax audits and any related litigation could be materially different from our historical tax provisions and accruals For further discussion on income taxes see Note 12 of the notes to the consolidated financial statements
Furthermore our overall effective income tax rate and tax expenses may be affected by various factors in our business including changes in our entity structure geographic mix of income and expenses tax laws and variations in the estimated and actual level of annual profits before income tax
Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board the SEC and various bodies formed to promulgate and interpret appropriate accounting principles A change in these principles or interpretations could have a significant effect on our reported financial results and may even affect the reporting of transactions completed before the announcement or effectiveness of a change
At March 31 2025 our goodwill had a carrying value of approximately 185 3 million which represented approximately 17 of our total assets We test goodwill for impairment at least annually at the reporting unit level or more often if an event occurs or circumstances change that would more likely than not reduce the fair value of its carrying amount This qualitative assessment requires us to assess and make judgments regarding a variety of factors which impact the fair value of the reporting unit or asset being tested including business plans anticipated future cash flows economic projections and other market data Because there are inherent uncertainties involved in these factors significant differences between these estimates and actual results could result in future impairment charges and could materially impact our future financial results For additional information on our goodwill impairment testing see Note 2 of the notes to the consolidated financial statements Any future impairment of this asset could have a material adverse effect on our results of operations which may adversely affect the market price of our common stock
We review our long lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable In January 2023 we reclassified our owned corporate headquarters as assets held for sale As a result we evaluated the carrying value of our long lived assets related to the property and determined that the carrying value of those assets may not be fully recoverable and as such recorded an impairment charge of 53 5 million in the fourth quarter of fiscal 2023 We recorded an additional 2 9 million impairment in fiscal 2025 related to changes in the estimated fair value less costs to sell As of March 31 2025 the sale has not yet been finalized
While classified as held for sale we may need to reassess the fair value of the building at each of our reporting periods and determine whether the carrying value is recoverable If the carrying value is not deemed to be recoverable based on current market conditions we may be required to record additional impairment charges in the future In addition if certain events or changes in circumstances arise such as being unable to sell the building within a reasonable timeframe or if selling the building would result in a negative economic future state we may need to reclassify the building from assets held for sale to assets held and used and record a cumulative catch up on the depreciable assets which may have a material impact on our operating results and could impact the market price of our common stock See Note 6 of the notes to the consolidated financial statements for additional information on our assets held for sale
We cannot predict our future quarterly revenues or operating results with certainty because of many factors outside of our control A significant revenue or profit decline lowered forecasts or volatility in our operating results could cause the market price of our common stock to decline substantially Factors that could affect our revenues and operating results include the following
the unpredictability of the timing and magnitude of orders for our solutions particularly transactions greater than 100 000 as a majority of our quarterly revenues have been earned and recorded near the end of each quarter
Our expense levels are relatively fixed and are based in part on our expectations of future revenues If revenue levels fall below our expectations and we are profitable at the time our net income would decrease because only a small portion of our expenses varies with our revenues Therefore any significant decline in revenues for any period could have an immediate adverse impact on our results of operations for that period We believe that period to period comparisons of our results of operations should not be relied upon as an indication of future performance Our results of operations could be below expectations of public market analysts and investors in future periods which would likely cause the market price of our common stock to decline
The market prices of companies in the data protection and cyber resiliency market have been extremely volatile Stock prices of many of those companies have often fluctuated in a manner unrelated or disproportionate to their operating performance In the past following periods of market volatility stockholders have often instituted securities class action litigation Securities litigation could have a substantial cost and divert resources and the attention of management from our business
Although we believe we currently have adequate internal control over financial reporting we are required to assess our internal control over financial reporting on an annual basis and any future adverse results from such assessment could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price
Management has assessed that our internal control over financial reporting is effective and lacks any material weaknesses Such assessment is made through subjective judgment of our management that may be open to interpretation The effectiveness of our internal control in the future is subject to the risk that such internal controls may become inadequate In the future if we fail to timely complete this assessment or if our independent auditors are unable to express an opinion on the effectiveness of our internal controls there may be a loss of public confidence in our financial reporting the market price of our stock could decline and we could be subject to regulatory sanctions or investigations by the Nasdaq Stock Market the SEC or other regulatory authorities which would require additional financial and management resources Any failure to implement required new or improved controls or difficulties encountered in their implementation could harm our operating results or cause us to fail to timely meet our regulatory reporting obligations
Certain provisions of our certificate of formation and our amended and restated bylaws or Delaware law could prevent or delay a potential acquisition of control of our Company which could decrease the trading price of our common stock
Our certificate of formation amended and restated bylaws and the laws in the State of Delaware contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the prospective acquirer and to encourage prospective acquirers to negotiate with our Board of Directors rather than to attempt a hostile takeover Delaware law also imposes restrictions on mergers and other business combinations between us and any holder of 15 or more of our outstanding common stock
We believe that these provisions protect our shareholders from coercive or otherwise unfair takeover tactics by effectively requiring those who seek to obtain control of the Company to negotiate with our Board of Directors and by providing our Board of Directors with more time to assess any acquisition of control However these provisions could apply even if an acquisition of control of the Company may be considered beneficial by some shareholders and could delay or prevent an acquisition of control that our Board of Directors determines is not in the best interests of our Company and our shareholders
Any economic failure or other material disruption caused by war climate change or natural disasters including fires floods hurricanes earthquakes and tornadoes power loss or shortages environmental disasters telecommunications or business information systems failures or similar events could also adversely affect our ability to conduct business If such disruptions result in cancellations of customer orders or contribute to a general decrease in economic activity or corporate spending on IT or impair our ability to meet our customer demands our operating results and financial condition could be materially adversely affected
There is also an increasing concern over the risks of climate change and related environmental sustainability matters In addition to physical risks climate change risk includes longer term shifts in climate patterns such as extreme heat sea level rise and more frequent and prolonged drought Such events could disrupt our operations or those of our customers or third parties on which we rely including through direct damage to assets and indirect impacts from supply chain disruption and market volatility
Our business may be adversely affected by the ongoing Russia Ukraine conflict the regional conflict in the Middle East or a public health crisis These events may cause us or our customers to temporarily suspend operations and could adversely affect the economies and financial markets of many countries resulting in an economic downturn that could affect demand for our solutions our ability to collect against existing trade receivables and our operating results
Commvault has established a cybersecurity program for the benefit of the company our customers partners and stakeholders The cybersecurity program includes policies processes and practices that are designed to assess identify and manage material risks from cybersecurity threats and is integrated into our enterprise risk management program Led by the Chief Security Officer CSO Commvault s cybersecurity program leverages the National Institute of Standards and Technology NIST Cybersecurity Framework with the primary objective of securing systems and data from cyber threats We partner with industry leading cybersecurity experts for continuous monitoring alerting mitigation and responsiveness related to our cybersecurity program We adopt industry best practices and security technologies and have established a Security Incident Response Plan SIRP which outlines our processes for incident preparation detection analysis containment eradication and post incident analysis In addition to the SIRP we maintain a Crisis Management Plan to organize roles and responsibilities in the event of a crisis a Disaster Recovery Plan to provide guidance in the recovery of systems following an outage and a Business Continuity Plan to identify alternative means of conducting business in the event of business disruption We partner with third party service providers to enhance our monitoring and response capabilities facilitate readiness activities including tabletop exercises and perform various methods of cybersecurity penetration testing All employees are required to undergo annual security awareness training on current and potential cybersecurity threats and report suspicious activity We also assess third party service provider cybersecurity controls and include security and privacy terms in contracts as appropriate
Commvault maintains a variety of third party certifications and undergoes annual assessments for SOC 2 Type 2 ISO 27001 HIPAA CJIS and PCI DSS In support of these certifications and assessments our products also undergo security testing Annually internal auditors complete a risk assessment of specific business operations such as privacy and sanctions compliance and travel and expense policy compliance identify areas of heightened risk and conduct dedicated audit engagements The findings observations and recommendations from these engagements are shared with Management including the CEO CFO Chief Trust Officer CSO Chief Information Officer CIO and Senior Vice President of Engineering and the Audit Committee as appropriate
Given the increasingly complex and sophisticated cyber threat landscape we try to be vigilant to predict and prevent attacks Commvault has prioritized cyber resilience measures and leverages governance processes and procedures to mitigate potential business impacts if and when an adverse event occurs To date Commvault is not aware of any risks from cybersecurity threats including as a result of any previous cybersecurity incidents that have materially affected or are reasonably likely to materially affect Commvault including its business strategy results of operations or financial condition Although no material impacts have been recorded to date IT system failures network disruptions cybersecurity incidents and data breaches could adversely impact our business internal controls results of operations and financial condition For example in February and April 2025 Microsoft notified the Company about unauthorized activity within our Azure environment by a suspected nation state threat actor As part of the ongoing investigation regarding this activity the Company immediately activated its incident response plan issued security advisories and implemented several advanced security measures including enhanced rotation of credentials and strengthened security monitoring among other proactive measures
For additional description of cybersecurity risks and potential related impacts on Commvault refer to the risk factor captioned Risks Related to Technology and Security We may be subject to IT system failures network disruptions cybersecurity incidents and breaches in data security in Part 1 Item 1A Risk Factors
Commvault s Board of Directors the Board provides oversight of Commvault s enterprise risk management strategy which includes risks from cybersecurity threats The Audit Committee of the Board receives quarterly briefings on the cybersecurity program from the CSO and briefings on the Enterprise Risk Management Committee ERMC from the Chief Trust Officer The Board is kept apprised of cybersecurity updates through quarterly reporting from the Audit Committee Chair and annual or as needed reporting directly to the Board from the CSO
making and incident preparedness and response The current CSO holds a Bachelor of Science and Master of Business Administration from the University of Maryland industry certifications such as CISSP PMP CIPP E CIPP US and CISA is affiliated with various industry working groups focused on threat intelligence and privacy and has over twenty years of experience in cybersecurity leading technical operational and strategic programs to protect critical data and infrastructure Management ensures cybersecurity risks are communicated through the establishment of the ERMC and regular or as needed reporting to the Audit Committee and the Board The ERMC is responsible for the implementation maintenance and execution of our enterprise risk management program The ERMC meets quarterly or as needed to assess consider and manage material risks including cybersecurity threats across the business An Executive Security Council is responsible for the significant operational decisions in the event of an active cybersecurity incident The Executive Security Council meets monthly or as needed with the Audit Committee Chair as an optional attendee to provide counsel and foster productive communication between Management and the Board
Our principal administrative sales marketing customer support and research and development facility is located at our owned corporate headquarters in Tinton Falls New Jersey In October 2024 we signed a purchase and sale agreement to sell the property We believe the sale will be completed in the first quarter of fiscal 2026 Upon closing of the transaction we will enter into a lease for a portion of the premises
In addition we have offices in the United States in California and Florida and outside the United States in Australia Austria Belgium Brazil Canada China Denmark Egypt France Germany India Israel Italy Japan Malaysia Netherlands Saudi Arabia Singapore South Africa South Korea Spain Sweden Switzerland Taiwan United Arab Emirates and United Kingdom
From time to time we are subject to claims in legal proceedings arising in the normal course of business We do not believe that we are currently party to any pending legal action that could reasonably be expected to have a material adverse effect on our business or operating results
As of May 2 2025 there were approximately 38 holders of our common stock The number of record holders does not represent the actual number of beneficial owners of shares of our common stock because shares are frequently held in street name by securities dealers and others for the benefit of individual owners who have the right to vote their shares
We have never paid cash dividends on our common stock and we intend to retain our future earnings if any to fund the growth of our business We therefore do not anticipate paying any cash dividends on our common stock in the foreseeable future Our future decisions concerning the payment of dividends on our common stock will depend upon our results of operations financial condition and capital expenditure plans as well as any other factors that the Board of Directors in its sole discretion may consider relevant
During the three months ended March 31 2025 we repurchased 29 8 million of common stock or approximately 0 2 million shares under our repurchase program As a result 91 5 million remained available under the current authorization A summary of our repurchases of common stock is as follows
The graph set forth below compares the cumulative total stockholder return on our common stock between March 31 2020 and March 31 2025 with the cumulative total return of i The Nasdaq Composite Index and ii The Nasdaq Computer Index over the same period This graph assumes the investment of 100 000 on March 31 2020 in our common stock The Nasdaq Composite Index and The Nasdaq Computer Index and assumes the reinvestment of dividends if any The graph assumes the initial value of our common stock on March 31 2020 was the closing sales price of 40 48 per share
The comparisons shown in the graph below are based upon historical data The stock price performance shown in the graph below is not necessarily indicative of nor is it intended to forecast the future performance of our common stock Information used in the graph was obtained from Nasdaq a source we believe to be reliable but we are not responsible for any errors or omissions in such information
You should read the following discussion and analysis along with our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10 K The statements in this discussion regarding our expectations of our future performance liquidity and capital resources and other non historical statements are forward looking statements These forward looking statements are subject to numerous risks and uncertainties including but not limited to the risks and uncertainties described under Risk Factors and elsewhere in this Annual Report on Form 10 K Our actual results may differ materially from those contained in or implied by any forward looking statements For discussion comparing the period ended March 31 2024 to March 31 2023 please refer to our Annual Report on Form 10 K filed with the SEC on May 13 2024
Commvault Systems Inc aims to provide its customers cyber resiliency by protecting and recovering their data and cloud native applications in a world of increasing cyber threats and attacks including ransomware We provide products and services across many types of environments including on premises hybrid and multi cloud Our offerings are delivered via self managed software software as a service SaaS integrated appliances or managed by partners
Our industry continues to go through accelerating changes as the result of compounding data growth increasing security threats and the introduction of new technologies These changes are shifting the demands on the importance of resilience for the modern enterprise Companies now require a comprehensive cyber resilience platform that simplifies and manages these forces holistically Commvault Cloud is designed to secure and accelerate the recovery so that data can be restored from anywhere to anywhere rapidly reliably and at scale
We generate revenues through subscription arrangements perpetual software licenses customer support contracts and other services A significant portion of our total revenues comes from subscription arrangements which include both sales of term based licenses and SaaS offerings We are focused on these types of recurring revenue arrangements
We expect our subscription arrangements will continue to generate revenues from the renewals of term based licenses and SaaS offerings sold in prior years Any of our pricing models capacity instance based etc can be sold via a subscription arrangement either through term based licensing or hosted services In term based license arrangements the customer has the right to use the software over a designated period of time The capacity of the license is fixed and the customer has made an unconditional commitment to pay Software revenue in these arrangements is generally recognized when the software is delivered In SaaS offerings customers use hosted software over the contract period without taking possession of the software Revenue related to SaaS is recognized ratably over the contract period
We sell to end user customers both directly through our sales force and indirectly through our global network of value added reseller partners systems integrators corporate resellers OEMs and marketplaces Subscription revenue generated through indirect distribution channels accounted for approximately 90 of total subscription revenue in recent fiscal years Subscription revenue generated through direct distribution channels accounted for approximately 10 of total subscription revenue in recent fiscal years Deals initiated by our direct sales force are sometimes transacted through indirect channels based on end user customer requirements which are not always in our control and can cause this overall percentage split to vary from period to period As such there may be fluctuations in the dollars and percentage of subscription revenue generated through our direct distribution channels from time to time We believe that the growth of our subscription revenue derived from both our indirect channel partners and direct sales force are key attributes to our long term growth strategy We intend to continue to invest in both our channel relationships and direct sales force in the future but we continue to expect more revenue to be generated through indirect distribution channels over the long term The failure of our indirect
We have a non exclusive distribution agreement with Arrow pursuant to which Arrow s primary role is to enable a more efficient and effective distribution channel for our solutions by managing our resellers and leveraging their own industry experience We generated approximately 35 36
of our total revenues through Arrow in fiscal 2025 fiscal 2024 and fiscal 2023 respectively If Arrow were to discontinue or reduce the sales of our solutions or if our agreement with Arrow was terminated and if we were unable to take back the management of our reseller channel or find another distributor to replace Arrow there could be a material adverse effect on our future business
ustomer support revenue includes support contracts tied to our software products Customer support includes software updates on a when and if available basis telephone support integrated web based support and other premium support offerings for both term based software license and perpetual software license arrangements We sell our customer support contracts as a percentage of net software Customer support revenue is recognized ratably over the term of the customer support agreement which is typically one year on our perpetual licenses The term of our subscription arrangements is typically one to three years but can range between one and five years
Our other services revenue consists primarily of professional service offerings including consultation assessment and design installation services and customer education Revenues from other services can vary period over period based on the timing services are delivered and are typically recognized as the services are performed
consists primarily of salaries commissions employee benefits stock based compensation and other direct and indirect business expenses including travel and related expenses sales promotion expenses public relations expenses and costs for marketing materials and other marketing events such as trade shows and advertising
consists primarily of salaries stock based compensation benefits and related expenses for research and development personnel associated with the development of new or the modification of existing offerings and applications further costs related to certain contract labor and consulting fees and expenses associated with the design certification and testing of our offerings are included as well as legal costs associated with the patent registration of such offerings and applications
consists primarily of salaries stock based compensation and benefits for our executive accounting human resources legal information technology and other administrative personnel Also included in this category are other general corporate expenses such as outside legal and accounting services compliance costs and insurance and
consists of depreciation expense for fixed assets computer equipment we use for information services and in our development and test labs and amortization of intangible assets In fiscal year 2023 depreciation for our owned corporate headquarters was also included
Sales outside the United States were 46 of our total revenues for fiscal 2025 48 for fiscal 2024 and 47 for fiscal 2023 The income statements of our non U S operations are translated into U S dollars at the average exchange rates for each applicable month in a period To the extent the U S dollar weakens against foreign currencies the translation of these foreign currency denominated transactions generally results in increased revenue operating expenses and income from operations for our non U S operations Similarly our revenue operating expenses and net income will generally decrease for our non U S operations if the U S dollar strengthens against foreign currencies
Using the average foreign currency exchange rates from fiscal 2024 our fiscal 2025 total revenues would have been higher by 4 2 million and our cost of revenues would have been higher by 1 0 million respectively Our operating expenses would not have been materially impacted for fiscal 2025
In addition we are exposed to risks of foreign currency fluctuation primarily from cash balances accounts receivables and intercompany accounts denominated in foreign currencies and are subject to the resulting transaction gains and losses which are recorded as a component of general and administrative expenses We recognized net foreign currency transaction losses
In presenting our consolidated financial statements in conformity with U S generally accepted accounting principles GAAP we are required to make estimates and judgments that affect the amounts reported therein Some of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events We base these estimates on historical experience and on various other assumptions that we believe to be reasonable and appropriate Actual results may differ significantly from these estimates To the extent that there are material differences between these estimates and actual results our future financial statement presentation financial condition results of operations and cash flows may be affected
In many cases the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management s judgment in its application while in other cases significant judgment is required in selecting among available alternative accounting standards that allow different accounting treatment for similar transactions We consider these policies requiring significant management judgment to be critical accounting policies The following is a description of these critical accounting policies
Our revenue recognition policies require us to make significant judgments and estimates In applying our revenue recognition policy we must determine which portions of our revenue are recognized currently generally software related revenue and which portions must be deferred and recognized in future periods generally SaaS customer support and other services revenue We analyze various factors including but not limited to the selling price of undelivered services when sold on a stand alone basis our pricing policies the creditworthiness of our customers and contractual terms and conditions in helping us to make such judgments about revenue recognition As most of our transactions go through indirect distribution channels we are also required to make judgments around principal versus agent considerations and judgments around which party is our customer in multi party arrangements Changes in judgment on any of these factors could materially impact the timing and amount of revenue recognized in a given period We recognize revenue net of sales tax
We generate revenues through subscription arrangements perpetual software licenses customer support contracts and other services A significant portion of our total revenues comes from subscription arrangements which include both sales of term based licenses and SaaS offerings We are focused on these types of recurring revenue arrangements
We expect our subscription arrangements will continue to generate revenues from the renewals of term based licenses and SaaS offerings sold in prior years We offer of our pricing models capacity instance based etc to be sold via a subscription arrangement either through term based licensing or hosted services In term based license arrangements the customer has the right to use the software over a designated period of time The capacity of the license is fixed and the customer has made an unconditional commitment to pay Software revenue in these arrangements is generally recognized when the software is delivered In SaaS offerings customers use hosted software over the contract period without taking possession of the software Revenue related to SaaS is recognized ratably over the contract period
We sell both perpetual and term based licenses of our software We refer to our term based software licenses as subscription arrangements We do not customize our software and installation services are not required The software is delivered before related services are provided and is functional without professional services updates and technical support We have concluded that our software licenses both perpetual and subscription are functional intellectual property that is distinct as the user can benefit from the software on its own Revenues for both perpetual and term based licenses is typically recognized when the software is delivered and or made available for download as this is the point the user of the software can direct the use of and obtain substantially all of the remaining benefits from the functional intellectual property We do not recognize software revenue related to the renewal of subscription software licenses earlier than the beginning of the new subscription period
We also offer software that integrates with appliances and address a wide range of business needs and use cases ranging from support for remote or branch offices with limited IT staff up to large corporate data centers These appliances are almost exclusively sold via a software only model in which we sell software to a third party which assembles an integrated appliance that is sold to end user customers As a result the revenues and costs associated with hardware are usually not in our financial statements
ustomer support revenue includes support contracts tied to our software products Customer support includes software updates on a when and if available basis telephone support integrated web based support and other premium support offerings for both term based software license and perpetual software license arrangements We sell our customer support contracts as a percentage of net software Customer support revenue is recognized ratably over the term of the customer support agreement which is typically one year on our perpetual licenses The term of our subscription arrangements is typically one to three years but can range between one and five years
Our other services revenue consists primarily of professional service offerings including consultation assessment and design installation services and customer education Revenues from other services can vary period over period based on the timing services are delivered and are typically recognized as the services are performed
Most of our contracts with customers contain multiple performance obligations For these contracts we evaluate and account for individual performance obligations separately if they are determined to be distinct The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis Standalone selling prices of software licenses both perpetual and term based are typically estimated using the residual approach Standalone selling prices for SaaS customer support contracts and other services are typically estimated based on observable transactions when these services are sold on a standalone basis
Under ASC 740 deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts Valuation allowances are established when in our judgment it is more likely than not that deferred tax assets will not be realized In assessing the need for a valuation allowance we consider all available objective and verifiable evidence both positive and negative including historical levels of pre tax income or loss both on a consolidated basis and tax reporting entity basis legislative developments expectations and risks associated with estimates of future pre tax income and prudent and feasible tax planning strategies At March 31 2025 and 2024 we recorded a valuation allowance which reflects uncertainties around our ability to generate sufficient income in certain jurisdictions to utilize our net deferred tax assets At March 31 2023 we had recorded a full valuation allowance as the realizability of the Company s gross deferred tax assets was not more likely than not We believe in the current period it is more likely than not that we will have sufficient taxable income to realize our remaining deferred tax assets
Goodwill represents the residual purchase price paid in a business combination after the fair value of all identified assets and liabilities have been recorded We test goodwill for impairment at least annually on January 1 or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable We have one reporting unit Goodwill is tested at this reporting unit level We have elected to first assess the qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test This may involve making judgments about a variety of factors that impact fair value including business plans anticipated future cash flows economic projections and other market data If the qualitative assessment indicates that it is more likely than not that the fair value is less than the carrying amount a quantitative goodwill impairment test is performed If the fair value exceeds the carrying amount no further analysis is required otherwise an impairment loss is recognized for the amount by which the carrying value of goodwill exceeds its fair value Because there are inherent uncertainties involved in these factors significant differences between these estimates and actual results could result in future impairment charges and could materially impact our future financial results No impairment of goodwill has been identified during the years presented
We apply judgment in estimating the fair value of purchased intangible assets which involves the use of significant judgment The assumptions used in valuing intangible assets include but are not limited to future expected cash flows of the asset discount rates to determine the present value of the future cash flows attrition rates of customers and expected technology life cycles We also estimate the useful lives of the intangible assets based on the expected period over which we anticipate generating economic benefit from the asset Additionally we assess purchased intangible assets for impairment when events or changes in circumstances indicate the carrying amount is not recoverable and exceeds its fair value Determining the fair value of intangible assets requires management to make estimates based on all available information and in some cases assumptions regarding the timing and amount of future revenues and expenses associated with the asset Because there are inherent uncertainties involved in these factors significant differences between these estimates and actual results could result in future impairment charges and could materially impact our future financial results No impairment of purchased intangible assets has been identified during the years presented
Amounts reported in millions are rounded based on the amounts in thousands As a result the sum of the components reported in millions may not equal the total amount reported in millions due to rounding
Total revenues increased 156 4 million or 19 year over year driven primarily by an increase in subscription revenue partially offset by decreases in perpetual license and other services revenues We remain focused on selling subscription arrangements through both term based software licenses and SaaS offerings
Subscription revenue increased 160 5 million or 37 year over year driven primarily by a 74 increase in our SaaS revenue Term based license revenue increased 22 primarily due to an increase in the number of larger term based license transactions deals greater than 0 1 million period over period and an increase in the average selling price of these transactions Subscription revenue accounted for 59 of total revenues in fiscal 2025 compared to 51 in fiscal 2024
Perpetual license revenue decreased 2 0 million or 3 year over year Our preferred route to market is led by the sale of term based licenses Perpetual licenses are generally only sold in certain verticals and geographies Perpetual license revenue accounted for 6 of total revenues in fiscal 2025 compared to 7 in fiscal 2024
Customer support revenue was flat compared to the same period of the prior year driven by a 25 7 million decrease in customer support revenue attached to perpetual license support renewals offset by a 25 5 million increase in customer support related to term based license arrangements
We track total revenues on a geographic basis Our Americas region includes the United States Canada and Latin America Our International region primarily includes Europe Middle East Africa Australia India Southeast Asia and China Americas and International represented 61 and 39 of total revenues respectively for the fiscal year ended March 31 2025 Total revenues increased 22 and 14 year over year in the Americas and International respectively
The increase in the Americas total revenues was primarily due to increases of 40 and 12 in subscription and perpetual license revenues respectively Customer support and other services revenues declined 2 and 3 respectively
The increase in International total revenues was primarily due to a 33 increase in subscription revenue partially offset by a 10 decrease in perpetual license revenue driven by the shift from selling perpetual licenses to subscription arrangements Customer support revenue increased 2 year over year Other services revenue declined 6 year over year due to a decrease in the delivery of professional services as compared to the same period of the prior year
Cost of subscription revenue increased 30 5 million representing 15 of our total subscription revenue in fiscal 2025 compared to 14 in fiscal 2024 The year over year increase is primarily the result of incremental hosting costs associated with the Clumio Inc Clumio acquisition and an increase in the cost of infrastructure related to growth in our SaaS offerings
Sales and marketing expenses increased 79 1 million or 22 due to increases in sales commissions and bonus associated with increased revenues relative to the prior year increases in employee compensation tied to strategic go to market investments and an increase of 11 0 million in stock based compensation In addition in fiscal 2025 there were increases year over year in certain marketing and go to market activities which included a live sales kickoff event and participation in certain strategic conferences including the RSA conference which did not occur in fiscal 2024
Research and development expenses increased 14 0 million or 11 driven by increases in employee compensation and related expenses resulting from additional headcount related to the Appranix Inc Appranix and Clumio acquisitions completed in April 2024 and October 2024 respectively Expenses related to stock based compensation increased 2 4 million compared to the prior year Investing in research and development remains a priority for Commvault and we anticipate continued responsible spending related to the development of our software applications and hosted services
General and administrative expenses increased 24 4 million or 21 driven by increases in accounting and legal expenses related to the acquisitions of Appranix and Clumio and increases in employee compensation and related expenses including a 3 2 million increase in stock based compensation year over year
Restructuring Our restructuring plan initiated in the fourth quarter of fiscal 2024 and completed in fiscal 2025 was intended to enhance customer satisfaction through the reorganization and redesign of our customer success functions The realignment of the customer success structure aimed to optimize operational efficiency and improve continuity for our customers through the pre sales and post sales experience Restructuring expenses were 10 0 million and 4 5 million for the years ended March 31 2025 and 2024 respectively These charges related primarily to severance and related costs associated with headcount reductions as well as costs related to office termination and exit charges These expenses included 4 6 million in fiscal 2025 and 1 5 million in fiscal 2024 of stock based compensation related to modifications of existing awards granted to certain employees impacted by the plan
Risks associated with our restructuring plan include additional unexpected costs adverse effects on employee morale and the failure to meet operational and growth targets due to the loss of key employees any of which may impair our ability to achieve anticipated results of operations or otherwise harm our business
Change in contingent consideration During the year ended March 31 2025 we recorded an expense of 2 1 million related to changes in the estimated fair value of our contingent consideration arrangement The arrangement is contingent upon meeting certain financial metrics by June 30 2025 and can range up to 4 0 million
Impairment charges During the year ended March 31 2025 we recorded an impairment charge of 2 9 million related to our assets held for sale which includes changes in the estimated fair value and estimated costs to sell
Income tax expense was 4 9 million in fiscal 2025 compared to a benefit of 85 3 million in fiscal 2024 Income tax expenses for the year ended March 31 2025 relate primarily to current federal taxes The income tax benefit for the fiscal year ended March 31 2024 relates primarily to the release of the previously recorded valuation allowance against certain deferred tax assets in the U S and foreign jurisdictions
In recent fiscal years our principal source of liquidity has been cash provided by operations As of March 31 2025 our cash and cash equivalents balance was 302 1 million of which approximately 265 4 million was held outside of the United States by our foreign legal entities These balances are dispersed across approximately 35 international locations around the world We believe that such dispersion meets the current and anticipated future liquidity needs of our foreign legal entities In the event we need to repatriate funds from outside of the United States such repatriation would likely be subject to restrictions by local laws and or tax consequences including foreign withholding taxes
On December 13 2021 we entered into a five year 100 million senior secured revolving credit facility the Credit Facility with JPMorgan Chase Bank N A The Credit Facility is available for share repurchases general corporate purposes and letters of credit The Credit Facility contains financial maintenance covenants including a leverage ratio and interest coverage ratio The Credit Facility also contains certain customary events of default which would permit the lender to among other things declare all loans then outstanding to be immediately due and payable if such default is not cured within applicable grace periods The Credit Facility also limits our ability to incur certain additional indebtedness create or permit liens on assets make acquisitions make investments loans or advances sell or transfer assets pay dividends or distributions and engage in certain transactions with foreign affiliates Outstanding borrowings under the Credit Facility accrue interest at an annual rate equal to the Secured Overnight Financing Rate plus 1 25 subject to increases based on our actual leverage The unused balance on the Credit Facility is also subject to a 0 25 annual interest charge subject to increases based on our actual leverage As of March 31 2025 there were no borrowings under the Credit Facility and we were in compliance with all covenants
On April 15 2025 we successfully refinanced our existing 100 million senior secured revolving credit facility replacing it with a new five year senior secured revolving credit facility This refinancing has increased the Company s total borrowing capacity to 300 million Under the terms of the new Credit Facility borrowings will accrue interest at a per annum rate determined by the Company s election of either the Secured Overnight Financing Rate SOFR plus a margin ranging from 1 50 to 2 00 or a base rate which is generally the greater of the prime rate plus a margin ranging from 0 50 to 1 00 The applicable margin in each case is contingent upon the Company s leverage ratio Additionally the unused balance on the Credit Facility is also subject to an annual interest charge of 0 25 subject to increases based on the Company s leverage ratio
During the fiscal year ended March 31 2025 we repurchased 165 0 million of common stock or approximately 1 2 million shares On April 17 2025 the Board of Directors approved an increase in our share repurchase program so that 250 0 million was available The Board s authorization has no expiration date
Fiscal 2025 165 0 million used to repurchase shares of our common stock under our repurchase program partially offset by 17 5 million of proceeds from the exercise of stock options and the Employee Stock Purchase Plan
Fiscal 2024 184 0 million used to repurchase shares of our common stock under our repurchase program partially offset by 13 4 million of proceeds from the exercise of stock options and the Employee Stock Purchase Plan
Working capital decreased 30 2 million from 110 2 million as of March 31 2024 to 80 0 million as of March 31 2025 The decrease in working capital is primarily the result of a decrease in cash and cash equivalents driven by the acquisitions of Appranix and Clumio in fiscal 2025 and an increase in the current portion of deferred revenue partially offset by an increase in accounts receivable
We believe that our existing cash cash equivalents and our cash from operations will be sufficient to meet our anticipated cash needs for working capital income taxes capital expenditures and potential stock repurchases for at least the next twelve months We may seek additional funding through public or private financings or other arrangements during this period Adequate funds may not be available when needed or may not be available on terms favorable to us or at all If additional funds are raised by issuing equity securities dilution to existing stockholders will result If we raise additional funds by obtaining loans from third parties the terms of those financing arrangements may include negative covenants or other restrictions on our business that could impair our operational flexibility and would also require us to fund additional interest expense If funding is insufficient at any time in the future we may be unable to develop or enhance our products or services take advantage of business opportunities or respond to competitive pressures any of which could have a material adverse effect on our business financial condition and results of operations
We have various contractual obligations and commitments such as contingent consideration obligations purchase commitments royalty expenses warranties and leases that are disclosed in the notes to the consolidated financial statements See Note 4 Business Combinations Note 9 Commitments and Contingencies and Note 16 Leases of the notes to the consolidated financial statements for further information regarding these commitments
Certain of our software licensing agreements contain certain provisions that indemnify our customers from any claim suit or proceeding arising from alleged or actual intellectual property infringement These provisions continue in perpetuity along with our software licensing and SaaS agreements We have never incurred a liability relating to one of these indemnification provisions in the past and we believe that the likelihood of any future payout relating to these provisions is remote Therefore we have not recorded a liability during any period related to these indemnification provisions
As a global company we face exposure to adverse movements in foreign currency exchange rates Our international sales are generally denominated in foreign currencies and this revenue could be materially affected by currency fluctuations Approximately 46 of our sales were outside the United States in fiscal 2025 and 48 in fiscal 2024 Our primary exposures are to fluctuations in exchange rates for the U S dollar versus the Euro and to a lesser extent the Australian dollar British pound sterling Canadian dollar Chinese yuan Indian rupee Korean won and Singapore dollar Changes in currency exchange rates could adversely affect our reported revenues and require us to reduce our prices to remain competitive in foreign markets which could also have a material adverse effect on our results of operations Historically we have periodically reviewed and revised the pricing of our products available to our customers in foreign countries and we have not maintained excess cash balances in foreign accounts
We estimate that a hypothetical 10 change in all foreign exchange rates would impact our reported operating profit by approximately 15 5 million annually This sensitivity analysis disregards the possibilities that
Our exposure to foreign currency transaction gains and losses is primarily the result of certain net receivables due from our foreign subsidiaries and customers being denominated in currencies other than the functional currency of the subsidiary Our foreign subsidiaries conduct their businesses in local currency and we generally do not maintain excess U S dollar cash balances in foreign accounts
We have audited the accompanying consolidated balance sheets of Commvault Systems Inc the Company as of March 31 2025 and 2024 the related consolidated statements of operations comprehensive income loss stockholders equity and cash flows for each of the three years in the period ended March 31 2025 and the related notes collectively referred to as the consolidated financial statements In our opinion the consolidated financial statements present fairly in all material respects the financial position of the Company at March 31 2025 and 2024 and the results of its operations and its cash flows for each of the three years in the period ended March 31 2025 in conformity with U S generally accepted accounting principles
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the Company s internal control over financial reporting as of March 31 2025 based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework and our report dated May 5 2025 expressed an unqualified opinion thereon
These financial statements are the responsibility of the Company s management Our responsibility is to express an opinion on the Company s financial statements based on our audits We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud Our audits included performing procedures to assess the risks of material misstatement of the financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements We believe that our audits provide a reasonable basis for our opinion
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that 1 relates to accounts or disclosures that are material to the financial statements and 2 involved our especially challenging subjective or complex judgments The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements taken as a whole and we are not by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates
As described in Note 3 to the consolidated financial statements the Company derives revenues from the sale of subscriptions perpetual licenses customer support and other services Most of the Company s contracts with customers contain multiple performance obligations which are accounted for separately if they are distinct The transaction price is allocated to separate performance obligations on a relative standalone selling price basis
We obtained an understanding evaluated the design and tested the operating effectiveness of controls over the Company s revenue recognition process including the evaluation of the contractual terms of the revenue arrangements
To test the amount of revenue recognized we performed audit procedures that included among others testing a sample of revenue transactions during the year and evaluating the identification of performance obligations based on an analysis of the contractual terms and independent confirmations of the terms and conditions of the contract directly with customers
Commvault Systems Inc and its subsidiaries Commvault we us or our aims to provide its customers cyber resiliency by protecting and recovering their data and cloud native applications in a world of increasing cyber threats and attacks including ransomware We provide products and services across many types of environments including on premises hybrid and multi cloud Our offerings are delivered via self managed software software as a service SaaS integrated appliances or managed by partners Customers use our Commvault Cloud platform to help protect themselves from threats like ransomware and recover their data efficiently
Beginning in fiscal 2025 changes in operating lease assets are being classified as a noncash lease adjustment to reconcile net income loss to net cash provided by operating activities This reclassification has no impact on the amount of cash flows from operating activities
The preparation of financial statements and related disclosures in conformity with U S generally accepted accounting principles GAAP requires management to make judgments and estimates that affect the amounts reported in our consolidated financial statements and the accompanying notes We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances The amounts of assets and liabilities reported in our balance sheets and the amounts of revenues and expenses reported for each of the periods presented are affected by estimates and assumptions which are used for but not limited to the accounting for revenue recognition income taxes and related reserves deferred commissions purchased intangible assets and goodwill Actual results could differ from those estimates
Restricted stock units and performance stock units without a market condition are measured based on the fair market values of the underlying stock on the date of grant Performance stock units with a market condition are measured using a Monte Carlo model We recognize stock based compensation expense using the straight line method for all stock awards that do not include a market or performance condition Awards that include a market or performance condition are expensed using the accelerated method
The costs for the development of new products and substantial enhancements to existing products are expensed as incurred until technological feasibility has been established at which time any additional costs would be capitalized in accordance with the accounting guidance for software Because our current process for developing software is essentially completed concurrently with the establishment of technological feasibility which occurs upon the completion of a working model no costs have been capitalized for any of the periods presented
ASC 740 The provision for income taxes and effective tax rates are calculated by legal entity and jurisdiction and are based on a number of factors including the level of pre tax earnings income tax planning strategies differences between tax laws and accounting rules statutory tax rates and credits uncertain tax positions and valuation allowances We provide for global intangible low taxed income GILTI earned by certain foreign subsidiaries in the year the tax is incurred and record an estimate of GILTI as a component of the tax provision We use significant judgment and estimates in evaluating tax positions The effective tax rate in a given financial statement period may be materially impacted by changes in the mix and level of earnings by taxing jurisdiction
Under ASC 740 deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts Valuation allowances are established when in our judgment it is more likely than not that deferred tax assets will not be realized In assessing the need for a valuation allowance we weigh the available positive and negative evidence including historical levels of pre tax income or loss both on a consolidated basis and tax reporting entity basis legislative developments expectations and risks associated with estimates of future pre tax income and prudent and feasible tax planning strategies
The functional currencies of our foreign operations are deemed to be the local country s currency Assets and liabilities of our international subsidiaries are translated at their respective period end exchange rates and revenues and expenses are translated at average currency exchange rates for the period The resulting balance sheet translation adjustments are included in other comprehensive income loss and are reflected as a separate component of stockholders equity
Foreign currency transaction gains and losses are recorded in general and administrative expenses in the consolidated statements of operations These gains and losses relate primarily to receivables and payables that are not denominated in the functional currency of the subsidiary they relate to We recognized net foreign currency transaction losses
Basic net income loss per common share is computed by dividing net income loss by the weighted average number of common shares during the period Diluted net income loss per share is computed using the weighted average number of common shares and if dilutive potential common shares outstanding during the period Potential common shares consist of the incremental common shares issuable upon the vesting of restricted stock units shares to be purchased under the Employee Stock Purchase Plan ESPP and the exercise of stock options The dilutive effect of such potential common shares is reflected in diluted earnings loss per share by application of the treasury stock method
The diluted weighted average shares outstanding exclude restricted stock units performance restricted stock units shares to be purchased under the ESPP and outstanding stock options totaling 221 271 and 3 939 for the fiscal years ended March 31 2025 2024 and 2023 respectively because the effect would have been anti dilutive
Trade and other receivables are primarily comprised of trade receivables that are recorded at the invoice amount net of an allowance for doubtful accounts which is not material Unbilled receivables represent amounts for which revenue has been recognized but which have not yet been invoiced to the customer The current portion of unbilled receivables is included in trade accounts receivable on the consolidated balance sheets Long term unbilled receivables are included in other assets The allowance for doubtful accounts was 166 as of March 31 2025 and 173 as of March 31 2024 For the years ended March 31 2025 2024 and 2023 bad debt expense was immaterial
Historically we have not experienced material losses related to the inability to collect receivables from our customers There is presently no indication that we will not collect material amounts of accounts receivable as of March 31 2025 The inability to collect receivables could have a material impact on our results of operations
Sales through our distribution agreement with Arrow Enterprise Computing Solutions Inc Arrow totaled approximately 35 36 and 37 of our total revenues for the years ended March 31 2025 2024 and 2023 respectively Arrow accounted for approximately 29 of our total accounts receivable as of March 31 2025 and 2024
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability an exit price in the principal or most advantageous market for such asset or liability in an orderly transaction between market participants on the measurement date Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs To measure fair value we use the following fair value hierarchy based on three levels of inputs of which the first two are considered observable and the last unobservable
The carrying amounts of our cash cash equivalents accounts receivable and accounts payable approximate their fair values due to the short term maturity of these instruments The contingent consideration is related to the acquisition of Appranix Inc Appranix and was valued using a Monte Carlo simulation model See Note 4 of the notes to the consolidated financial statements for further details of the acquisition and contingent consideration
These investments are included in other assets in the accompanying consolidated balance sheets The net asset values of these investments are determined using quarterly capital statements from the funds which are based on our contributions to the funds allocation of profit and loss and changes in fair value of the underlying fund investments Changes in fair value as reported on the capital statements are recorded through the consolidated statements of operations as non operating income or expense These private equity funds focus on making investments in key technology sectors principally by investing in companies at expansion capital and growth equity stages We have total unfunded commitments in private equity funds of 1 494 as of March 31 2025
We determine if an arrangement contains a lease at inception We generally lease our facilities under operating leases Operating lease right of use ROU assets are included in operating lease assets on our consolidated balance sheets Current portion of operating lease liabilities and long term operating lease liabilities are included on our consolidated balance sheets
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term As most of our leases do not provide an implicit rate we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at the commencement date
We recognize operating lease costs over the estimated term of the lease which includes options to extend lease terms that are reasonably certain of being exercised starting when possession of the property is taken from the landlord When a lease contains a predetermined fixed escalation of the minimum rent we recognize the related operating lease cost on a straight line basis over the lease term In addition certain of our lease agreements include variable lease payments such as estimated tax and maintenance charges These variable lease payments are excluded from minimum lease payments and are included in the determination of lease cost when it is probable that the expense has been incurred and the amount can be reasonably estimated We account for the lease and non lease components as a single lease component for all our leases
Property and equipment are stated at cost less accumulated depreciation and amortization Depreciation is calculated on a straight line basis over the estimated useful lives of the assets Computers servers and related equipment are generally depreciated over eighteen months to three years and furniture and fixtures are generally depreciated over three to twelve years Leasehold improvements are amortized over the shorter of the useful life of the improvement or the term of the related lease Purchased software is generally depreciated over three years Expenditures for routine maintenance and repairs are charged against operations Major replacements improvements and additions are capitalized
ASC 360 and were reclassified as such These assets are no longer being depreciated In the first quarter of fiscal 2025 we concluded a portion of the property previously classified as held for sale no longer met the held for sale criteria and was reclassified as held for use For further discussion on assets held for sale see Note 6 of the notes to the consolidated financial statements
Goodwill is recorded when the consideration paid for an acquisition exceeds the fair value of net tangible and intangible assets acquired The carrying value of goodwill is tested for impairment on an annual basis on January 1 or more often if an event occurs or circumstances change that would more likely than not reduce the fair value of its carrying amount For the purpose of impairment testing we have a single reporting unit We have elected to first assess the qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test If the qualitative assessment indicates that it is more likely than not that the fair value is less than the carrying amount a quantitative goodwill impairment test is performed If the fair value exceeds the carrying amount no further analysis is required otherwise an impairment loss is recognized for the amount by which the carrying value of goodwill exceeds its fair value
Our finite lived purchased intangible assets consist of developed technology and customer relationships Developed technology purchased in fiscal 2025 was valued using the multi period excess earnings method and is being amortized on a straight line basis over its economic life of five years Customer relationships purchased in fiscal 2025 were valued using the distributor method and are being amortized on a straight line basis over their economic life of ten years Developed technology purchased in fiscal 2022 was valued using the replacement cost method and was amortized on a straight line basis over its economic life of three years ending in fiscal 2025 We believe these methods most closely reflect the pattern in which the economic benefits of the assets will be consumed Impairment losses are recognized if the carrying amount of an intangible asset is both not recoverable and exceeds its fair value
We review our long lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable To determine the recoverability of our long lived assets we evaluate the estimated future undiscounted cash flows that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the long lived asset If the estimated future undiscounted cash flows demonstrate that recoverability is not probable an impairment loss would be recognized An impairment loss would be calculated based on the excess carrying amount of the long lived asset over the long lived asset s fair value The fair value would be determined based on valuation techniques such as a comparison to fair values of similar assets
Sales commissions bonuses and related payroll taxes earned by our employees are considered incremental and recoverable costs of obtaining a contract with a customer Our typical contracts include performance obligations related to term based software licenses SaaS offerings perpetual software licenses software updates and customer support In these contracts incremental costs of obtaining a contract are allocated to the performance obligations based on the relative estimated standalone selling prices and then recognized on a systematic basis that is consistent with the transfer of the goods or services to which the asset relates We do not pay commissions on annual renewals of customer support contracts for perpetual licenses The costs allocated to software and products are expensed at the time of sale when revenue for the functional software license is recognized The costs allocated to software updates and customer support for perpetual licenses are amortized ratably over a period of approximately five years the expected period of benefit of the asset capitalized We currently estimate a period of five years is appropriate based on consideration of historical average customer life and the estimated useful life of the underlying software sold as part of the transaction The commission paid on the renewal of subscription arrangements is not commensurate with the commission paid on the initial purchase As a result the cost of commissions allocated to SaaS offerings software updates and customer support on the initial term based software license transactions are amortized over a period of approximately five years consistent with the accounting for these costs associated with perpetual licenses The costs of commissions allocated to SaaS offerings software updates and customer support for the renewal of term based software licenses is limited to the contractual period of the arrangement as we pay a commensurate renewal commission upon the next renewal of the subscription software license and related updates and support
The incremental costs attributable to professional services are generally amortized over the period the related services are provided and revenue is recognized Amortization expense related to these costs is included in sales and marketing expenses in the accompanying consolidated statements of operations
Deferred revenues represent amounts collected from or invoiced to customers in excess of revenues recognized This results primarily from the billing of annual customer support agreements the billing of SaaS subscription arrangements and billings for other services that have not yet been performed by us The value of deferred revenues will increase or decrease based on the timing of invoices and recognition of revenue
We consider all shares repurchased as canceled shares restored to the status of authorized but unissued shares on the trade date The aggregate purchase price of the shares of our common stock repurchased is reflected as a reduction to stockholders equity We account for shares repurchased as an adjustment to common stock at par value with the excess repurchase price allocated between additional paid in capital and accumulated deficit
In November 2023 the Financial Accounting Standards Board FASB issued a new standard to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses In addition the amendments enhance interim disclosure requirements clarify circumstances in which an entity can disclose multiple segment measures of profit or loss provide new segment disclosure requirements for entities with a single reportable segment and contain other disclosure requirements
In December 2023 the FASB issued a new standard to improve income tax disclosures The standard requires greater disaggregated information about a reporting entity s effective tax rate reconciliation as well as information on income taxes paid
In November 2024 the FASB issued a new standard to improve income statement expense disclosures The standard requires greater disaggregated information on certain expense captions as well as disclosures about selling expenses
Subscription includes the revenues derived from term based arrangements including the software portion of term based licenses and SaaS offerings The software component of term based licenses is typically recognized when the software is delivered or made available for download The term of our subscription arrangements is typically one to three years but can range between one and five years For SaaS offerings revenue is generally recognized ratably over the contract term beginning on the date that the service is made available to the customer
Perpetual license includes the revenues from the sale of perpetual software licenses Perpetual software license revenue is typically recognized when the software is delivered or made available for download
Customer support includes revenues associated with support contracts tied to our software products Customer support includes software updates on a when and if available basis telephone support integrated web based support and other premium support offerings for both subscription software and perpetual software license arrangements We sell our customer support contracts as a percentage of net software purchases Customer support revenue is recognized ratably over the term of the customer support agreement which is typically one year on our perpetual licenses and over the term on our term based licenses
Other services consist primarily of revenues related to professional service offerings including consultation assessment and design installation services and customer education Revenues related to other services can vary period over period based on the timing services are delivered and are typically recognized as the services are performed
We do not customize our software licenses both perpetual and term based and installation services are not required Software licenses are delivered before related services are provided and are functional without professional services updates or technical support We have concluded that our software licenses both perpetual and term based are functional intellectual property that is distinct as the user can benefit from the software on its own Revenues for both perpetual and term based licenses are typically recognized when the software is delivered and or made available for download as this is the point the user of the software can direct the use of and obtain substantially all the remaining benefits from the functional intellectual property We do not recognize software revenue related to the renewal of subscription software licenses earlier than the beginning of the new subscription period
We also offer software that integrates with appliances and address a wide range of business needs and use cases ranging from support for remote or branch offices with limited IT staff up to large corporate data centers These appliances are almost exclusively sold via a software only model in which we sell software to a third party which assembles an integrated appliance that is sold to end user customers As a result the revenues and costs associated with hardware are usually not included in our financial statements
Most of our contracts with customers contain multiple performance obligations For these contracts we evaluate and account for individual performance obligations separately if they are determined to be distinct The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis Standalone selling prices of software licenses both perpetual and term based are typically estimated using the residual approach Standalone selling prices for SaaS customer support contracts and other services are typically estimated based on observable transactions when these services are sold on a standalone basis We recognize revenue net of sales tax
We disaggregate revenues from contracts with customers into geographical regions Our Americas region includes the United States Canada and Latin America Our International region primarily includes Europe Middle East Africa Australia India Southeast Asia and China
Remaining performance obligations represent expected future revenue from existing contracts where performance obligations are unsatisfied or partially unsatisfied at the end of the reporting period Remaining performance obligations include unfulfilled contracts at the end of a given period and can include subscription arrangements term based licenses and SaaS agreements customer support and other services As of March 31 2025 our remaining performance obligations inclusive of deferred revenues were 790 349 of which approximately 63 is expected to be recognized as revenue over the next 12 months and the remainder recognized thereafter
Remaining performance obligations excluding deferred revenue related to subscription arrangements customer support revenue and other services were 82 233 57 588 and 24 078 respectively Of these balances we expect approximately 65 of subscription arrangements 33 of customer support and 100 of other services to be recognized as revenue over the next 12 months and the remainder recognized thereafter We expect approximately 40 of subscription arrangements and 9 of customer support remaining performance obligations to be recognized as revenue in the first quarter of fiscal 2026 These balances represent transactions consisting primarily of early renewals unbilled and undelivered support and other services and orders received prior to the last day of the quarter that were not delivered or provisioned to customers
Remaining performance obligations will fluctuate period to period We do not believe the amount of remaining performance obligations is indicative of future sales or revenue or that the mix at the end of any given period correlates with actual sales performance
Amounts collected in advance of services being provided are accounted for as deferred revenue Nearly all of our deferred revenue balance is related to SaaS arrangements customer support and other services
In some arrangements we allow customers to pay for term based licenses over the term of the software license When a term based license arrangement contains payment terms that extend beyond one year a significant financing component may exist The significant financing component is calculated as the difference between the stated value and present value of the license and is recognized as interest income over the extended payment period The total license fee net of the significant financing component is recognized as revenue at the point in time when the software is transferred to the customer Interest income from significant financing components was not material for the fiscal year ended March 31 2025 2024 and 2023
Amounts recognized as revenue in excess of amounts billed are recorded as unbilled receivables Unbilled receivables which are anticipated to be invoiced in the next twelve months are included in accounts receivable on the consolidated balance sheets Long term unbilled receivables are included in other assets The opening and closing balances of our accounts receivable unbilled receivables and deferred revenues are as follows
The increase in accounts receivable inclusive of unbilled receivables is primarily a result of an increase in revenue relative to the prior year period The increase in deferred revenue is a result of an increase in SaaS contracts which are billed upfront but recognized ratably over the contract period and an increase in deferred customer support revenue
The amount of revenue recognized in the period that was included in the opening deferred revenue balance was approximately 353 345 for the year ended March 31 2025 The vast majority of this revenue consists of customer support and SaaS arrangements The amount of revenue recognized from performance obligations satisfied in prior periods was not significant
On April 15 2024 we completed the acquisition of 100 of the shares of Appranix a Boston based cloud cyber resilience company for a purchase price of 26 272 which consisted of 21 032 in cash exclusive of 340 of contingent consideration and 4 900 of unregistered restricted stock units These stock units were valued based on the volume weighted average price of our share price for the thirty days preceding the close date As a result 50 unregistered restricted stock units were issued at a fair value of 98 98 per share The primary reason for the business combination is to extend and enhance our product and service offerings in the cyber resiliency market None of the goodwill recorded is expected to be deductible for income tax purposes
During the fiscal year ended March 31 2025 we incurred costs related to the acquisition of Appranix of approximately 683 which were included in general and administrative expenses The following table summarizes the final purchase price and purchase price allocation
The contingent consideration arrangement requires us to pay up to 4 000 in cash to the former owner of Appranix contingent upon the achievement of certain financial metrics measured on December 31 2024 and June 30 2025 The actual consideration can range from 0 to 4 000 The fair value of the contingent liability on the acquisition date was estimated to be 340 using a Monte Carlo simulation model At the end of each reporting period after the acquisition date the arrangement is remeasured at its fair value with changes in fair value recorded through the consolidated statements of operations as operating expenses As of March 31 2025 we expect the achievement to be 2 400 of which 1 527 has already been paid We recorded 2 060 in operating expenses during fiscal 2025 related to changes in the estimated fair value and as a result 873 is included in accrued liabilities on the consolidated balance sheets as of March 31 2025
On October 1 2024 we completed the acquisition of certain assets of Clumio Inc Clumio a California based data backup and recovery provider for an initial purchase price of 44 909 in cash consideration In the fourth quarter of fiscal 2025 customary closing adjustments led to a reduction in the purchase price of 598 resulting in final cash consideration of 44 311 The primary reason for the business combination is to extend our product offerings in our existing cyber resiliency market We expect that substantially all of the goodwill acquired in this transaction will be deductible for income tax purposes
During the fiscal year ended March 31 2025 we incurred costs related to the acquisition of Clumio of approximately 1 858 which were included in general and administrative expenses The following table summarizes the final purchase price allocation
We also entered into compensation arrangements with the co founders and certain employees of Clumio which included granting approximately 13 000 in restricted stock units and performance stock units that vest over the next three years The performance stock units have the potential to vest between 0 and 100 if certain performance goals are met over three years These awards are included in the restricted stock unit table in Note 11 of the notes to the consolidated financial statements
We completed the acquisition of Appranix on April 15 2024 and the acquisition of Clumio on October 1 2024 Accordingly the operations of both Appranix and Clumio are included in our consolidated statements of operations from the dates of the acquisitions to March 31 2025
The following unaudited pro forma results of operations have been prepared using the acquisition method of accounting to give effect to the Appranix and Clumio acquisitions as though they occurred on April 1 2023 The pro forma amounts reflect certain adjustments such as expenses related to the noncash amortization of intangible assets stock based compensation and acquisition related costs The fiscal 2025 supplemental pro forma net income was adjusted to exclude 2 541 of acquisition related costs and 2 060 of expense related to changes in the estimated fair value of contingent consideration incurred in fiscal 2025 The fiscal 2024 supplemental pro forma net income was adjusted to include these charges In addition both periods include noncash amortization expenses related to intangible assets and stock based compensation as if the acquisitions had taken place on April 1 2023
The unaudited pro forma financial information is presented for illustrative purposes only is based on a purchase price allocation and is not necessarily indicative of the results of operations that would have actually been reported had the acquisitions occurred on April 1 2023 nor is it necessarily indicative of the future results of operations of the combined companies
Goodwill represents the residual purchase price paid in business combinations after the fair value of all identified assets and liabilities have been recorded It includes the estimated value of potential expansion with new customers the opportunity to further develop sales relationships with new customers and intangible assets that do not qualify for separate recognition Goodwill is not amortized and there were no impairments to the carrying amounts of goodwill during the fiscal years ended March 31 2025 2024 or 2023 Approximately 35 033 of the goodwill recorded is expected to be deductible for income tax purposes
Intangible assets consist of developed technology and customer relationships Developed technology acquired in fiscal 2025 was valued using the multi period excess earnings method and has an estimated useful life of five years Previously acquired developed technology was valued using the replacement cost method has an estimated useful life of three years and was fully amortized by the end of fiscal 2025 Customer relationships purchased in fiscal 2025 were valued using the distributor method and have an estimated useful life of ten years All of our intangible assets are amortized on a straight line basis Purchased intangible assets net of amortization are summarized below
During the fiscal year ended March 31 2025 we acquired developed technology valued at 19 600 and customer relationships valued at 3 800 as part of the acquisitions of Appranix and Clumio Amortization expense from acquired intangible assets was 3 705 for the fiscal year ended March 31 2025 and 1 250 for the fiscal years ended 2024 and 2023
During the fourth quarter of fiscal 2023 we determined the assets and land related to our owned corporate headquarters in Tinton Falls New Jersey met all of the criteria for classification as assets held for sale in accordance with ASC 360
ASC 360 The property s previous carrying amount was written down to its estimated fair value less estimated costs to sell resulting in a non cash impairment charge of 53 481 on our consolidated statements of operations for the period ended March 31 2023 During the first quarter of fiscal 2025 we concluded a portion of the property with an estimated fair value of 1 000 no longer met the held for sale criteria and was reclassified as held for use
On October 2 2024 we signed a purchase and sale agreement to sell the property for 36 000 in cash consideration The agreement includes a due diligence period for the buyer is contingent on receiving approvals from certain government agencies and includes other customary conditions We believe the sale will close in the first quarter of fiscal 2026 Upon closing of the transaction we will enter into a lease for a portion of the premises
The assets have been classified as held for sale for more than one year In accordance with ASC 360 assets not sold by the end of the one year period may still qualify as held for sale if certain conditions are met As of March 31 2025 we concluded all of the held for sale criteria were still met and the assets were properly classified on the consolidated balance sheets In addition we have assessed the assets for any changes in fair value less costs to sell and recorded an impairment charge of 2 910 during the year ended March 31 2025 which includes changes in the estimated fair value and estimated costs to sell
We recorded depreciation and amortization expense of 5 367 5 165 and 8 958 for the years ended 2025 2024 and 2023 respectively Depreciation expense allocated to our cost of goods sold was approximately 938 for the year ended 2023 There was no depreciation expense allocated to our cost of goods sold for the years ended 2024 and 2025
As discussed in Note 6 of the notes to the consolidated financial statements assets related to the sale of the Tinton Falls New Jersey headquarters were reclassified to assets held for sale in the fourth quarter of fiscal 2023 at which time depreciation ended
We in the normal course of business enter into various purchase commitments for goods or services Our outstanding commitments primarily relate to marketing and IT services and also include the remaining purchase commitments for our use of certain cloud services with third party providers Total non cancellable purchase commitments as of March 31 2025 are as follows
In June 2022 we entered into an amended agreement with a third party provider in the ordinary course of business for the use of certain cloud services through June 2027 Under the amended agreement we committed to a purchase of 200 000 throughout the term of the agreement As of March 31 2025 we had 35 541 of remaining obligations under the purchase agreement
We have certain software royalty commitments associated with the shipment and licensing of certain products Royalty expense is generally based on a fixed cost per unit shipped or a fixed fee for unlimited units shipped over a designated period Royalty expense included in cost of subscription and perpetual license revenues was 10 602 9 717 and 9 339 for the fiscal years ended March 31 2025 2024 and 2023 respectively
We provide certain provisions within our software licensing agreements to indemnify our customers from any claim suit or proceeding arising from alleged or actual intellectual property infringement These provisions continue in perpetuity along with our software licensing agreements We have never incurred a liability relating to one of these indemnification provisions and management believes that the likelihood of any future payout relating to these provisions is remote Therefore we have not recorded a liability during any period for these indemnification provisions
During fiscal 2025 we entered into a settlement agreement resulting in a payment of 1 475 which resolved certain legal matters For the year ended March 31 2025 675 was recorded in general and administrative expenses and the remaining 800 was incurred in a prior period that is not presented in the consolidated statements of operations
The Board of Directors the Board approved a share repurchase program of 250 000 in April 2024 The Board s authorization has no expiration date During fiscal 2025 we repurchased 165 015 of our common stock or approximately 1 215 shares As a result 91 471 remained available under the current authorization as of March 31 2025 Our share repurchase program has been funded by our existing cash and cash equivalent balances as well as cash flows provided by our operations
We maintain the Omnibus Incentive Plan the 2016 Incentive Plan for granting awards to employees The 2016 Incentive Plan authorizes a broad range of awards including stock options stock appreciation rights full value awards including restricted stock restricted stock units performance shares or units and other stock based awards and cash based awards As of March 31 2025 approximately 2 759 shares were available for future grant under the 2016 Incentive Plan
As of March 31 2025 we have granted non qualified stock options restricted stock units and performance stock awards under our stock incentive plans Historically most equity awards granted by us under our stock incentive plans generally vest quarterly over a three year period except that the shares that would otherwise vest quarterly over the first twelve months do not vest until the first anniversary of the grant We anticipate that future grants under our stock incentive plans will be restricted stock units and performance stock awards and do not anticipate that we will grant stock options
The following table presents the stock based compensation expense included in cost of revenues sales and marketing research and development general and administrative and restructuring expenses for the years ended March 31 2025 2024 and 2023 Stock based compensation is attributable to restricted stock units performance based awards and the ESPP
As of March 31 2025 there was approximately 146 094 of unrecognized stock based compensation expense related to all of our employee stock plans that is expected to be recognized over a weighted average period of 1 58 years We account for forfeitures as they occur To the extent that awards are forfeited stock based compensation will be different from our current estimate
As of March 31 2024 we had 124 stock options outstanding with a weighted average exercise price of 45 25 all of which were exercised during the year ended March 31 2025 No stock options were granted during the periods presented and as of March 31 2025 no stock options remain outstanding The total intrinsic value of stock options exercised was 8 089 1 378 and 1 176 in the years ended March 31 2025 2024 and 2023 respectively
The total fair value of the restricted stock units that vested during the years ended March 31 2025 2024 and 2023 was 214 371 118 047 and 114 422 respectively The fair value of awards includes the awards with a market condition described below
In fiscal 2025 we granted 91 performance stock units PSUs to certain executives Vesting of these awards is contingent upon i us meeting certain non GAAP performance goals performance based in fiscal 2025 and ii our customary service periods The awards vest over three years The related stock based compensation expense is determined based on the value of the underlying shares on the date of grant and is recognized over the vesting term using the accelerated method Based on our results the PSUs achieved at 105 The awards are included in the restricted stock unit table
In fiscal 2024 we granted 120 PSUs to certain executives Vesting of these awards is contingent upon i us meeting certain non GAAP performance goals performance based in fiscal 2024 and ii our customary service periods The awards vest over three years The related stock based compensation expense is determined based on the value of the underlying shares on the date of grant and is recognized over the vesting term using the accelerated method Based on our results the PSUs achieved at 108 The awards are included in the restricted stock unit table
In fiscal 2025 we granted 91 market PSUs to certain executives The vesting of these awards is contingent upon us meeting certain total shareholder return TSR levels as compared to the Russell 3000 market index over the succeeding three years from grant date The awards vest in three annual tranches and have a maximum potential to vest at 300 273 shares based on TSR performance The related stock based compensation expense is determined based on the estimated fair value of the underlying shares on the date of grant and is recognized using the accelerated method over the vesting term The estimated fair value was calculated using a Monte Carlo simulation model The fair value of the awards granted during the year was 175 25 per unit The awards are included in the restricted stock unit table above
In fiscal 2024 we granted 120 market PSUs to certain executives The vesting of these awards is contingent upon us meeting certain TSR levels as compared to the Russell 3000 market index over the succeeding three years from grant date The awards vest in three annual tranches and have a maximum potential to vest at 200 240 shares based on TSR performance The related stock based compensation expense is determined based on the estimated fair value of the underlying shares on the date of grant and is recognized using the accelerated method over the vesting term The estimated fair value was calculated using a Monte Carlo simulation model The fair value of the awards granted during the year was 87 90 per unit The awards are included in the restricted stock unit table above
The ESPP is a shareholder approved plan under which substantially all employees may purchase our common stock through payroll deductions at a price equal to 85 of the lower of the fair market values of the stock as of the beginning or the end of six month offering periods An employee s payroll deductions under the ESPP are limited to 10 of the employee s salary and employees may not purchase more than 25 of stock during any calendar year Employees purchased 119 shares in exchange for 11 922 of proceeds in fiscal 2025 and 188 shares in exchange for 10 578 of proceeds in fiscal 2024 The ESPP is considered compensatory and the fair value of the discount and look back provision are estimated using the Black Scholes formula and recognized over the six month withholding period prior to purchase The total expense associated with the ESPP for fiscal 2025 2024 and 2023 was 3 898 3 146 and 3 740 respectively As of March 31 2025 there was approximately 1 887 of unrecognized cost related to the current purchase period of our ESPP
provides for the recognition of deferred tax assets if realization of such assets is more likely than not At March 31 2025 and 2024 we recorded valuation allowances of 23 550 and 18 140 respectively which reflect uncertainties around our ability to generate sufficient income in certain jurisdictions to utilize our net deferred tax assets which primarily relate to Federal Foreign Tax Credits and NJ State R D Credits We believe it is more likely than not that we will have sufficient taxable income to realize our remaining deferred tax assets
Beginning on March 31 2023 for federal income tax purposes we are required to capitalize and amortize domestic research and development expenditures over five years and foreign research and development expenditures over fifteen years such expenditures were previously deducted as incurred Our cash flows from operations are adversely affected due to significantly higher cash tax payments
At March 31 2025 we had no remaining federal net operating loss NOL carryforwards and state NOL carryforwards of 1 046 which expire over various years beginning in March 2033 depending on the jurisdiction As of March 31 2025 we had foreign NOL carryforwards of 3 749 that will expire over various years beginning in March 2028 depending on the jurisdiction and 40 271 that will not expire As of March 31 2025 we had federal capital loss carryforwards of 871 that will expire in March 2027 At March 31 2025 we had foreign capital loss carryforwards of 298 that will not expire
At March 31 2025 we had no remaining federal research and development R D tax credit carryforwards and state R D tax credit carryforwards of approximately 27 227 The New Jersey R D credit carryforwards of 18 232 expire over various years beginning from March 2026 through March 2041 The California R D credits of 8 995 do not expire
At March 31 2025 we had federal foreign tax credits FTC carryforwards of approximately 6 920 which are expected to expire from March 2030 through March 2034 We also had 27 in foreign FTC carryforwards that will expire over various years beginning in March 2026
We conduct business globally and as a result file income tax returns in the United States and in various state and foreign jurisdictions In the normal course of business we are subject to examination by taxing authorities throughout the world The following table summarizes the tax years subject to income tax examinations by tax authorities as of March 31 2025 The years subject to income tax examination in our foreign jurisdictions cover the maximum time period with respect to these jurisdictions Due to NOLs in some cases the tax years continue to remain subject to examination with respect to such NOLs
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations in each of our tax jurisdictions The number of years with open tax audits varies depending on the tax jurisdiction A number of years may lapse before a particular matter is audited and finally resolved A summary of the changes in the amount of unrecognized tax benefits is as follows
We estimate that no significant remaining unrecognized tax benefits will be realized during the fiscal year ending March 31 2026 Interest income expense and penalties related to unrecognized tax benefits are recorded in income tax expense in the consolidated statements of operations In the years ended March 31 2025 2024 and 2023 the impact related to interest expense interest income and penalties was not significant
We have a defined contribution plan as allowed under Section 401 k of the Internal Revenue Code covering substantially all US employees Effective January 1 2012 we make contributions equal to a discretionary percentage of the employee s contributions determined by us During the years ended March 31 2025 2024 and 2023 we made contributions of 2 749 2 889 and 2 525 respectively
We operate in one segment Our products and services are sold throughout the world through direct and indirect sales channels Our chief operating decision maker the CODM is the Chief Executive Officer The CODM makes operating performance assessment and resource allocation decisions on a global basis The CODM does not receive discrete financial information about asset allocation expense allocation or profitability by product or geography The CODM uses consolidated net income loss to measure segment profit or loss allocate resources and assess performance The CODM reviews and utilizes function expenses cost of revenues research and development sales and marketing and general and administrative at the consolidated level to manage the Company s operations Other segment items included in consolidated net income loss are interest income interest expense other income net and income tax expense benefit which are reflected in the consolidated statements of operations Refer to our consolidated statements of operations for our significant segment expenses and net income loss in the periods presented
Revenues by geography are based upon the billing address of the customer All transfers between geographic regions have been eliminated from consolidated revenues The following table sets forth revenue by geographic area
No individual country other than the United States accounted for 10 or more of revenues for the years ended March 31 2025 2024 and 2023 Revenue included in the Other caption above primarily relates to our operations in Europe Australia Canada and Asia
The following table sets forth the Company s long lived assets by geographic area Beginning in fiscal 2025 this presentation has been updated to include only property and equipment net and right of use assets In prior years this table also included goodwill intangible assets and other non current assets
In the fourth quarter of fiscal 2024 we initiated a restructuring plan which was completed in fiscal 2025 It was intended to enhance customer satisfaction through the reorganization and redesign of our customer success functions The realignment of the customer success structure aimed to optimize operational efficiency and improve continuity for our customers through the pre sales and post sales experience These charges related primarily to severance and related costs associated with headcount reductions stock based compensation related to modifications of existing awards granted to certain employees impacted by the plan and office termination and exit charges
In the fourth quarter of fiscal 2022 we initiated a restructuring plan which was completed in fiscal 2023 It was aimed to increase efficiency in our sales marketing and distribution functions as well as reduce costs across all functional areas The plan included a reorganization to combine our EMEA and APJ field organizations into our International region These restructuring charges related primarily to severance and related costs associated with headcount reductions and stock based compensation related to modifications of existing awards granted to certain employees impacted by the plan
Our lease liabilities relate primarily to operating leases for our global office infrastructure These operating leases expire at various dates through fiscal 2031 We did not have any finance leases for the years ended March 31 2025 2024 or 2023
As of March 31 2025 the maturities of lease liabilities based on the total minimum lease commitment amount including options to extend lease terms that are reasonably certain of being exercised are as follows
As of March 31 2025 the minimum lease commitment amount for operating leases signed but not yet commenced was 377 These commitments are related to office lease renewals that expire at various dates through fiscal 2027
On December 13 2021 we entered into a five year 100 000 senior secured revolving credit facility the Credit Facility with JPMorgan Chase Bank N A The Credit Facility is available for share repurchases general corporate purposes and letters of credit The Credit Facility contains financial maintenance covenants including a leverage ratio and interest coverage ratio The Credit Facility also contains certain customary events of default which would permit the lender to among other things declare all loans then outstanding to be immediately due and payable if such default is not cured within applicable grace periods The Credit Facility also limits our ability to incur certain additional indebtedness create or permit liens on assets make acquisitions make investments engage in loans or advances sell or transfer assets pay dividends or distributions and engage in certain transactions with foreign affiliates Outstanding borrowings under the Credit Facility accrue interest at an annual rate equal to the Secured Overnight Financing Rate SOFR plus 1 25 subject to increases based on our actual leverage The unused balance on the Credit Facility is also subject to a 0 25 annual interest charge subject to increases based on our actual leverage As of March 31 2025 there were no borrowings under the Credit Facility and we were in compliance with all covenants
We have deferred the expense related to debt issuance costs which are classified as other assets and will amortize the costs into interest expense over the term of the Credit Facility Unamortized amounts at March 31 2025 and 2024 were 198 and 313 respectively The amortization of debt issuance costs and interest expense incurred was 115 and 253 respectively for the years ended March 31 2025 2024 and 2023 Interest paid was 253 for the years ended March 31 2025 2024 and 2023
On April 15 2025 we successfully refinanced our existing 100 000 senior secured revolving credit facility replacing it with a new five year senior secured revolving credit facility This refinancing has increased the Company s total borrowing capacity to 300 000 Under the terms of the new Credit Facility borrowings will accrue interest at a per annum rate determined by the Company s election of either the Secured Overnight Financing Rate SOFR plus a margin ranging from 1 50 to 2 00 or a base rate which is generally the greater of a prime rate plus a margin ranging from 0 50 to 1 00 The applicable margin in each case is contingent upon the Company s leverage ratio Additionally the unused balance on the Credit Facility is also subject to an annual interest charge of 0 25 subject to increases based on the Company s leverage ratio
Our management with the participation of the Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a 15 e and 15d 15 e of the Securities Exchange Act of 1934 as of March 31 2025 Based on that evaluation the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31 2025
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting as defined in Rules 13a 15 f of the Exchange Act There are inherent limitations in the effectiveness of any internal control including the possibility of human error and the circumvention or overriding of controls Accordingly even an effective internal control can provide only reasonable assurance with respect to financial
Our management with the participation of our principal executive officer and principal financial officer has evaluated the effectiveness of our internal control over financial reporting as of March 31 2025 In making this assessment management used the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission COSO in the 2013 Internal Control Integrated Framework
Based on our assessment using those criteria our management concluded that as of March 31 2025 our internal control over financial reporting was effective The effectiveness of our internal control over financial reporting as of March 31 2025 has been audited by Ernst Young LLP our independent registered public accounting firm as stated in their report which is included below in this Annual Report on Form 10 K
There was no change in our internal control over financial reporting that occurred during the fourth quarter of fiscal 2025 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting
We have audited Commvault Systems Inc s internal control over financial reporting as of March 31 2025 based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework the COSO criteria In our opinion Commvault Systems Inc the Company maintained in all material respects effective internal control over financial reporting as of March 31 2025 based on the COSO criteria
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the consolidated balance sheets of the Company as of March 31 2025 and 2024 the related consolidated statements of operations comprehensive income loss stockholders equity and cash flows for each of the three years in the period ended March 31 2025 and the related notes and our report dated May 5 2025 expressed an unqualified opinion thereon
The Company s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management s Report on Internal Control over Financial Reporting Our responsibility is to express an opinion on the Company s internal control over financial reporting based on our audit We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audit in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects
Our audit included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists testing and evaluating the design and operating effectiveness of internal control based on the assessed risk and performing such other procedures as we considered necessary in the circumstances We believe that our audit provides a reasonable basis for our opinion
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company 2 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and 3 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
On February 3 2025 Vivie Lee a member of our Board of Directors adopted a Rule 10b5 1 trading arrangement intended to satisfy the affirmative defense of Rule 10b5 1 c for the sale of 2 333 shares of the Company s common stock The plan is in effect until February 3 2026
On February 10 2025 Allison Pickens a member of our Board of Directors adopted a Rule 10b5 1 trading arrangement intended to satisfy the affirmative defense of Rule 10b5 1 c for the sale of 2 760 shares of the Company s common stock The plan is in effect until June 4 2026
During the three months ended March 31 2025 no other directors or officers of the Company adopted modified or terminated any Rule 10b5 1 trading arrangement or Non Rule 10b5 1 trading arrangement as each term is defined in Item 408 of Regulation S K
We will furnish to the SEC a definitive Proxy Statement not later than 120 days after the close of the fiscal year ended March 31 2025 Information with respect to this Item is incorporated herein by reference from the sections of our 2025 Proxy Statement captioned Proposal No 1 Election of Directors Nominees for Election and Corporate Governance under the subheadings Governance Documents and Board Committees Audit Committee
Our Board of Directors has adopted a code of business ethics and conduct which applies to all of our employees The code of business ethics and conduct is in addition to our code of ethics for senior financial officers The full texts of our code of business ethics and conduct and our code of ethics for senior financial officers can be found on our website www commvault com
Information with respect to this Item is incorporated herein by reference from the sections of our 2025 Proxy Statement captioned Executive Compensation excluding the information under the subheading Pay Versus Performance Talent Management and Compensation Committee Report and Corporate Governance Director Compensation
Information with respect to this Item is incorporated herein by reference from the section of our 2025 Proxy Statement captioned Corporate Governance under the subheadings Security Ownership of Management and Certain Beneficial Owners and Fiscal 2025 Equity Compensation Plan Information
Information with respect to this Item is incorporated herein by reference from the sections of our 2025 Proxy Statement captioned Corporate Governance Transactions with Related Persons and Proposal No 1 Election of Directors Director Independence
Information with respect to this Item is incorporated herein by reference from the section of our 2025 Proxy Statement captioned Proposal No 3 Ratification of the Appointment of Independent Auditors under the subheadings Audit Audit related Tax and All Other Fees and Policy on Audit Committee Pre Approval of Audit and Non Audit Services of Independent Auditor
Certificate of Amendment of Amended and Restated Certificate of Incorporation of Commvault Systems Inc Incorporated by reference to Exhibit 3 1 to the Registrant s Form 10 Q for the quarter ended September 30 2023
Form of Indemnity Agreement between Commvault Systems Inc and each of its current officers and directors Incorporated by reference to Exhibit 10 3 to the Registrant s Annual Report on Form 10 K for the year ended March 31 2022
Credit Agreement dated December 13 2021 by and among Commvault Systems Inc the Lenders from time to time party thereto and JPMorgan Chase Bank N A as Administrative Agent Incorporated by reference to Exhibit 10 1 to the Registrant s Form 10 Q for the quarter ended December 31 2021
Purchase and Sale Agreement by and between Commvault and Somerset Development LLC with an effective date of October 2 2024 Incorporated by reference to Exhibit 10 1 to the Registrant s Form 8 K dated October 4 2024
Certain exhibits to this Agreement have been omitted pursuant to Item 601 a 5 of Regulation S K A copy of any omitted exhibit will be furnished as a supplement to the Securities and Exchange Commission upon request
Pursuant to the requirements of Section 13 or 15 d of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized in the city of Tinton Falls State of New Jersey on May 5 2025

Company Name	COMMVAULT SYSTEMS INC Vist SEC web-site
Category	SERVICES-PREPACKAGED SOFTWARE
Trading Symbol	CVLT