Commvault CEO on the “next wave” for the data security firm

Data security company Commvault crushed earnings expectations Tuesday, sending the stock up some 20% in its best daily gain since last October.

With the animal spirits clearly romping in the market, Commvault, a midcap vendor of B2B data security and IT data services, isn’t the sexiest thing for investors to get excited about.

But its share price has been on the move, rising more than 140% over the last couple years — handily outpacing the S&P MidCap 400’s return of about 18% — as the company has managed to reinvigorate sales, push up profit margins, and deal with the activist investors who were targeting the stock a few years back.

We sat down with Commvault CEO Sanjay Mirchandani, who took over in 2019, to get a sense of how durable he thinks the company’s turnaround is as well as its prospects for growing into the expensive valuation the market has slapped on the stock, with a forward price to sales of 6.3x compared to a 1.3x for the index.

This conversation was edited for clarity and concision.

Matt Phillips, Sherwood News: Sanjay, thanks taking some time today. It’s a big day for the stock, by the way, as I’m sure you noticed. You were named as Commvault’s CEO in 2019, when the company was facing some pressure from activist investors after a few years of spotty financial performance. Talk about some key decisions you made.

Sanjay Mirchandani: One of the first decisions we made was to invest in a SaaS product, even though our industry was sort of the last to embrace SaaS and the public cloud. But we invested in a product called Metallic within weeks of my coming onboard.

Sherwood: Bearing in mind that a lot of our readers are probably not going to know the company that well, in just the most basic way possible, what does Metallic do?

Mirchandani: It was built to be a data protection suite, delivered as a SaaS product. So it’s a service, and we run it for you. If you’ve got Office 365, if you’ve got Salesforce.com, if you’ve got your own homegrown apps that are cloud-native, virtual machines — whatever your infrastructure, your application layers involved, we back that up for you.

But the beauty of what we built, if I may be immodest for a minute, is that we made it seamless for customers as they move to the public cloud to avail themselves of our capabilities, either cloud-based or on-premise.

If your IT organization was doing all of this management for you, they got to see all of it in a single pane of glass, whether it was on-premise that they were managing or it was in the cloud that we were managing.

Sherwood: So the focus on SaaS was clearly a strategic decision you thought the company had to make.

Mirchandani: I had no crystal ball to say how fast it would happen, but it was inevitable. Our industry was last part of the data infrastructure business that needed to embrace the public cloud.

I’m happy to say that that was one thing we did that has held us in very good stead as a company, and it’s coming through in our results. Our SaaS annual recurring revenue is north of $300 million, for a product that is a basically 4.5-year-old business.

Sherwood: To move toward some of these numbers you reported today, how did those strategic decisions that we talked about map onto the reinvigoration of growth at the company? It looks like it was 25.5% year-on-year growth in the most recent quarter. A few years back that was more like 6% or 7%.

Mirchandani: First things first, the platform we’re building, we build every day and we enhance every day. It doesn’t matter what workload it is, what cloud on the edge, on-premise, it doesn’t matter. We are by far the leader.

So innovation at the end of it is key because what we’re selling for customers is a really tough problem. If you’re an airline, if you’re a retailer, if you’re an accounting company, your competence is that business. It’s not cyber resilience or cybersecurity. But those are capabilities every company now has to be darn good at. The bad guys only have to be right once; you have to right every single time.

We have a great platform that we continue to invest in. I spent over a billion dollars over the last three, four years on R&D — significant for a company of our size. We have over 1,100 patents, active patents, and we take that very seriously. We innovate and bring that value to customers.

Number two: cloud first. Everyone’s going cloud first. And building an application and protecting it in the cloud is a world apart from building an application and protecting it on-premise, as you did two or three or four years ago. What we’re trying to do is be in front of the customer’s problems related to the cloud.

Sherwood: You mentioned your focus on bringing some of your technologies to the AI world. Does that push have a name? Is there a new product? Is there something I should be looking for?

Mirchandani: In November, we’re going to be announcing a whole bunch of new things along the lines of what we, you and I, have been talking about at a high level. For us, AI is about adding value. And what we do is we help customers be more resilient, so my AI efforts in the company, my R&D efforts using AI for customers, is to enable them to be more resistant. We’re using AI to help with that kind of thing: detecting threats, managing those threats, giving you a point of view on those threats. We also build AI into the product to make it more usable, self-healing, self-helping, so customers can get up and running faster.

We just bought a company, Satori, and what Satori does is really visibility, observability, and policy enforcement on data. That makes complete sense when you’re building AI model LLMs, you’re training them, and your employees are interacting with them. You want to make sure that there’s some oversight and enforcement. So we bought this little company out of Israel to help us further enhance the platform with observability. We think this is going to be the next wave.

Sherwood: That seems like a pretty good place to leave it. Thanks very much for taking the time. I really appreciate it.

Mirchandani: Likewise.