Commvault Systems Inc: Form 10-Q for the period ended Sep 30, 2025

You should read the following discussion and analysis along with our consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. 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” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025, as such risks and uncertainties may be updated from time to time in our periodic filings with the Securities and Exchange Commission. Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Overview

Commvault Systems, Inc. and its subsidiaries ("Commvault," "we," "us," "our," or the "Company") 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-premise, hybrid and multi-cloud. Our offerings are delivered via self-managed software, software-as-a-service ("SaaS"), integrated appliances, or managed by partners.

Sources of Revenues

We generate revenues through subscription arrangements, which includes both term-based software licenses and SaaS, perpetual software licenses, customer support contracts and other services. A significant portion of our total revenues comes from subscription arrangements, whether deployed on-premise (term-based license) or delivered via hosted cloud SaaS solutions. These arrangements are economically and contractually similar, as customers receive access to our software for a specified term under binding agreements. 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 either through term-based licensing or via hosted cloud SaaS solutions. In term-based license arrangements, software revenue is generally recognized when the software is delivered. 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, original equipment manufacturers, and marketplaces. Revenue generated through indirect distribution channels accounted for approximately 90% of total revenues in both the six months ended September 30, 2025 and 2024. Revenue generated through direct distribution channels accounted for approximately 10% of total revenues in both the six months ended September 30, 2025 and 2024. 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 revenue generated through our distribution channels from time-to-time. We believe that the growth of our 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 distribution channels or our direct sales force to effectively sell our products and services could have a material adverse effect on our revenues and results of operations.

We have non-exclusive distribution agreements with certain partners who enable a more efficient and effective distribution channel for our solutions by managing our resellers and leveraging their own industry experience. For the six months ended September 30, 2025 and 2024, Partner A accounted for approximately 32% and 36% of our total revenues, respectively. Separately, Partner B accounted for approximately 12% and 10% of our total revenues for the six months ended September 30, 2025 and 2024, respectively. If these partners discontinue or reduce the sales of our solutions or if our agreements with them were terminated, and if we were unable to take back the management of our reseller channel or find another distributor to replace them, there could be a material adverse effect on our future business.

Our customer 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 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, which typically range from one to three 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.

For additional information on how we recognize revenue, see Note 3 of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Key Performance Indicators ($ in millions)

We monitor the following key performance indicators to help evaluate the state of our business. We believe the below metrics are material to investors to understand the growth and performance of our business, as they help normalize certain variable factors. Metrics such as Annualized Recurring Revenue ("ARR"), Subscription ARR, SaaS ARR and SaaS Net Dollar Retention Rate ("SaaS NRR") provide a consistent view of our recurring revenue profile. ARR, Subscription ARR, and SaaS ARR exclude non-recurring elements and reflect the annualized value of active contracts, while SaaS NRR measures net expansion within our existing customer base. Together, we believe these metrics offer meaningful insight into the health and trajectory of our recurring revenue streams.

Annualized Recurring Revenue (ARR)

ARR represents the annualized recurring value of all active contracts at the end of a reporting period. It includes recurring subscription offerings (including term licenses, SaaS, and utility software), maintenance related to perpetual and term licenses, extended maintenance contracts (enterprise support), and managed services. It excludes non-recurring elements such as perpetual licenses and professional services which are typically delivered at a point in time. ARR is calculated by dividing the total contract value by the number of days in the contract term and multiplying by 365. We believe ARR is a valuable metric for evaluating the growth of our business, as it provides a normalized view of recurring revenue by excluding the variability associated with contract term lengths and omitting contracts that are not expected to renew.

Subscription ARR

Subscription ARR includes only term licenses, SaaS, and utility arrangements, calculated using the same methodology as ARR. We believe Subscription ARR provides meaningful insight into the growth of our subscription-based offerings and reflects both new customer acquisition and expansion within our existing customer base. As our most strategically significant and rapidly expanding revenue streams, our subscription arrangements are central to our long-term growth strategy and operational focus.

25

SaaS ARR

SaaS ARR includes only the cloud-hosted portion of Subscription ARR and is calculated using the same methodology. SaaS ARR reflects the annualized value of active SaaS contracts and we believe this metric provides insight into customer adoption trends and expansion within our cloud-based offerings. As SaaS continues to represent a growing share of our total revenue, we view this metric as a key indicator of our ability to meet the evolving needs of our customer base. Continued adoption and conversion to SaaS arrangements are critical to sustaining our long-term growth and aligning with customer preferences for cloud-delivered solutions.

SaaS Net Dollar Retention Rate (SaaS NRR)

SaaS NRR is the percentage of SaaS ARR retained from existing customers at the start of an annual period after accounting for expansion revenue, churn, and downgrades. It is presented on a constant currency basis using exchange rates as of March 31, 2025. Acquired SaaS ARR is excluded until the acquisition is fully integrated, which we generally expect to occur twelve months from the closing date. We believe our SaaS Net Dollar Retention Rate offers valuable insight into the year-over-year expansion of our existing customer base, reflecting both increased utilization of current products and services as well as the adoption of additional offerings.

These metrics are non-GAAP measures and do not have standardized definitions under GAAP. As such, they may not be comparable to similarly titled measures used by other companies and should be considered as a supplement to, and not as a substitute for, financial information prepared in accordance with GAAP. Management uses these metrics to assess the health of our recurring revenue base and to inform strategic decision-making. These metrics should be viewed independently of GAAP revenue, deferred revenue and unbilled revenue and are not intended to be combined with or to replace those items. ARR is not a forecast of future revenue.

Foreign Currency Exchange Rates’ Impact on Results of Operations

Sales outside the United States were 45% and 46% of our total revenues for the six months ended September 30, 2025 and 2024, respectively. 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 revenues, operating expenses and income from operations for our non-U.S. operations. Similarly, our revenues, operating expenses and income from operations 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 the three months ended September 30, 2024, our total revenues would have been lower by $4.2 million, our cost of revenues would have been lower by $0.1 million and our operating expenses would have been lower by $0.8 million from non-U.S. operations for the three months ended September 30, 2025. Using the average foreign currency exchange rates from the six months ended September 30, 2024, our total revenues would have been lower by $9.2 million, our cost of revenues would have been lower by $0.3 million and our operating expenses would have been lower by $2.3 million from non-U.S. operations for the six months ended September 30, 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 of approximately $0.9 million and $2.1 million for the three and six months ended September 30, 2025, respectively. We recognized net foreign currency transaction losses of approximately $0.3 million for the three and six months ended September 30, 2024.

Critical Accounting Policies

In presenting our consolidated financial statements in conformity with 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. These critical accounting policies are:

• Revenue Recognition
• Accounting for Income Taxes
• Goodwill and Purchased Intangible Assets

There have been no significant changes in our critical accounting policies during the six months ended September 30, 2025 as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025.

Results of Operations

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.

Three months ended September 30, 2025 compared to three months ended September 30, 2024

Revenues ($ in millions)

• Total revenues increased $42.9 million, or 18% year over year, driven by increases in both term-based license revenue and SaaS revenue. We remain focused on selling subscription arrangements through both term-based software licenses and SaaS offerings.
• Term-based license revenue increased $8.2 million, or 10% year over year, as a result of a 17% increase in transaction volume tempered by a shift in term duration which reduced average deal size period over period.
• SaaS revenue increased $30.4 million, or 61% year over year, as a result of growth in SaaS ARR driven by both new customer acquisitions and expansion of our existing customer base.
• Perpetual license revenue increased $1.6 million, or 15% year over year. Perpetual licenses are generally only sold in certain verticals and geographies.
• Customer support revenue increased $2.5 million, or 3% year over year, driven by a $7.9 million increase in customer support revenue related to term-based license arrangements, partially offset by a $5.4 million decrease in customer support revenue attached to perpetual license support renewals.
• Other services revenue increased $0.2 million, or 2% year over year. Changes in other services revenue can vary period over period, primarily due to the timing professional services are delivered.

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 three months ended September 30, 2025. Total revenues increased 16% and 22% year over year in the Americas and International, respectively.

• The increase in Americas total revenues was primarily due to increases of 5% and 76% in term-based license and SaaS revenues, respectively, partially offset by a 26% decrease in perpetual license revenue, driven by the shift from selling perpetual licenses to subscription software arrangements. Customer support revenue decreased 1% year over year. Other services revenue decreased 7% year over year primarily due to the timing professional services were delivered compared to the same period of the prior year.
• The increase in International total revenues was due to increases of 22%, 39%, 41%, 9% and 16% in term-based license, SaaS, perpetual license, customer support and other services revenues, respectively, as compared to the same period of the prior year.

Our total revenues in International is subject to changes in foreign exchange rates as further discussed above in the “Foreign Currency Exchange Rates’ Impact on Results of Operations” section.

Cost of Revenues and Gross Margin ($ in millions)

• Total cost of revenues increased $12.2 million and represented 20% of our total revenues for the three months ended September 30, 2025 compared to 18% for the three months ended September 30, 2024.
• Cost of term-based license revenue remained flat compared to the same period of the prior year, representing 3% of our term-based license revenue for the three months ended September 30, 2025 and 2024.
• Cost of SaaS revenue increased $12.0 million and represented 36% of our SaaS revenue for the three months ended September 30, 2025 compared to 35% for the three months ended September 30, 2024. The year over year increase is primarily the result of incremental hosting costs associated with acquisitions and an increase in the cost of infrastructure related to growth in our SaaS offerings.
• Cost of perpetual license revenue decreased $0.2 million and represented 2% of our perpetual revenue for the three months ended September 30, 2025 compared to 4% for the three months ended September 30, 2024.
• Cost of customer support revenue decreased $0.5 million and represented 19% of our customer support revenue for the three months ended September 30, 2025 compared to 20% for the three months ended September 30, 2024.
• Cost of other services revenue increased $0.8 million and represented 75% of our other services revenue for the three months ended September 30, 2025 compared to 69% for the three months ended September 30, 2024.

Operating Expenses ($ in millions)

• Sales and marketing expenses increased $20.3 million, or 20%, primarily driven by a $12.5 million increase in employee compensation and sales commissions associated with increases in headcount and revenues relative to the same period in the prior year, including an increase of $1.1 million in stock-based compensation. In addition, there was an increase year over year of $3.5 million due to higher spending on marketing initiatives, which included in-person events and travel.
• Research and development expenses increased $6.0 million, or 18%, driven by an increase of $3.1 million in employee compensation and related expenses, including an increase of $2.2 million in stock-based compensation. The increase in employee compensation and related expenses is primarily driven by additional headcount, including headcount related to acquisitions. 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 $8.4 million, or 25%, driven by an increase of $6.1 million in employee compensation and related expenses, including an increase of $2.3 million in stock-based compensation. In addition, we incurred $1.8 million in legal and consulting expenses in the second quarter of fiscal 2026 as a result of our response to a non-routine security matter that did not occur in the same period in the prior year.
• Depreciation and amortization expense increased $0.6 million, driven by the acquisition of intangible assets.
• Restructuring: Our restructuring plan, initiated in the first quarter of fiscal 2026, is intended to optimize our Business Technology organization. Restructuring expenses were $1.4 million for the three months ended September 30, 2025. These charges relate primarily to severance and associated costs from headcount reductions and include $0.4 million of stock-based compensation resulting from modifications to existing awards granted to certain employees impacted by the plan. We anticipate the workforce realignment and identification of planned technology changes will be completed in fiscal 2026, and the remaining activities under the restructuring plan, including the technology transitions, are expected to be completed in fiscal 2027. Restructuring expenses were $0.6 million for the three months ended September 30, 2024 related to a prior restructuring plan that was completed in fiscal 2025.

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.

Income Tax Expense

Income tax expense was $0.4 million in the three months ended September 30, 2025 compared to expense of $1.1 million in the three months ended September 30, 2024. The decrease in income tax expense compared to the same period in the prior year relates primarily to estimated current federal taxes. The One Big Beautiful Bill Act (the “OBBBA”), enacted on July 4, 2025, includes several corporate tax provisions relevant to U.S. businesses. Included in this legislation are provisions that allow for the immediate expensing of domestic research and development expenses, extensions of bonus depreciation, and modifications to the international tax regimes. The provisions in the legislation are generally effective beginning in our fiscal 2026. The Company is continuing to evaluate the impact of these provisions on its financial statements, but an estimate of the financial impact has been included in our operating results for the three months ended September 30, 2025. The OBBBA did not have a material impact to our income tax provision for the three months ended September 30, 2025.

Six months ended September 30, 2025 compared to six months ended September 30, 2024

Revenues ($ in millions)

• Total revenues increased $100.2 million, or 22% year over year, driven primarily by increases in both term-based license revenue and SaaS revenue, partially offset by a decrease in perpetual license revenue. We remain focused on selling subscription arrangements through both term-based software licenses and SaaS offerings.
• Term-based license revenue increased $37.1 million, or 23% year over year, primarily due to a 22% increase in larger transactions (deals greater than $0.1 million) period over period. This increase was driven by a 20% increase in transaction volume.
• SaaS revenue increased $59.2 million, or 63% year over year, as a result of growth in SaaS ARR driven by both new customer acquisitions and expansion of our existing customer base.
• Perpetual license revenue decreased $4.9 million, or 20% year over year. Perpetual licenses are generally only sold in certain verticals and geographies.
• Customer support revenue increased $5.3 million, or 3% year over year, driven by a $15.7 million increase in customer support revenue related to term-based license arrangements, partially offset by a $10.4 million decrease in support attached to perpetual license support renewals.
• Other services revenue increased $3.5 million, or 16% year over year. Changes in other services revenue can vary period over period, primarily due to the timing professional services are delivered.

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 six months ended September 30, 2025. Total revenues increased 20% and 25% year over year in the Americas and International, respectively.

• The increase in Americas total revenues was primarily due to increases of 10% and 79% in term-based license and SaaS revenues, respectively, partially offset by a 32% decrease in perpetual license revenue, driven by the shift from selling perpetual licenses to subscription software arrangements. Customer support remained flat compared to the same period of the prior year. Other services revenues increased 18% primarily due to the timing professional services were delivered compared to the same period of the prior year.
• The increase in International total revenues was due to increases of 54%, 40%, 8% and 13% in term-based license, SaaS, customer support and other services revenues, respectively, partially offset by a decrease of 13% in perpetual license revenue, as compared to the same period of the prior year.

Our total revenues in International is subject to changes in foreign exchange rates as further discussed above in the “Foreign Currency Exchange Rates’ Impact on Results of Operations” section.

Cost of Revenues and Gross Margin ($ in millions)

• Total cost of revenues increased $23.2 million and represented 19% of our total revenues for the six months ended September 30, 2025 compared to 18% for the six months ended September 30, 2024.
• Cost of term-based license revenue increased $0.5 million and represented 2% of our term-based license revenue for the six months ended September 30, 2025 compared to 3% for the six months ended September 30, 2024.
• Cost of SaaS revenue increased $22.2 million and represented 36% of our SaaS revenue for the six months ended September 30, 2025 compared to 35% for the six months ended September 30, 2024. The year over year increase is primarily the result of incremental hosting costs associated with acquisitions and an increase in the cost of infrastructure related to growth in our SaaS offerings.
• Cost of perpetual license revenue decreased $0.3 million and represented 2% of our total perpetual revenue for the six months ended September 30, 2025 compared to 3% for the six months ended September 30, 2024.
• Cost of customer support revenue decreased $0.5 million and represented 18% of our total customer support revenue for the six months ended September 30, 2025 compared to 19% for the six months ended September 30, 2024.
• Cost of other services revenue increased $1.3 million and represented 66% of our total other services revenue for the six months ended September 30, 2025 compared to 70% for the six months ended September 30, 2024. The increase in cost of other services revenue was driven by timing of the delivery of certain professional services.

Operating Expenses ($ in millions)

• Sales and marketing expenses increased $46.8 million, or 24%, primarily driven by a $25.8 million increase in employee compensation and sales commissions associated with increases in headcount and revenues relative to the same period in the prior year, including an increase of $4.2 million in stock-based compensation. In addition, there was an increase year over year of $12.6 million due to higher spending on marketing initiatives, which included in-person events and travel.
• Research and development expenses increased $13.0 million, or 19%, driven by an increase of $8.5 million in employee compensation and related expenses, including an increase of $4.1 million in stock-based compensation. The increase in employee compensation and related expenses is primarily driven by additional headcount, including headcount related to acquisitions. 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 $18.9 million, or 29%, driven by an increase of $14.4 million in employee compensation and related expenses, including an increase of $5.4 million in stock-based compensation. In addition, we incurred $1.8 million in legal and consulting expenses in the second quarter of fiscal 2026 as a result of our response to a non-routine security matter that did not occur in the same period in the prior year.
• Depreciation and amortization expense increased $1.2 million, or 31%, driven by the acquisition of intangible assets.
• Restructuring: Our restructuring plan, initiated in the first quarter of fiscal 2026, is intended to optimize our Business Technology organization. Restructuring expenses were $1.7 million for the six months ended September 30, 2025. These charges relate primarily to severance and associated costs from headcount reductions and include $0.5 million of stock-based compensation resulting from modifications to existing awards granted to certain employees impacted by the plan. We anticipate the workforce realignment and identification of planned technology changes will be completed in fiscal 2026, and the remaining activities under the restructuring plan, including the technology transitions, are expected to be completed in fiscal 2027. Restructuring expenses were $5.2 million for the six months ended September 30, 2024 related to a prior restructuring plan that was completed in fiscal 2025.

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 first quarter of fiscal 2026, we recorded a reduction to expense of $0.5 million related to the final achievement under our contingent consideration arrangement related to the acquisition of Appranix, Inc. The arrangement, with final aggregate consideration of $1.9 million, was contingent upon meeting certain financial metrics by June 30, 2025 and could have ranged up to $4.0 million.

Income Tax Expense

Income tax expense was $3.8 million in the six months ended September 30, 2025 compared to expense of $3.2 million in the six months ended September 30, 2024. The increase in income tax expense compared to the same period in the prior year relates primarily to estimated current federal taxes. The OBBBA, enacted on July 4, 2025, includes several corporate tax provisions relevant to U.S. businesses. Included in this legislation are provisions that allow for the immediate expensing of domestic research and development expenses, extensions of bonus depreciation, and modifications to the international tax regimes. The provisions in the legislation are generally effective beginning in our fiscal 2026. The Company is continuing to evaluate the impact of these provisions on its financial statements, but an estimate of the financial impact has been included in our operating results for the six months ended September 30, 2025. The OBBBA did not have a material impact to our income tax provision for the six months ended September 30, 2025.

Liquidity and Capital Resources

In recent fiscal years, our principal source of liquidity has been cash provided by operations. As of September 30, 2025, our cash and cash equivalents balance was $1,063.6 million, of which approximately $280.0 million was held outside of the United States by our foreign legal entities. These balances are dispersed across approximately 35 international locations. 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 September 5, 2025, we completed a private offering of senior, unsecured convertible notes (the "Notes"), with an aggregate principal amount of $900.0 million. Net proceeds after deducting initial debt issuance costs were approximately $878.6 million. In connection with the Notes, we entered into capped call transactions (the "Capped Calls") which are expected to reduce the potential dilution of our common stock upon any conversion of the Notes and/or offset any cash payments we could be required to make in excess of the principal amount of converted Notes. We used an aggregate amount of $99.6 million of the net proceeds of the Notes to purchase the Capped Calls. Upon conversion, consideration will consist of cash, up to the principal amount of the Notes to be converted, and, for any conversion in excess of principal, cash or shares of our common stock, at our election.

On April 15, 2025, we refinanced our existing $100.0 million senior secured revolving credit facility, replacing it with a new five-year $300.0 million senior secured revolving credit facility (the “Credit Facility”) with JPMorgan Chase Bank, N.A, as administrative agent, and the lenders party thereto. 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 lenders 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 or investments, make loans or advances, sell or transfer assets, pay dividends or distributions, and engage in certain transactions with affiliates. Outstanding borrowings under the Credit Facility accrue interest at a per annum rate determined by the Company’s election of either the Secured Overnight Financing Rate 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 subject to an unused commitment fee ranging from 0.25% to 0.35% per annum based on the Company's leverage ratio. As of September 30, 2025, there were no borrowings under the Credit Facility and we were in compliance with all covenants.

On April 17, 2025, the Board approved an increase of the existing share repurchase program so that $250.0 million was available. The Board's authorization has no expiration date. For the six months ended September 30, 2025, we repurchased $146.1 million of our common stock, of which $117.7 million was used in connection with the Notes and paid from the net proceeds. The remaining amount available under the current authorization as of September 30, 2025 was $103.9 million.

Our summarized cash flow information is as follows (in millions):

• Net cash provided by operating activities was impacted by net income adjusted for the impact of non-cash charges, an increase in deferred revenue and a decrease in accounts receivable, partially offset by a decrease in accrued expenses.
• Net cash used in investing activities was the result of $26.0 million for the acquisition of Satori Cyber Ltd., $6.6 million for the purchase of equity securities and $5.1 million of capital expenditures, partially offset by $34.8 million of net proceeds from the sale of Commvault's corporate headquarters.
• Net cash provided by financing activities was the result of $900.0 million of proceeds from the issuance of the Notes and $7.0 million of proceeds from the ESPP, partially offset by $146.1 million of repurchases of our common stock, $99.6 million for the purchase of the Capped Calls and $22.2 million of payment of debt issuance costs.

Working capital increased $737.6 million from $80.0 million as of March 31, 2025 to $817.6 million as of September 30, 2025. The net increase in working capital was primarily the result of an increase in cash and cash equivalents from the issuance of convertible notes and a decrease in accrued liabilities, partially offset by an increase in the current portion of deferred revenue.

Our primary cash needs over the next 12 months and longer term include working capital requirements, income taxes, capital expenditures, potential stock repurchases and the potential cash portion of consideration upon conversion or at maturity of our 0% convertible senior notes due 2030. We have discretion to settle conversion consideration above principal in cash, stock, or a combination; the timing and amount of any related cash outflows will depend on our stock price, conversion activity, and our financing strategy. We believe our existing cash and cash flows from operations are sufficient to meet these cash requirements for at least the next 12 months.

Impact of Recently Issued Accounting Standards

See Note 2 of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of the impact of recently issued accounting standards.

Interest Rate Risk

Convertible Senior Notes

On September 5, 2025, we issued our Notes with an aggregate principal amount of $900.0 million. In connection with the issuance of the Notes, we entered into privately negotiated capped call transactions with certain counterparties. The capped calls transactions are expected generally to offset the potential dilution to our common stock as a result of any conversion of the Notes.

We do not have economic interest rate exposure on the Notes as the notes have a 0% interest rate; however, the fair value of the Notes is exposed to interest rate risk. Generally, the fair value of the Notes will increase as interest rates fall and decrease as interest rates rise. As of September 30, 2025, we carried the Notes at face value less unamortized debt issuance costs on our consolidated balance sheets. For further information refer to Note 14 of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Foreign Currency Risk

Economic Exposure

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 45% of our sales were outside the United States for the six months ended September 30, 2025. 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.

Transaction Exposure

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. Foreign currency transaction gains and losses are recorded in general and administrative expenses in the consolidated statements of operations. We recognized net foreign currency transaction losses of approximately $0.9 million and $2.1 million for the three and six months ended September 30, 2025, respectively. We recognized net foreign currency transaction losses of approximately $0.3 million for the three and six months ended September 30, 2024.

Evaluation of Disclosure Controls and Procedures

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 amended, as of September 30, 2025. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2025.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the second quarter of fiscal 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Internal Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025, which are incorporated herein by reference, and could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. If any of the risks actually occur, our business, financial conditions or results of operations could be negatively affected. In that case, the trading price of our stock could decline, and our stockholders may lose part or all of their investment.

There have been no material changes from the risk factors set forth in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025, other than the following:

Risks Related to Our Convertible Senior Notes

We may lack the cash or financing capacity to satisfy required cash payments under the Notes, including upon conversion, following a fundamental change, or at maturity.

On September 5, 2025, we issued $900 million aggregate principal amount of 0% convertible senior notes due 2030 (the “Notes”) pursuant to an indenture (the “Indenture”) and entered into related capped call transactions (the “Capped Calls”). If a Fundamental Change occurs (as defined in the Indenture), holders may require us to repurchase the Notes in cash at 100% of principal plus any special or additional interest (together capped at 0.50% per annum). If holders convert, we may elect to settle in cash, shares, or a combination. We must also repay any Notes that remain outstanding at maturity in cash, which could require refinancing. Our ability to fund required cash amounts will depend on cash on hand, cash flows, and access to capital markets and credit facilities, and may be limited by law, regulation, or agreements governing our indebtedness. We may not redeem the Notes before September 22, 2028, and any optional redemption thereafter requires our common stock to trade at or above 130% of the conversion price for a specified period, which may affect the timing and magnitude of cash outflows. Failure to make a required cash payment would constitute a default under the Indenture and could result in cross-defaults or accelerations under other indebtedness.

The conditional conversion feature of the Notes, if triggered, may adversely affect our liquidity, financial condition, and results of operations.

If the conditional conversion feature of the Notes is triggered, holders may convert their Notes during specified periods. Unless we elect to satisfy our conversion obligation solely by delivering shares of our common stock (other than cash in lieu of any fractional share), we would be required to settle a portion or all of our conversion obligation in cash, which could adversely affect liquidity. Even if no conversions occur, applicable accounting rules could require us to reclassify all or a portion of the Notes as current liabilities, reducing our reported working capital.

Conversion of the Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock, and the Capped Calls may provide only partial offset.

The Notes are initially convertible at 4.2215 shares per $1,000 principal amount, equivalent to an initial conversion price of approximately $236.88 per share. If we elect to settle conversions in shares, existing stockholders will be diluted. The conversion rate is subject to adjustment upon certain events and may be increased for a limited period in connection with specified corporate events, which could amplify dilution. The Capped Calls offset dilution only up to an initial cap of approximately $357.56 per share, and above that level dilution will not be mitigated. In addition, the existence of the Notes may encourage short selling by market participants, because conversions can be used to satisfy short positions, and expectations of potential conversion could depress our common stock price.

Hedging activity by Capped Call counterparties may affect the trading price of our stock and the value of the Notes.

Banks party to the Capped Calls (or their affiliates) may establish, adjust, or unwind hedges in our common stock or related derivatives, including during any conversion observation period and around redemption or unwind events, which could increase or decrease the trading price of our common stock and, during an observation period, affect the amount of conversion consideration and the value of the Notes.

Accounting for the Notes and Capped Calls may increase volatility in our reported financial results.

The Notes and Capped Calls are subject to complex accounting requirements. Although the Capped Calls are accounted for in stockholders’ equity and therefore not remeasured each period, conversions and changes in our share count may affect diluted earnings per share, and application of the relevant accounting standards may introduce period-to-period volatility in our reported results.