Q3 2024 Commvault Systems Inc Earnings Call
Participants
Michael Melnyk; Director of IR; Commvault Systems, Inc.
Sanjay Mirchandani; President, CEO & Director; Commvault Systems, Inc.
Gary Merrill; CFO; Commvault Systems, Inc.
Aaron Rakers; Analyst; Wells Fargo Securities, LLC
Howard Ma; Analyst; Guggenheim Securities, LLC
James Fish; Analyst; Piper Sandler & Co.
Rudy Kessinger; Analyst; D.A. Davidson & Co.
Eric Martinuzzi; Analyst; Lake Street Capital Markets, LLC
Jason Ader; Analyst; William Blair & Company L.L.C.
Thom Blakey; Analyst; KeyBanc Capital Markets Inc.
Presentation
Operator
Hello, and welcome to the Commvault Q3 fiscal year 2024 earnings conference call. (Operatot Instructions) . I will now turn the conference over to Michael Melnyk Head of Investor Relations. Please go ahead.
Michael Melnyk
Good morning, and welcome to our earnings conference call are Michael Miller, Head of Investor Relations, and I'm joined by Celgene, which is already combo CEO, and Jerry Merrell, Campbell, CFO and earnings presentation with key financial and operating metrics posted on the Investor Relations website for reference statements. Made on today's call will include forward-looking statements about combo future expectations, plans and prospects. Also certain caution, which in today's earnings release and Commvault most recent periodic reports filed with the SEC for discussion of risks and uncertainties that could cause the Company's actual results to be materially different than those contemplated in the forward looking statements.
Commvault does not assume any obligation to update these statements. During this call, Campbell's financial results are presented on a non GAAP basis. Reconciliation between non-GAAP and GAAP measures can be found on our website. Thank you again for joining us. Now I'll turn it over to Sanjay for his opening remarks. Sunday.
Sanjay Mirchandani
Thank you, Mike. Good morning and thank you for joining us today. I am pleased to report our Q3 results exceeded expectations, including double-digit year-over-year growth across our most important taking out by our own metrics. This was an exceptional quarter. We also set the stage for the future by introducing market-leading innovation with Commvault plus our revolutionary platform for cyber results.
Some financial highlights include total revenue increased 11% year over year to $217 million. This was driven by a 31% increase in subscription revenue, which now represents more than half of our total risk. Total ARR. The primary metric we use to measure underlying growth grew 17% year over year to over three quarters of a $1 billion. Subscription ARR grew 29% year over year to $571 million and is now over 75% of total sales up SaaS, they are increased 77% year over year to $152 million, and we expanded operating margins by 180 basis points year over year, while continuing to repurchase shares. These results reinforce the top of products and services and more demand than ever, especially as companies grapple with how to keep the data secure compliant and resilient in a world increasingly under threat of cyber attacks for two years now, we discussed how the volume intensity and sophistication of cyberattacks would require a radically different approach to cyber resiliency database where when perimeter security alone would. Suffice, it's just a matter of time until the bad actors day.
So rather than just looking at prevention, CEOs and CFOs alike are putting a heavy emphasis on recovery and resilience. This transition has fueled the most important pivot in our 27 year history. In November, we introduced combo cloud powered by Metallica AI. This platform brings together the best of all worlds, industry-leading data protection, combined with data security, data intelligence and recovery. Commvault cloud offers the fastest most reliable recovery of any solution in the market today with our platform, data can be restored from anyone anywhere rapidly reliably and at massive scale .
The platform provides a high capabilities, giving customers automated and predictive recovery, threat intelligence and operational efficiencies to deliver true cyber resilience. No longer will organizations need to make a natural choice is between SaaS and other data center workloads with our platform. We support more workloads than any other vendor in our space, and we do all of this and lowest total cost of ownership. We scale the platform integrating with major hyperscalers as well as leading cybersecurity and AI companies like Avaira Toric price, Databricks, Microsoft Sentinel and Palo Alto Networks among others .
I'm pleased to share that customers, partners and industry analysts have been reading about. For instance, one customer told analyst firm enterprise strategy, group quote, were highly regulated industry Commvault was the only solution we found that gives us the flexibility and assurance that satisfied our auditors because of Commvault. I can assure a leadership team that we are protected and we all sleep better at night, end quote,
IDC research, Vice President, Phil Goodman said quote, this announcement relines Commvault products to meet customer preferences and sets the company on a path to be very competitive and cyber resilience and quote. And we continue to introduce major innovations in the platform that stalled critical customer challenges.
For example, with our clean room recovery offering, we are closing the gap that exists between incident response planning and readiness. New clean room recovery capabilities enabled customers to thoroughly and cost effectively test the recovery plans, it also provide them with a safe, on-demand environment to recover. It is this kind of groundbreaking innovation that sets us apart from the competition and helps us take share and land new business.
In fiscal Q3, we added another 500,000 subscription customers now represent well over half of our total active customer base. A couple of examples include a large state agency that detective security gaps with its incumbent vendor. This new customer turn the Commvault for immutable Aircraft ransomware protection anomaly detection and an improved cyber resilience posture. And we also help the Fortune 500 capital equipment company, eliminate this patchwork of tenders and move their workloads onto our unified platform .
That allowed them to modernize and improve their cyber resilience posture, better protect them from ramps, and we're able to lower total cost of ownership. To expand our perspective and keep us at the forefront of innovation. We also established a cyber resilience council comprised of security visionaries from top cyber cloud and government organizations. The Council of Advisors on security trends and cyber threats, which will ship product development strategy and partnering opportunities.
It is shared by Melissa Hathaway, a thought leader in cyber security and Digital Risk Management to serve and to presidential administrations for two months away from closing our fiscal year. And I couldn't be more excited about our momentum as we approach fiscal year '25.
With that, I'll turn it over to Gary to discuss our results. Gary.
Gary Merrill
Thanks, Sanjay, and good morning, everyone. I am pleased to report strong revenue and earnings outperformance in Q3. Starting with the top line, total revenue was $217 million, an increase of 11% year over year and significantly outpaced our Q3 expectations.
Our total revenue growth was highlighted by 31% year over year. Increase in subscription revenue to $114.2 million(sic - 8k, page 4) reflected about solid double digit growth in terms software licenses and accelerating contribution of SaaS revenue. Our execution was strong as large software deal, close rates improved sequentially and we delivered against our largest term subscription renewal quarter of the fiscal year. This execution resulted in term software deals over $100,000, up 25% year over year, driven by increases in both average selling price and deal volume.
Q3 perpetual license revenue was $15 million as the perpetual licenses are generally sold in limited verticals and geographies. At the current run rate. We believe that the headwinds to our reported total revenue growth from perpetual license sales are normalizing as we exit the current fiscal year. Q3 c ustomer support revenue, which includes support for both our term based and perpetual software licenses, was $77 million, down just 1% year over year. Q3 and fiscal year '24 continued to benefit from the continued trend of fewer conversions of perpetual support contracts to term software licenses.
Year-to-date customer support revenue from perpetual licenses represented 54% of total customer support with the balance coming from term software and related arrangements. This compares to approximately 60% in fiscal year '23 and 75% in fiscal year '22. At this trajectory, we expect customer support revenue from term-based software licenses become the majority of our customer support revenue next fiscal year.
Moving from revenue results to ARR. Q3 ARR was $752 million, representing 17% year over year growth and continues to reflect underlying strength of our business when our revenue was presented on an annualized basis, subscription ARR, which includes term-based software arrangements and fast contracts, increased 29% year over year to $571 million.
Within subscription SaaS ARR grew 77% year over year to $152 million, driven by new customer acquisitions and strong expansion with existing customers. Q3 GAAP net dollar retention rate or NRR was a healthy 125%. Now I'll discuss expenses and profitability. Fiscal Q3 gross margins increased 90 basis points sequentially to 82.9% and includes continued improvement in our SaaS gross margins.
Fiscal Q3 operating expenses were $132 million, up 9% year over year, reflecting the impact of our planned go-to-market investments throughout fiscal year '24 in higher marketing spend during the quarter, including our shift event in New York City.
Overall operating expenses as a percentage of total revenue was 61%, representing 100 basis points of leverage year over year. Consistent with our objectives humans expenses relative to revenue results, we ended the quarter we global head count of approximately 2,900 employees, flat sequentially and up 3% year over year.
Our current head count balance includes additional inside sales teams, renewal and related customer success teams to support the customer journey and are accelerating velocity sales m otion. Non-gaap EBIT for Q3 increased 21% year over year to $47 million. Non-gaap EBIT margins increased 180 basis points year over year to 21.5%.
Moving to some key balance sheet and cash flow metrics. We ended the quarter with no debt and $284 million in cash, of which $80 million within the United States. Our Q3 free cash flow grew 45% year over year to $43 million. Through the first three quarters of the fiscal year, we generated $121 million of pretax flow, an increase of 20% year on year. The biggest drivers of free cash flow or SaaS deferred revenue and the strength of our software subscription renewals with typically include upfront payment on multiyear contracts.
In Q3, we repurchased $51 million of stock under our repurchase program, resulting in year-to-date purchases totaling $134 million, representing 111% of year-to-date free cash flow.
Now I'll discuss our outlook for fiscal Q4 and the full fiscal year '24. All of the following guidance metrics for based on current foreign currency exchange rates. For fiscal Q4, we expect subscription revenue, which includes both the software portion of term-based licenses and sense to be $111 to $115 million. This represents 20% year over year growth at the midpoint.
This Q4 subscription revenue outlook reflects continued momentum in our new customer and expansion in business, but a smaller renewal pool in fiscal Q4 relative to Q3. As a result, we expect total revenue to be $210 to $214 million. At these revenue levels, we expect Q4 consolidated gross margins to be in the range of 18 months to 18% and EBIT margins in the range of 20%, 21%.
We continue to execute some foundational go to market changes, which include amplifying our discrete focus on our land-and-expand opportunities, scaling our motion to secure our growing subscription renewal base and investing to capitalize on our fiscal year '25 growth objectives. These investments are reflected in the range of our Q4 margin guidance.
Our projected diluted share count for fiscal Q4 is approximately 44.5 million shares. Now I wanted to give an updated outlook on the full fiscal year '24, which includes once again raising our total revenue and total ARR expectations for the full year. We expect fiscal year '24 total ARR growth of 15% year over year, which reflects a 100 basis point increase over our prior guidance.
We now expect subscription ARR, which includes term-based licenses and SaaS to increase 25% year over year and reflects a similar 100 basis point increase over our prior guidance. From a revenue perspective, we now expect subscription revenue to be in the range of $420 million to $424 million, growing 21% year over year at the midpoint, reflecting the continued momentum in our business in the $9 million increase at the midpoint compared to our prior guidance.
At these revenue levels, subscription revenue will exceed over 50% of our total revenues f or the full year, we expect total revenue to be in the range of $826 million to $830 million, reflecting an $11 million increase at the midpoint components of our prior guidance. Our improved fiscal year '24. Total revenue outlook reflects the seasonally stronger of subscription software trends that we usually experience in the second half of the fiscal year, combined with the ongoing momentum of our fast offerings.
Moving to full year fiscal '24 margin, EBIT and cash flow outlook, we continue to expect gross margins of 82% to 80%, non-GAAP EBIT margin expansion of 50 basis points to 100 basis points year over year. We are also maintaining our expected full year free cash flows of $170 million.
As of December 31, we had $122 million remaining on our existing share repurchase authorization, and we expect to continue with our existing practice or repurchasing at least 75% of our annual free cash flows.Yyear to date. We are pacing well ahead of target, and we intend to continue the share repurchase momentum during the current quarter. For details and trends, all of our key metrics, please take time to review our investor deck contained on the Investor Relations section of our website.
Operator, you can now open the line for questions.
Question and Answer Session
Gary Merrill
Thank you. (Operator Instructions)
Aaron Rakers of Wells Fargo
Aaron Rakers
Thanks, guys, for taking the question and congrats on the good quarter. I guess the first question, and I appreciate that you're not going to give guidance looking out into fiscal '25, but I'm just curious with the momentum you're seeing in subscription and obviously the SaaS business as well, how does how do you guys start to think about seasonality, in particular, thinking about the March quarter? And I guess out a layer into that, how do we think about the customer support growth as that starts to that the rate of decline start to ease and maybe we return to growth as we look into next fiscal year?
Gary Merrill
Fair and good morning. It's Gareth, like the remainer of third, all Yes, a couple of different data and maybe I'll start with the Q4 piece of data, the current March quarter for perspective. So Q3 is looking back a quarter. We just finished was a really significant quarter for us by our measure that it's one of the best, if not the best quarter we've ever had.
And we're really starting to see that cyber changing the way that people are buying. So some of some of the trend to be solved during that quarter gave us the confidence to raise both our Q4 and full year numbers. And as you mentioned about this, typically subscription revenue right of our guidance, less about 20% growth year over year at the midpoint. And what we're seeing and what we're expecting in fiscal Q4 is continued momentum in that land and expand motion of also the SaaS revenue that we're now generating as a tailwind and provide more predictability to our P&L.
Those together, we'll see a slightly smaller renewal opportunity in fiscal Q4 relative to Q3. So that's also reflected into our guidance for fiscal Q3 had the largest renewable we've ever we've ever had in our history. So we think those trends along with continued execution and some really good acceleration in our partner ecosystem is really going to help us set the foundation for next year for total revenue is what's happening in the customer support revenue.
And what you see there is that the decline year over year are starting to get mitigated and now down into the low in the low single digits. Some of that's reflective of your conversion that I mentioned on last call. We continue to see fewer convergence that then eliminate them there, headwinds we see in support. So somebody those headwinds will get mitigated going into next fiscal year, which should also provide some of that continued momentum. Allstate.
Aaron Rakers
Yes, Gary, I appreciate that. Let me let me maybe kind of double-click on that. And just ask more specifically, do you think the customer support revenue can turn to growth? Yes. As we look at the next fiscal year.
Gary Merrill
No I would say, as I look into next fiscal year, I would say flat to slightly down is, but I would expect on a full-year basis, Aaron, is what I would expect that this place, I think by the end of next fiscal year, the the the term component like the maintenance and support from our term licenses will become the majority of that customer support. But I think that will take it into the back half of next year, which means better, no full year basis will slightly be kind of probably low single digits.
Aaron Rakers
Yes, that's helpful. And then a final quick question on the term side, it, can you just talk about what you're seeing from a maturity perspective? You know, entirely the term length of the deals you're engaged with, it sounds like large deals have improved the macro microvia. So just kind of any updated thoughts on what you're seeing any kind of term Lakes return compression dynamics.
Gary Merrill
Yes, absolutely. So what we continue to see now is stabilization in our term lengths. Last quarter, we saw the data first quarter stabilization. This quarter. We saw another quarter stabilization on the subscription side. Our average term, still rounding, so about two years, but that stabilization on, which is also demonstrated by good execution, but also demand for our cyber resilience products is also giving a little more predictability in there on the other piece there. And that's also critical to this is how we align with the partner ecosystem. Right those the bigger deals and larger transformational projects are tied with some of the new monitor partner ecosystem, whether it be hyperscaler, there are others, and they also provide some, you know, some foundational support for keeping net of that term like LTE and uptake there.
Michael Melnyk
And as Sanjay, I'll just add one more point as customers start really moving and pivoting the hybrid model and hybrid cloud workloads. Our platform allows them to do that mitigation and move their workloads and have the same as the same technology support them both in the cloud and data centric. So University, we see that as well, that others will.
Aaron Rakers
Thanks, Ed.
Operator
Howard Ma, Guggenheim Securities
Howard Ma
Yes, thanks and impressive results. I have a question that first for Sanjay, it sounds like if you were to dissect the outperformance in the quarter, I guess between the general spending environment, it may be improving. It looks like it might be in secular tailwinds that have had no consolidating are increasing at infrastructure and security budget that versus your own internal execution due to new product creatives and go-to-market execution in. I understand it might be hard to separate at the end of the internal from external. But if you could, if you were to force the stack rank the internal versus external it. I'm curious what your thoughts a bit.
Sanjay Mirchandani
Well, I'd say I would say it's probably 75%, but this quarter in the past 75% interest. And I would say that because really powered Gary touched on this, our own business transformation moving are moving our installed base of customers and our new customers into a more ratable format as well as the subscription oriented format is actually working on subscription renewal tailwind is kicking in. So the stuff that was a headwind for us to three years ago is actually becoming a nice, a nice, nice build own.
And this last quarter was testimony to that. We've also been we talked about our execution internally, really aligning our sales force, our marketing campaigns, our demand generation campaigns, all the things that you would expect to avail of the opportunity in front of us around cyber. So that's, you know, that's kicking in nicely as well. And green shoots on some of the sort of the demand we're seeing on cyber resilience in the third is the new platform, the platform, the actual scalable cloud polymetallic, a platform that we're selling into customers at this point, technologies, like my colleagues in recovery are really beginning to get customers' attention. So uniquely different from what I've not perfect math, but I'd say 75% of what we're seeing is a combination of what we're doing and good execution alongside the fact that we're solving the talk externally resolving it really hard look at cyber cyber threats are rail and and we'll be able to do for them is meaningful.
Howard Ma
Okay. That's really good color. Thank you for quantifying that, Sanjay, I have a follow-up for Gary. Gary, with the recent launch of comparable cloud and these new security bundle, can you give us some numbers around initial traction in cross selling these security modules to existing customers as well as adoption by net new logos? Thanks.
Gary Merrill
Yes, good morning, Howard atmosphere and begin this morning. So a couple of things is, as you know, we are announcements related to our new platform combo cloud just hit the market just a couple of months ago, okay? So where we're focused now is on demand gen. So it is starting to see some very early benefit that we will start to see it in our in our pipeline and funnel that we're creating. That's also reflected in our Q4 outlook. What the what this will do is going to give us an amazing opportunity for expansion as well. None of that is reflected in our results for Q3. So our results in Q3, foundries have talked about executing against that pipeline. We had strong close rates that we've set of that accelerated quarter on quarter.
And what we're seeing now is building that demanded for next fiscal year and the ability to cross sell through our install base finally have a platform that makes our patent the buying process for our customers, easy between software into exact and facilitates that expansion opportunity to go from our foundational model that we have today all the way through the cyber resilience offering that we've had we've announced.
Sanjay Mirchandani
And Howard, suddenly it's quite honestly, it's too early to quantify in dollar terms the impact, but we're very, very positive about it from what we see it as the pipeline, because I'll give you that I will give you an anecdotal point of view the number of conversations I've had with the securities and see. So since we launched on the member base has been unprecedented. We'll see, you know, really deep dive on the fact that, Tom, what we call shift, right, our ability to really take the customer journey and make sure that protection and then resilience of the core of how they think about cyber recovery is key.
And we're having deep conversations for a proof of concepts more than we ever have because we've been able to really bring to life the completeness of the buck.
Howard Ma
Thanks, guys. Really, really exciting stuff.
Sanjay Mirchandani
Thanks, Howard. Thank you, Howard.
Operator
James Fish with Piper Sandler.
James Fish
Hey, guys, great quarter. Just building off the last few that we've asked around cyber is owed resiliency strength. Look, I know can be hard to really parse out what percentage of customers are buying the cyber buying for cyber security use cases at this point? Or what's really the exposure to cyber budgets rather than kind of a traditional backup and recovery? How often is a chief information security officer, for example, in the room as you guys are in that final pit?
Sanjay Mirchandani
I didn't know you have a subject. I guess I just sort of touched on that in the previous Howard's question. We're seeing a lot of security conversations. And by the way, we knew this was not first foray into security. We've executed on our product for a long time. Last June, we announced a series of innovations and then we followed that up in November. We continue to follow that up now. No, you know, the data even in the even before cyber resilience, data protection with us, information security was point was there was nothing about it. So we have security built into into our overall data protection platform, which we've extended end to end with our cyber resilience capable.
Okay. Let me give you let me give you an example. And I mean, I've said this for a long time data protection and data security emerging. And I think that they have officially come together. So if you're if you're recovering from a breach or a threat or an attack and you're recovering data, you can't just blindly bring data back. You have to make sure that you're expanding that data for any vulnerability that may have, then that may have been added since you've backed up, okay or new and the environment it so threat scanning, which was atypical security, chip less capability, is completely integrated with recovery capabilities.
So that's what we've been doing it. So it's very hard to sort of segregate that's a business security versus business, and it is resilient. And we've been doing this for a while. I mean, I can't I mean, yes, customers may talk to us and say, hey, we want to talk with data protection, but it's really with life of the fact that the freshness to protect against the cyber. So it's all it's all one platform, one capabilities.
James Fish
makes. I'm Sanjay, I appreciate that. And then, Gary, you had mentioned you guys are looking to invest on the go-to-market side. Just can you elaborate a little bit more on the details there? You know, how many heads or should we look? Should we be looking for you guys to add in this upcoming quarter in order to hit those objectives? Is it going to be maybe I mean, inside sales team are looking more at kind of feel like that?
Gary Merrill
Yes. Thanks, Jim, and good morning. Yes, in some of my prepared remarks, the top of that investment. So I think foundational to what so again, I've always talked about, it's about profitable and responsible growth. So that's always that is our foundation. But as I look out into next year, some of the investments that we're starting to make is that it's really be able to capitalize on on the growth opportunity that's in front of us. We're seeing the world of February wouldn't come together to give us. This is an amazing opportunity to hopefully accelerate growth. And with that does require some level of and of investments.
And it's more about making sure that we continue to generate the demand around cyber and make sure that we are targeting the right buyers and the decision makers that can help drive the decisions related to cyber resilience and more and most importantly, continue to make sure we have the right resources in campaign around on around accelerating our SaaS, the SaaS model.
Okay. What some of these investments require that alignment, especially into the partner ecosystem for? Okay. So if I look at the partner ecosystem is that with forces remote places this quarter and we want to capitalize on that momentum. It's also building out the MS. peers, especially with our SaaS bucket of product. And third is a lot of these large transformational cyber pod projects are totally integrated with the GSIs alliances.
Okay. So if you're trying to think about some of the areas that are reported to us to capitalize on the growth there, the key areas for focus.
James Fish
makes sense. Great quarter, guys.
Gary Merrill
Thank you. Thank you.
Operator
Rudy Kessinger, D.A. Davidson & Co
Rudy Kessinger
Hey, guys, thanks for taking my questions. And I'll add my congrats to what looks like a great quarter. Some really good numbers here. On SaaS, you know, a grocery accelerated last quarter, a bit sustain this quarter, 77% SaaS ARR growth in net new debtors, or it's just really impressive. Could you talk about when you look at the growth in metallic a quarter of the quarter, just what percent of that new SaaS ARR is coming from cross-selling versus new customers? And also, do you have any conversions in there yet? Or is it still mostly true organic ARR growth?
Gary Merrill
safety related? Gary, good morning and nice to hear from you today. What the key things that we look at two related this asset as we look at sequentially from an ARR basis. Okay. And hitting the $152 million ARR, there are some sequential growth we had from last quarter. This quarter was an all-time high. So in a numerical, we had the high highest sequential increases that they are, which is shown to the acceleration we're seeing in the as as a service delivery model. And it's a combination of three things, as you highlighted. one is I'll call our land-and-expand new business, and we're still seeing the majority of that from upsell.
Okay. So meaning on more and more of the same workloads are primary workloads. We're starting to see the cross sell start to commit, but it's still the on relatively less than the additional workloads of similar functionality. Now in your opinion, you're seeing with the new cyber is on the offerings. We're setting ourselves up for that cross-sell opportunity as we get into the next in the next week. So we look to next fiscal year for that. But the key driver on the 125% NRR as it has been upset.
The other key piece, though, is the maturing renewal cycle and driving to really strong gross renewal rate. So we're doing a very good job of now maturing, hasn't fully mature renewal rental cycle as well. So those pieces are help driving that. That momentum.
Sanjay Mirchandani
And really, it's Sanjay and even today directly ask the question, but new customers as part of our land on new customer acquisition momentum with our SaaS workload is growing in the hundreds every every quarter and the attach, you know, the cross-sell of software with was that is actually quite something we appreciate and are working on because because our customers but I would just also a testimony to our platform strategy as customers move it up by about. So they start with one workload and then quickly move into US data center based workload because you may have you may have product that you want to back up in a different way in the data center.
So not only do we look at cross-sell within within the SaaS offers, but also cross-selling between software and SaaS. And having a single platform with was the capabilities we have enables that hybrid journey for customers. So they can start anywhere either in the cloud or on-premise and then go both ways that that that's a key differentiator for us.
Gary Merrill
So really that's all true growth. There's one last point you to your question. I wanted to finish on that. What we're seeing a metallic is not cannibalizing over from converting our install base. You asset-specific, you asked that question specifically, and we're not that's not part of the current the current play or what's driving the business. This is all about net new business.
Rudy Kessinger
Great. That's all very helpful color. I guess just one quick last one on SaaS. Again, you mentioned that the record net new SaaS ARR in Q three. If I look back last year seasonality, your net new metallic air are in Q4 was a good step up from two three. Should we expect to see that play out again this year? I know you're not guiding specifically the SaaS ARR, but it just gives you a month into the quarter.
So how should we expect net new air SaaS ARR to come in for the March quarter versus December?
Gary Merrill
I'll take everybody's Gary gave, I think the seasonality sold last year from fiscal Q3 to Q4. It's there for something like we would expect for this year. I think we saw roughly a $15 million or sosequential growth. I think something like that or slightly more at what our objective would be to keep that momentum going. We have a strong pipeline going into the quarter, and we're seeing our close rates continue to improve as well. So we're optimistic about where we're going to land for the fiscal year. We're not calling it, but we're trying to get.
Rudy Kessinger
Okay, great. That's it for me. Thanks.
Operator
Thanks for taking the questions again and congrats again. Thank you.
Eric Martinuzzi, Lake Street.
Eric Martinuzzi
I noticed a nice pickup on the Americas region up 16% year on year with that kind of a broad based across verticals or was there any particular verticals that stood out for you?
Gary Merrill
Yes, Eric, this is Gary. I'd like to hear from you again this morning as well our Americas, but had really strong quarter from a total perspective. Our Americas business was up 16% year over year, really driven by that subscription revenue as well. Just the total subscription revenue in the Americas was up 43% year over a year.
And what we're seeing is really strong traction on some of the large on the larger deals, larger deals on renewals as well as time goes on larger land that is in land and expand deals are new, but I'm sorry, our big they also when we say kind of those term software deals over $100,000 for up almost 50% year over year. So it's all tied to driving the cyber resilience message and making sure that we are helping our customers solve those difficult problems.
Not vertical-specific. Last quarter, we talked a lot about added this quarter. It was more broad-based across Bert across the vertical stream tied to executing in the renewal stream and the larger deals.
Eric Martinuzzi
Got it. And then for the buyback program, I know you haven't given us a view for FY25, but if you've been relatively consistent over the past couple of years about this greater than 75% of the annual free cash flow, is that the intent going forward here you that? Are you going to revisit that when you the US at the current plan?
Gary Merrill
Yes. So our current guidance will continue to hold. We believe right now that our buybacks are a key part of our responsible growth strategy in and, you know, our publicly facing stated guidance of at least 75% of free cash flow is a good modeling trend. As you can kind of tell through the nine months, we're well ahead of that were north of 100%, right, of free cash flow because we're opportunistic also in the market, and we see the value that we have as a company and our ability to continue to drive shareholder value.
Eric Martinuzzi
Thanks for taking my questions.
Operator
Jason Ader with William Blair.
Jason Ader
Thank you. Good morning, guys. Just wanted to ask about the revenue growth outlook. I know you've talked about the split 6% to 7% growth cagar from the 2021 Analyst Day, a much richer Civeo. Maybe you've updated that. But just wanted to get a sense of whether you are reiterating that you think it could be higher. And then more specifically, as we think about 2025 FY25, without pinning you down on guidance right now, do you think the growth could be higher in revenue to be higher in '25 and '24?
Gary Merrill
Hey, Jason, it's Gary. Good morning. I will get a couple a couple of the employees of our revenue growth for us. It is ultimately an output of what we're seeing from an ARR perspective. So let me start let me start there, and we're seeing really strong growth. If you look at our ARR growth of 17% this quarter on is really strong. And we're seeing that across all of our core businesses.
Our Q4 guidance implies that will end up this fiscal year on the top line, right in that 6% revenue growth. We have on an amazing opportunity to accelerate as we move forward. Obviously, we have we have not we have not given guidance for FY25 yet. Clearly, our expectation that FY25 growth will be higher than FY24 quarter. And as we start to get out of work towards our next call next quarter for give a little more clarity on full year [FY24] annual results. But we but most importantly is we see the opportunity in the market that key. So as we see the opportunity to the market, we can continue to build on momentum from the quarter. We just had.
And clearly, we're expectation is that our growth next year will be higher than this year on the top line culture.
Jason Ader
Okay, great. And then up another one for you. Gary, can you give us a sense of how much revenue in a given quarter is actually effectively, let's call it in the bag that took petty on kind of day one of the quarter and in terms of and I would include renewals, let's just assume you're going to get the renewal there. I know you don't always get 100%, but let's just assume you're going to get the renewal and then committee contracts, which I guess would be the airport and SaaS. So those things combined, how much of your revenue in a given quarter was actually coming from those sources today?
Gary Merrill
We don't quantify specifically, right. I'll say would be with the contractual revenue would have been the behavioral and acute well are at day one day one of the quarter, though, as you look at a couple of key pieces, we disclose our fast there are configured that they are divided by roughly four and you could almost guaranteed you get that piece and the other pieces, customer support, right, that very predictable. So when you look at just those two pieces that and in customer support, you have a very strong starting point for the quarter.
It how we see the renewal piece then which drive leverage in the incremental that goes over our land play. The same business, I think we're up close is that on a relative basis, each quarter becomes more and more predictable than the previous with some of the foundational pieces. And that will be kind of focuses on increasing product of predictability. Sequentially each quarter goes so me.
Jason Ader
Okay. Let me just ask us in a slightly different pattern other than answer, if I'm not sure I heard of your $100,000 plus deals now today, how much our actual renewals versus?
Gary Merrill
new basically new business? Both for that? I think we can get into specifics yet as we're not going into those specifics, but they're both. They're both very healthy contributions.
Jason Ader
And it's obviously a lot higher today than it was a couple of data to come.
Gary Merrill
Yes, that's right.
Jason Ader
Thank you guys.
Operator
Your next question comes from the line of Tom Blakey with KeyBanc Capital Markets.
Thom Blakey
Good morning, guys, and a great great execution here and solid results. Congratulations on. Just wanted to maybe piggyback on Jason there on the potential renewal of genuine. Pretty clear about saying that fiscal 3Q just past was a very large opportunity for the company and at the low the largest, I think Gary said in that fiscal 4Q would be lower on managers and literally just assets. But what will the renewal opportunity that it seems like you have a solid grasp around the sort of renewal opportunity in fiscal '25 be bigger or partial year of the same as fiscal '24.
Gary Merrill
Got it. So I'm a Tom Carey, and I'll jump in as me, give a little maybe different foundational pieces that will help us out of that by '25. Fiscal Q3 is typically our largest because it's tied to all of the calendar year. And right deals we've done over a period in fiscal Q4 will be moving money. Well, we're not significantly but lower. Okay. So that means that the seasonality of the second half is always stronger than the first half of any fiscal year. And that trend is I look into next year will continue on an overall basis. I would expect the renewal population next year to be larger than it will happen later this year, but not by the same amount that we saw this year, right?
This year had a larger sequential year-over-year. Next will be larger, but to lead to a much lesser extent,
Thom Blakey
much less than fiscal 2020 target by the relative to fiscal '24 by higher Gasco 24. Nonetheless, that's helpful. Regarding maybe so they can get. And maybe you could start with the context of the expanding opportunity set that you have here with regard to cyber resilience. You know, we we agree with you in terms of the convergence of data recovery and data security last couple of years here on top of my talk to us about like maybe incentives and the capacity that you have internally to have an icon involved in terms of attacking opportunities you climb up to the. So I'll kind of sweet there.
Sanjay Mirchandani
Sorry, what was the last part of your question?
Thom Blakey
So in terms of in addition to incentives, what kind of capacity do you have for need to be our continued build out our two component of your of your approach to see So swing in terms of discussions with the social,
Sanjay Mirchandani
I mean, some incentives, I mean, there have there, you know, we continue to fine tune that as needed, obviously within the within the comp plans. But really what's what's more important is the investment and focus we've put around enabling our sales force and our ecosystem on our new capabilities around cyber resilience, kind of unprecedented, how much time and effort we put and cost we've put into getting that getting that right. And that's an ongoing journey.
We've also brought in some really, really seasoned securities, we call them feel CTOs of to really enable our customer conversations alongside our our field. We've got some specialists as well that that understand security inside now practitioners. We've also announced recently a cyber cyber resilience board, which has which is a board of absolute luminaries in the field of cyber security, headed by Melissa Hathaway, who was an advisor in and part of two presidential administrations on security and cyber cyber security.
So we're really ramping to not just the product, but also the capabilities, the thought leadership around it and enablement, um, you know, within that. So there's a lot of work going on. And yes, and I'd be I'd be wrong for me to forget, we've also, as part of the platform, it's a subtlety, but it's an important piece, which is we've actually gone. We've shifted left. In other words, we have integrated and continue to integrate and continue to increase the ecosystem connections into what we call the identifying, defend the perimeter security costs and making sure that the technology our customers used to to defend the perimeter and and manage it is something we integrate what because it makes both sides the Recovery and Resilience side, which we do.
And you know, the defendant identified side that our partners to and working together, we make the customer safer. And so, you know, there's a lot of work that we've been asked, not that we announced at all in November, but we've been actively for a long, long time for a lot of ground lost to do a lot to do everybody. We hire, train and bring in with the security backup quite simple as simple as that as a litmus test.
Thom Blakey
The The follow-up would just be with regarding to security budgets at firms who have had yield higher than ever expanding probably for the last decade or more. Do you envision that this is , your initial conversations are along those lines. You mentioned TCO in your preamble. Is this a calm bulk kind of like taking wallet share and consolidating vendors? Or is this more of a whole it was at the beginning? Or is this more measures to the continued expansion?
Sanjay Mirchandani
I think, you know, Tom, I think the fact that the two pieces that have traditionally been and separate upcoming together from a solution point, if you'd like to our platform, just we've seen customers at the table with the IT organization, the infrastructure team as well as the security. And they're working together rightfully so to solve the complex issue, a hard problem. And and I think they're quite obviously in the budget sort of months together in many customers to say, we feel that this is not just the data data protection based on our data security be it has to be together. So we're I think we, you know, I think we're actually seeing deficiencies with customers with the approach we're taking. It does make it easier because you're not you don't have internal of internal sort of production inside of customer.
Thom Blakey
Okay. That's helpful. And just one very quick one side. I have four questions there, but the gross margin guidance was impressive. Gary, just maybe talk about the moving pieces there, specifically with regard to McNeil metallic in the cloud because you're scaling here would be helpful and gentlemen, thank you, guys.
Gary Merrill
Yes, for sure. And I agree up that question with you separately. Gross margin perspective, getting stability in the gross margin is important and there's two pieces. one is when you see acceleration in our subscription and some extra, the chunk of that revised subscription term software feel good renewal and using the same growth, we're going to see gross margin momentum. The key pieces, though, to our gross margin in getting stability and leverage our that gross margins, we're working very clearly towards our goal of getting into that 70% plus range of gross margin a year ago. We were in the 50%. We're now well on our way towards that objective over time.
Time of getting to 70% plus. And you're starting to see the leverage that we're getting right now on driving improvements in the gross margin on that.
Thom Blakey
Great. Thanks, guys. Quarter. Thank you.
Operator
My apologies. Your next question comes from the line of Aaron Rakers of Wells Fargo.
Aaron Rakers
Yes. Thanks, guys. Thanks for the quick follow-up. I'll be brief here. Obviously, a lot of momentum around the cybersecurity and the resilience attributes of the business. I'm just curious like architecturally, as we think about the data center and what's evolving overall around AI?
Are you starting to see any engagements with customers that you can just simply say that AI. is actually driving this. It's kind of change of sentiment or investment cycle for your business as as enterprises kind of scrubbed through and think about their data and how they're going to leverage that more a from an AI perspective going forward?
Gary Merrill
I mean the answer the short answer is you can't have a conversation with RAI. coming up. That's just the fact that we've done is we've kind of turn I'll turn to your question on its head a little bit. And what we've done is look at what we can do for customers that make their life better. Because of you know, we've had a I and our technology for many years with mostly mostly in machine learning type and automation type scenarios. Now with the newer generation of AI, our first foray into really delivering value, not just watching that technology, but truly delivering value for them to three the primary buckets. one is operational, scale and Brazilians, giving them the ability to really work with large volumes of data with deep degrees of automation.
Okay. And so the operational AI just enables that, and that's in the product today. Second is really threat and risk management and assessment. So even though the number of risks that threaten the volume of data that's been written and restored a I can do a wonderful job helping customers really truly anomaly detection really do the CyberArk to get real cyber resilience.
So we've built a lot of that into the product. And the one that I think it's getting great traction, which I think has immense value is predictive recovery. The complexity of recovering data with absolutely solid clean backups for a customer who has just been breached is very complex because of the sophistication of the regions and a time span between entry and payload. And so we're using AI to help customers really get a great starting point. And then and then applying AI across a clean room recovery scenario to really help customers truly resilient and recover.
At the end of the that's what matters. And so these are the three I'm oversimplifying it, but these are the three big buckets under which we've applied a I end up in the first Avatar of our technology and is continuing. We have a very rich and robust roadmap. And everything I've talked about exists. So there's no there's no real washing. It should book. There's a lot going on right now. And we have to be seen what we have to be very, we think, a very conservative approach around this because at the end of the day, it's mission critical data that we're working with us.
Operator
This concludes the question and answer session. I will turn the call over to Michael Melnyk for closing remarks.
Michael Melnyk
Thanks, everyone, for joining this morning. As a reminder, the Investor Relations website, a presentation summarizing our key KPI's feel free to reach out to me during the quarter with any questions. Thanks very much. Thank you.
Operator
This concludes today's conference call. We thank you for joining. You may now disconnect your lines
