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Commvault Systems, Inc. (NASDAQ:CVLT)
Q3 2021 Earnings Call
Jan 27, 2021, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Michael J. Melnyk -- Director, Investor Relations

Hello, everyone, and thanks for joining us today for Commvault's Fiscal Third Quarter Earnings Review and FutureReady Investor Event. My name is Michael Melnyk, Head of Investor Relations, and we look forward to spending the next couple of hours with you today.

Our leadership team is excited to discuss our view of the dynamic data protection and management market, while highlight how our vision and strategy has been brought to life through our transformed software and SaaS portfolio, our optimized go-to-market motion and our focus on execution excellence, all of which are fueling our intended return to sustainable and profitable growth. Given the increased visibility associated with our growing recurring revenue base we'll provide near and long-term targets and will discuss in more comprehensive capital allocation framework. [Operator Instructions] You can submit your questions to the Investor Event microsite.

Before I turn it over to our President and CEO, Sanjay Mirchandani, I'll quickly summarize our safe harbor statement. Today we will be making forward-looking statements under the safe harbor provisions of the United States Securities Laws. These statements are based on our current expectations and assumptions and remain subject to risks and uncertainties, our actual results may differ materially. Factors that could cause our results to differ from these statements can be found in our SEC filings. We're also referencing non-GAAP financial measures and targets. The reconciliation of non-GAAP financial measures to comparable GAAP measures can be found on our Investor Relations website. We hope you enjoy today's program. Sanjay will be joining us after the short video introduction. Thank you. [Video Presentation]

Sanjay Mirchandani -- Director, President and Chief Executive Officer

Wow, it's a great time to be in this industry. I'm thrilled to be with you today to share our vision and what we see as the opportunity ahead. Thank you for being with us. When I joined Commvault, we focused on three priorities, one, simplifying our business to make it easier for partners and customers to work with us, two, radically innovating to meet a market in massive transition, and three, executing by focusing on what matters to deliver results, which is why we've exceeded expectations in five of the last six quarters, with the only exception at the start of the pandemic. I'm proud to say we've made tremendous progress assuring in a new era for Commvault. Our high performing engineering team is innovating faster than ever. Our field is delivering results and we have a winning team and culture already helping customers with their digital transformations.

Before I get into our view of future, let me take a minute to talk about our Q3 results. Simply put, Q3 was our best quarter ever. We delivered all-time highs for total revenue as well as software and product revenue. All of our geographies had a solid quarter. Annual recurring revenue is the primary metric we use to indicate the health of our business, also crossed a critical milestone over $0.5 billion. Finally, we delivered record earnings per share, which demonstrates our balanced approach to revenue growth and profitability. These results reflect and are the result of our transformation over the past two years.

With that, let me share a little bit about our vision and expectations moving forward. We're here today because three things are coming together right now. First, as organizations digitally transform and embrace the cloud, multi-generational data sprawl threatens the fundamental integrity of their business, more on that in a moment. Second, we believe our portfolio delivered through intelligent data services as software and SaaS is best aligned to help customers with their hard problems. And third, we've been working really hard over the past two years to get ready for this opportunity, and we think we are. That translates to our near-term outlook. We are positioned to deliver between 6% and 7% total annual revenue growth, 9% to 10% software and products growth, and 10% ARR growth. We're on a path to deliver over 25% EBITDA through fiscal year '23 and we will be close to the Rule of 40 by fiscal year '25.

Now, let's go into a little more detail about what's it take. As you know, Commvault has a rich heritage of delivering world-class solutions. More than a 100,000 organizations around the world are leveraging Commvault's technology. Over 25 years we have evolved as conditions have changed and we developed a powerful ability to help customers reinvent themselves for the future and thrive. We believe this is what gives us a unique vantage point to help customers accelerate their digital transformations. It's not just about modernizing back-up environments or moving to the cloud or even transitioning to SaaS. These miss the heart of today's mission critical data challenge.

You see digital transformation changes everything when it comes to data. And when you're very existence depends on data, how do you ensure the fundamental integrity of your business without increasing your exposure, slowing down your transformation or leaving yourself ill-equipped to handle what's next. This is the question being asked more and more by Board members, by CIOs, by CISOs, by governments and by customers. It's not surprising that organizations are in a state of change. Infrastructure is moving to the cloud and sometimes back again. Businesses need that flexibility. Tightly integrated and monolithic software is being replaced by SaaS applications. Once modern agile software delivery processes are now being replaced by DevOps and sometimes no art methodologies to immediately bring capabilities to market. Containers are being used increasingly in production environments. The use of mobile is an imperative and the lines of ownership between IT and the business are fast blurring.

So what does all this mean? Data is in constant motion, almost kinetic, if you will, from here to there, from this application to that application, never has data been further away from the tool that created it than it is now and this causes multi-generational data sprawl throughout an organization and it's only getting worse as data grows exponentially. Frankly, it's out of control. This introduces massive data fragmentation, inefficiencies and potential points of failure. For starters, you can't control what you don't know we exists, like dark data or some SaaS apps spun up somewhere unknown to IT. This is compounded by the rise of ransomware attacks and increased data governance scrutiny. Can the organization recover quickly and evolve to beat these governance demands. All of which depends on integrated data protection and management policies driven by deep degrees of automation. Otherwise, you just cannot reach the promise of the cloud. This is what I mean by an existential risk.

The heart of the challenge is what we at Commvault called the business integrity gap. Simply put, it is the growing exposure between the current budgets and capabilities and the organization's need to digitally transform. The gap won't go away on its own. Just think about these trends. Implementing new SaaS applications to compete more effectively actually increases the data footprint that you manage. 9 out of 10 organizations have a multi-cloud strategy, containerized applications are increasing, ransomware event are rising fast, up 40% this past fall and continue to get more sophisticated and it's frankly hard to find people with the necessary skills to span this gap. If this wasn't challenging enough, we're also in the midst of a pandemic which has catapulted us into unnatural timelines furthering the gap. In fact, IDC predicts that by the end of 2021, 80% of organizations will accelerate their move to cloud-centric infrastructure and applications, that is twice as fast. The new imperatives are to modernize and use technology to drive competitive advantage, but organizations need to take control of their data now.

So how do organizations close the business integrity gap? Unfortunately, some organizations have employed inferior strategies hoping and praying or adding a new set of tools which will only come up short while adding complexity. There is a better way which brings us to the second reason why we will seize our opportunity. We believe that we are the best positioned to solve this existential problem with multi-generational intelligent data services delivered through software and SaaS. Folks, our entire existence is around data and innovation. We've been doing this for 25 years and have the patents and the accolades to prove it. Customers rely on us and are looking to us to help them close the gap, which is why we've invested over a $1 billion in R&D to continually enhance our no boundaries architecture.

The digital transformation journey our customers are on requires that they manage the data life cycle with an integrated set of services versus discrete disparate products and can be consumed on-premise through the cloud and through SaaS. Our portfolio enables this today. Let's have a look. First, we start with the broadest workload coverage in the business. The broader the coverage, the more relevant you are on the journey, on-premise, cloud, multi-cloud and hybrid cloud and SaaS applications. Because business continuity such a strategic imperative, we believe a rich set of intelligent data services to apply to your workload data often starting with data protection and disaster recovery. Then we layer in modern storage through Hedvig, HyperScale X and cloud storage via Metallic. And we build on that with data insights that optimize storage and provide governance and compliance. The piece of the middle Metallic SaaS is where the future lies. Built on our core technology, Metallic provides a world-class modern SaaS experience to make a quick and easy to start and get to scale.

You see enterprises have a bit of everything in their environment and need the flexibility to mix and match intelligent data services using software or SaaS, whichever works best for their business. Our platform provides the automation and APIs to integrate into customer workflows and it can all be managed from a single user interface. We shouldn't make the customer choose how to use the technology. We should give them the flexibility by supporting the broadest workloads, layers of capabilities, rich insights and a better overall experience across our services. And just a little bit, Don Foster and team will discuss our maturity model for customers working through this journey. But don't only take our word for it. We are firmly positioned in the upper right of the force to wave and the Gartner Magic Quadrant. And in Gartner's latest critical capabilities report, we ran the table, earning number one positions for the physical, virtual and public cloud environments. Folks, this is a first. No other company has done this. Not only are we thought leaders, but we have an early mover advantage and this recognition is a testament to our wide workload coverage and deep data readiness capabilities. So we have the intelligent data services to close the gap. But what does this mean for you as investors.

We now operate in markets that will grow to $42 billion by 2024. According to industry estimates, the new data management space, which will be worth $37 billion in 2024 is growing at about 7% per year. The majority of which will come from data protection as a service, growing at 17% to more than $15 billion by 2024. This is where we have a real advantage with our fast growing metallic offering, which today sells in 24 countries. In fact, we already have hundreds of customers protecting petabytes of data and we've added nearly $5 billion in TAM from software defined storage when we acquired Hedvig, which we quickly integrated into our new HyperScale X appliance, saving on operational cost and giving us unique cloud extension capabilities for hybrid workloads and a world-class cloud made of Kubernetes storage platform. This brings us to the third part of our journey. Since I joined Commvault, we've transformed our business top to bottom.

So let's discuss how we've transformed the breakneck speed and the growth drivers we're focused on to capitalize on the massive opportunity ahead. We've been working hard on the things that are going to help us secure new customers, cover more workloads and capture added value. We have a broader portfolio to enable our land and expand model. Our SaaS offerings are attracting new customers and adding value to existing accounts. Our customer success team is driving repeatable business through adoption and renewal initiatives. We significantly strengthened our sales productivity, which Gary will discuss later, and we've built stronger technology and go-to-market partnerships across all regions to bring in new customers.

I recently caught up with Gavriella Schuster at Microsoft to discuss the power of partnerships further. Thanks for joining us today Gavriella.

Gavriella Schuster -- Corporate Vice President,Commercial Partner at Microsoft

Yeah. Thanks for having me.

Sanjay Mirchandani -- Director, President and Chief Executive Officer

2020 was a lot of things for the world. But one of the things we saw in the business was a lot of our customers accelerating the digital transformations. As we go into 2021, what are you thinking about this, what are you seeing with your customers?

Gavriella Schuster -- Corporate Vice President,Commercial Partner at Microsoft

Well, what I'm seeing is that customers are moving very, very quickly. They're trying to provide great virtualization, collaboration spaces for their people, they're trying to secure their environment, and they're trying to accelerate their move to the cloud. And so what this means is that it puts a lot of pressure on the partner ecosystem to move very quickly and on all of us. And I think we've made a lot of progress as an ecosystem in responding to our customers' need, helping our customers recover. And I think what's in the road ahead as we move into 2021 is to help customers and reimagine what does the world look like post-COVID and how do they really set up their organizations to be more resilient in the future and to really keep the lessons learned from 2020 as we move forward. Because I think, well, it's been painful, the state of the world has been painful, it has enabled everyone to learn new ways of doing business. So I guess I would throw back to you. You speak to a lot of customers. Are you having similar conversations?

Sanjay Mirchandani -- Director, President and Chief Executive Officer

We are, and what -- and we look at it from the point of view of data. That's our life. And what we're seeing is data is front and center. Every business has been transforming to a data-centric business and customers want to be able to manage it, really prioritize it, be able to get value out of it, protect it, because the bad guys are at work, and all of this is causing sort of adoption of the cloud, but also causing customers to rethink how they do things and that's what we see. So Gavriella, I'm going to put you on the spot. Commvault, Metallic, our partnership very strategic for us. What brought it all together for Microsoft?

Gavriella Schuster -- Corporate Vice President,Commercial Partner at Microsoft

Well, I mean, so there is a number of factors. First of all, it's a great representation of Commvault's commitment to its customers when it comes to security, back-up from recovery and services. And so we are very happy to continue the strong partnership that we've had for many years and supporting on this new delivery. We're working and learning from home has made security and recovery a top concern for our customers and so it's very timely to market. The service itself within Metallic is easy to configure, it's scalable, it's robust, it safeguards the Exchange, SharePoint, OneDrive, it also really safeguards the back-end and protects the VMs and the file server. So it's really a great end-to-end solution.

So having a partner that has a long history in the market and is incredibly valuable from a customer perspective and also from a Microsoft perspective is where this partnership really comes to life and where we want to put our efforts. So I'm happy to say that our engineering teams have really worked very closely together to build these solutions and help customers solve the challenges that they're facing today in real time and I'm glad we were collectively able to get Metallic into the market. So like to know bit like how is Metallic doing from your perspective?

Sanjay Mirchandani -- Director, President and Chief Executive Officer

Well, thank you for sharing your perspective on Metallic. We're very excited about it. This is a product we built ground-up for the enterprise and partner with Microsoft very closely as we did it. The product is now available across Europe, it's available in Asia, obviously the United States and Canada. We've added a heap of services into the product over the past quarter or so and we're getting great traction. Customers are seeing how easy it is to adopt, how easy it is to add additional services around it, and how easy it is to grow as their businesses grow with Metallic. So we're really excited about it.

Gavriella Schuster -- Corporate Vice President,Commercial Partner at Microsoft

Awesome. I couldn't agree more. I mean, I think that Commvault Microsoft have a proven track record together for over 20 years and especially now when our customers need us so much. The companies need new innovations from trusted leaders and while there is still a lot more work that we can do together. I'm very excited about the work that we've done in bringing Metallic to the market and having it built on Azure. So I think that we're in for a great ride as we move into 2021.

Sanjay Mirchandani -- Director, President and Chief Executive Officer

Absolutely, we've just begun the products and the partnership and the ecosystem of our partners, have incredible potential and most of our great value for our customers. Gavriella, thank you so much for joining us. We really appreciate it.

Gavriella Schuster -- Corporate Vice President,Commercial Partner at Microsoft

You're welcome, and thank you for your leadership and continued partnership with Microsoft.

Sanjay Mirchandani -- Director, President and Chief Executive Officer

Likewise. I want to thank Gavriella, for being part of our event. It's partnerships like this that make us excited about what's ahead. In addition, we need to run efficiently as an organization. To use a metaphor, we have been changing the engines of an airplane, while in flight. We have driven massive cost savings by streamlining our organization, driving process efficiencies, increasing our presence in low-cost locations and remaining focused on spending.

Next, we have continued to invest. As the market evolves, we need to continue to innovate to stay ahead. I believe we are staying ahead, especially with Metallic and our HyperScale X solution. And finally, we've made significant progress in attracting top talent, committing ourselves for transparency and creating a winning culture. I would like to call out another reason for my confidence. We have the right leadership in place. As you know, it's all about the people.

During my tenure, we've built a tremendous leadership team comprised of Commvault veterans and industry leaders who have brought fresh perspective and energy to the company. I'm proud to work alongside them. You'll be hearing from some of them during this meeting. In a few moments Don, Manoj, Ranga and Geeta will go a bit deeper into our technological vision and advantages. Then Chris, Riccardo, Sandy and Gary will discuss our go-to-market strategy. After that, Brian will take you through the detailed financials. And then our Independent Directors, Martha Bejar and YY Lee will shine a light on our important environmental, social and governance initiatives. And before we wrap, we will have 40 minutes to take your questions.

With that, thank you for joining us today. And now I'd like to hand it over to Don Foster, an 18-year Commvault veteran, who makes a huge difference with our customers, to discuss how we're driving innovation. Don?

Don Foster -- Vice President, Global Sales Engineering

Thanks, Sanjay, and thank you all for your time. Over the last 24 months, new technology trends have driven new customer needs. And then solving for these new trends, we've uncovered a new strategic problem that organizations face. And as Sanjay described earlier, this is the business integrity gap. Over the last 24 months, we've also released a number of innovations in our product portfolio focused on closing that gap and allowing customers to control their always in-motion data environment. Over the next 20 minutes will discuss three key trends that highlight and showcase how our product portfolio and strategy are supporting our ability for aggressive market growth.

Those three trends are, number one, the IT is actually transforming into a hybrid and multi-cloud landscape. Number two, that that same hybrid multi-cloud landscape is catalyzing the next phase of application modernization with micro services and containers. And number three, there is an increased demand for SaaS-driven outcomes for all workloads both in the cloud and on-premises. We believe that we are uniquely positioned to handle these data-related challenges that have emerged from these new trends, and more importantly, help customers meet the demands that they have today and tomorrow.

Now these five stats that Sanjay covered earlier really helped to highlight the acceleration that's occurring in the digital business transformation. In fact, it's this acceleration that is widening the business integrity gap for organizations everywhere. Business and IT leaders alike must start thinking differently about their data. Ask different questions and find answers through and with technology to implement and enact to new strategy that can support the movement to the hybrid multi-cloud world. Working with over a 100,000 organizations worldwide, we are confident that we know how to close this business integrity gap. Customers of all types fall somewhere on the spectrum of this data readiness journey. All trying to ascertain that industrialized state which guarantees they have data readiness and that they can respond to whatever might be coming in their direction and that they can protect their business in action.

Let's quickly walk through the different states of the data readiness journey. In the seamless state we often find organizations struggling with multiple data management tools, delivering inconsistent results, inconsistent coverage, and more importantly, lacking a single source of truth for operations across their organization. Now the first step in solving this is an easy one. Consolidation of these data management point solutions into a unified set of intelligent data management services is the key to assuring in the seamless state. Once their data management operations are unified, protection, coverage, governance, reporting all are drastically improved and it also introduces new automation techniques to allow customers to manage at scale. Once this management and scale is achieved, then it's all about data awareness. Data awareness completely across the data state and that brings a customer into the optimized state.

We're understanding your data state and having data awareness and combining that with workflow automation that is built-off of artificial intelligence and machine learning with the awareness of how the data state is actually a living organism or living a state that helps provide a solid ransomware response pattern in case you get struck by a ransomware attack. And finally, once that entire data environment is optimized, only through policy automation and delivering the automated and continuous autonomous optimization of the entire data landscape with cloud as a foundation -- foundational component of your strategy, have you achieved that true industrial state. Here leveraging cloud, leveraging the automation components in the API integration, a customer can truly be and achieve an industrial state of readiness so that they can be ready for whatever the business is throwing at them today and be agile and future proof into what's coming in the future.

Commvault with our portfolio of intelligent data services can provide and help customers achieve that true industrialized state of data readiness. Data management in a complete form, starting with our data protection products and our disaster recovery solution provides customers solid and an all-encompassing solution that will allow customers to build-off of our no-limits architecture at scale and provide freedom to consume our solutions, whether it be on-premises, whether it be through a converged appliance with our HyperScale X solution or even through SaaS with our Metallic-based offerings. Moreover, we can add to this solution by helping customers then achieve that complete data awareness across their data state, eliminating dark data and also providing an understanding of what the risk profile that data landscape looks like, all while meeting the needs of governance, compliance and the eDiscovery needs from that single integrated portfolio.

Customers and analysts alike all agree that only Commvault can achieve and it help closing that business readiness gap. In fact, just last week, I had a chance to sit down with one of our customers. Russell Peters at Coca-Cola, Senior Cloud Architect, and we discussed exactly how Commvault help them transform. So I'm here with Russell Peters, Senior Cloud Architect at Coca-Cola. And Russell, thanks for joining. The last year has been a really interesting year. We see lots of changes to IT priorities, and of course, along with that some changes in the data management priorities that companies have. How has that affected your business?

Russell Peters -- Platform Engineer

Well, the pandemic has affected us significantly. We haven't reduced our brand count that we have. We had over 500 brand starting 2020. And basically having quality near time -- near real-time data that's clear can easily flow at a high pace, given to the right teams is of paramount importance to figure out how to reduce and -- our brand count that we have. We're trying to leverage AI cognitive services to unlock the potential of the data to more effectively discover our consumer trends and of course protecting our data assets is very vital.

Don Foster -- Vice President, Global Sales Engineering

So it sounds like Coca-Cola has truly become a data-driven business. Now, I know we've been working with your organization for a number of years now. Why did Coca-Cola choose Commvault over any other number of vendors that are in the market space to help manage these data management priorities?

Russell Peters -- Platform Engineer

Well, it started out Microsoft basically they use -- they said, they use Commvault for their SAP HANA footprint and we needed the same sort of thing. So we first engage Commvault as a candidate to orchestrate catalog, our HANA database back-ups and other databases. But also we needed to protect data in our field offices and certain plants around the globe. So we needed a solution that was strong in the cloud as well as in hybrid cloud, VMware and our physical environments. So, Commvault differentiated itself by checking all of the boxes.

Don Foster -- Vice President, Global Sales Engineering

Wow, that's fantastic. So, everything from on-prem, virtual, physical, cloud, cloud native, Commvault was a data management solution that help you solve all of those challenges.

Russell Peters -- Platform Engineer

You bet, yeah.

Don Foster -- Vice President, Global Sales Engineering

That's a fantastic. Russell, thank you so much for your time today.

Russell Peters -- Platform Engineer

Thanks, Don.

Don Foster -- Vice President, Global Sales Engineering

What an incredible customer testimonial of our innovation and action and hoping Coca-Cola achieve that hybrid and multi-cloud world. Speaking of hybrid and multi-cloud, I'd like to invite our Head of Products, Ranga Rajagopalan to come and double-click into this topic and really help highlight how we're helping our customers accelerate in their hybrid and multi-cloud world. Ranga, the floor is all yours.

Ranga Rajagopalan -- Vice President, Products

Thank you, Don. As you rightly pointed out, businesses are in different stages of IT transformation and they are adopting different approaches to the hybrid multi-cloud. Some customers prefer to use cloud as a secure off-site storage, while some other customers prefer to use cloud as an on-demand disaster recovery location for their business critical workloads. Also, as part of the hybrid cloud journey, customers are accelerating their use of SaaS, PaaS and cloud native workloads, all of which required to be protected the same business SLAs. In short, we can say that no two customers are going to have the same approach to the hybrid multi-cloud. Through our leadership and innovation in multi-cloud data management, we ensure that our customers can achieve that industrialized state of data management regardless of their approach.

Let me explain how. Traditional on-prem applications continue to be the dominant application architecture for most businesses and they need a simple future-proof way for protecting all those applications. Last year, we introduced Commvault HyperScale X as our flagship product, next-generation secondary storage solution powered by our very on Hedvig distributed file system technology. HyperScale X is delivered as an integrated hyperconverged scale out solution, which can start small and grow as the customer's data needs grow. And with HyperScale X, customers can protect all their hybrid cloud applications. Our entire differentiated data management software is pre-packaged into HyperScale X. So our customers can easily turn on any of our intelligent data services that Don was mentioning before, be it be backup and recovery or eDiscovery, disaster recovery or data governance, any of these services customers can turn on with HyperScale X through our granular licensing.

With our huge and growing set of workloads, we enable our customers to protect all their workloads with HyperScale X as as a single reliable data protection solution. Additionally, HyperScale X can also serve as the edge of LANs for our Metallic SaaS. This means that our customers can get the dual benefits of SaaS simplicity for even the most traditional enterprise on-prem workloads, while at the same time getting rapid local recovery, thanks to HyperScale X, all managed with the confidence of a single brain and with the simplicity of Command Center as a single pane of glass across all the workloads.

Remember, we were talking about using cloud as a storage target, HyperScale X enables this use case by natively and seamlessly integrating into leading public clouds like Azure, AWS, GCP and so on to directly write the backup copies to the customers' cloud of choice. Additionally, in October of last year, we went another step further in simplifying our customers' cloud journey. We introduced Metallic Cloud Storage Service or MCSS as a seamless cloud extension of HyperScale X. MCSS is built for global scale with layered security and it is all managed by Metallic. When MCSS is combined with HyperScale X, HyperScale X turns into a reliable secure cloud gateway, providing ransomware protection and recovery. It stores hard copies of data on-prem and securely moves the secondary copies to MCSS.

Cloud is also becoming a very attractive location for disaster recovery of business critical workloads. With HyperScale X, customers can simply turn on Commvault DR and start using clouds as their disaster recovery locations. Commvault disaster recovery provides flexible and scalable replication, reliable recovery automation and verifiable recovery readiness and all of this come together to empower our customers to do automated failover and failback of business critical workloads to AWS, Azure, VMware cloud or even another data center. Through the breadth of workloads across cloud on-prem, SaaS and PaaS that we bring to the table, we ensure that HyperScale X is a single data protection solution for our customers without getting into any point-product complexity. We're bringing together all the differentiated aspects of our connected portfolio, HyperScale X literally serves as a single-stop shop to enable all the paths to the hybrid multi-cloud that we discussed earlier.

With that, I'm going to transition back to Don to discuss some of the other transformational data management trends that we're seeing with our customers. Thank you.

Don Foster -- Vice President, Global Sales Engineering

Thanks, Ranga. The execution on our product portfolio is proof that we have had a multi-hybrid cloud focus within our technologies and how we deliver solutions for our customers. But it's not just about our product portfolio, it's also about how we work with our partners. Have a quick listen to the testimonial provided by Sabina Joseph, General Manager of Americas Partner Technology at AWS. She provides some really interesting insight about some of the things Commvault and AWS have done together.

Sabina Joseph -- General Manager, Americas Technology Partners

My name is Sabina Joseph and I am responsible for managing our technology partnerships in the Americas at AWS. I want to thank Commvault for your partnership and working with AWS since 2014 to deliver data protection solutions for our mutual customers. Just this past year alone Commvault has expanded support across many of our AWS services, including supporting our hybrid services. This level of integration gives our mutual customers the flexibility they need regardless of whether or not they're running on-premises, on AWS or in a hybrid architecture. Last month, Commvault presented with one of our large enterprise customers at reInvent. The presentation showcased how Commvault and AWS protect over 1,200 EC2 instances, 150,000 snapshots and 1.2 petabytes of data and yet the customer only needed one individual to manage this very large environment. Thanks to Commvault for your partnership and providing an important solution for customers as they increasingly move to the cloud. Thank you so much for your time.

Don Foster -- Vice President, Global Sales Engineering

Thanks Sabina for the fantastic testimonial. Proof again that hybrid multi-cloud focus of data management truly leaves that there is no workload left behind. And with the hybrid multi-cloud world, it's also catalizing the next phase of application modernization from microservices and containers. And with that topic in hand, I'd like to introduce our expert, our resident expert and containers of microservices, an esteemed Product Manager, Geeta Vaghela and she is going to talk us through how we're keeping customers ready for that next transformation of application modernization. Geeta, the floor is all yours.

Geeta Vaghela -- Head of Product Management, Storage

Thanks, Don. As discussed, business is at a various points in their IT transformation and this is actually even more pronounced when we think about next-gen technologies like microservices and containers. In fact, Gartner predict that 85% enterprises will use containers by 2025. This comes with the promise of speed and innovation and digital agility which businesses want to use not only keep pace and respond to adversities and change, but to outpace their competitors. The promise of containers and microservices is really the foundation to provide performance, agility and application ability. But this doesn't come for free.

So when we think about the value that was brought to the market by containers and microservices, we also need to think about the new challenges that this introduces. Microservices by design unlikely performant. This is great and they really announce the application efficiency design, reuse and being able to get applications to market faster. But by virtually it no longer contain state for information. That responsibility now lies at I&O, where state required by an application needs to be managed in a performant way, so the applications can still deliver on the lightweight value of it with performance, while supporting state for applications.

Similarly, I mentioned to reduce development time. So by repurposing the LEGO blocks with microservices, you can create applications faster, but this means that the glue the communication between the applications needs to be bulletproof. And so there is a real focus in terms of making sure that there is programmability in every component so that you can really get that intra-application communication. And finally, with all of the variations in how you can deploy today with IaaS, PaaS, microservices, on-prem, off-prem, public cloud, hybrid cloud, portability becomes hugely important. And when we think about porting applications, it's no longer a single entity. It contains state, it contains secret keys, it contains data. And so, when we are thinking about porting these applications from one place to another, we really need to think about comprehensive portability to be able really allow CI/CD.

From a Commvault perspective, we really look at this with two inflection points. The first is around technology inflection and this is what allows businesses to adopt to new technologies. So we think about that as alluring the barrier to entry. How do we integrate into existing workloads. That could be automating orchestration tools for your I&O or it could be things that could be native for our DevOps engineers. And so that integration and that being seamless so that is part of the known environment it's usually important. Similarly, we think about being application-driven and this is really providing granular opportunity for each application to pick and choose the I&O capabilities or attributes that it needs to be successful.

If we go back and we think that the maturity inflection point here, it was really shown to us by virtualization. Now consider the -- you credit enterprise platform of choice. So think about how virtualization grew. It started by virtualize and compute, banking networking and storage and then came the real enterprise grade resilience. So this is unified management, the economies of scale and the simplified way of being able to deploy virtualization without creating a cyber. As we think about allowing businesses to adopt these next-gen technologies, these are the two points we want to solve for, the technology and the maturity inflection point and that allows businesses to take advantage of these next-gen technologies and deployment them in production.

From Commvault, similar to how we think about microservices, we consider our attributes and our products within the portfolio as LEGO block. And so when we go to store with hybrid-distributed storage, protect with Commvault Complete and protect with Metallic -- and migrate with Metallic, whether it's on-prem, off-prem being able to migrate using a SaaS model is really what we're seeing our customers ask for. So, in conclusion, the intention here is to provide seamless on-prem, comprehensive data management and a solution that's future proof for our customers. We allow our customers to embrace next-gen technology capabilities and deploy them in production.

With that, back to you Don.

Don Foster -- Vice President, Global Sales Engineering

Thank you, Geeta. Well, definitely you mentioned SaaS and we've definitely seen the way that customers want to consume these new data management solutions to be across the spectrum of different areas, be it packaged software on-premises, maybe be it through converged appliances like our HyperScale X, and of course, through SaaS offerings like what our Metallic offering offers to customers today. We're incredibly focused on the whole SaaS delivery for customers and ensuring that we can combine this into a single solution for how they manage their data. And with SaaS being a major trend in the marketplace and we're seeing that increased demand for SaaS-based outcomes, regardless of where the workloads live in the cloud or on-premises, we're acutely focused on helping to deliver those types of capabilities.

And with that, I'm going to invite Manoj Nair, our General Manager for our Metallic Business Unit, to come and help address exactly what we're doing for the SaaS-based offerings for customers, both today and into the future. Manoj, the floor is all yours.

Manoj Nair -- General Manager, Metallic

Thank you, Don. Let's double-click on what Don just said and why is SaaS really becoming the fastest growing initiative for customers of all sizes. Today, if you have a workload that you're managing yourself, you're probably already moved it to a SaaS model or you looking to move to SaaS model. It doesn't matter what size of customer you are. It's because of the simplicity of the SaaS experience that sends from technology, try before you buy, grow in small, expand as your needs grow that entire experience is whats making SaaS the fastest growing initiative and our industry is no different. Data protection as a service is growing faster than traditional data protection. It's into this environment the Metallic was born in October of 2019. And we have been on an innovation care since then. No one could have predicted the pandemic, but we were ready with our remote workforce, support options and we expanded cloud coverage to include all the major cloud AWS, Azure, VMware, on-premise in the cloud.

We also built out our three go-to-market pillars with an expanded partnership with Microsoft between Metallic and Azure that allows us to go directly to use the Microsoft channel and the Microsoft indirect channel. We also expanded our coverage in the Commvault channel both our direct sales force and the large Commvault partner network. Last but not the least very important for SaaS initiative is growth marketing. And we built out our growth marketing engines to bring in net new customers into the Commvault family and we're also adding a lot more in terms of our data management capabilities to help with that expansion, including GDPR and compliance.

GDPR managed today of the companies all over the world. If you're a multinational doesn't have to be an European countries, but that has also helped us with our global expansion. Just yesterday, we announced that we're live in 10 more countries in EMEA, nine in Europe, a number on the map in Africa with our capabilities launched in South Africa. Very important difference that we have versus all the other data protection as a service companies is our hybrid support with what we call SaaS Plus. The Saas Plus distributed architecture is very important for customers and it's very unique. We can protect the workload from the cloud, from our SaaS service, whether that workload lives on-prem and we can make a copy and protect that workload, on-prem workload on-prem, we can protect the workload that's on AWS, with the copy on AWS, and all that data can be -- now have an additional copy on let's say some other cloud Azure. That flexibility is very important because data has gravity and that data gravity some of the things that are preventing customers from adopting cloud even faster. That data gravity is also seen in edge workloads which is why as long as that we launched our Metallic edge capabilities with the HyperScale X flagship portfolio now having a Metallic mode, where Metallic is able to use that as an edge extension where it does not make sense to bring the data back to the cloud.

All of this innovation is what's driving our results and the results are showing with hundreds of customers in production. We just last quarter added as many customers as the prior three quarters. We're protecting petabytes of data, bringing in lots of new customers to the Commvault family. A third of our customers are using Metallic to protect their enterprise mission critical workloads. Our land-and-expand strategy is really working. We're seeing customers acquire multiple Metallic services. My best story there as a customer who started with a few hundred users and all 365 for few thousand dollars booking early last year by end of the year was a million dollar plus booking across almost the entire set of workloads of their users. That's the power of Metallic.

And we're seeing partners also are gravitating toward that with a partner originated booking also growing significantly. All this is what makes us feel like Metallic is setting the standard for -- the gold standard for data management as a service. Our breadth of coverage, our ability to protect data whether it's terabytes or petabytes, customers of any size are able to come in, start with a few workloads and expand it. And the workload coverage today covers all major SaaS hybrid cloud and endpoint workloads. Just yesterday we launched our support for Salesforce.com and Oracle. Today, Metallic is giving customers the ability to use a simple SaaS model to be ready to combat ransomware, to be ready for any critical issues that they might face with their crown jewels and really bridge that business integrity gap that Don talked about earlier with a simple SaaS experience.

Thank you, and back to you Don.

Don Foster -- Vice President, Global Sales Engineering

Thanks, Manoj. This is really exciting stuff. All the innovation that we're driving toward our SaaS-based offering completely complements exactly what we're delivering for customers across our entire portfolio. In fact, through the conversation today we've shown how we're mapping our solutions, our innovation, our strategy to help customers achieve the movement to a hybrid multi-cloud world, be prepared for that movement for its containerization and microservices and that next evolution of the application modernization journey. And more importantly, to your point Manoj, showcasing how we can deliver these technologies and these solutions to help customers achieve that industrialized state of data readiness and to help close that business integrity gap, whether it'd be through on-premises software, whether it be in the cloud through SaaS or even at the edge. We truly have the best product portfolio to help customers meet these needs across all of these different environments. But products by themselves are not just enough. It's great to have the innovation as solid product portfolio. How you go to market and bring those to your customers and partners is just as important.

And so with that, I'm going to pass the baton to my friend and colleague, Chris Powell, to help us deep dive directly into what our go-to-market strategy is and how we're going to bring these solutions to our customers.

Chris Powell -- Vice President, Chief Marketing Officer

Thanks, Don, and thank you all for being here with us today. I'm Chris Powell. I head up our marketing efforts here at Commvault. And I'm pleased to be talking about the ways that we're driving our go-to-market forward. If you think about all of the innovations that you just heard Don and the product folks cover off, they were the ways that we're driving forward and really innovating in some ways that have been accelerated over the past couple of years. That spirit of innovation is really been brought into the ways that we're going to market and there is three key things that we're going to talk about.

First, Riccardo Di Blasio, our Chief Revenue Officer is going to talk about how he is driving growth in his organization. Second, we'll have Sandy Hamilton, our Head of Customer Success, Vice President of Customer Success talk about the ways that she's driving the adoption, the renewals, the expansion with our customers in building out a world-class customer success function. And then finally, Gary Merrill, our Vice President of Operations is going to talk about how we're driving all of this with greater efficiency.

So, with no further ado, let's get started. Welcome, Riccardo.

Riccardo Di Blasio -- Vice President, Chief Revenue Officer

Thank you, Chris, and nice meeting everyone. My name is Riccardo Di Blasio.

Chris Powell -- Vice President, Chief Marketing Officer

So, Riccardo, I know when we talk about the ways that we're looking to grow the organization, you have a great way to frame this out in terms of our growth drivers. Can you sort of take over through your three growth drivers?

Riccardo Di Blasio -- Vice President, Chief Revenue Officer

So, the number one driver we have is a manic focus in our traditional business, which is the data protection business. We can do so much more here in order to have our fair share. So the first big part of our growth strategy will be to double down in our data protection market and keep growing convincing a lot of organization around the world to switch for a better technology like comm. The second one is what we call new business, which is where we had all benefit from all the product portfolio that you saw before that allow us to give us our unique up-sell and cross-selling opportunities and really going fishing into addition -- an additional addressable market. And last but not least, what we call leverages, which are you will see later on the slide, our people, the operating model and a robust partner ecosystem.

Chris Powell -- Vice President, Chief Marketing Officer

Riccardo, this next piece -- first piece you really talk about here this traditional business. I know that there is so many different key indicators of success that we're seeing, what are some of the ways that you see success in our traditional business today?

Riccardo Di Blasio -- Vice President, Chief Revenue Officer

Yeah. As you know, we are operating in a market which is fundamentally going flat and in spite of that we've been able to grow double-digit 14 %, more precisely, this year, which is the living proof that we are gaining share at speed. As a consequence of that, we added more than a 1,000 logos over the course of the year of new clients that switch into Commvault technology. Generating more than a 1 exabyte of workloads that migrated into the public cloud leveraging a technology like ours.

Chris Powell -- Vice President, Chief Marketing Officer

So, I know that when the market looks at this, some of the best ways that we can explain what's happening is through customer success stories and we have one of the biggest customer success stories in our history. I know that's occurred just in the last couple of quarters. Talk about that a little bit.

Riccardo Di Blasio -- Vice President, Chief Revenue Officer

Indeed, and we're very fortunate that this particular case is a very large American Retail Corporation part of the Fortune 500. But we have so many cases like this. We've been able to make them switch fundamentally win in three conversation. Number one is the product. When you're dealing with large complex legacy environment, Commvault is a second-to-none technology, capable to provide the best customer experience and the best performance in order to build your data protection platform. The second is the economics, we've been able to generate, thanks to that. Delivering one of the best total cost of ownership in the industry in a very fast ROI. And last but not least, we've been able to do that, thanks to our partners. And in this specific case, thanks to Microsoft, which we've been blessed in having a strong partnership with Microsoft and all the team of Microsoft that in this case with joined forces to win a new account.

Chris Powell -- Vice President, Chief Marketing Officer

And that's great. Speaking of Microsoft, I know we've recently asked Casey McGee from Microsoft to give us some of his thoughts on the partnership with Commvault and how we're going to market?

Don Foster -- Vice President, Global Sales Engineering

Over the last year the pandemic has had a dramatic impact on how businesses have served their customers. The speed and amount of transportation has been dramatic. We've seen a rapid shift to remote work leveraging Office 365 and Teams to replace typical in-person work. Companies are also serving their customers in new and different ways. Remote meetings, digital commerce and innovations and supply chain have all transformed. With this cloud data has grown exponentially, cyber security and data protection have become even more critical to manage for IT decision makers. One of the most important aspects of the Microsoft-Commvault partnership is our focus on ensuring customers' data is protected through the resiliency, reliability and security of our platform.

We believe the starts with Microsoft Azure and has completed through the partnership with Commvault. So our partnership has seen a early progress with accounts of all sizes. We have invested in building a joint sales strategy, engaging with our partner network and bringing unique new innovations to market, with Joint technologies like MCSS. Commvault-Microsoft have a rich 20-plus year partnership and it really shows through how well our field teams partner on our co-sell engagements. We spent a lot of time together on joint account planning in order to more deeply understand our customers and to help our customers drive their digital transformation and adopt hybrid cloud.

Through our work together Microsoft and Commvault have identified a number of customer scenarios, where we believe our innovation can help accelerate growth. Microsoft and Commvault have a robust partner channel ecosystem that provides proximity to and engagement with companies of all sizes. This partner ecosystem will play an important role in helping bring Metallic one of our most important innovations to market. Metallic leverages Commvault's proven technology to bring SaaS delivered innovations to market and to do so in a way that is much faster than a typical bespoke solution. Customers know they can rely on the innovation from Commvault and the trusted cloud platform from Azure.

Thank you, Ricardo for the opportunity to speak with you today and we deeply appreciate the partnership.

Chris Powell -- Vice President, Chief Marketing Officer

So Riccardo the next piece that I know that we are focused on is as you -- really it's driving new business. So when you look at new business, a lot of discussion happen around the products group talking about the expansion of our product portfolio and what does -- that does to our total addressable market. Can you talk about what the total addressable market expansion means from a field perspective?

Riccardo Di Blasio -- Vice President, Chief Revenue Officer

Certainly. Well, the short answer we've been able to create a much larger addressable market $42 billion by year made for precisely. And here the rule of the game is to go above and beyond our data protection market with the up-selling and cross-selling of the new product portfolio that the company build over the last couple of year and this is a very powerful revenue stream for us because not only will allow us to secure better our data production business, but will give us the opportunity to have one more conversations with our clients on a lot of other things.

Chris Powell -- Vice President, Chief Marketing Officer

So I know the big way that that's being driven is that broader portfolio that we spoke about earlier. When you're talking with customers, what do they think about this broader portfolio?

Riccardo Di Blasio -- Vice President, Chief Revenue Officer

They love it, because they see this as a data steps, right. So where at the center you have our core data protection business, but then you can spend between the value of the data, the data insight and the storage of the data and you can take that step and deliver rateable model as a service through our Metallic engine there. So that hybrid way of delivering technologies and that breadth of technology is a very powerful conversation to have.

Chris Powell -- Vice President, Chief Marketing Officer

So in those conversations with customers and the adoption of the broader portfolio, again no better way to look at this than with the customer example, so how about this one here in the healthcare industry?

Riccardo Di Blasio -- Vice President, Chief Revenue Officer

Yes. This is -- we're very lucky that this is one of the many examples, but you will see while us delivering the data protection business, we've been able to drive more conversation with the client and convince them to also adopt our new technology HyperScale X as well as having that delivered through Metallic as a service. So we've been able to take a traditional transaction only for data protection and make it larger to a much bigger transaction and have more conversation within the same account. And we do this with existing accounts, but we also do this with new prospect accounts.

Chris Powell -- Vice President, Chief Marketing Officer

Excellent. So, Riccardo, that brings us to your third growth driver, which is around go-to-market leverage. Can you talk a little about what that means for you?

Riccardo Di Blasio -- Vice President, Chief Revenue Officer

Yes, Chris. So the leverage we've been able to generate with our new go-to-market strategy, first of all, is the people. We've been very lucky that we've been able to develop internally, but at the same time attract from outside people with deep domain expertise. There are capable to hit the ground and run out of the gate, having a material impact in that field productivity. The second is the business model. We've been activating inside sales organization around the world, creating an ecosystem with our account managers and sales engineering. But we've been also able to adopt new technologies, AI, machine learn driven they are giving us more insight of our field organization, of our segmentation so that we can be more focused in the different segment of the industry that we target. And you heard me before. We are also very lucky that we can benefit and leverage a robust partner ecosystem and our goal is to double down on this. And not only if you meet our current partner, more global capital partner was to attract new ones.

Chris Powell -- Vice President, Chief Marketing Officer

So speaking of the partner ecosystem. I know this is a big part of your overall go-to-market efforts and even some recent executive hires you might want to mention. So, how do you see the partner ecosystem within your go-to-market?

Riccardo Di Blasio -- Vice President, Chief Revenue Officer

Absolutely. It is a fantastic opportunity for us. And yeah, I mean, you called it out, we recently hired John Tavares to lead our new global sales partner organization around the world. And what you see in the slide is just an example. The slide is not exhaustive. Our partnerships span from global system integrators to cloud providers to managed service provider to tech alliances with other vendors like our or with the value-added reseller that are in the territories and the distributors. So unique opportunity. We will not going to be able to be where we want to be without our partners.

Chris Powell -- Vice President, Chief Marketing Officer

So, Riccardo, thanks for all these insights. Let's summarize again for the group, what these three ways that you're looking to grow the organization? And then we'll bring into Sandy.

Riccardo Di Blasio -- Vice President, Chief Revenue Officer

Absolutely. So number one focus on data production, our traditional business, gain our fair share by leveraging all the new operating model, our people and our partners, doing the same with our newly created addressable market, the new business, the up-selling and cross-selling and leveraging the three elements of the plan in order to maniacally execute all the above. And this is also an opportunity for me to call it out the importance of customer success in our organization and this is a great segue to introduce my partner in crime Sandy Hamilton who led Customer Success worldwide. Sandy, over to you.

Sandra Hamilton -- Vice President, Customer Success

Thank you, Riccardo. And it's great to be here with you all today. When I joined Commvault about 18 months ago, my priority was to build a world-class customer success team. Now that can mean a lot of different things to different people. But here at Commvault we have aligned all post-sale activities, including enablement and customer education under customer success. Essentially, pulling the thread from new customer on-boarding through expansion and onto renewal. And that's just what we've been doing over the past six quarters. We've built an organization focused on delivering an exceptional experience for our customers that also delivers business value and outcomes for Commvault. A great customer experience in our business is similar to what you or I would want. A partner who is easy to do business with, who makes you feel important and who delivers value for your investment.

We have dedicated customer success professionals around the world and increasingly in our center of excellence, which not only provides round the clock coverage, but financial leverage as well. There are three key business outcomes we are focused on. First is the adoption of Commvault's leading solutions to make sure customers are using what they bought. Second, expanding across our portfolio of products. And third, ultimately renewing our subscription install base. So let's dive a bit deeper into each one of these, starting with adoption.

When we work closely with our customers, we set them up for success. They adopt their solutions faster and then they have the opportunity to expand. Over the past three years, there has been a dramatic decrease in time-to-second-purchase, on average 10 months faster. So what's changed? We have dedicated customer success managers, a programmatic set of on-boarding activities and a maniacal focus on education. Things like giving customers best practice set of guides and offering data-driven health reviews. And as you heard Ranga mentioned, we now have an expanded portfolio which we believe creates more opportunities for us to work with customers and for customers to work with us.

So, now let's talk now how we actually are expanding customers in these new -- into these new products. We intend to expand our accounts and grow subscription revenues with targeted campaigns for new products to promote cross-sell opportunities, to monitor capacity and workload consumption to promote up-sell opportunities and roll out incentive programs for the teams to ensure alignment against our goals. This year alone we have seen our subscription customers expand at twice the rate of perpetual. And during the past four years the number of new subscription customers who own multiple products has increased by more than 30% as a result of expanding and one in three of our subscription customers have expanded this year alone.

So let me give you two examples. First, a large financial services company and then a mid-market information management organization. As you can see from these examples, expansion is occurring across market segments and what is driving the expansion is not only additional capacity, but also new products and services, including our data intelligence solutions and our SaaS offering Metallic. I recently had the opportunity to talk with one of our long time customers, Justin, at the University of Canberra in Australia. It is now ranked one of the top 20 young universities in the world.

Hey, good afternoon, Justin. Really appreciate you being here to talk with us this afternoon. I was wondering if you might share with us a couple of different aspects. You guys have been a long time customer of Commvault about 15 years now and not only have you stay with Commvault during that period of time, but you've also continued to really stay with us as we've innovated and put out new technologies and new products. You guys have really been there every step of the way with us. So maybe you can share a bit about your journey with us and we'd love to hear that.

Justin, "Yeah, yeah. No worries. Thanks for having me. Yes. As you said, we've had a long-term partnership with Commvault. And for me that really comes down to some key aspects that I guess the -- what the product does for us, value for money and the excellent support we get from Commvault. As part of my job, I'm required to make sure that we are using the best products from a technology point of view for the university. So every so often I have to go out into the market and I mean -- and I enjoy doing that as well as part of my job to see what technology user out there to make sure we're still using what's best for us and over the years looking at products like IQ and Beam and Rubrik which great products in their own right. We still circle back to Commvault time and time again for a number of reasons which I've touched on being they're often the leader in technology and feature sets in the product, value for money and probably first and foremost it's just the excellent support we get from Commvault, both locally from our reps here and from our professional services and support point of view.

And as we've continue to evolve over the year, then universities a lot of rapid change with technology and Commvault has been one of those vendors that keep up with those technology changes to protect the various technologies, the new ones we adopt and put in and that's been evidenced over the last few years. And even recently, late last year, we put in the HyperScale platform from Commvault. And for us that kind of was an because we already were heavy users of the Nutanix hyperconverged platform. So we kind of knew the the great feature set you kind of get out of a hyperconverged platform and how easy it is to support and how much redundancy is built-in. So that's been a great journey for us as well and is freed up a lot of our technical resources here to focus on other areas."

Super. Well, listen, Justin, I apologize that our time today was so short, but I know you have to run. And so I just want to say again, thank you for taking the time. We love to hear stories from our great long time customers like this and I'm sure we'll talk again soon. So, thank you.

Justin, "No worries. Thanks for having me."

One of the best things about my role is that I get to speak with so many great customers like Justin and hear their stories about how Commvault continues to help them achieve their business goals. But now back to our business goals. Let's turn to renewals. Renewals are a strategic imperative for Commvault. We are focused on continuous engagement to understand the customer health, leveraging predictive analytics to identify opportunities and risks, and providing flexibility on licensing models to help customers who want to move from modern -- move to modern-based subscription pricing. And while it is early days with this fiscal year being the first with a meaningful renewal population, our net retention rate has been firmly above 100% in each quarter of this year. We've increased our customer net promoter score by 19 points to be among best in class. And we have almost 1,000 individuals who advocate on our behalf. This all speaks to the fact that customers are staying with us and are happy. So here's what I want you to remember three key takeaways. Number 10, the average decrease in the number of months to second purchase. One in three, the number of customers who have subscriptions that are expanding and 100% plus is the quarterly net retention rate so far this year.

So, I want to thank you for you time and now I am going to turn it over to Gary Merrill, our Head of Operations.

Gary Merrill -- Vice President, Operations

Thanks, Sandy, and hello, everyone. I'm Gary Merrill, VP of Operations. I'm excited to spend a few minutes with you on our third topic, which is outlining the operating leverage we are targeting as we optimize our sales and marketing spend. As you see with this first visual, since FY'18, we have dramatically reduced our annual sales and marketing expense by about $75 million, while still strategically investing in key growth initiatives. This includes Metallic go-to-market as covered earlier by Manoj, and the build out of our customer success team as you just heard from Sandy, both of which are included in sales and marketing expense. So this is a 1,200 basis point improvement through our estimated FY'21 results. For our current year FY'21, we expect that sales and marketing expense will be approximately 41% of revenue, which is a 400 basis point improvement over just FY'20. We expect to drive additional sales and marketing expense leverage as we approach our FY'23 goal of 38% as a percentage of revenue. To achieve this, I'm working with the go-to-market leadership team as we are focused on continued operating discipline tied to our customer segmentation approach.

First, we are focusing our account executives on expanding the footprint in our existing installed base and in enterprise prospect accounts. This should can complement our new segmented sales motion which is intended to cost efficiently secure our subscription renewal opportunity. In FY'22 alone, we estimate that our subscription renewal opportunity is approximately $80 million, 60% larger than the approximate $50 million opportunity just this current fiscal year. As we enter FY'22 and beyond, we anticipate additional leverage from our recently built-out inside sales organization as well as our customer success function as the adoption of our product portfolio accelerates. These strategic changes have created a land, expand and renew motion that we expect will continue to drive operating margin leverage. Brian will discuss this further in the financial overview section.

Okay. We expect that another key driver to our operating leverage will be sales rep productivity, which is the sum of our software and SaaS bookings on a front line per rep sales basis. We are targeting double-digit CAGR increases in sales rep productivity over the next few years. Don't forget that talent and tenure are both key to sales rep productivity. We have been transforming our sales force with a material percentage of our sales reps having brought on board less than two years. These recent hires are ramping nicely and we are seeing increased sales rep productivity across all geographic regions under the direction of our new go-to-market leadership. We believe our continued top line success will lead to a more tenured sales force, which in turn should be more productive on average.

In addition, we expect that the accelerated adoption of our product portfolio that Sandy discussed will also facilitate additional sales rep productivity as it is aligned directly to our subscription led land expand and renew motion. Leveraging our low touch inside sales reps and customer success resources during the customer journey should allow our direct sales force to land opportunities in a large and underpenetrated market. And our sales reps will continue to benefit from increased marketing leverage as we continue to shift focus toward more efficient digital channels. The team and I are aligning our Commvault resources to take advantage of a stronger and more modern partner ecosystem, spanning from technology alliances to GSIs to service providers. We fully expect that this will provide a tailwind to improve both our reach and our execution. Lastly, our growing subscription renewal base provides a repeatable revenue stream to support our sales rep productivity objectives. So in summary, we've built a land expand and renew sales motion that we believe will provide operating leverage for years to come, balancing our earnings expectations with our top line objectives.

And with that, I'll turn it back over to Chris.

Chris Powell -- Vice President, Chief Marketing Officer

Thanks, Gary, and thanks, Riccardo and Sandy. That was a great summary of the ways that we're looking to win in the market. First, driving growth with Riccardo and talking about the growth drivers in his field organization working with our ecosystem. Second, Sandy talked about the ways we're driving adoption, expansion and renewals with our customer base as she builds out a world-class customer success function. And you just heard from Gary talking about the ways that will drive greater efficiency.

Next, I hand it over to Brian Carolan, our Chief Financial Officer.

Brian Carolan -- Vice President, Chief Financial Officer

Thanks, Chris, and hello, everyone. Thanks for joining us today. For those of you who don't know me, I'm Brian Carolan, Commvault's Chief Financial Officer. These are exciting times for Commvault and I hope you're enjoying today's event. Hope you had a chance to review our fiscal third quarter results that we released this morning. I'm pleased to say that this was the largest revenue quarter in the company's history. We set numerous records this past quarter. And here are some of the highlights.

Total revenues were $188 million, up 7% year-over-year, a quarterly record. Software and products revenue was $89 million, up 16% year-over-year, also a quarterly record. Large deal revenue which are deals greater than $100,000 of software grew 19% year-over-year with the average deal size up 15% year-over-year to approximately $322,000. And that's an important stat for us because our results weren't driven by one or two mega deal. In fact, the number of seven-figure deals was meaningfully above our recent run rate with solid contributions from all three geographic regions. Subscription revenue increased over 50% year-over-year and represented 55% of software and products revenue, up from 41% a year ago. Annual recurring revenue increased 11% year-over-year and is now over $0.5 billion. On a constant currency basis, ARR grew 8%. Recurring revenue was approximately $140 million and represented 74% of total revenue compared to 70% a year ago.

Non-GAAP EBITDA grew 26% year-over-year to almost $40 million. Non-GAAP margins were approximately 21%, up 300 basis points year-over-year. We had $33 million of share repurchases during the quarter and EPS was a record $0.57 per share. To summarize, this was a record quarter for Commvault and we are pleased with our progress. As you've seen throughout the day, our organization has rallied together over the past two years to reposition the company with the focus on sustainable and responsible growth. What's also gratifying is the fact that we are building consistency and credibility. So what's the key takeaway. We're focused on creating long-term shareholder value. And there are three key levers that go into that, increasing our recurring revenue, driving margin expansion, and a committed and attractive capital allocation policy.

On our earnings calls, Sanjay frequently speaks to customers being on a journey always moving from something to something. Well, we've been on our own journey to transition our business from a perpetual model to a recurring revenue model. So, let's take a look at where we've been, where we are today and what we expect in the years ahead. Some of you may recall that prior to FY'18 we almost exclusively sold perpetual software licenses. At that time, subscription and utility contracts accounted for less than 10% of our software and products revenue. Recurring revenue, which includes subscription, software and maintenance, represented about 50% of total revenue.

Beginning in FY'18, we introduced more flexible subscription-based pricing. We've made significant progress since then. Fast forward to today and now subscription revenue accounts for about 58% of our software revenue, and recurring revenue represents about 77% of total revenue. FY'21 marked the first year of a significant multi-year subscription renewal cycle that we expect to serve as a revenue tailwind in the years ahead. I'm happy to report that our net dollar retention rate for our subscription revenue business comfortably exceeds 100%. In fact, fiscal Q3 was our strongest subscription retention quarter of the year.

Earlier this year in fiscal Q1, we introduced annual recurring revenue or ARR as a metric. We believe ARR represents a good measure of all of our recurring revenue streams. As shown earlier, recurring revenue currently represents about 77% of total revenue. As we sell more subscription products and SaaS solutions, we believe the recurring revenue mix can approach 80% to 85% over the near-term. Historically, the largest component of ARR has been perpetual maintenance. It's important to understand that subscription offerings contribute about 2X the amount of ARR when compared to perpetual contracts on a like-for-like basis.

Over the last several years, particularly in FY'21 as we successfully cycled through our first renewal year, subscription offerings have grown to represent an increasingly meaningful portion of ARR. Over the next couple of years, we expect subscription offerings to crossover perpetual maintenance and become the largest contributor to ARR. Long-term, we expect our subscription offerings to represent the majority of ARR. And with that, we see potential for 10% or more annual ARR growth. And let me give you a few reasons why we believe this.

The factors driving this projected acceleration are, one, a large and growing total addressable market, a portfolio that is aligned to the addressable market both from a solution and pricing perspective, and optimized go-to-market motion that addresses all segments for the market from enterprise down to SME and a growing subscription renewal opportunity with opportunities for expansion. So let me start first with the total addressable market or TAM. The data management market is large and growing. Innovation, both internal and external, has been the primary driver of our TAM expansion. In addition to our core data protection offerings, we believe that our internal and external innovation has expanded our TAM opportunity to over $40 billion by 2024. This is based on data from IDC and sell side projections.

More importantly, we've expanded into higher growth adjacencies, including the integrated appliance market, the software defined storage market and most recently data protection as a service market, which IDC projects to grow at high teens CAGR through 2024. Our new unbundled product portfolio and simple subscription-based pricing makes it easier for potential customers to try and buy our products. Our comprehensive portfolio has solutions for customers' unique data needs, whether it's data protection, data storage or data intelligence. And these solutions can be consumed in any form factor, including downloadable software, an integrated appliance or as a service. Our new portfolio offerings can also scale up to large enterprises and scale down to mid-market, SME and SMB. Not only is our portfolio aligned to a large addressable market, we've also enhanced our go-to-market motion in an effort to increase our share across all segments of the market.

So let's discuss these land and expand opportunities in our addressable market. Historically, we competed in the data replication and protection market. This is a large market estimated at approximately $9 billion dominated by a handful of legacy players. Over the past several years, the legacy market share leaders have become share donors to the market innovators such as Commvault. Based on IDC data, we estimate that our share increased by about 200 basis points over that same time frame. In fact, since FY'18, our new subscription logos have grown at approximately 50% CAGAR, that's 50%. Looking forward, we believe our enhanced portfolio and go-to-market motion will drive additional new logo growth and further market share gains in this large and fragmented addressable market. In addition to landing these new customers, we expect to expand with our existing base. Simply put, we believe that incumbency is an asset. The majority of our customers are large, well-capitalized enterprises with whom we have a long-standing relationships approximately nine years.

Historically, customer dollar expansion was primarily capacity driven. But in recent quarters, we're starting to see some green shoots from our cross-sell motion, especially as digital transformation initiatives reshape IT spending priorities toward cloud and SaaS. For example, as Sandy mentioned earlier, expansion with subscription customers is happening at a faster pace and earlier in the customer life cycle. In Q3, over 50% of our Metallic customers are also using another Commvault solution and reps that are successfully selling Metallic are also selling more software. There was a direct positive correlation. This cross-sell effort is a new and emerging motion for us, but we expect to continue progress on this front.

We also have a growing subscription renewal opportunity. The software value in FY'21 is approximately $50 million with nearly 25% of this remaining in fiscal Q4. More exciting than our initial success in FY'21 is that our subscription renewal opportunity increases to approximately $80 million in FY'22. Keep in mind that FY'21 was the launch year of our customer success team. We've learned a lot from this inaugural effort and want to capitalize on these larger renewal opportunities in the years ahead. Sustainable revenue growth is only one element to creating long-term shareholder value.

Now, let's pivot to margins, and I'll begin with gross margins. Prior to introducing our first gen HyperScale appliance late in fiscal year FY'18, our gross margins were consistently in the 86% to 87% range. Following the launch, third-party IP costs and the cost of pass-through hardware associated with that appliance impacted gross margins which bottomed out at just below 83% in FY'20. We've recently taken some strategic actions to improve our gross margins, including the successful integration of Hedvig, the decision to return to a software-only model and optimizing our field operations and global delivery capabilities. These have all contributed to our year-to-date improvement in gross margins.

Over the near-term, we believe we can approach historical peak levels. However, for something that could have a dampening impact to overall gross margins is how fast the expected growth from Metallic comes due to the incremental cloud storage costs, especially as we expand into new geographies.

Now onto operating expenses. Since FY'18, we have aggressively worked to drive overall operating expenses lower, even while investing in growth driving initiatives like our Metallic platform, the Hedvig integration, restructuring of our sales force and our renewed customer success effort. In aggregate, non-GAAP total operating expenses declined 12% from FY'18 through FY'20. We achieved G&A savings through real estate optimization and a shift toward lower cost geographies, but the largest driver has been optimization of our go-to-market motions. In FY'18, total non-GAAP operating expenses represented almost 74% of revenue with sales and marketing expense making up 53% of that base.

As you heard from our go-to-market leaders, over the past three years, we've taken actions to aggressively reduce sales and marketing expense, while increasing productivity. Our progress to date has been significant. We expect to end FY'21 with sales and marketing expense representing approximately 41% of revenue. This is an improvement of over 1,200 basis points since FY'18. Our return to sustainable revenue growth combined with our relentless discipline around costs should allow us to deliver FY'21 non-GAAP EBIT margins of over 18%, an increase of nearly 500 basis points year-over-year.

Now let's talk about another important value driver, our capital allocation priorities. Our primary use of free cash flow are share repurchases. Historically, we have been opportunistic with our approach. However, our shift to a recurring revenue model and our relentless focus on execution affords us better visibility and predictability of our revenue, margins and free cash flow. The improved visibility, our debt-free balance sheet and our meaningful free cash flow generation gives us confidence to adopt a more committed approach to capital deployment in the years ahead. In fiscal Q3, we repurchased approximately $33 million of our stock. Today, we are committing to repurchase an additional $200 million of our stock by the end of FY'22. We intend to act on that beginning in Q4 '21. But wait there's more, in addition to that fixed dollar commitment, we also intend to return at least 75% of free cash flow annually beginning in FY'22. We expect these planned repurchases to more than offset dilution from share compensation.

I know we've given you a lot today. Lot of exciting topics and metrics to absorb. So let's take a moment to recap. Sanjay discussed the growing

Business integrity gap and how Commvault's intelligent data services help customers, products team explained how our portfolio innovation has positioned us as the leader in the industry, the go-to-market team talked about our refined subscription land -- led land and expand motion, positioning us to increase market share through new customer acquisition and dollar expansion across our large and diverse installed base, and I've discussed how our pursuit of executional excellence across all functions should continue to drive our return to sustainable and profitable growth. So you've heard about our transformation journey, you've seen the recent consistency of our financial results and when you put it all together that now gives us confidence to layout near-term and longer-term targets.

So let's discuss our Q4 '21 outlook and near-term targets. Looking to Q4 '21, we expect software and products revenue growth of approximately 26% to be about $84 million. Total revenue would be approximately $182 million, which is growth of 11% year-over-year. Keep in mind, we are still transitioning away from older generation solutions that carry third-party royalties and there will be some remaining sales of lower margin hardware this quarter. And just a reminder on opex, our fiscal Q4 is calendar Q1. So there is a seasonal FICA reset of approximately $3 million. Despite this, we expect total expenses to be roughly flat sequentially, resulting in non-GAAP EBIT margins approaching 17%.

Now I'll discuss the near-term targets which we expect to be achieved by the end of FY'23. We believe our software revenue CAGR will be in the range of 9% to 10%. Subscription revenue as a percentage of software and products revenue will likely approach 70% to 75%, up from approximately 55% in FY'21. We can see total annual revenue growth of approximately 6% to 7%. Please keep in mind that our subscription transition will have a potential dampening effect on services revenue. Also, we are strategically converting many of our customers that are legacy perpetual pricing models to subscription and SaaS models. The recurring revenue mix should be in the range of 80% to 85% over the near-term, up from approximately 75% in FY'21. And we are striving for ARR growth of 10% or more. We have set an objective of achieving non-GAAP EBITDA margins of 25% by the end of fiscal 2023. That represents a nearly 600 basis point improvement of a projected 19% base in FY'21. This will translate into non-GAAP EBIT margins of approximately 23.5%.

Finally, we expect non-GAAP EPS to increase at a double-digit CAGR off a projected FY'21 base of approximately $2 per share. To help you tie this all out, I'll share some expense line item guidance to highlight the drivers of margin improvement. As I noted earlier, we expect gross margins to approach peak levels of approximately 87% over the near-term. We expect sales and marketing expenses as a percentage of revenue to decline to approximately 38% or better over the near-term. Both R&D and G&A expenses as a percentage of revenue should approximate their current levels. And longer term, which we defined as FY'25 and beyond, we are focused on the algorithm of a balanced revenue growth and EBITDA margin and have aspirations to achieve the Rule of 40. Keep in mind that as a tech company things can change rapidly. We envision the market continuing to shift toward cloud and recurring SaaS-based solutions. We believe that we will be well positioned for this. We intend to accomplish this responsibly with the majority of the leverage come from sales and marketing and G&A.

In summary, we believe the new Commvault presents a compelling investment opportunity. The plan we discuss today highlights a recurring revenue model characterized by sustainable growth, improved profitability, strong free cash flow and an attractive capital return policy. We believe that we have the ingredients to create material shareholder value in the years to come. Before I hand it back to Sanjay, you heard him speak earlier about our commitment to ESG. We've actually asked two of our Board members, Martha Bejar and YY Lee to share their thoughts and what this means to Commvault. [Video Presentation]

As you can see, Commvault is more than just it's innovation and fundamentals. It is also on how we continually strive to be a better company for our employees, customers, shareholders and the communities where we live and work. After all people want to work for and do business with socially responsible companies. That is core to who we are. And our social responsibility will remain a priority for us this year and in the years to come.

And with that, I'll bring back our CEO, Sanjay Mirchandani. Sanjay, welcome back.

Sanjay Mirchandani -- Director, President and Chief Executive Officer

Thanks, Brian. As you can see, we are excited about the opportunity ahead and believe we have the people, portfolio, strategy and fundamentals to continue our path to sustainable and responsible growth. We look forward to continuing these conversations with you in the future. During these unusual times, the health of employees, partners and customers is of utmost importance to us a Commvault. As an organization, we carefully follow CDC and state COVID guidelines. Everyone that is here in the office today has been tested for COVID and received a negative test result.

With that, Brian and I will begin the question-and-answer session. So we can hear from you.

Questions and Answers:

Sanjay Mirchandani -- Director, President and Chief Executive Officer

The first question is, your software growth numbers were well above your guided range, can you give us some more color on the Q3 results and what drove the upside?

Well, nobody better than Brian for that.

Brian Carolan -- Vice President, Chief Financial Officer

Thank you, Sanjay, and hello, everyone. Great to be here. So, sure. This was a gratifying quarter for us, a record quarter in many respects, record software, record total revenue, record EPS as you heard and what was great is that it was really the quality of the earnings and the quality of the revenues that came in was really important to us. Our large deal revenue which are six-figure software deals and greater was up 19% year-over-year and the average deal size approximated our four quarter average. So that really means that it was driven by many, many large deals, not just one or two, what we call mega deals. So that was really gratifying to see. Also our deals less than $100,000 was also up meaningfully is up 10%. So really good contributions from that. Our recurring revenue is still making strides. 74% of our revenue was recurring in nature. Our ARR balance now sit squarely at over $0.5 billion, up 11% year-over-year, 8% constant currency. And also, we saw strong contributions from all of our geographies. The sales and marketing changes that we made 12 to 18 months ago are starting to pay off and we're starting to see green shoots of that. And then lastly, we did this responsibly. We had our margins improved by 300 basis points year-over-year, resulting in record EPS for us.

So with that, I'll turn to the second question. Can you give some more color on the capital allocation plan? I want to make sure I understand the total commitment.

Sure, I'd be happy to do that. What we laid out today, we think is a very responsible and attractive capital allocation plan. We have committed a sizable chunk of our existing cash and future cash flows to share repurchases. Let me break down the numbers. We've actually committed $200 million of our cash over the next 14 months through the end of FY'22 to share repurchases. In addition, starting on April 1, 2021, we will dedicate 75% of our future free cash flows to share repurchases. You add all that up and that is a sizable commitment from our perspective and we think it's a great use of our capital, great use of our cash and we're excited to roll that out today.

So let's move on to the next question. I think it's going to be for Sanjay. Sanjay, I'll read this. You outlined a very large TAM, much bigger than what we discussed post Hedvig acquisition, can you give some more color on the market opportunity? So, Sanjay.

Sanjay Mirchandani -- Director, President and Chief Executive Officer

Thanks, Brian. So we outlined a $42 billion TAM opportunity based on some logical grouping of layers if you would on the opportunity. It starts with core data protection, data protection as a service, insights, analytics, GDPR, GRC type things around the data and then software defined storage. These tend to be fragmented as markets and tend to be difficult for customers to embark upon and get the full life cycle. We think as customers go through digital transformation, we have a great opportunity here to help them through it. When I speak to CIOs, they are concerned about where their data is. They're concerned about ransomware. They're concerned about the cloud. They're concerned about digital transformation. And we think our portfolio aligned to the opportunity is number one in being able to help our customers in that journey.

The next question is, and I think I'll take this, you announced new pricing and packaging last summer, how is that being accepted?

So, so far so good. The feedback we're getting, we're pleased with. I think more importantly, the folks that actually have to deal with the pricing with customers and partners appreciate what we've done. We simplified our packaging and licensing in the summer based on feedback. It makes it easier for customers to buy what they need aligned to the workloads. So, as they add more workloads they can in a granular way acquired licenses and capabilities to work with us. And also to note, our newer technologies and products are subscription first in alignment with the strategy that Brian and I shared. So we see a growing trend hopefully with our subscription revenue.

In that light, how should we think about subscription renewal as an opportunity? Brian, why don't you take that one.

Brian Carolan -- Vice President, Chief Financial Officer

Sure. Thanks, Sanjay. We get this question quite a bit. And it's a great question to ask. I think it's important to understand that renewals is just part of the story. We started this journey several years ago. For those of you that may not be as familiar with Commvault, prior to FY'18 less than 10% of our software revenue was recurring in nature. Beginning in FY'18, we started a concerted effort to move to more recurring based revenue. Now we're happy to report that well north of 50% of our software revenue was considered recurring. Part of this is that when we started selling these contracts multi-year contracts back in FY'18, they're generally three years in length. So fast forward to today, in FY'21, that's actually the first meaningful renewal cycle that we've had for our subscription business. And I would say things are progressing well to date.

In fact, our Q3 net retention rate for our entire subscription business is firmly above 100%. The opportunity that we had in FY'21 is a $50 million software opportunity. We see that actually growing to $80 million in FY'22 and then growing again in FY'23. So again, this will be a tailwind for the near-term ahead. It will normalize probably after that point in time as we approach that 70% to 75% range of subscription revenue as a percentage of software. And I think again, it's more than just about the renewal. It's part of the whole motion that Sandy Hamilton laid out. It's the land, adapt, expand and renew altogether and that's where we're looking at that subscription business with the net retention rate above 100% we're seeing green shoots pop-up with respect to our product portfolio and our customer success motion really contributing tangible results.

Next question. I think I'll take this one, Sanjay. Can you talk to us about the drivers of ARR and can you break it down and components of subscription, perpetual contracts, Metallic, other?

Sure, I'd be happy to do this. Well, as you heard on our call today and presentation, ARR is an important metric for us and it's going to be an important metric for us for years ahead. And it really is a measurement of the journey that we have been on and will continue to be on for the foreseeable future. As I said, it stands at over $0.5 billion, but we're not done. We expect this to grow north of 10% over the near-term and what gives us confidence is that, we're continuing to go with subscription-led and SaaS-led offerings as you heard from our go-to-market team. Also things like Metallic, our SaaS offering, while it's still growing. It's growing rapidly. It's in the seven-figure range and that's going to contribute to our ARR growth over time. In fact, over the near-term, we actually foresee our subscription revenue overtaking the perpetual maintenance revenue that also rolls into ARR. Right now, perpetual maintenance is the largest component. But over the next couple of years, we see that subscription becomes the majority. We're encouraged by this. We think it's a great metric and again we firmly believe that we're going to be at least 10% or better ARR growth in the near-term.

Switching gears, I think Sanjay, I'll ask this one of you. Have you come up, lot of questions on Metallic. We're getting, sorry, there is another one that popped in. Sorry about that. Your guidance suggests 17% software growth this year in FY'21. You also have a $30 million renewal tailwind in FY'22. Why are you guiding to only 9% or 10%?

Correct. So our guidance would suggest that our software growth for FY'21 is in the 17% range. Keep in mind that that's building off a base in FY'20 which we would consider a transformational year for us. Also we are hit like many companies with the onset of COVID in the March 2020 quarter. And so therefore, our growth rate of 17% may not be the best metric to use going forward. And also that creates a more difficult comp for FY'22 off the FY'21 guidance that we laid out. We think that near-term that our guidance that we laid out today of a 9% to 10% software growth CAGR still represents a very compelling growth opportunity for us. And why is that?

So first of all, we're growing and taking market share. We have a large market that we operate in. We're entering into higher growth adjacency markets as you heard. You add all that up. Our TAM should expand over $40 billion, 7% CAGR over that time period. Also, we had that portfolio that is well aligned to that growing market opportunity. And in addition to that, we are creating a much stickier recurring revenue stream, as you heard. We're leading with SaaS. We're leading with subscription-led offerings. We're seeing green shoots of success there. And again, I think that the ARR growth is going to be the true measurement which is north of 10% growth compared to our software growth of approximately 9% to 10%.

Now, I'll jump to the Metallic question that did pop in. We're getting a lot of good feedback on this. Can you talk to us about the progress to date on your road map ahead and how are you different from competitors that are out there?

Sanjay Mirchandani -- Director, President and Chief Executive Officer

I could take the rest of the allocated time to answer that question. We're really excited. The Metallic is doing really well. We've gone from two countries at launch to 23 as of yesterday. Our portfolio has gone from three core services to seven, supporting major SaaS workloads. We have Office 365 enhancement, Salesforce.com, major cloud providers like Azure, AWS, VMware all supported, endpoints supported, hybrid across cloud supported, on-premise and edge supported, hundreds of paying customers, ARR has tripled over the past three quarters. A third of our customers are enterprise customers with healthy expansion. In fact, 50% of our customers are Metallic have more -- are also using some other Commvault product. It's also bringing in new customers, 40% of our Metallic customers are new to Commvault really enabling our land, expand, adopt motion.

How are we doing with the competition?

I'd like to compete on the merits of what we built on our technology and I think Metallic has by far the best technology in the SaaS data protection as a service capability. We are rolling out services very fast and we can do that because our core, our heritage is data protection. Metallic is also managed through a single interface, whether the workload was originated on-premise on the edge are in the cloud. While some of the competition may be focused on the particular segment or a particular workload, we have the broadest. Our heritage is enterprise. So we build for scale. We're going to win on the merits of all that.

The next question is, how have your win rates track over the last couple of years, especially relative to some of the private players? how do you beat the competition?

Okay. Another question near and dear to my heart. So we think of the competition very simply put in three buckets. There is the legacy competition that we've been competing with and winning against and taking share from every day. We've got the appliance players over the past few years who had an advantage with -- an early mover advantage on a form factor and I think that's been leveled. Our HyperScale X and our Metallic technologies that will blow that away. And the third is SaaS and I just shared with you how we're doing with Metallic. The difference is we have a superior set of products. No workload left behind from traditional to new. We out-innovate. We have over 900 patents and more. The second is really run partnerships, making sure that we have -- no great business has built by itself. Riccardo and I talk about it all the time. Strong partnerships like the ones we highlighted today matter and they matter across the world and that also gives access to customers for the solutions they need. The third piece simplicity, making it easy to adopt, making it easy to change your mind as you transform and giving you a single way to think about all of this. So superior product, great partnerships and simplification day-in and day-out allow us to work.

You recently announced John Tavares to lead the channel. How critical is the channel to Commvault?

I'll take that. Yes, we did announce John Tavares. We're really happy to have him leading our global partner organization, brings a lot of great experience.

How important is the channel to Commvault? Very important. Since I've been at Commvault, I have stated it over and over again and I mean it that we are a channel-friendly company. We cannot build this business. We cannot put those guys -- that long-term guidance out there without our channel and our partners. 90% of our business even today is transacted with the channel. Many of our market -- marquee win come with partnerships. In addition to go-to- market channel partnerships and we also have deep integration technical integration on our platforms and our technology with our key alliance partners. And that includes over 20 cloud providers that we work with. So it's a combination of really engaging with the channel in a committed manner worldwide and also making sure our technology works better out of the door with our partners.

The next question is regarding sales and marketing expense. Can you do more on sales and marketing expense? Will you give any details in fiscal year -- for fiscal fiscal year '22?

Brian, this is right to you.

Brian Carolan -- Vice President, Chief Financial Officer

Okay. Thank you, Sanjay. Well, as you heard from our Gary Merrill, he laid out in really good detail. We've done a lot with sales and marketing expense. And in fact, we've reduced our spend by roughly $70 million from FY'18 to FY'21. Took the overall cost as a percentage of sales from 53% down to our projection of 41% for this fiscal year. So we've accomplished a lot, but we're not done. We're not stopping there. Now we want to make this more repeatable. We want to make it more sustainable. We're focused on rep productivity, rep maturity, partner leverage, adding some complementary customer success functions and resources also inside sales reps. So I think this is going to also feed into the land, adopt, expand and the renew strategy, because as we get more muscle memory here and more recurring revenue, our cost of sale associated with that revenue, we believe, is going to go down. With respect to any details, I would say, just kind of look at the glide path that we're on. Gary laid out that where we're at 41% in FY'21 is our expectation. We expect to get to 38% by FY'23. I think that journey will accelerate as we go along over the next couple of years and we're confident in those targets that we laid out. But in summary, we've done a lot, but there's still a lot more to do.

Next one is, we put our targets a few years ago. How is this different? How confident are you in your near-term outlook?

I would say without any doubt, we have many, many reasons to be confident and much more confident I think than we were a few years ago. First of all, we have the right markets. We've expanded our market opportunity drastically. We've realigned our product portfolio. We have a rebuilt, go-to-market and distribution platform and structure. We actually built out a customer success function. We've got a renewals, opportunity and a tailwind for years to come. And also the recent momentum gives us further confidence in our guidance that we laid out today. So let me just unpack that a little bit. The market in particular I mean 7% TAM growth we're projecting that our software growth is going to be an excess to that. The overall growth will be around the 6% to 7% range. The go-to-market infrastructure, as you heard from Riccardo Di Blasio and Sandy Hamilton, this is really starting to hit its stride. We brought in a lot of talent over the last 12 to 18 months. Talent brings additional talent and we're really confident that we're starting to see that. And then also just a recurring revenue gives us further confidence, $0.5 billion of recurring revenue with a tailwind of subscription renewals that should contribute to that growth profile. So, in summary, we're confident in our strategy and confident in our targets that we laid out.

And then question is do you really think it's feasible to approach a Rule of 40 in the long term?

Yeah, great question. So, first and foremost, we're squarely focused on hitting our near-term targets through FY'23. And then I think beyond that you're going to start seeing a flywheel effect that kicks in after that. So again, we will be much more entrenched into larger high growth markets. Our product portfolio has a huge competitive advantage and it's only going to get bigger. We will have more recurring revenue at that point in time. We'll have a more mature SaaS business at that point in time. And also our sales reps will be much more productive and gaining much more leverage and as you heard from Sanjay just our partner leverage should add to this equation. So again, we're very focused on this algorithm of revenue growth and EBITDA growth in the combination that we see, getting to the Rule of 40 once we kind of breakthrough the near-term targets that we laid out today through FY'23.

Question for you, Sanjay. What is driving the strength in Europe and Asia? Have you done something material in terms of sales in those geographies? Sanjay, I'll let you to take over.

Sanjay Mirchandani -- Director, President and Chief Executive Officer

Thanks, Brian. Folks, I know we are at the top of the hour, but we got a few more questions coming in. So will take them. Europe -- and thank you for noticing that Europe and Asia is doing well, but our Americas business is also doing well. We've really put simply, we've got -- our strategy is resonating. The problems we're solving for customers matter. Our technology portfolio is more granular and easier to consume and our teams, which includes our partner channel, are doing a great job getting in front of the customers. So, notwithstanding the pandemic, we've been able to really drive and make a difference with our customers' digital transformation journey. So it's working and it's working around the planet.

You cited and I'm going to take two more questions. You cited software defined storage in your TAM slide, what is the future of Hedvig, just HyperScale X or is there a stand-alone opportunity?

Well, when we acquired Hedvig in October, year and a half ago, it was driven by three key goals. One was the technology and it continues to be absolutely state-of-the-art for what it was built. Two improved margins because incorporating Hedvig into our into our architecture, we didn't have to pay the third-party royalties that were price. The third, it gave us an adjacency into roughly a $5 billion software defined storage market. The outcomes are really quite straightforward. We've been able to integrate Hedvig right into our HyperScale X and we've got a world-class product there that we talked about. We're seeing the margin improvement every day as customers embrace our HyperScale X technology and there is growing interest every day on stand-alone software defined storage if we continue to bring to market an innovate around. So the three premises upon which we acquired Hedvig a whole -- larger than ever.

And folks, the last question, I know you're having fun, but this is the last question. Regarding HyperScale X, help us understand where this fits in your portfolio? How much does it contribute to your current business?

I did call it our flagship product and I mean it, because HyperScale X essentially incorporate everything we do. Encapsulates everything we build. It is the cornerstone of our strategy. It's central to how we solve hard problems that customers have. It's a simple form factor. You can have it as an appliance, you can have it as software. The choice is yours as a customer. It ties to the cloud. It ties to the edge. You get ransomware protection built-in with an easy button so to speak. And it gives you that expansion you need over time into the hybrid cloud. We're very excited about this. I keep saying this is -- this encapsulates everything we do and as much as you'd like me to call out. The numbers we don't care about the numbers for HyperScale X in particular.

So with that folks, I think we're out of time. Let's bring this to a close. I hope you enjoyed the session. We did. Once again, thank you for all your participation and interest in Commvault. Have a great day.

Duration: 120 minutes

Call participants:

Michael J. Melnyk -- Director, Investor Relations

Sanjay Mirchandani -- Director, President and Chief Executive Officer

Gavriella Schuster -- Corporate Vice President,Commercial Partner at Microsoft

Don Foster -- Vice President, Global Sales Engineering

Russell Peters -- Platform Engineer

Ranga Rajagopalan -- Vice President, Products

Sabina Joseph -- General Manager, Americas Technology Partners

Geeta Vaghela -- Head of Product Management, Storage

Manoj Nair -- General Manager, Metallic

Chris Powell -- Vice President, Chief Marketing Officer

Riccardo Di Blasio -- Vice President, Chief Revenue Officer

Sandra Hamilton -- Vice President, Customer Success

Gary Merrill -- Vice President, Operations

Brian Carolan -- Vice President, Chief Financial Officer

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