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Feb 26, 2015

Splunk Inc. Announces Fiscal Fourth Quarter and Full Year 2015 Financial Results

Full Year Revenues Grew 49%; Added Over 600 New Customers in Fourth Quarter

SAN FRANCISCO--(BUSINESS WIRE)-- Splunk Inc. (NASDAQ:SPLK), provider of the leading software platform for real-time Operational Intelligence, today announced results for its fiscal fourth quarter and full year ended January 31, 2015.

Fourth Quarter 2015 Financial Highlights

  • Total revenues were $147.4 million, up 48% year-over-year.
  • License revenues were $98.1 million, up 43% year-over-year.
  • GAAP operating loss was $57.1 million; GAAP operating margin was negative 38.7%.
  • Non-GAAP operating income was $11.5 million; non-GAAP operating margin was 7.8%.
  • GAAP loss per share was $0.47; non-GAAP income per share was $0.09.
  • Operating cash flow was $51.5 million with free cash flow of $48.8 million.

Full Year 2015 Financial Highlights

  • Total revenues were $450.9 million, up 49% year-over-year.
  • License revenues were $283.2 million, up 42% year-over-year.
  • GAAP operating margin was negative 47.9%; non-GAAP operating margin was 2.7%.
  • Operating cash flow was $104.0 million with free cash flow of $90.0 million.

"We are proud to welcome more than 600 new customers to the Splunk family, which now includes over 9,000 customers around the world," said Godfrey Sullivan, Chairman and CEO. "We finished FY15 with strong performance across the board and posted our best quarter yet for both Splunk Cloud and the Splunk App for Enterprise Security. Our investments in cloud and solutions are helping to drive global customer adoption."

Fourth Quarter 2015 and Recent Business Highlights

Customers:

  • Signed more than 600 new enterprise customers, ending the fiscal year with over 9,000 customers worldwide.
  • New and Expansion Customers Include: Accor (France), Auchan (France), Bank Gospodarstwa Krajowego (Poland), DATEV (Germany), Gamesys (United Kingdom), ICBC Asia (Hong Kong), Kaspersky Lab (Russia), Lennar Corporation, Macy's, New York City Metropolitan Transportation Authority, Red Hat, SA Power Networks (Australia), Sephora, theScore (Canada), Tesco (United Kingdom), Toyota Motor Corporation, U.S. Department of State, Walmart Brasil, The Washington Post and Zillow.

Product:

  • Introduced the new Splunk App for AWS to deliver real-time security and operational visibility into AWS CloudTrail, Amazon CloudWatch, billing and Amazon S3 data.
  • Released the new Splunk Mobile App to support enterprise security requirements such as single sign-on and Mobile Device Management compatibility.
  • Introduced the Splunk App for Salesforce, a service available only on Splunk Cloud to analyze adoption and usage data, monitor security threats and detect application delivery issues in Salesforce.
  • Released the new Splunk App for Microsoft Exchange with a new Exchange Service Analyzer to give insight into the health of the entire Exchange environment.

Recognition:

Appointments:

  • Appointed Adam Bangle, Vice President of EMEA.
  • Promoted Anthony Palladino to Vice President of Americas.
  • Promoted Bill Cull to Vice President of Worldwide Public Sector.
  • Promoted Emilio Umeoka to Vice President of Asia Pacific and Worldwide Partners.

Financial Outlook

The company is providing the following guidance for its fiscal first quarter 2016 (ending April 30, 2015):

  • Total revenues are expected to be between $116 million and $118 million.
  • Non-GAAP operating margin is expected to be between negative 2% and 4%.

The company is updating its previous guidance for its fiscal year 2016 (ending January 31, 2016):

  • Total revenues are expected to be approximately $600 million (was approximately $575 million per prior guidance provided on November 20, 2014).

The company is providing the following guidance for its fiscal year 2016 (ending January 31, 2016):

  • Non-GAAP operating margin is expected to be between 2% and 3%.

All forward-looking non-GAAP financial measures contained in this section "Financial Outlook" exclude estimates for stock-based compensation expenses, employer payroll tax expense related to employee stock plans, amortization of acquired intangible assets, ground lease expense related to a build-to-suit lease obligation, impairment of a long-lived asset and acquisition-related costs.

While a reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis, the company has provided a reconciliation of GAAP to non-GAAP financial measures in the financial statement tables for its fiscal fourth quarter 2015 and fiscal year 2015 non-GAAP results included in this press release.

Conference Call and Webcast

Splunk's executive management team will host a conference call today beginning at 1:30 p.m. PT (4:30 p.m. ET) to discuss the company's financial results and business highlights. Interested parties may access the call by dialing (866) 501-1535. International parties may access the call by dialing (216) 672-5582. A live audio webcast of the conference call will be available through Splunk's Investor Relations website at http://investors.splunk.com/events.cfm. A replay of the call will be available through March 5, 2015 by dialing (855) 859-2056 and referencing Conference ID 72662995.

Safe Harbor Statement

This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding Splunk's revenue and non-GAAP operating margin targets for the company's fiscal first quarter and fiscal year 2016 in the paragraphs under "Financial Outlook" above and other statements regarding momentum in the company's business, expected success from product and service investments and innovations, customer adoption and growth strategies. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: Splunk's limited operating history and experience developing and introducing new products; including its cloud offerings; risks associated with Splunk's rapid growth, particularly outside of the U.S.; Splunk's inability to realize value from its significant investments in its business, including product and service innovations; Splunk's transition to a multi-product software and services business; Splunk's inability to successfully integrate acquired businesses and technologies; and general market, political, economic and business conditions.

Additional information on potential factors that could affect Splunk's financial results is included in the company's Quarterly Report on Form 10-Q for the quarter ended October 31, 2014, which is on file with the U.S. Securities and Exchange Commission. Splunk does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

About Splunk Inc.

Splunk Inc. (NASDAQ: SPLK) provides the leading software platform for real-time Operational Intelligence. Splunk® software and cloud services enable organizations to search, monitor, analyze and visualize machine-generated big data coming from websites, applications, servers, networks, sensors and mobile devices. More than 9,000 enterprises, government agencies, universities and service providers in more than 100 countries use Splunk software to deepen business and customer understanding, mitigate cybersecurity risk, prevent fraud, improve service performance and reduce cost. Splunk products include Splunk® Enterprise, Splunk Cloud™, Hunk®, Splunk MINT Express™ and premium Splunk Apps. To learn more, please visit http://www.splunk.com/company.

Social Media: Twitter | LinkedIn | YouTube | Facebook

Splunk, Splunk &#62 , Listen to Your Data, The Engine for Machine Data, Hunk, Splunk Cloud, Splunk Storm, SPL, Splunk MINT Express and Splunk MINT Enterprise are trademarks and registered trademarks of Splunk Inc. in the United States and other countries. All other brand names, product names, or trademarks belong to their respective owners. © 2015 Splunk Inc. All rights reserved.

           
SPLUNK INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
 
Three Months Ended Fiscal Year Ended
January 31, January 31, January 31, January 31,
2015 2014 2015 2014
Revenues
License $ 98,082 $ 68,794 $ 283,191 $ 199,024
Maintenance and services   49,310     31,116     167,684     103,599  
Total revenues   147,392     99,910     450,875     302,623  
 
Cost of revenues
License 1,174 101 1,859 330
Maintenance and services 5   20,366     11,097     66,519     35,495  
Total cost of revenues 1,2,3   21,540     11,198     68,378     35,825  
Gross profit   125,852     88,712     382,497     266,798  
 
Operating expenses
Research and development 47,335 26,260 150,790 75,895
Sales and marketing 107,695 76,336 344,471 215,335
General and administrative 4   27,921     18,600     103,046     53,875  
Total operating expenses 1,2,3,6   182,951     121,196     598,307     345,105  
Operating loss   (57,099 )   (32,484 )   (215,810 )   (78,307 )
 
Interest and other income (expense), net
Interest income, net 262 51 754 225
Other income (expense), net   542     (461 )   216     (920 )
Total interest and other income (expense), net   804     (410 )   970     (695 )
Loss before income taxes (56,295 ) (32,894 ) (214,840 ) (79,002 )
Income tax provision (benefit) 7   733     (263 )   2,276     6  
Net loss $ (57,028 ) $ (32,631 ) $ (217,116 ) $ (79,008 )
 
 
Basic and diluted net loss per share $ (0.47 ) $ (0.30 ) $ (1.81 ) $ (0.75 )
 

 

Weighted-average shares used in computing basic and diluted net loss per share

 

122,385

    108,047     119,775     105,067  
 
 
1 Includes amortization of acquired intangible assets as follows:
Cost of revenues $ 911 $ 566 $ 3,004 $ 648
Research and development 69 58 776 70
Sales and marketing 150 146 597 188
 
2 Includes stock-based compensation expense as follows:
Cost of revenues $ 5,536 $ 2,548 $ 17,189 $ 5,283
Research and development 19,260 9,834 60,777 20,829
Sales and marketing 28,606 14,587 90,064 30,012
General and administrative 9,792 6,275 46,149 13,244
 
3 Includes employer payroll tax on employee stock plans as follows:
Cost of revenues $ 295 $ 74 $ 639 $ 171
Research and development 1,570 874 3,219 1,151
Sales and marketing 1,182 781 2,850 1,688
General and administrative 1,000 385 2,160 961
 
4 Includes ground lease expense related to build-to-suit lease obligation $ 222 $ - $ 666 $ -
 
5 Includes charge related to impairment of long-lived asset $ - $ - $ - $ 2,128
 
6 Includes acquisition-related costs as follows:
Research and development $ - $ - $ - $ 408
General and administrative - 314 - 314
 
7 Includes a partial release of the valuation allowance due to acquisition $ - $ (427 ) $ - $ (1,174 )
 
     
SPLUNK INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
 
January 31, January 31,
2015 2014
 
ASSETS
 
Current assets
Cash and cash equivalents $ 387,315 $ 897,453
Investments, current portion 462,849 -
Accounts receivable, net 128,413 83,348
Prepaid expenses and other current assets   21,256     12,019  
Total current assets   999,833     992,820  
 
Investments, non-current 165,082 -
Property and equipment, net 50,374 15,505
Intangible assets, net 10,416 12,294
Goodwill 19,070 19,070
Other assets   3,016     642  
Total assets $ 1,247,791   $ 1,040,331  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities
Accounts payable $ 3,726 $ 2,079
Accrued payroll and compensation 65,220 43,876
Accrued expenses and other liabilities 27,819 12,743
Deferred revenue, current portion   249,883     149,156  
Total current liabilities   346,648     207,854  
 
Deferred revenue, non-current 54,202 43,165
Other liabilities, non-current   33,620     4,404  
Total non-current liabilities   87,822     47,569  
Total liabilities   434,470     255,423  
 
Stockholders' equity
Common stock 123 116
Accumulated other comprehensive income (loss) (837 ) 58
Additional paid-in capital 1,200,858 954,441
Accumulated deficit   (386,823 )   (169,707 )
Total stockholders' equity   813,321     784,908  
Total liabilities and stockholders' equity $ 1,247,791   $ 1,040,331  
 
           
SPLUNK INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Three Months Ended Fiscal Year Ended
January 31, January 31, January 31, January 31,
2015 2014 2015 2014
 
Cash Flows From Operating Activities
Net loss $ (57,028 ) $ (32,631 ) $ (217,116 ) $ (79,008 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 3,526 2,192 12,494 6,692
Amortization of investment premiums 323 - 775 -
Stock-based compensation 63,194 33,244 214,179 69,368
Deferred income taxes 466 (186 ) (327 ) (1,374 )
Excess tax benefits from employee stock plans 261 188 (847 ) (351 )
Impairment of long-lived asset - - - 2,128
Changes in operating assets and liabilities
Accounts receivable, net (45,863 ) (29,353 ) (45,065 ) (19,400 )
Prepaid expenses, other current and non-current assets (9,243 ) (372 ) (11,284 ) (6 )
Accounts payable 721 (96 ) 1,766 171
Accrued payroll and compensation 16,739 13,221 21,344 15,753
Accrued expenses and other liabilities 3,624 (2,766 ) 16,297 2,454
Deferred revenue   74,808     50,988     111,764     77,421  
Net cash provided by operating activities   51,528     34,429     103,980     73,848  
 
Cash Flow From Investing Activities
Purchases of investments (129,433 ) - (820,710 ) -
Maturities of investments 129,000 - 192,000 -
Acquisitions, net of cash acquired - (20,780 ) (2,500 ) (29,738 )
Purchases of property and equipment   (2,750 )   (2,043 )   (13,950 )   (9,308 )
Net cash used in investing activities   (3,183 )   (22,823 )   (645,160 )   (39,046 )
 
Cash Flow From Financing Activities
Proceeds from the exercise of stock options 3,987 4,866 16,792 23,731
Excess tax benefits from employee stock plans (261 ) (188 ) 847 351
Proceeds from employee stock purchase plan 6,139 5,358 14,494 11,434
Taxes paid related to net share settlement of equity awards - (15,404 ) - (18,156 )
Payment related to build-to-suit lease obligation - - (523 ) -
Proceeds from follow-on offering, net of offering costs   -     539,339     -     539,339  
Net cash provided by financing activities   9,865     533,971     31,610     556,699  
 
Effect of exchange rate changes on cash and cash equivalents   (448 )   (19 )   (568 )   13  
Net increase (decrease) in cash and cash equivalents 57,762 545,558 (510,138 ) 591,514
Cash and cash equivalents at beginning of period   329,553     351,895     897,453     305,939  
Cash and cash equivalents at end of period $ 387,315   $ 897,453   $ 387,315   $ 897,453  
 

SPLUNK INC.

Non-GAAP financial measures and reconciliations

To supplement Splunk's consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States ("GAAP"), Splunk provides investors with certain non-GAAP financial measures, including non-GAAP gross margin, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss) and non-GAAP net income (loss) per share (collectively the "non-GAAP financial measures"). These non-GAAP financial measures exclude all or a combination of the following (as reflected in the following reconciliation table): stock-based compensation expense, employer payroll tax expense related to employee stock plans, amortization of acquired intangible assets, ground lease expense related to a build-to-suit lease obligation, impairment of a long-lived asset, acquisition-related costs and the partial release of the valuation allowance due to acquisition. In addition, non-GAAP financial measures include free cash flow, which represents cash from operations less purchases of property and equipment. The presentation of the non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Splunk uses these non-GAAP financial measures for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. Splunk believes that these non-GAAP financial measures provide useful information about Splunk's operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. In addition, these non-GAAP financial measures facilitate comparisons to competitors' operating results.

Splunk excludes stock-based compensation expense because it is non-cash in nature and excluding this expense provides meaningful supplemental information regarding Splunk's operational performance. In particular, because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under FASB ASC Topic 718, Splunk believes that providing non-GAAP financial measures that exclude this expense allows investors the ability to make more meaningful comparisons between Splunk's operating results and those of other companies. Splunk excludes employer payroll tax expense related to employee stock plans in order for investors to see the full effect that excluding that stock-based compensation expense had on Splunk's operating results. These expenses are tied to the exercise or vesting of underlying equity awards and the price of Splunk's common stock at the time of vesting or exercise, which may vary from period to period independent of the operating performance of Splunk's business. Splunk also excludes the non-cash charge for previously capitalized Storm research and development expense (reflected as an impairment of a long-lived asset) as a result of its strategic decision to start making its Storm product available at no cost to customers, a decision that Splunk expects to be infrequent in nature. Splunk also excludes acquisition-related costs, amortization of acquired intangible assets and ground lease expense related to its build-to-suit lease obligation from its non-GAAP financial measures because these are considered by management to be outside of Splunk's core operating results. Splunk further excludes the partial release of the valuation allowance due to acquisition from non-GAAP net income (loss) and non-GAAP net income (loss) per share because it is also considered by management to be outside Splunk's core operating results. Accordingly, Splunk believes that excluding these expenses provides investors and management with greater visibility to the underlying performance of its business operations, facilitates comparison of its results with other periods and may also facilitate comparison with the results of other companies in its industry. Splunk considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including investing in its business, making strategic acquisitions and strengthening its balance sheet.

There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by Splunk's competitors and exclude expenses that may have a material impact upon Splunk's reported financial results. Further, stock-based compensation expense has been and will continue to be for the foreseeable future a significant recurring expense in Splunk's business and an important part of the compensation provided to Splunk's employees. The non-GAAP financial measures are meant to supplement and be viewed in conjunction with GAAP financial measures.

The following table reconciles Splunk's non-GAAP results to Splunk's GAAP results included in this press release.

     
SPLUNK INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)
(Unaudited)
 
 
Three Months Ended Fiscal Year Ended
January 31, January 31, January 31, January 31,
2015 2014 2015 2014
 

Reconciliation of cash provided by operating activities to free cash flow:

Net cash provided by operating activities $ 51,528 $ 34,429 $ 103,980 $ 73,848
Less purchases of property and equipment   (2,750 )   (2,043 )   (13,950 )   (9,308 )
Free cash flow (Non-GAAP) $ 48,778   $ 32,386   $ 90,030   $ 64,540  
 
Net cash used in investing activities $ (3,183 ) $ (22,823 ) $ (645,160 ) $ (39,046 )
Net cash provided by financing activities $ 9,865   $ 533,971   $ 31,610   $ 556,699  
 

Gross margin reconciliation:

GAAP gross margin 85.4 % 88.8 % 84.8 % 88.2 %
Stock-based compensation expense 3.8 2.6 3.9 1.7
Employer payroll tax on employee stock plans 0.2 0.1 0.1 0.1
Amortization of acquired intangible assets 0.6 0.6 0.7 0.2

Impairment of long-lived asset

  -     -     -     0.7  
Non-GAAP gross margin   90.0   %   92.1   %   89.5   %   90.9 %
 

Operating income (loss) reconciliation:

GAAP operating loss $ (57,099 ) $ (32,484 ) $ (215,810 ) $ (78,307 )
Stock-based compensation expense 63,194 33,244 214,179 69,368
Employer payroll tax on employee stock plans 4,047 2,114 8,868 3,971
Amortization of acquired intangible assets 1,130 770 4,377 906
Impairment of long-lived asset - - - 2,128
Acquisition-related costs - 314 - 722
Ground lease expense related to build-to-suit lease obligation   222     -     666     -  
Non-GAAP operating income (loss) $ 11,494   $ 3,958   $ 12,280   $ (1,212 )
 

Operating margin reconciliation:

GAAP operating margin (38.7 ) % (32.5 ) % (47.9 ) % (25.9 )%
Stock-based compensation expense 42.8 33.3 47.5 22.9
Employer payroll tax on employee stock plans 2.7 2.1 2.0 1.3
Amortization of acquired intangible assets 0.8 0.8 1.0 0.3
Impairment of long-lived asset - - - 0.7
Acquisition-related costs - 0.3 - 0.3
Ground lease expense related to build-to-suit lease obligation   0.2     -     0.1     -  
Non-GAAP operating margin   7.8   %   4.0   %   2.7   %   (0.4 )%
 

Net income (loss) reconciliation:

GAAP net loss $ (57,028 ) $ (32,631 ) $ (217,116 ) $ (79,008 )
Stock-based compensation expense 63,194 33,244 214,179 69,368
Employer payroll tax on employee stock plans 4,047 2,114 8,868 3,971
Amortization of acquired intangible assets 1,130 770 4,377 906
Impairment of long-lived asset - - - 2,128
Acquisition-related costs - 314 - 722
Ground lease expense related to build-to-suit lease obligation 222 - 666 -
Partial release of the valuation allowance due to acquisition   -     (427 )   -     (1,174 )
Non-GAAP net income (loss) $ 11,565   $ 3,384   $ 10,974   $ (3,087 )
 

Reconciliation of shares used in computing basic and diluted net income (loss) per share:

Weighted-average shares used in computing GAAP basic net loss per share 122,385 108,047 119,775 105,067
Effect of dilutive securities: Employee stock awards   6,216     10,685     7,364     -  
Weighted-average shares used in computing Non-GAAP basic and diluted net income (loss) per share   128,601     118,732     127,139     105,067  
 
 
GAAP basic and diluted net loss per share $ (0.47 ) $ (0.30 ) $ (1.81 ) $ (0.75 )
 
Non-GAAP basic and diluted net income (loss) per share $ 0.09   $ 0.03   $ 0.09   $ (0.03 )
 

Splunk Inc.
Sherry Lowe, 415-852-5529
slowe@splunk.com
Investor Contact
Ken Tinsley, 415-848-8476
ktinsley@splunk.com

Source: Splunk Inc.

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