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Nov 21, 2019

Splunk Inc. Announces Fiscal Third Quarter 2020 Financial Results

Software Revenues Grew 40%;
Total ARR of $1.44 Billion, up 53% year over year

SAN FRANCISCO--(BUSINESS WIRE)--Nov. 21, 2019-- Splunk Inc. (NASDAQ: SPLK), provider of the Data-to-Everything Platform, today announced results for its fiscal third quarter ended October 31, 2019.

Third Quarter 2020 Financial Highlights

  • Software revenues were $454 million, up 40% year-over-year.
  • Total revenues were $626 million, up 30% year-over-year.
  • GAAP operating loss was $47 million; GAAP operating margin was negative 7.6%.
  • Non-GAAP operating income was $106 million; non-GAAP operating margin was 16.8%.
  • GAAP loss per share was $0.38; non-GAAP income per share was $0.58.
  • Operating cash flow was negative $135 million with free cash flow of negative $162 million.

“Splunk continues to show the world how our Data-to-Everything Platform is uniquely positioned to bring data to every question, decision and action,” said Doug Merritt, President and CEO, Splunk. “Whether through our groundbreaking innovations like Splunk® Data Fabric Search and Splunk® Data Stream Processor or aggressive acquisition strategy, Splunk is transforming the way our customers around the world turn data into doing.”

“With the shift to a renewable model largely complete, momentum in our term license and cloud offerings drove 53% growth in total ARR during the quarter,” said Jason Child, chief financial officer, Splunk.

Business Highlights

Customers:

  • Signed 440 new enterprise customers.
  • New and Expansion Customers Include: Airbus Defence and Space (Germany), Anaplan, Bendigo Bank (Australia), Carnival Cruise Lines, Chegg, Crowdstrike, Lloyds Banking Group (United Kingdom), Monash University (Australia), NEC (Japan), SKY Italia (Italy), Takeda Pharmaceuticals (Japan), University of Adelaide (Australia), University of Bristol (United Kingdom), U.S. Census Bureau, Xcel Energy

Corporate:

  • Splunk Unveils the Data-to-Everything Platform: At a special customer event featuring President Barack Obama, Splunk introduced the Data-to-Everything Platform, designed to unlock trapped value by bringing data to every question, decision, and action. The Splunk Data-to-Everything Platform helps customers around the world remove the barriers between data and action, allowing them to know what is happening within their organizations and turn data into doing.
  • Product Innovations at .conf19 Help Customers Transform with Data: In front of a capacity crowd of 11,000 at .conf19, Splunk unveiled milestone updates to its Data-to-Everything Platform, including new products such as Splunk Data Fabric Search (DFS), which accelerates insights by integrating massive datasets; Splunk Data Stream Processor (DSP), which continuously collects high-velocity, high-volume data from diverse sources and turns it into valuable insights; and Splunk Mission Control, which combines the power of SIEM, SOAR and UBA into a common work surface that unifies security operations. Splunk also announced new versions of Splunk Enterprise 8.0 and Splunk Enterprise Security 5.0, designed to process massive scale to data in any form.
  • Strategic Acquisitions Position Splunk as a Leader in Monitoring and Observability: In addition to its SignalFx acquisition, Splunk continues to make strategic investments that will help customers monitor and observe data no matter where they are in their cloud journey. Splunk also announced the acquisition of Omnition, a stealth-mode SaaS company that is innovating in distributed tracing, improving monitoring across microservices applications, and Streamlio, an open source distributed messaging leader that will help accelerate Splunk’s real-time stream processing.
  • Splunk Ventures Invests in the Modern Data Ecosystem: Splunk announced the launch of Splunk Ventures, a $150 million fund designed to fuel the next generation of data analytics. Splunk Ventures’ Innovation Fund expects to invest $100 million in startups working to transform data into business value, and Splunk Ventures’ Social Impact Fund expects to invest $50 million in organizations using data for the good of society. Splunk also announced its first Social Impact Fundinvestment in Zonehaven, a cloud-based analytics application designed to help communities use data to improve evacuations and reduce wildfire risk.
  • Splunk Cloud Attains FedRAMP Authorization: Splunk’s footprint in the federal government continues to grow. Splunk announced it has received FedRAMP authorization at a moderate impact level. Achieving FedRAMP authorization from the General Services Administration (GSA) FedRAMP Program Management Office (PMO) brings the power of Splunk Cloud to agencies that are eager to remove the barrier between data and action and turn data into doing.

Financial Outlook

The company is providing the following guidance for its fiscal fourth quarter 2020 (ending January 31, 2020):

  • Total revenues are expected to be approximately $780 million.
  • Non-GAAP operating margin is expected to be approximately 23%.

The company is updating its previous guidance for its fiscal year 2020 (ending January 31, 2020):

  • Total revenues are expected to be approximately $2.35 billion (was approximately $2.30 billion).
  • Non-GAAP operating margin is expected to be approximately 14% (unchanged from previous guidance).

All forward-looking non-GAAP financial measures contained in this section “Financial Outlook” exclude estimates for stock-based compensation and related employer payroll tax, acquisition-related adjustments, and amortization of acquired intangible assets.

A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, many of these costs and expenses that may be incurred in the future. The company has provided a reconciliation of GAAP to non-GAAP financial measures in the financial statement tables for its fiscal third quarter 2020 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-presentations. A replay of the call will be available through November 28, 2019 by dialing (855) 859-2056 and referencing Conference ID 6965602.

Safe Harbor Statement

This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding trends in revenue composition, statements regarding acquisitions and related benefits, Splunk’s revenue and non-GAAP operating margin targets for the company’s fiscal fourth quarter and fiscal years 2020 in the paragraphs under “Financial Outlook” above and other statements regarding our market opportunity, the market for data-related products, future growth, momentum, strategy, technology and product innovation, expectations for our industry and business, customer demand, customer success and feedback, expanding use of Splunk by customers, and expected benefits and scale of our products. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: risks associated with Splunk’s rapid growth, particularly outside of the United States; Splunk’s inability to realize value from its significant investments in its business, including product and service innovations and through acquisitions; Splunk’s shift from sales of perpetual licenses in favor of sales of term licenses and subscription agreements for our cloud services; Splunk’s transition to a multi-product software and services business; Splunk’s inability to successfully integrate acquired businesses and technologies; Splunk’s inability to service its debt obligations or other adverse effects related to our convertible notes; and general market, political, economic, business and competitive market 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 fiscal quarter ended July 31, 2019, which is on file with the U.S. Securities and Exchange Commission (“SEC”) and Splunk’s other filings with the SEC. 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) turns data into doing with the Data-to-Everything Platform. Splunk technology is designed to investigate, monitor, analyze and act on data at any scale.

Splunk, Splunk> and Turn Data Into Doing 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. © 2019 Splunk Inc. All rights reserved.

Splunk Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended October 31, Nine Months Ended October 31,

2019

 

2018

 

2019

 

2018

 
Revenues
License

$

373,684

 

$

279,603

 

$

855,825

 

$

619,246

 

Maintenance and services

 

252,652

 

 

201,380

 

 

711,919

 

 

561,679

 

Total revenues

 

626,336

 

 

480,983

 

 

1,567,744

 

 

1,180,925

 

 
Cost of revenues
License

 

5,796

 

 

5,922

 

 

17,414

 

 

16,717

 

Maintenance and services

 

102,023

 

 

83,303

 

 

284,536

 

 

234,226

 

Total cost of revenues

 

107,819

 

 

89,225

 

 

301,950

 

 

250,943

 

Gross profit

 

518,517

 

 

391,758

 

 

1,265,794

 

 

929,982

 

 
Operating expenses
Research and development

 

158,887

 

 

117,722

 

 

422,287

 

 

310,818

 

Sales and marketing

 

319,023

 

 

264,223

 

 

896,757

 

 

726,089

 

General and administrative

 

88,092

 

 

59,819

 

 

226,118

 

 

168,405

 

Total operating expenses

 

566,002

 

 

441,764

 

 

1,545,162

 

 

1,205,312

 

Operating loss

 

(47,485

)

 

(50,006

)

 

(279,368

)

 

(275,330

)

 
Interest and other income (expense), net
Interest income

 

12,612

 

 

8,571

 

 

45,373

 

 

15,322

 

Interest expense

 

(24,406

)

 

(12,270

)

 

(71,527

)

 

(16,401

)

Other income (expense), net

 

(215

)

 

(186

)

 

(1,408

)

 

(657

)

Total interest and other income (expense), net

 

(12,009

)

 

(3,885

)

 

(27,562

)

 

(1,736

)

Loss before income taxes

 

(59,494

)

 

(53,891

)

 

(306,930

)

 

(277,066

)

Income tax provision (benefit)

 

(1,855

)

 

1,814

 

 

7,010

 

 

637

 

Net loss

$

(57,639

)

$

(55,705

)

$

(313,940

)

$

(277,703

)

 
 
Basic and diluted net loss per share

$

(0.38

)

$

(0.38

)

$

(2.08

)

$

(1.91

)

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

 

152,404

 

 

146,391

 

 

150,659

 

 

145,015

 

Splunk Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
 
October 31, 2019 January 31, 2019
 
Assets
Current assets
Cash and cash equivalents

$

873,470

 

$

1,876,165

 

Investments, current

 

948,352

 

 

881,220

 

Accounts receivable, net

 

638,050

 

 

469,658

 

Prepaid expenses and other current assets

 

103,238

 

 

73,197

 

Deferred commissions, current

 

84,530

 

 

78,223

 

Total current assets

 

2,647,640

 

 

3,378,463

 

 
Investments, non-current

 

66,933

 

 

110,588

 

Operating lease right-of-use assets

 

278,261

 

 

-

 

Property and equipment, net

 

125,626

 

 

158,276

 

Intangible assets, net

 

248,997

 

 

91,622

 

Goodwill

 

1,278,456

 

 

503,388

 

Deferred commissions, non-current

 

67,842

 

 

64,766

 

Other assets

 

356,042

 

 

193,140

 

Total assets

$

5,069,797

 

$

4,500,243

 

 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable

$

28,026

 

$

20,418

 

Accrued compensation

 

215,224

 

 

226,061

 

Accrued expenses and other liabilities

 

203,521

 

 

125,641

 

Deferred revenue, current

 

689,877

 

 

673,018

 

Total current liabilities

 

1,136,648

 

 

1,045,138

 

 
Convertible senior notes, net

 

1,693,951

 

 

1,634,474

 

Operating lease liabilities

 

246,977

 

 

-

 

Deferred revenue, non-current

 

165,723

 

 

204,929

 

Other liabilities, non-current

 

381

 

 

95,245

 

Total non-current liabilities

 

2,107,032

 

 

1,934,648

 

Total liabilities

 

3,243,680

 

 

2,979,786

 

 
Stockholders' equity
Common stock

 

155

 

 

149

 

Accumulated other comprehensive loss

 

(3,161

)

 

(2,506

)

Additional paid-in capital

 

3,367,866

 

 

2,754,858

 

Accumulated deficit

 

(1,538,743

)

 

(1,232,044

)

Total stockholders' equity

 

1,826,117

 

 

1,520,457

 

Total liabilities and stockholders' equity

$

5,069,797

 

$

4,500,243

 

Splunk Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
Three Months Ended October 31, Nine Months Ended October 31,

2019

 

2018

 

2019

 

2018

 
Cash flows from operating activities
Net loss

$

(57,639

)

$

(55,705

)

$

(313,940

)

$

(277,703

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization

 

18,938

 

 

13,779

 

 

46,079

 

 

37,946

 

Amortization of deferred commissions

 

21,196

 

 

22,715

 

 

75,078

 

 

55,592

 

Amortization of investment premiums (accretion of discounts)

 

(2,324

)

 

(1,315

)

 

(7,969

)

 

(1,852

)

Amortization of debt discount and issuance costs

 

20,382

 

 

8,491

 

 

59,477

 

 

8,491

 

Stock-based compensation

 

132,852

 

 

107,681

 

 

378,928

 

 

307,345

 

Deferred income taxes

 

(214

)

 

(302

)

 

(398

)

 

(427

)

Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net

 

(226,485

)

 

(55,489

)

 

(165,735

)

 

100,873

 

Prepaid expenses and other assets

 

(79,688

)

 

(40,847

)

 

(190,037

)

 

(62,784

)

Deferred commissions

 

(31,247

)

 

(37,356

)

 

(84,461

)

 

(80,716

)

Accounts payable

 

(6,445

)

 

3,781

 

 

(1,129

)

 

6,771

 

Accrued compensation

 

33,394

 

 

48,410

 

 

(12,821

)

 

36,577

 

Accrued expenses and other liabilities

 

1,571

 

 

4,239

 

 

18,966

 

 

10,498

 

Deferred revenue

 

40,846

 

 

40,993

 

 

(30,843

)

 

28,475

 

Net cash provided by (used in) operating activities

 

(134,863

)

 

59,075

 

 

(228,805

)

 

169,086

 

 
Cash flows from investing activities
Purchases of investments

 

(275,962

)

 

(611,633

)

 

(815,685

)

 

(810,264

)

Maturities of investments

 

264,376

 

 

177,950

 

 

805,971

 

 

525,126

 

Acquisitions, net of cash acquired

 

(576,296

)

 

-

 

 

(576,296

)

 

(394,910

)

Purchases of property and equipment

 

(27,090

)

 

(7,319

)

 

(53,524

)

 

(15,177

)

Other investment activities

 

(2,500

)

 

(744

)

 

(3,750

)

 

(5,119

)

Net cash used in investing activities

 

(617,472

)

 

(441,746

)

 

(643,284

)

 

(700,344

)

 
Cash flows from financing activities
Proceeds from the exercise of stock options

 

68

 

 

341

 

 

624

 

 

1,695

 

Proceeds from employee stock purchase plan

 

-

 

 

-

 

 

34,482

 

 

24,201

 

Proceeds from the issuance of convertible debt, net of issuance costs

 

-

 

 

2,106,225

 

 

-

 

 

2,106,225

 

Purchase of capped calls

 

-

 

 

(274,275

)

 

-

 

 

(274,275

)

Taxes paid related to net share settlement of equity awards

 

(46,467

)

 

-

 

 

(164,160

)

 

(779

)

Repayment of financing lease obligation

 

-

 

 

(644

)

 

-

 

 

(1,862

)

Net cash provided by (used in) financing activities

 

(46,399

)

 

1,831,647

 

 

(129,054

)

 

1,855,205

 

 
Effect of exchange rate changes on cash and cash equivalents

 

199

 

 

(541

)

 

(1,552

)

 

(1,778

)

Net increase (decrease) in cash and cash equivalents

 

(798,535

)

 

1,448,435

 

 

(1,002,695

)

 

1,322,169

 

Cash and cash equivalents at beginning of period

 

1,672,005

 

 

419,681

 

 

1,876,165

 

 

545,947

 

Cash and cash equivalents at end of period

$

873,470

 

$

1,868,116

 

$

873,470

 

$

1,868,116

 

Splunk Inc.
Operating Metrics

Total Annual Recurring Revenue (“ARR”) represents the annualized revenue run-rate of active subscription, term license, and maintenance contracts at the end of a reporting period. Contracts are annualized by dividing the total contract value by the number of days in the contract term and then multiplying by 365.

Non-GAAP Financial Measures and Reconciliations

To supplement Splunk’s condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States (“GAAP”), Splunk provides investors with the following non-GAAP financial measures: cost of revenues, gross margin, research and development expense, sales and marketing expense, general and administrative expense, operating income (loss), operating margin, income tax provision (benefit), net income (loss), net income (loss) per share and free cash flow (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 tables): expenses related to stock-based compensation and related employer payroll tax, amortization of acquired intangible assets, adjustments related to a financing lease obligation, acquisition-related adjustments, including the partial release of the valuation allowance due to acquisitions, and non-cash interest expense related to convertible senior notes that were issued in the fiscal third quarter of 2019. The adjustments for the financing lease obligation are to reflect the expense Splunk would have recorded if its build-to-suit lease arrangement had been deemed an operating lease instead of a financing lease and is calculated as the net of actual ground lease expense, depreciation and interest expense over estimated straight-line rent expense. The non-GAAP financial measures are also adjusted for Splunk's estimated tax rate on non-GAAP income (loss). To determine the annual non-GAAP tax rate, Splunk evaluates a financial projection based on its non-GAAP results. The annual non-GAAP tax rate takes into account other factors including Splunk's current operating structure, its existing tax positions in various jurisdictions and key legislation in major jurisdictions where Splunk operates. The non-GAAP tax rate applied to the three and nine months ended October 31, 2019 was 20%. Splunk expects to utilize this annual non-GAAP tax rate for all of fiscal 2020 and will provide updates to this rate on an annual basis, or more frequently if material changes occur. The applicable fiscal 2019 tax rates are noted in the reconciliations. In addition, non-GAAP financial measures includes 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 and 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 amortization of acquired intangible assets, adjustments related to a financing lease obligation, acquisition-related adjustments, including the partial release of the valuation allowance due to acquisitions, and non-cash interest expense related to convertible senior notes from the applicable non-GAAP financial measures because these expenses are considered by management to be outside of 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 tables reconcile Splunk’s GAAP results to Splunk’s non-GAAP results included in this press release.

Splunk Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)
(Unaudited)
   
   
   
Reconciliation of Cash Provided by (Used in) Operating Activities to Free Cash Flow
   
  Three Months Ended October 31, Nine Months Ended October 31,
 

2019

 

2018

 

2019

 

2018

Net cash provided by (used in) operating activities

$

(134,863

)

$

59,075

 

$

(228,805

)

$

169,086

 

Less purchases of property and equipment

 

(27,090

)

 

(7,319

)

 

(53,524

)

 

(15,177

)

Free cash flow (non-GAAP)

$

(161,953

)

$

51,756

 

$

(282,329

)

$

153,909

 

Net cash used in investing activities

$

(617,472

)

$

(441,746

)

$

(643,284

)

$

(700,344

)

Net cash provided by (used in) financing activities

$

(46,399

)

$

1,831,647

 

$

(129,054

)

$

1,855,205

 

   
   
   
Reconciliation of GAAP to Non-GAAP Financial Measures
Three Months Ended October 31, 2019
  GAAP Stock-based
compensation
and related
employer
payroll tax
Amortization
of acquired
intangible
assets
Acquisition-
related
adjustments
Non-cash
interest expense
related to
convertible
senior notes
Income tax
effects related
to non-GAAP
adjustments (3)
Non-GAAP
   
Cost of revenues  

$

107,819

 

$

(10,729

)

$

(7,865

)

$

-

 

$

-

 

$

-

 

$

89,225

 

Gross margin  

82.8

%

1.7

%

1.3

%

-

%

-

%

-

%

85.8

%

   
Research and development  

 

158,887

 

 

(45,701

)

 

(174

)

 

(12

)

 

-

 

 

-

 

 

113,000

 

Sales and marketing  

 

319,023

 

 

(51,795

)

 

(2,081

)

 

(172

)

 

-

 

 

-

 

 

264,975

 

General and administrative  

 

88,092

 

 

(27,082

)

 

-

 

 

(7,408

)

 

-

 

 

-

 

 

53,602

 

Operating income (loss)  

 

(47,485

)

 

135,307

 

 

10,120

 

 

7,592

 

 

-

 

 

-

 

 

105,534

 

Operating margin  

 

(7.6

)%

 

21.6

%

 

1.6

%

 

1.2

%

-

%

-

%

 

16.8

%

   
Income tax provision (benefit)  

 

(1,855

)

 

-

 

 

-

 

 

6,006

 

(2)

 

-

 

 

18,630

 

 

22,781

 

Net income (loss)  

$

(57,639

)

$

135,307

 

$

10,120

 

$

1,586

 

$

20,382

 

$

(18,630

)

$

91,126

 

Net income (loss) per share (1)  

$

(0.38

)

$

0.58

 

   
(1) GAAP net loss per share calculated based on 152,404 weighted-average shares of common stock. Non-GAAP net income per share calculated based on 156,526 diluted weighted-average shares of common stock, which includes 4,122 potentially dilutive shares related to employee stock awards. GAAP to non-GAAP net income (loss) per share is not reconciled due to the difference in the number of shares used to calculate basic and diluted weighted-average shares of common stock.
(2) Represents the partial release of the valuation allowance.
(3) Represents the tax effect of the non-GAAP adjustments based on the estimated annual effective tax rate of 20%.
   
   
   
   
Reconciliation of GAAP to Non-GAAP Financial Measures
Three Months Ended October 31, 2018
  GAAP Stock-based
compensation
and related
employer
payroll tax
Amortization
of acquired
intangible
assets
Adjustments
related to
financing lease
obligation
Non-cash
interest expense
related to
convertible
senior notes
Income tax
effects related
to non-GAAP
adjustments (3)
Non-GAAP
   
Cost of revenues  

$

89,225

 

$

(9,203

)

$

(5,923

)

$

300

 

$

-

 

$

-

 

$

74,399

 

Gross margin  

 

81.4

%

 

2.0

%

 

1.2

%

 

(0.1

)%

-

%

-

%

 

84.5

%

   
Research and development  

 

117,722

 

 

(35,892

)

 

(249

)

 

514

 

 

-

 

 

-

 

 

82,095

 

Sales and marketing  

 

264,223

 

 

(46,527

)

 

(955

)

 

1,134

 

 

-

 

 

-

 

 

217,875

 

General and administrative  

 

59,819

 

 

(18,875

)

 

-

 

 

259

 

 

-

 

 

-

 

 

41,203

 

Operating income (loss)  

 

(50,006

)

 

110,497

 

 

7,127

 

 

(2,207

)

 

-

 

 

-

 

 

65,411

 

Operating margin  

 

(10.4

)%

 

23.0

%

 

1.5

%

 

(0.5

)%

-

%

-

%

 

13.6

%

   
Income tax provision  

 

1,814

 

 

-

 

 

-

 

 

-

 

 

-

 

 

12,597

 

 

14,411

 

Net income (loss)  

$

(55,705

)

$

110,497

 

$

7,127

 

$

(169

)

(2)

$

8,491

 

$

(12,597

)

$

57,644

 

Net income (loss) per share (1)  

$

(0.38

)

$

0.38

 

   
(1) GAAP net loss per share calculated based on 146,391 weighted-average shares of common stock. Non-GAAP net income per share calculated based on 152,691 diluted weighted-average shares of common stock, which includes 6,300 potentially dilutive shares related to employee stock awards. GAAP to non-GAAP net income (loss) per share is not reconciled due to the difference in the number of shares used to calculate basic and diluted weighted-average shares of common stock.
(2) Includes $2.0 million of interest expense related to the financing lease obligation.
(3) Represents the tax effect of the non-GAAP adjustments based on the estimated annual effective tax rate of 20%.
   
   
   
Reconciliation of GAAP to Non-GAAP Financial Measures
Nine Months Ended October 31, 2019
  GAAP Stock-based
compensation
and related
employer
payroll tax
Amortization
of acquired
intangible
assets
Acquisition-
related
adjustments
Non-cash
interest
expense related
to convertible
senior notes
Income tax
effects related
to non-GAAP
adjustments (3)
Non-GAAP
   
Cost of revenues  

$

301,950

 

$

(33,342

)

$

(19,662

)

$

-

 

$

-

 

$

-

 

$

248,946

 

Gross margin  

 

80.7

%

 

2.1

%

 

1.3

%

-

%

-

%

-

%

 

84.1

%

   
Research and development  

 

422,287

 

 

(130,539

)

 

(672

)

 

(12

)

 

-

 

 

-

 

 

291,064

 

Sales and marketing  

 

896,757

 

 

(155,657

)

 

(3,991

)

 

(172

)

 

-

 

 

-

 

 

736,937

 

General and administrative  

 

226,118

 

 

(72,206

)

 

-

 

 

(7,408

)

 

-

 

 

-

 

 

146,504

 

Operating income (loss)  

 

(279,368

)

 

391,744

 

 

24,325

 

 

7,592

 

 

-

 

 

-

 

 

144,293

 

Operating margin  

 

(17.8

)%

 

24.9

%

 

1.6

%

 

0.5

%

-

%

-

%

 

9.2

%

   
Income tax provision  

 

7,010

 

 

-

 

 

-

 

 

6,006

 

(2)

 

-

 

 

22,226

 

 

35,242

 

Net income (loss)  

$

(313,940

)

$

391,744

 

$

24,325

 

$

1,586

 

$

59,478

 

$

(22,226

)

$

140,967

 

Net income (loss) per share (1)  

$

(2.08

)

$

0.90

 

   
(1) GAAP net loss per share calculated based on 150,659 weighted-average shares of common stock. Non-GAAP net income per share calculated based on 155,960 diluted weighted-average shares of common stock, which includes 5,301 potentially dilutive shares related to employee stock awards. GAAP to non-GAAP net income (loss) per share is not reconciled due to the difference in the number of shares used to calculate basic and diluted weighted-average shares of common stock.
(2) Represents the partial release of the valuation allowance.
(3) Represents the tax effect of the non-GAAP adjustments based on the estimated annual effective tax rate of 20%.
   
   
   
Reconciliation of GAAP to Non-GAAP Financial Measures
Nine Months Ended October 31, 2018
  GAAP Stock-based
compensation
and related
employer
payroll tax
Amortization
of acquired
intangible
assets
Adjustments
related to
financing
lease
obligation
Acquisition-
related
adjustments
Non-cash
interest
expense related
to convertible
senior notes
Income tax
effects related
to non-GAAP
adjustments (4)
Non-GAAP
   
Cost of revenues  

$

250,943

 

$

(28,190

)

$

(15,526

)

$

916

 

$

-

 

$

-

 

$

-

 

$

208,143

 

Gross margin  

 

78.8

%

 

2.4

%

 

1.3

%

 

(0.1

)%

-

%

-

%

-

%

 

82.4

%

   
Research and development  

 

310,818

 

 

(98,648

)

 

(795

)

 

1,510

 

 

-

 

 

-

 

 

-

 

 

212,885

 

Sales and marketing  

 

726,089

 

 

(139,387

)

 

(1,785

)

 

3,451

 

 

-

 

 

-

 

 

-

 

 

588,368

 

General and administrative  

 

168,405

 

 

(53,602

)

 

-

 

 

741

 

 

(6,034

)

 

-

 

 

-

 

 

109,510

 

Operating loss  

 

(275,330

)

 

319,827

 

 

18,106

 

 

(6,618

)

 

6,034

 

 

-

 

 

-

 

 

62,019

 

Operating margin  

 

(23.3

)%

 

27.2

%

 

1.5

%

 

(0.6

)%

 

0.5

%

-

%

-

%

 

5.3

%

   
Income tax provision  

 

637

 

 

-

 

 

-

 

 

-

 

 

3,313

 

(3)

 

-

 

 

11,037

 

 

14,987

 

Net income (loss)  

$

(277,703

)

$

319,827

 

$

18,106

 

$

(456

)

(2)

$

2,721

 

$

8,491

 

$

(11,037

)

$

59,949

 

Net income (loss) per share (1)  

$

(1.91

)

$

0.40

 

   
(1) GAAP net loss per share calculated based on 145,015 weighted-average shares of common stock. Non-GAAP net income per share calculated based on 151,451 diluted weighted-average shares of common stock, which includes 6,436 potentially dilutive shares related to employee stock awards. GAAP to non-GAAP net income (loss) per share is not reconciled due to the difference in the number of shares used to calculate basic and diluted weighted-average shares of common stock.
(2) Includes $6.2 million of interest expense related to the financing lease obligation.
(3) Represents the partial release of the valuation allowance.
(4) Represents the tax effect of the non-GAAP adjustments based on the estimated annual effective tax rate of 20%.

 

Source: Splunk Inc.

Media Contact
Richard Brewer-Hay
Splunk Inc.
press@splunk.com

Investor Contact
Ken Tinsley
Splunk Inc.
ir@splunk.com