splk-20210825
0001353283false00013532832021-08-252021-08-25


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

____________________________________________________

FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported)

August 25, 2021
____________________________________________________
  
Splunk Inc.
(Exact name of registrant as specified in its charter)
 
Delaware 001-35498 86-1106510
(State or other jurisdiction of
incorporation)
 (Commission File Number) (IRS Employer
Identification No.)
 
270 Brannan Street
San Francisco, California 94107
(Address of principal executive offices, including zip code)
 
(415) 848-8400
(Registrant’s telephone number, including area code)
____________________________________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareSPLKThe NASDAQ Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o



Item 2.02                                Results of Operations and Financial Condition.
 
On August 25, 2021, Splunk Inc. (the "Company") issued a press release announcing its financial results for the fiscal second quarter ended July 31, 2021. A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.
 
The Company also posted supplemental material dated August 25, 2021, on the “Events and Presentations” section of its website (http://investors.splunk.com). Except as specifically noted herein, information on the Company’s website is not, and will not be deemed to be, a part of this Current Report on Form 8-K or incorporated into any other filings the Company may make with the Securities and Exchange Commission.

The information contained herein and in the accompanying exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any filing under the Securities Act of 1933, as amended, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference in such filing.
 
Item 9.01                                Financial Statements and Exhibits.
 
(d)                                Exhibits
 
Exhibit
Number
 Description
 
104Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL document

2


SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
Date: August 25, 2021
  SPLUNK INC.
   
   
 By:/s/ Jason Child
  Jason Child
  Senior Vice President and Chief Financial Officer

3
Document

Exhibit 99.1
https://cdn.kscope.io/85bcdec7fac26c660f01113d6342af21-splunklogoa17a.jpg
P R E S S   R E L E A S E 


Splunk Announces Fiscal Second Quarter 2022 Financial Results

Cloud ARR Up 72%
Expects Total ARR of $3.1 Billion by Fiscal Year End

SAN FRANCISCO – August 25, 2021 – Splunk Inc. (NASDAQ: SPLK), provider of the Data-to-Everything Platform, today announced results for its fiscal second quarter ended July 31, 2021.

Second Quarter 2022 Financial Highlights
Cloud ARR was $976 million, up 72% year-over-year.
Total ARR was $2.63 billion, up 37% year-over-year.
Cloud revenue was $217 million, up 73% year-over-year.
Total revenues were $606 million, up 23% year-over-year.
234 customers with Cloud ARR greater than $1 million, up 100% year-over-year.
582 customers with Total ARR greater than $1 million, up 47% year-over-year.

“Our team delivered another strong quarter, validating the high strategic value we deliver to the world’s largest and most dynamic organizations,” said Doug Merritt, President and CEO of Splunk. “We doubled the number of customers with Cloud ARR of $1 million dollars or more as workloads and data continue to shift to cloud. Our second quarter execution was broad-based with each of our major geographic regions exceeding our own expectations as more and more customers around the world rely on Splunk and our market-leading data platform and cloud-based capabilities.”

“We delivered another quarter of high growth with Total ARR of $2.63 billion dollars, up 37% year-over-year,” said Jason Child, Chief Financial Officer, Splunk. “We outperformed in the first half of the year and are well-positioned heading into the second half. We expect $1.3 billion of Cloud ARR and Total ARR of well over $3 billion by fiscal year end as we help our customers accelerate their digital transformations.”

Business Highlights:

New and Expansion Customers Include: Arlo, Chartis Group LLC, Fujitsu, Hiscox Underwriting Group Services Limited, Intel Corporation, N-able Technologies, Inc., Norwegian Labour and Welfare Administration (NAV), and Rover Group, Inc.

New Cloud-based Platforms Help Customers Maximize the Value from their Data: Splunk launched the Splunk Observability Cloud, Splunk IT Cloud, and Splunk Security Cloud to help organizations safely conquer complexity and fast-track cloud transformation. In addition, Splunk completed the acquisition of TruSTAR, a cloud-native security company offering a data-centric intelligence platform.
Silver Lake Investment: Silver Lake Partners, a global leader in technology investing, made a $1 billion investment in Splunk senior notes to support the continued transformation of Splunk's business and management of the company's capital structure, including Splunk's $1 billion share buyback program. Kenneth Hao, Chairman and Managing Partner of Silver Lake, was also appointed to Splunk’s Board of Directors.
Splunk Ranks First in Both IT and Security Market Share Reports By Gartner, Inc.: Splunk leads IT Operations Management (ITOM) Performance Analysis and Security Information and Event Management (SIEM) market share rankings for the second and third consecutive year in 2020 reports.*
Splunk Expands Executive Bench and Technical Leadership: Splunk welcomed Shawn Bice as president of Products and Technology and appointed executives to the positions of Chief Cloud Officer, Chief Marketing Officer, and Chief Product Officer.
Splunk Delivers State of Observability and Security Reports: Global research reveals that IT leaders’ early investments in observability lead to improvements in performance, customer experience and bottom line. As well, security strategy evolution is necessary to address the increasing complexity of hybrid, multicloud infrastructures as supply chain attacks and remote work continues.

Financial Outlook

The company is providing the following guidance for its fiscal third quarter 2022 (ending October 31, 2021):

Cloud ARR is expected to be between $1.10 billion and $1.11 billion.
Total ARR is expected to be between $2.8 billion and $2.825 billion.
Total revenues are expected to be between $625 million and $650 million.
Non-GAAP operating margin is expected to be between negative 15% and negative 20%.

The company is providing the following guidance for its fiscal year 2022 (ending January 31, 2022):

Cloud ARR is expected to be between $1.305 billion and $1.330 billion.
Total ARR is expected to be between $3.085 billion and $3.135 billion.
Total revenues are expected to be between $2.53 billion and $2.60 billion.
Non-GAAP operating margin is expected to be between negative 14% and negative 17%.
Operating Cash Flow is expected to be approximately $100 million.

All forward-looking non-GAAP financial measures contained in this “Financial Outlook” section exclude estimates for stock-based compensation and related employer payroll tax, acquisition-related adjustments, amortization of intangible assets, restructuring and facility exit charges and capitalized software development costs.

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 second quarter 2022 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 September 1, 2021 by dialing (855) 859-2056 and referencing Conference ID 2160425.

Safe Harbor Statement
This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding Splunk’s guidance for total ARR, cloud ARR, revenue and non-GAAP operating margin targets for the company’s fiscal third quarter and fiscal year 2022 and operating cash flow for the company’s fiscal year 2022 in the paragraphs under “Financial Outlook” above and elsewhere in this press release, statements regarding our market opportunity, including trends in the pace of customer digital and cloud transformation, our global presence and trends in customer demand, engagement and bookings; the growth of our cloud business; the market for data-related products and the importance of data and our ability to leverage these trends; our strategy, technology and product innovation; expectations for our industry, business and products, such as our business model, customer demand, our partner relationships, 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 the company's business, including product and service innovations and through acquisitions; Splunk’s shift from sales of licenses to sales of cloud services which impacts the timing of revenue and margins; a shift from generally invoicing multi-year contracts upfront to invoicing on an annual basis which impacts cash collections; 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 the company's convertible notes; the emergence of new COVID-19 variants such as the Delta variant, the impact of new variants such as the Delta variant and related public health measures on our business, as well as the impact of new variants such as the Delta variant on the overall economic environment, including customer buying capacity, urgency and patterns; 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 April 30, 2021, 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.

*Gartner, Inc., Market Share Analysis: ITOM, Performance Analysis Software, Worldwide, 2020; Laurie Wurster and Shailendra Upadhyay, June 11, 2021; Gartner, Inc., Market Share: All Software Markets, Worldwide 2020, Neha Gupta et al, April 14, 2021

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>, Data-to-Everything, D2E 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. © 2021 Splunk Inc. All rights reserved.

For more information, please contact:
Media Contact
Patricia Hogan
Splunk Inc.
press@splunk.com

Investor Contact
Ken Tinsley
Splunk Inc.
IR@splunk.com
Splunk Inc. | www.splunk.com




Splunk Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
 
 Three Months Ended July 31,Six Months Ended July 31,
2021202020212020
Revenues
Cloud services$217,422 $125,870 $411,380 $238,022 
License219,600 176,814 362,881 325,199 
Maintenance and services168,721 188,974 333,533 362,514 
Total revenues605,743 491,658 1,107,794 925,735 
Cost of revenues
Cloud services98,016 59,728 186,101 113,218 
License2,459 5,474 6,749 11,540 
Maintenance and services 82,932 66,850 162,463 135,911 
Total cost of revenues183,407 132,052 355,313 260,669 
Gross profit422,336 359,606 752,481 665,066 
Operating expenses
Research and development259,709 197,297 506,907 389,421 
Sales and marketing 382,129 323,687 738,237 642,911 
General and administrative124,928 78,081 287,114 160,805 
Total operating expenses766,766 599,065 1,532,258 1,193,137 
Operating loss(344,430)(239,459)(779,777)(528,071)
Interest and other income (expense), net
Interest income507 3,581 886 10,056 
Interest expense(39,013)(30,148)(72,603)(54,585)
Other income (expense), net1,146 5,917 (77)5,243 
Total interest and other income (expense), net(37,360)(20,650)(71,794)(39,286)
Loss before income taxes(381,790)(260,109)(851,571)(567,357)
Income tax provision (benefit)2,161 1,213 3,381 (456)
Net loss$(383,951)$(261,322)$(854,952)$(566,901)
Basic and diluted net loss per share$(2.34)$(1.64)$(5.23)$(3.58)
Weighted-average shares used in computing basic and diluted net loss per share164,018 158,952 163,615 158,241 
 

Splunk Inc. | www.splunk.com



Splunk Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
July 31, 2021January 31, 2021
Assets 
Current assets 
Cash and cash equivalents$2,231,165 $1,771,064 
Investments, current267,035 87,847 
Accounts receivable, net882,436 1,114,199 
Prepaid expenses and other current assets171,261 162,939 
Deferred commissions, current100,774 136,331 
Total current assets3,652,671 3,272,380 
Investments, non-current36,889 13,728 
Accounts receivable, non-current194,630 347,202 
Operating lease right-of-use assets239,066 356,296 
Property and equipment, net132,841 182,780 
Intangible assets, net192,904 206,153 
Goodwill1,401,628 1,334,888 
Deferred commissions, non-current104,284 69,637 
Other assets91,411 85,422 
Total assets$6,046,324 $5,868,486 
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable$45,789 $9,319 
Accrued compensation302,156 281,986 
Accrued expenses and other liabilities240,994 202,959 
Deferred revenue, current954,070 1,030,484 
Total current liabilities1,543,009 1,524,748 
Convertible senior notes, net3,054,463 2,302,635 
Operating lease liabilities219,242 330,970 
Deferred revenue, non-current80,539 110,418 
Other liabilities, non-current14,406 5,710 
Total non-current liabilities3,368,650 2,749,733 
Total liabilities4,911,659 4,274,481 
Stockholders’ equity
Common stock165 163 
Accumulated other comprehensive loss(864)(592)
Additional paid-in capital4,689,282 4,063,885 
Treasury stock(229,515)— 
Accumulated deficit(3,324,403)(2,469,451)
Total stockholders’ equity1,134,665 1,594,005 
Total liabilities and stockholders’ equity$6,046,324 $5,868,486 

Splunk Inc. | www.splunk.com



Splunk Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

 Three Months Ended July 31,Six Months Ended July 31,
2021202020212020
Cash flows from operating activities
Net loss$(383,951)$(261,322)$(854,952)$(566,901)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization24,829 22,191 50,625 42,685 
Amortization of deferred commissions35,669 34,242 77,983 61,120 
Amortization of investment premiums (accretion of discounts), net382 (252)432 (944)
Amortization of debt discount and issuance costs31,226 24,322 57,784 44,738 
Gain on extinguishment of convertible senior notes— (6,952)— (6,952)
Repurchase of convertible senior notes attributable to the accreted interest related to debt discount— (22,149)— (22,149)
Loss on lease termination— — 52,524 — 
Non-cash operating lease costs(1,565)5,228 571 15,759 
Stock-based compensation204,780 154,873 387,197 313,691 
Disposal of property and equipment33 476 33 981 
Deferred income taxes835 257 (294)(644)
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable, net(109,548)(142,838)384,798 184,261 
Prepaid expenses and other assets 83,327 17,339 (14,842)12,493 
Deferred commissions(47,508)(37,939)(77,073)(60,154)
Accounts payable (3,140)15,627 19,698 22,963 
Accrued compensation74,247 36,331 20,170 (61,378)
Accrued expenses and other liabilities11,395 8,773 17,817 (1,294)
Deferred revenue 23,069 (18,283)(107,731)(102,307)
Net cash provided by (used in) operating activities (55,920)(170,076)14,740 (124,032)
Cash flows from investing activities
Purchases of investments(269,352)— (289,573)(87,135)
Maturities of investments— 242,902 87,766 497,725 
Acquisition, net of cash acquired(80,333)— (80,333)— 
Purchases of property and equipment(3,510)(11,060)(4,363)(25,816)
Capitalized software development costs(2,082)(3,585)(5,148)(7,133)
Other investment activities(1,293)(511)(1,168)(2,886)
Net cash provided by (used in) investing activities (356,570)227,746 (292,819)374,755 
Cash flows from financing activities
Proceeds from the exercise of stock options636 1,253 1,174 2,671 
Proceeds from employee stock purchase plan48,246 44,214 48,246 44,214 
Proceeds from the issuance of convertible senior notes, net of issuance costs982,749 1,246,544 982,749 1,246,544 
Purchase of capped calls— (137,379)— (137,379)
Partial repurchase of convertible senior notes— (668,929)— (668,929)
Repurchases of common stock(192,208)— (192,208)— 
Taxes paid related to net share settlement of equity awards(40,966)— (101,781)(49,228)
Net cash provided by financing activities 798,457 485,703 738,180 437,893 
Effect of exchange rate changes on cash and cash equivalents— 2,015 — 626 
Net increase in cash and cash equivalents 385,967 545,388 460,101 689,242 
Cash and cash equivalents at beginning of period 1,845,198 922,507 1,771,064 778,653 
Cash and cash equivalents at end of period $2,231,165 $1,467,895 $2,231,165 $1,467,895 
Splunk Inc. | www.splunk.com



Splunk Inc.
Operating Metrics

Total Annual Recurring Revenue (“Total ARR”) represents the annualized revenue run-rate of active cloud services, term license and maintenance contracts at the end of a reporting period. Cloud Annual Recurring Revenue (“Cloud ARR”) represents the annualized revenue run-rate of active cloud services contracts at the end of a reporting period. Each contract is annualized by dividing the 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: cloud services cost of revenues, cloud services gross margin, 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 intangible assets, acquisition-related adjustments, restructuring and facility exit charges, capitalized software development costs and non-cash interest expense related to convertible senior notes. The non-GAAP financial measures are also adjusted for Splunk's estimated tax rate on non-GAAP income (loss). To determine the estimated non-GAAP tax rate, Splunk evaluates financial projections based on its non-GAAP results and the tax effect of those projections. The estimated non-GAAP tax rate takes into account many factors including our operating structure and tax positions. The non-GAAP tax rate applied to the three and six months ended July 31, 2021 was 20%. The applicable fiscal 2021 tax rates are noted in the reconciliations. In addition, non-GAAP financial measures include free cash flow, which represents operating cash flow less purchases of property and equipment. Splunk considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated or used by the business.

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 intangible assets, acquisition-related adjustments, restructuring and facility exit charges, capitalized software development costs and non-cash interest expense related to convertible senior notes from the applicable non-GAAP financial measures because these adjustments are considered by management to be outside of Splunk’s core operating results.

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 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. 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. | www.splunk.com



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 July 31,Six Months Ended July 31,
2021202020212020
Net cash provided by (used in) operating activities$(55,920)$(170,076)$14,740 $(124,032)
Less purchases of property and equipment(3,510)(11,060)(4,363)(25,816)
Free cash flow (non-GAAP)$(59,430)$(181,136)$10,377 $(149,848)
Net cash provided by (used in) investing activities$(356,570)$227,746 $(292,819)$374,755 
Net cash provided by financing activities$798,457 $485,703 $738,180 $437,893 


Reconciliation of GAAP to Non-GAAP Financial Measures
Three Months Ended July 31, 2021
GAAPStock-based compensation and related employer payroll taxAmortization of intangible assetsAcquisition-related adjustmentsRestructuring and facility exit chargesCapitalized software development costsNon-cash interest expense related to convertible senior notes
Income tax adjustment (2)
Non-GAAP
Cloud services cost of revenues$98,016 $(4,698)$(7,299)$— $— $(594)$— $— $85,425 
Cloud services gross margin54.9 %2.2 %3.4 %— %— %0.2 %— %— %60.7 %
Cost of revenues183,407 (22,295)(9,758)— — (594)— — 150,760 
Gross margin69.7 %3.7 %1.6 %— %— %0.1 %— %— %75.1 %
Research and development259,709 (82,191)— — — 2,081 — — 179,599 
Sales and marketing382,129 (65,613)(5,101)— (613)— — — 310,802 
General and administrative124,928 (38,099)— (957)(533)— — 85,345 
Operating loss(344,430)208,198 14,859 957 607 (954)— — (120,763)
Operating margin(56.9)%34.4 %2.5 %0.2 %0.1 %(0.2)%— %— %(19.9)%
Income tax provision (benefit)2,161 — — — — — — (27,540)(25,379)
Net loss$(383,951)$208,198 $14,859 $957 $607 $(954)$31,227 $27,540 $(101,517)
Net loss per share (1)
$(2.34)$1.27 $0.09 $0.01 $— $(0.01)$0.19 $0.17 $(0.62)
_________________________
(1)                Calculated based on 164,018 weighted-average shares of common stock.
(2)            Represents the income tax adjustment using our estimated non-GAAP tax rate of 20%.


Reconciliation of GAAP to Non-GAAP Financial Measures
Three Months Ended July 31, 2020
GAAPStock-based compensation and related employer payroll tax Amortization of intangible assetsRestructuring and facility exit chargesCapitalized software development costsNon-cash interest expense related to convertible senior notes
Income tax adjustment (2)
Non-GAAP
Cloud services cost of revenues$59,728 $(2,812)$(5,290)$(229)$— $— $— $51,397 
Cloud services gross margin52.5 %2.2 %4.3 %0.2 %— %— %— %59.2 %
Cost of revenues132,052 (14,653)(10,511)(497)— — — 106,391 
Gross margin73.1 %3.1 %2.1 %0.1 %— %— %— %78.4 %
Research and development197,297 (68,102)— (2,884)3,585 — — 129,896 
Sales and marketing323,687 (52,865)(4,333)(1,168)— — — 265,321 
General and administrative78,081 (24,553)— (518)— — — 53,010 
Operating loss(239,459)160,173 14,844 5,067 (3,585)— — (62,960)
Operating margin(48.7)%32.6 %3.0 %1.0 %(0.7)%— %— %(12.8)%
Income tax provision (benefit)1,213 — — — — — (14,366)(13,153)
Net loss$(261,322)$160,173 $14,844 $5,543 (3)$(3,585)$17,369 (4)$14,366 $(52,612)
Net loss per share (1)
$(1.64)$1.01 $0.09 $0.03 $(0.02)$0.11 $0.09 $(0.33)
_________________________
(1)               Calculated based on 158,952 weighted-average shares of common stock.
(2)                Represents the income tax adjustment using our estimated non-GAAP tax rate of 20%.
(3)                Includes a $0.5 million loss on disposal of property, plant and equipment.
(4)                Includes non-cash interest expense of $24.3 million and a $7.0 million non-recurring gain on extinguishment of convertible senior notes.


Reconciliation of GAAP to Non-GAAP Financial Measures
Six Months Ended July 31, 2021
GAAPStock-based compensation and related employer payroll taxAmortization of intangible assetsAcquisition-related adjustmentsRestructuring and facility exit chargesCapitalized software development costsNon-cash interest expense related to convertible senior notes
Income tax adjustment (2)
Non-GAAP
Cloud services cost of revenues$186,101 $(8,368)$(14,040)$— $— $(1,188)$— $— $162,505 
Cloud services gross margin54.8 %2.0 %3.4 %— %— %0.3 %— %— %60.5 %
Cost of revenues355,313 (40,617)(19,826)— — (1,188)— — 293,682 
Gross margin67.9 %3.7 %1.8 %— %— %0.1 %— %— %73.5 %
Research and development506,907 (162,465)(26)— — 5,149 — — 349,565 
Sales and marketing738,237 (123,331)(9,847)— (613)— — — 604,446 
General and administrative287,114 (71,787)— (957)(55,228)(709)— — 158,433 
Operating loss(779,777)398,200 29,699 957 55,841 (3,252)— — (298,332)
Operating margin(70.4)%35.9 %2.7 %0.1 %5.0 %(0.2)%— %— %(26.9)%
Income tax provision (benefit)3,381 — — — — — — (65,849)(62,468)
Net loss$(854,952)$398,200 $29,699 $957 $55,841 $(3,252)$57,786 $65,849 $(249,872)
Net loss per share (1)
$(5.23)$2.44 $0.18 $0.01 $0.34 $(0.02)$0.35 $0.40 $(1.53)
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(1)                Calculated based on 163,615 weighted-average shares of common stock.
(2)            Represents the income tax adjustment using our estimated non-GAAP tax rate of 20%.


Reconciliation of GAAP to Non-GAAP Financial Measures
Six Months Ended July 31, 2020
GAAPStock-based compensation and related employer payroll taxAmortization of intangible assetsRestructuring and facility exit chargesCapitalized software development costsNon-cash interest expense related to convertible senior notes
Income tax adjustment (2)
Non-GAAP
Cloud services cost of revenues$113,218 $(5,202)$(10,296)$(229)$— $— $— $97,491 
Cloud services gross margin52.4 %2.2 %4.3 %0.1 %— %— %— %59.0 %
Cost of revenues260,669 (28,635)(20,884)(497)— — — 210,653 
Gross margin71.8 %3.0 %2.3 %0.1 %— %— %— %77.2 %
Research and development389,421 (139,367)(25)(2,884)7,133 — — 254,278 
Sales and marketing642,911 (112,287)(8,666)(1,168)— — — 520,790 
General and administrative160,805 (46,198)— (518)— — — 114,089 
Operating loss(528,071)326,487 29,575 5,067 (7,133)— — (174,075)
Operating margin(57.0)%35.3 %3.2 %0.5 %(0.8)%— %— %(18.8)%
Income tax benefit(456)— — — — — (34,564)(35,020)
Net loss$(566,901)$326,487 $29,575 $5,543 (3)$(7,133)$37,785 (4)$34,564 $(140,080)
Net loss per share (1)
$(3.58)$2.05 $0.19 $0.04 $(0.05)$0.24 $0.22 $(0.89)
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(1)                Calculated based on 158,241 weighted-average shares of common stock.
(2)                Represents the income tax adjustment using our estimated non-GAAP tax rate of 20%.
(3)                Includes a $0.5 million loss on disposal of property, plant and equipment.
(4)                Includes non-cash interest expense of $44.7 million and a $7.0 million non-recurring gain on extinguishment of convertible senior notes.


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