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Splunk Announces Fiscal Second Quarter 2024 Financial Results

Increases Annual Recurring Revenue 16%

Grows Cloud Revenue 29%

Nearly Quadruples Trailing Twelve Month Operating and Free Cash Flow

Splunk Inc. (NASDAQ: SPLK), the cybersecurity and observability leader, today announced results for its fiscal second quarter ended July 31, 2023.

Second Quarter 2024 Financial Highlights

  • Total ARR was $3.858 billion, up 16% year-over-year.
  • Total revenues were $911 million, with Cloud revenue growing 29% to $445 million.
  • GAAP Operating Expenses declined 2% year-over-year; non-GAAP Operating Expenses declined 3% year-over-year.
  • Trailing twelve month operating cash flow was $827 million, up 247% year-over-year.
  • Trailing twelve month free cash flow was $805 million, up 273% year-over-year.
  • 834 customers with total ARR greater than $1 million, an increase of 111 year-over-year.

“Splunk delivered another solid quarter, demonstrating the incredible value organizations worldwide gain from unified security and observability,” said Gary Steele, President and CEO of Splunk. “Through our ongoing focus on accelerating innovation and harnessing AI, we unveiled many important advancements during the quarter to help customers strengthen their overall digital resilience and security posture. Our team’s strong execution, operational discipline and deep customer engagement have again illustrated Splunk’s leadership.”

“Q2 represents a strong quarter of growth, execution, and operating leverage. We generated 16% ARR growth as we reduced non-GAAP operating expenses by 3% year-over-year,” said Brian Roberts, CFO of Splunk. “We are raising our full year outlook on the top and bottom line as we focus on driving growth by delivering value to customers and increasing profitability through greater efficiency.”

Recent Business Highlights

  • Splunk Unveils New Artificial Intelligence (AI), Security and Observability Innovations at .conf23: Thousands of partners and customers, including FedEx, Carnival, IKEA and VMware, attended Splunk’s annual user conference to drive digital resilience and power their organizations to be ready for anything. Key product announcements included:
    • Splunk AI, a collection of new AI-powered offerings to enhance Splunk’s unified security and observability platform. Splunk AI combines automation with human-in-the-loop experiences, so organizations can drive faster detection, investigation and response while controlling how AI is applied to their data.
    • Splunk Edge Hub, a new solution that simplifies the ingestion and analysis of data generated by sensors, IoT devices and industrial equipment. Exclusively distributed through authorized domain expert partners, this solution provides more complete visibility across IT and OT environments by streaming previously hard to access data directly into the Splunk Platform.
    • New portfolio innovations across Splunk’s unified security and observability platform. Enhancements include unified security operations with Splunk Attack Analyzer automated threat analysis, Splunk Observability Cloud and Splunk Cloud Platform integrations as well as unparalleled visibility across any environment – from edge to the cloud – with Splunk platform enhancements.
  • Splunk and Microsoft Collaborate Through Strategic Partnership: Also announced during .conf23, Splunk and Microsoft are partnering to build Splunk’s enterprise security and observability offerings on Microsoft Azure. Additionally, for the first time, Splunk solutions will be available for purchase on the Microsoft Azure Marketplace.
  • Splunk Named a Leader in 2023 Gartner® Magic Quadrant™ for Application Performance Monitoring (APM) and Observability*. This recognition follows Splunk’s ninth consecutive recognition as a Leader in the 2022 Gartner® Magic Quadrant™ for Security Information and Event Management**, positioning Splunk as a vendor recognized by Gartner in both reports.
  • Splunk Cloud Platform Attains StateRAMP Moderate Authorization: As a State Risk and Authorization Management Program (StateRAMP)-authorized provider, SLED organizations can leverage Splunk’s actionable intelligence and advanced analytics at scale to address use cases across various areas such as cybersecurity, IT modernization, procurement processes, artificial intelligence and more.

Financial Outlook

The company is providing the following guidance for its fiscal third quarter 2024 (ending October 31, 2023):

  • Total ARR is expected to be approximately $3.980 billion.
  • Total revenues are expected to be between $1.02 billion and $1.035 billion.
  • Non-GAAP operating margin is expected to be between 24.7% and 25.3%.
  • Free cash flow is expected to be approximately $75 million which implies trailing twelve months free cash flow of $834 million.

The company is updating the following guidance for its fiscal year 2024 (ending January 31, 2024):

  • Total ARR is expected to be between $4.150 billion and $4.175 billion (was previously between $4.125 billion and $4.175 billion).
  • Total revenues are expected to be between $3.925 billion and $3.95 billion (was previously approximately $3.9 billion).
  • Non-GAAP operating margin is expected to be between 21.0% and 21.5% (was previously between 18% and 18.5%).
  • Free cash flow is expected to be between $855 million and $875 million (was previously between $805 million and $825 million).

A reconciliation of non-GAAP guidance measures to corresponding GAAP guidance measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, expenses that may be incurred in the future. For example, stock-based compensation-related charges, including related employer payroll tax-related items, are impacted by the timing of employee stock transactions, the future fair market value of our common stock, and our future hiring and retention needs, all of which are difficult to predict and subject to constant change. We have provided a reconciliation of GAAP to non-GAAP financial measures in the financial statement tables for our historical non-GAAP financial results included in this release.

Conference Call and Webcast

Splunk’s executive management team will host a conference call beginning at 1:30 p.m. PT (4:30 p.m. ET) today to discuss financial results and business highlights. Interested parties may access the call by dialing (800) 715-9871 in the U.S. or (646) 307-1963 from international locations and referencing conference ID 3140501. A live audio webcast and replay of the conference call will also be available on Splunk’s Investor Relations website at https://investors.splunk.com/events-presentations. An audio webcast replay of the call will be available for the next 12 months.

Safe Harbor Statement

This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding Splunk’s long-term prospects, including Splunk’s guidance for total ARR, total revenues, non-GAAP operating margin and free cash flow for the company’s fiscal third quarter 2024 and fiscal year 2024 and free cash flow for the trailing twelve months ended with the third quarter 2024; our global presence and trends in customer demand and engagement; statements regarding our operating efficiency, growth, profitability and cash flows; statements regarding our products, projects, technology and ongoing product development, including recently announced products; statements regarding our partnerships; statements regarding our market opportunity as well as our ability to meet customer needs; and trends in the markets for our products, including the security and observability markets. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: the macroeconomic environment, including inflationary pressures, economic uncertainty and impacts on information technology spending; risks associated with Splunk’s growth, particularly outside of the United States; the impact of Splunk’s restructuring plans; risks associated with Splunk’s ability to successfully introduce and gain market acceptance for new products and technologies; 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; 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; 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, 2023, 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, Magic Quadrant for APM and Observability, Gregg Siegfried, Mrudula Bangera, 5 July 2023

**Gartner, Magic Quadrant for Security Information and Event Management, Pete Shoard, Andrew Davies, Mitchell Schneider, October 2022

Gartner does not endorse any vendor, product or service depicted in its research publications and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

GARTNER and MAGIC QUADRANT is a registered trademark and service mark of Gartner and Magic Quadrant is a registered trademark of Gartner, Inc and/or its affiliates in the U.S. and internationally and are used herein with permission. All rights reserved.

About Splunk Inc.

Splunk Inc. (NASDAQ: SPLK) helps build a safer and more resilient digital world. Organizations trust Splunk to prevent security, infrastructure and application issues from becoming major incidents, absorb shocks from digital disruptions, and accelerate digital transformation.

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. © 2023 Splunk Inc. All rights reserved.

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

2023

2022

2023

2022

 
Revenues
Cloud services

$

445,163

 

$

346,405

 

$

864,598

 

$

669,334

 

License

 

295,439

 

 

281,716

 

 

466,869

 

 

467,527

 

Maintenance and services

 

169,983

 

 

170,632

 

 

330,626

 

 

335,973

 

Total revenues

 

910,585

 

 

798,753

 

 

1,662,093

 

 

1,472,834

 

 
Cost of revenues
Cloud services

 

134,587

 

 

122,860

 

 

264,294

 

 

242,381

 

License

 

1,963

 

 

1,337

 

 

3,345

 

 

2,800

 

Maintenance and services

 

75,353

 

 

82,594

 

 

151,499

 

 

163,766

 

Total cost of revenues

 

211,903

 

 

206,791

 

 

419,138

 

 

408,947

 

Gross profit

 

698,682

 

 

591,962

 

 

1,242,955

 

 

1,063,887

 

 
Operating expenses
Research and development

 

239,099

 

 

257,057

 

 

476,051

 

 

512,748

 

Sales and marketing

 

421,635

 

 

410,622

 

 

828,140

 

 

805,835

 

General and administrative

 

106,469

 

 

114,381

 

 

213,841

 

 

227,089

 

Total operating expenses

 

767,203

 

 

782,060

 

 

1,518,032

 

 

1,545,672

 

Operating loss

 

(68,521

)

 

(190,098

)

 

(275,077

)

 

(481,785

)

 
Interest and other income (expense), net
Interest income

 

28,686

 

 

4,847

 

 

52,624

 

 

6,219

 

Interest expense

 

(11,243

)

 

(12,905

)

 

(22,101

)

 

(23,568

)

Other income (expense), net

 

(5,440

)

 

(3,613

)

 

(3,834

)

 

(3,603

)

Total interest and other income (expense), net

 

12,003

 

 

(11,671

)

 

26,689

 

 

(20,952

)

Loss before income taxes

 

(56,518

)

 

(201,769

)

 

(248,388

)

 

(502,737

)

Income tax provision

 

6,730

 

 

7,943

 

 

11,280

 

 

11,297

 

Net loss

$

(63,248

)

$

(209,712

)

$

(259,668

)

$

(514,034

)

 
 
Basic and diluted net loss per share

$

(0.38

)

$

(1.30

)

$

(1.57

)

$

(3.19

)

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

 

166,459

 

 

161,787

 

 

165,737

 

 

161,070

 

Splunk Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
 
July 31, 2023 January 31, 2023
 
Assets
Current assets
Cash and cash equivalents

$

1,523,462

 

$

690,587

 

Investments, current

 

925,526

 

 

1,316,347

 

Accounts receivable, net

 

974,202

 

 

1,572,604

 

Prepaid expenses and other current assets

 

202,987

 

 

174,388

 

Deferred commissions, current

 

117,542

 

 

116,758

 

Total current assets

 

3,743,719

 

 

3,870,684

 

 
Investments, non-current

 

41,587

 

 

41,700

 

Accounts receivable, non-current

 

212,049

 

 

314,286

 

Operating lease right-of-use assets

 

178,105

 

 

186,981

 

Property and equipment, net

 

107,541

 

 

108,540

 

Intangible assets, net

 

91,699

 

 

119,588

 

Goodwill

 

1,416,920

 

 

1,416,920

 

Deferred commissions, non-current

 

246,216

 

 

242,731

 

Other assets

 

39,086

 

 

42,493

 

Total assets

$

6,076,922

 

$

6,343,923

 

 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable

$

26,214

 

$

15,299

 

Accrued compensation

 

300,956

 

 

357,550

 

Accrued expenses and other liabilities

 

207,421

 

 

229,480

 

Deferred revenue, current

 

1,392,465

 

 

1,657,685

 

Debt, current

 

776,456

 

 

775,656

 

Total current liabilities

 

2,703,512

 

 

3,035,670

 

 
Debt, non-current

 

3,102,930

 

 

3,099,289

 

Operating lease liabilities

 

191,917

 

 

202,268

 

Deferred revenue, non-current

 

88,688

 

 

91,102

 

Other liabilities, non-current

 

28,865

 

 

26,107

 

Total non-current liabilities

 

3,412,400

 

 

3,418,766

 

Total liabilities

 

6,115,912

 

 

6,454,436

 

 
Stockholders' equity
Common stock

 

174

 

 

171

 

Accumulated other comprehensive loss

 

(1,716

)

 

(6,363

)

Additional paid-in capital

 

4,993,644

 

 

4,671,776

 

Treasury stock

 

(984,689

)

 

(989,362

)

Accumulated deficit

 

(4,046,403

)

 

(3,786,735

)

Total stockholders' equity (deficit)

 

(38,990

)

 

(110,513

)

Total liabilities and stockholders' equity

$

6,076,922

 

$

6,343,923

 

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

2023

2022

2023

2022

 
Cash flows from operating activities
Net loss

$

(63,248

)

$

(209,712

)

$

(259,668

)

$

(514,034

)

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

 

22,268

 

 

24,631

 

 

46,945

 

 

47,952

 

Amortization of deferred commissions

 

33,613

 

 

26,585

 

 

66,143

 

 

53,574

 

Amortization of investment premiums (accretion of discounts), net

 

(2,439

)

 

(764

)

 

(10,404

)

 

(482

)

Loss on strategic equity investments, net

 

2,414

 

 

188

 

 

3,414

 

 

97

 

Amortization of debt issuance costs

 

2,413

 

 

3,971

 

 

4,441

 

 

5,484

 

Non-cash operating lease costs

 

(1,684

)

 

(972

)

 

(751

)

 

(2,805

)

Stock-based compensation

 

199,046

 

 

199,476

 

 

383,517

 

 

413,141

 

Deferred income taxes

 

(25

)

 

(372

)

 

(509

)

 

(1,020

)

Loss on disposal of assets

 

23

 

 

-

 

 

10

 

 

-

 

Changes in operating assets and liabilities:
Accounts receivable, net

 

(208,628

)

 

(89,839

)

 

700,777

 

 

553,106

 

Prepaid expenses and other assets

 

74,087

 

 

38,097

 

 

(24,646

)

 

17,078

 

Deferred commissions

 

(43,744

)

 

(38,203

)

 

(70,412

)

 

(62,754

)

Accounts payable

 

11,372

 

 

63,116

 

 

10,915

 

 

23,629

 

Accrued compensation

 

58,973

 

 

39,858

 

 

(56,594

)

 

(138,298

)

Accrued expenses and other liabilities

 

(7,371

)

 

12,640

 

 

(23,913

)

 

(17,142

)

Deferred revenue

 

(67,206

)

 

(87,328

)

 

(267,634

)

 

(252,807

)

Net cash provided by (used in) operating activities

 

9,864

 

 

(18,628

)

 

501,631

 

 

124,719

 

 
Cash flows from investing activities
Purchases of property and equipment

 

(3,104

)

 

(3,458

)

 

(5,873

)

 

(6,650

)

Capitalized software development costs

 

(2,501

)

 

(2,562

)

 

(5,152

)

 

(4,990

)

Purchases of marketable securities

 

(203,019

)

 

(143,007

)

 

(877,018

)

 

(923,762

)

Maturities of marketable securities

 

943,060

 

 

110,334

 

 

1,282,895

 

 

209,424

 

Purchases of strategic investments

 

(150

)

 

(300

)

 

(3,300

)

 

(6,099

)

Other investment activities

 

-

 

 

936

 

 

-

 

 

1,436

 

Net cash provided by (used in) investing activities

 

734,286

 

 

(38,057

)

 

391,552

 

 

(730,641

)

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

 

143

 

 

182

 

 

230

 

 

1,132

 

Proceeds from employee stock purchase plan

 

51,201

 

 

48,596

 

 

51,201

 

 

48,596

 

Taxes paid related to net share settlement of equity awards

 

(73,489

)

 

(58,220

)

 

(111,739

)

 

(124,614

)

Net cash used in financing activities

 

(22,145

)

 

(9,442

)

 

(60,308

)

 

(74,886

)

 
Net increase (decrease) in cash and cash equivalents

 

722,005

 

 

(66,127

)

 

832,875

 

 

(680,808

)

Cash and cash equivalents at beginning of period

 

801,457

 

 

814,010

 

 

690,587

 

 

1,428,691

 

Cash and cash equivalents at end of period

$

1,523,462

 

$

747,883

 

$

1,523,462

 

$

747,883

 

Splunk Inc.

Operating Metrics

Total Annual Recurring Revenue (“Total ARR”) represents the annualized value of active cloud services, term licenses and maintenance contracts at the end of a reporting period. Cloud Annual Recurring Revenue (“Cloud ARR”) represents the annualized value of active cloud services contracts at the end of a reporting period. We calculate Cloud DBNRR at a point in time by dividing the Cloud ARR at the end of a reporting period (“Cloud Current Period ARR”) by the Cloud ARR for the same group of customers at the end of the prior 12-month period (“Cloud Prior Period ARR”). Cloud Current Period ARR includes expansion and is net of existing customer contraction and attrition but excludes ARR from new customers in the current period. The trailing 12-month Cloud DBNRR represents the dollar weighted-average of the point in time Cloud DBNRR as of the end of each of the prior 12 months and is calculated by dividing the sum of the Cloud Current Period ARR for each of the prior 12 months by the sum of the Cloud Prior Period ARR for each of the prior 12 months. We use the trailing 12-month Cloud DBNRR because it mitigates the impact of any monthly expansions, contractions, and attrition which may not be representative of our recurring contract base.

Non-GAAP Financial Measures and Reconciliations

To supplement Splunk’s unaudited interim condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting, 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 expenses, operating income (loss), operating margin, income tax provision (benefit), net income (loss), basic and diluted 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, restructuring and facility exit charges, capitalized software development costs, non-cash interest expense related to convertible senior notes and a net loss (gain) on strategic equity investments. The non-GAAP financial measures are also adjusted for Splunk's current and deferred tax rate on non-GAAP income (loss). Splunk uses a long-term projected non-GAAP tax rate to provide consistency across interim reporting periods. We base our rate on non-GAAP financial projections. In determining our tax rate, we exclude the impact of nonrecurring items, and we make assumptions including those about tax legislation and our tax positions. We applied a 20% non-GAAP tax rate to the three and six months ended July 31, 2023 and 2022. In addition, non-GAAP financial measures include free cash flow, which represents operating cash flow less purchases of property and equipment and capitalized software development costs. 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. Employer payroll tax expense is 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, restructuring and facility exit charges, capitalized software development costs, non-cash interest expense related to convertible senior notes and a net loss (gain) on strategic equity investments from the applicable non-GAAP financial measures because these adjustments are considered by management to be outside of Splunk’s core operating results. A reconciliation of non-GAAP guidance measures to corresponding GAAP guidance measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, expenses that may be incurred in the future. For example, stock-based compensation-related charges, including related employer payroll tax-related items, are impacted by the timing of employee stock transactions, the future fair market value of our common stock, and our future hiring and retention needs, all of which are difficult to predict and subject to constant change. We have provided a reconciliation of GAAP to non-GAAP financial measures in the financial statement tables for our historical non-GAAP financial results included in this release.

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.
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, Trailing Twelve Months Ended July 31,

2023

2022

2023

2022

2023

2022

Net cash provided by (used in) operating activities

$

9,864

 

$

(18,628

)

$

501,631

 

$

124,719

 

$

826,542

 

$

238,027

 

Less purchases of property and equipment

 

(3,104

)

 

(3,458

)

 

(5,873

)

 

(6,650

)

 

(12,843

)

 

(12,958

)

Less capitalized software development costs

 

(2,501

)

 

(2,562

)

 

(5,152

)

 

(4,990

)

 

(8,944

)

 

(9,203

)

Free cash flow (non-GAAP)

$

4,259

 

$

(24,648

)

$

490,606

 

$

113,079

 

$

804,755

 

$

215,866

 

Net cash provided by (used in) investing activities

$

734,286

 

$

(38,057

)

$

391,552

 

$

(730,641

)

$

52,033

 

$

(771,574

)

Net cash used in financing activities

$

(22,145

)

$

(9,442

)

$

(60,308

)

$

(74,886

)

$

(102,996

)

$

(949,735

)

Reconciliation of GAAP to Non-GAAP Financial Measures
Three Months Ended July 31, 2023
GAAP Stock-based

compensation and

related employer

payroll tax
Amortization of

intangible assets
Restructuring

and facility exit

charges (3)
Capitalized

software

development costs
Non-cash interest

expense related to

convertible senior

notes
Loss on strategic

equity investments,

net
Income tax

adjustment (2)
Non-GAAP
 
Cloud services cost of revenues

$

134,587

 

$

(5,973

)

$

(8,209

)

$

(11

)

$

(3,638

)

$

-

 

$

-

 

$

-

 

$

116,756

 

Cloud services gross margin

 

69.8

%

 

1.3

%

 

1.8

%

 

0.0

%

 

0.8

%

 

-

%

 

-

%

 

-

%

 

73.8

%

 
Cost of revenues

 

211,903

 

 

(22,870

)

 

(9,438

)

 

50

 

 

(3,638

)

 

-

 

 

-

 

 

-

 

 

176,007

 

Gross margin

 

76.7

%

 

2.5

%

 

1.0

%

 

0.0

%

 

0.4

%

 

-

%

 

-

%

 

-

%

 

80.7

%

 
Research and development

 

239,099

 

 

(87,888

)

 

-

 

 

2,516

 

 

2,501

 

 

-

 

 

-

 

 

-

 

 

156,228

 

Sales and marketing

 

421,635

 

 

(64,968

)

 

(4,267

)

 

63

 

 

-

 

 

-

 

 

-

 

 

-

 

 

352,463

 

General and administrative

 

106,469

 

 

(31,058

)

 

-

 

 

(1,158

)

 

-

 

 

-

 

 

-

 

 

-

 

 

74,253

 

Operating expense

 

767,203

 

 

(183,914

)

 

(4,267

)

 

1,421

 

 

2,501

 

 

-

 

 

-

 

 

-

 

 

582,944

 

Operating income (loss)

 

(68,521

)

 

206,784

 

 

13,705

 

 

(1,471

)

 

1,137

 

 

-

 

 

-

 

 

-

 

 

151,634

 

Operating margin

 

(7.5

)%

 

22.7

%

 

1.5

%

 

(0.2

)%

 

0.1

%

 

-

%

 

-

%

 

-

%

 

16.7

%

 
Income tax provision

 

6,730

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

26,963

 

 

33,693

 

Net income (loss)

$

(63,248

)

$

206,784

 

$

13,705

 

$

(1,471

)

$

1,137

 

$

2,413

 

$

2,414

 

$

(26,963

)

$

134,771

 

Basic net income (loss) per share (1)

$

(0.38

)

$

1.24

 

$

0.08

 

$

(0.01

)

$

0.01

 

$

0.01

 

$

0.02

 

$

(0.16

)

$

0.81

 

Diluted net income (loss) per share (1)

$

(0.38

)

$

0.71

 

(1) GAAP basic and diluted net loss per share and non-GAAP basic net income per share is calculated based on 166,459 weighted-average shares of common stock. Non-GAAP net income per share is calculated based on 190,740 diluted weighted-average shares of common stock, which includes 24,281 potentially dilutive shares related to convertible notes and employee stock awards. GAAP to non-GAAP diluted net income (loss) per share is not reconciled due to the difference in the number of weighted-average shares used to calculate GAAP and non-GAAP diluted net income (loss) per share.
(2) Represents the income tax adjustment using our estimated non-GAAP tax rate of 20%.
(3) Excludes $127 of total stock-based compensation restructuring charges, which are included under Stock-based compensation and related employer payroll tax.
Reconciliation of GAAP to Non-GAAP Financial Measures
Three Months Ended July 31, 2022
GAAP Stock-based

compensation and

related employer

payroll tax
Amortization of

intangible assets
Capitalized

software

development costs
Non-cash interest

expense related

to convertible

senior notes
Loss on strategic

equity investments,

net
Income tax

adjustment (2)
Non-GAAP
 
Cloud services cost of revenues

$

122,860

 

$

(6,025

)

$

(7,579

)

$

(2,991

)

$

-

 

$

-

 

$

-

 

$

106,265

 

Cloud services gross margin

 

64.5

%

 

1.7

%

 

2.2

%

 

0.9

%

 

-

%

 

-

%

 

-

%

 

69.3

%

 
Cost of revenues

 

206,791

 

 

(23,563

)

 

(8,807

)

 

(2,991

)

 

-

 

 

-

 

 

-

 

 

171,430

 

Gross margin

 

74.1

%

 

2.9

%

 

1.1

%

 

0.4

%

 

-

%

 

-

%

 

-

%

 

78.5

%

 
Research and development

 

257,057

 

 

(88,445

)

 

-

 

 

2,562

 

 

-

 

 

-

 

 

-

 

 

171,174

 

Sales and marketing

 

410,622

 

 

(59,712

)

 

(5,242

)

 

-

 

 

-

 

 

-

 

 

-

 

 

345,668

 

General and administrative

 

114,381

 

 

(32,524

)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

81,857

 

Operating expense

 

782,060

 

 

(180,681

)

 

(5,242

)

 

2,562

 

 

-

 

 

-

 

 

-

 

 

598,699

 

Operating income (loss)

 

(190,098

)

 

204,244

 

 

14,049

 

 

429

 

 

-

 

 

-

 

 

-

 

 

28,624

 

Operating margin

 

(23.8

)%

 

25.5

%

 

1.8

%

 

0.1

%

 

-

%

 

-

%

 

-

%

 

3.6

%

 
Income tax provision (benefit)

 

7,943

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(3,721

)

 

4,222

 

Net income (loss)

$

(209,712

)

$

204,244

 

$

14,049

 

$

429

 

$

3,971

 

$

188

 

$

3,721

 

$

16,890

 

Basic net income (loss) per share (1)

$

(1.30

)

$

1.27

 

$

0.09

 

$

-

 

$

0.02

 

$

-

 

$

0.02

 

$

0.10

 

Diluted net income (loss) per share (1)

$

(1.30

)

$

0.09

 

(1) GAAP basic and diluted net loss per share and non-GAAP basic net loss per share calculated based on 161,787 weighted-average shares of common stock. Non-GAAP net income per share calculated based on 184,571 diluted weighted-average shares of common stock, which includes 22,784 potentially dilutive shares related to convertible notes and employee stock awards. GAAP to non-GAAP diluted net income (loss) per share is not reconciled due to the difference in the number of weighted-average shares used to calculate GAAP and non-GAAP diluted net income (loss) per share.
(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, 2023
GAAP Stock-based

compensation and

related employer

payroll tax
Amortization of

intangible assets
Restructuring and

facility exit

charges(3)
Capitalized

software

development costs
Non-cash interest

expense related to

convertible senior

notes
Loss on strategic

equity investments,

net
Income tax

adjustment (2)
Non-GAAP
 
Cloud services cost of revenues

$

264,294

 

$

(12,504

)

$

(16,418

)

$

(411

)

$

(7,426

)

$

-

 

$

-

 

$

-

 

$

227,535

 

Cloud services gross margin

 

69.4

%

 

1.5

%

 

1.9

%

 

0.1

%

 

0.9

%

 

-

%

 

-

%

 

-

%

 

73.7

%

 
Cost of revenues

 

419,138

 

 

(44,631

)

 

(18,876

)

 

(1,508

)

 

(7,426

)

 

-

 

 

-

 

 

-

 

 

346,697

 

Gross margin

 

74.8

%

 

2.7

%

 

1.1

%

 

0.1

%

 

0.5

%

 

-

%

 

-

%

 

-

%

 

79.1

%

 
Research and development

 

476,051

 

 

(166,443

)

 

-

 

 

(13,981

)

 

5,152

 

 

-

 

 

-

 

 

-

 

 

300,779

 

Sales and marketing

 

828,140

 

 

(125,229

)

 

(9,014

)

 

(4,046

)

 

-

 

 

-

 

 

-

 

 

-

 

 

689,851

 

General and administrative

 

213,841

 

 

(60,108

)

 

-

 

 

(5,563

)

 

-

 

 

-

 

 

-

 

 

-

 

 

148,170

 

Operating expense

 

1,518,032

 

 

(351,780

)

 

(9,014

)

 

(23,590

)

 

5,152

 

 

-

 

 

-

 

 

-

 

 

1,138,800

 

Operating income (loss)

 

(275,077

)

 

396,411

 

 

27,890

 

 

25,098

 

 

2,274

 

 

-

 

 

-

 

 

-

 

 

176,596

 

Operating margin

 

(16.6

)%

 

23.9

%

 

1.7

%

 

1.5

%

 

0.1

%

 

-

%

 

-

%

 

-

%

 

10.6

%

 
Income tax provision (benefit)

 

11,280

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

30,948

 

 

42,228

 

Net income (loss)

$

(259,668

)

$

396,411

 

$

27,890

 

$

25,098

 

$

2,274

 

$

4,441

 

$

3,414

 

$

(30,948

)

$

168,912

 

Basic net income (loss) per share (1)

$

(1.57

)

$

2.39

 

$

0.17

 

$

0.15

 

$

0.01

 

$

0.03

 

$

0.02

 

$

(0.19

)

$

1.02

 

Diluted net income (loss) per share (1)

$

(1.57

)

$

0.89

 

(1) GAAP basic and diluted net loss per share and non-GAAP basic net loss per share calculated based on 162,376 weighted-average shares of common stock. Non-GAAP net income per share calculated based on 185,791 diluted weighted-average shares of common stock, which includes 23,415 potentially dilutive shares related to convertible notes and employee stock awards. GAAP to non-GAAP diluted net income (loss) per share is not reconciled due to the difference in the number of weighted-average shares used to calculate GAAP and non-GAAP diluted net income (loss) per share.
(2) Represents the income tax adjustment using our estimated non-GAAP tax rate of 20%.
(3) Excludes $2,557 of total stock-based compensation restructuring charges, which are included under Stock-based compensation and related employer payroll tax.
Reconciliation of GAAP to Non-GAAP Financial Measures
Six Months Ended July 31, 2022
GAAP Stock-based

compensation and

related employer

payroll tax
Amortization of

intangible assets
Capitalized

software

development costs
Non-cash interest

expense related

to convertible

senior notes
Loss on strategic

equity investments,

net
Income tax

adjustment (2)
Non-GAAP
 
Cloud services cost of revenues

$

242,381

 

$

(11,035

)

$

(15,157

)

$

(5,433

)

$

-

 

$

-

 

$

-

 

$

210,756

 

Cloud services gross margin

 

63.8

%

 

1.6

%

 

2.3

%

 

0.8

%

 

-

%

 

-

%

 

-

%

 

68.5

%

 
Cost of revenues

 

408,947

 

 

(43,991

)

 

(17,614

)

 

(5,433

)

 

-

 

 

-

 

 

-

 

 

341,909

 

Gross margin

 

72.2

%

 

3.0

%

 

1.2

%

 

0.4

%

 

-

%

 

-

%

 

-

%

 

76.8

%

 
Research and development

 

512,748

 

 

(175,949

)

 

-

 

 

4,990

 

 

-

 

 

-

 

 

-

 

 

341,789

 

Sales and marketing

 

805,835

 

 

(134,759

)

 

(10,484

)

 

-

 

 

-

 

 

-

 

 

-

 

 

660,592

 

General and administrative

 

227,089

 

 

(69,919

)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

157,170

 

Operating expense

 

1,545,672

 

 

(380,627

)

 

(10,484

)

 

4,990

 

 

-

 

 

-

 

 

-

 

 

1,159,551

 

Operating loss

 

(481,785

)

 

424,618

 

 

28,098

 

 

443

 

 

-

 

 

-

 

 

-

 

 

(28,626

)

Operating margin

 

(32.7

)%

 

28.9

%

 

1.9

%

 

-

%

 

-

%

 

-

%

 

-

%

 

(1.9

)%

 
Income tax provision (benefit)

 

11,297

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(20,095

)

 

(8,798

)

Net loss

$

(514,034

)

$

424,618

 

$

28,098

 

$

443

 

$

5,484

 

$

97

 

$

20,095

 

$

(35,199

)

Basic and diluted net loss per share (1)

$

(3.19

)

$

2.65

 

$

0.17

 

$

-

 

$

0.03

 

$

-

 

$

0.12

 

$

(0.22

)

(1) Calculated based on 161,070 weighted-average shares of common stock.
(2) Represents the income tax adjustment using our estimated non-GAAP tax rate of 20%.

 

Contacts

For more information, please contact:

Media Contact

Patricia Hogan

Splunk Inc.

press@splunk.com

Investor Contact

Katie White

Splunk Inc.

ir@splunk.com

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