Splunk Inc. Announces Fiscal Second Quarter 2014 Financial Results

  Splunk Inc. Announces Fiscal Second Quarter 2014 Financial Results

         Company Crosses 6,000 Customer Mark; Total Revenues Grow 50%

Business Wire

SAN FRANCISCO -- August 29, 2013

Splunk Inc. (NASDAQ: SPLK), the leading software platform for real-time
operational intelligence, today announced results for its fiscal second
quarter ended July 31, 2013.

  *Total revenues were $66.9 million, up 50% year-over-year.
  *License revenues were $43.2 million, up 43% year-over-year.
  *GAAP operating loss was $13.3 million or 19.9% of revenues.
  *Non-GAAP operating loss was $0.8 million or 1.1% of revenues.
  *GAAP loss per share was $0.13; non-GAAP loss per share was $0.01.
  *Operating cash flow was $6.3 million with free cash flow of $4.3 million.

“This past quarter marked a milestone for Splunk as we expanded the breadth of
our product offerings beyond core Splunk Enterprise and premium apps by adding
the beta version of Hunk: Splunk Analytics for Hadoop,” said Godfrey Sullivan,
Chairman and CEO. “We are pleasedto welcome more than 400 new customers who
are joining the Splunk family at an exciting time as we transition to a
multi-product company.”

Second Quarter 2014 and Recent Business Highlights

Customers:

  *Signed more than 400 new customers, ending the quarter with more than
    6,000 customers worldwide.
  *New license customers include: Bank of the West, Bombardier (Germany),
    Commercial Bank of Dubai, GitHub, Inc., Hyundai Heavy Industries Co., Ltd.
    (HHI) (Korea), Middle Tennessee State University, Panasonic Corporation,
    POLITICO, Shaw Communications Inc., Softbank Telecom Corp., Sony
    Corporation, South Carolina Department of Health and Human Services,
    SunTrust Banks, Westdeutsche Lotterie GmbH & Co.
  *Expansion customers include: Adobe, Bloomberg, CalPERS, Cisco Systems,
    Inc., Comcast Corporation, Duke Medicine, Florida Department of Financial
    Services, Highmark Blue Cross Blue Shield, Korea Securities Depository,
    Moody’s Corporation, Otto GmbH & Co KG (Germany), Pearson Education, Rally
    Software, Symantec Corporation, Telstra, TONGYANG Insurance (Korea), U.S.
    Air Force, U.S. Department of the Interior, U.S. Department of Justice,
    The Washington Post Company.

Product:

  *Announced the beta version of Hunk: Splunk Analytics for Hadoop. Hunk
    (beta) is a new software product from Splunk that enables exploration,
    analysis and visualization of data in Hadoop.
  *Announced the general availability (GA) of the latest version of the
    Splunk App for VMware to provide accelerated operational visibility into
    virtualized environments. Customers rely on the Splunk App for VMware to
    enable proactive monitoring, comprehensive operational analytics and data
    correlation with all technology tiers beyond virtualization, including
    applications, operating systems and hardware infrastructure such as
    servers, storage and network devices.
  *Announced the GA ofSplunk Software Developer Kits (SDKs) for C#, PHP and
    Ruby.These SDKs, along with the SDKs for Java, JavaScript and Python that
    shipped in December, enable developers to customize and extend the power
    of Splunk software, further establishing Splunk Enterprise as the platform
    for machine data.

Recognition:

  *Won two top awards in the Asia Pacific region.CeBIT.AU, a leading
    business technology conference in Australia, honored Splunk with its top
    industry prize, theCeBIT.AU ICT Excellence Awardand the CeBIT.AU
    Business Award for Top Business Solution.
  *Named “Best in Big Data Analytics” at the 2013 Information Management
    Awards by NetworkWorld Asia, an enterprise IT magazine read by more than
    16,000 IT professionals.

Financial Outlook

The company is providing the following guidance for its fiscal third quarter
2014 (ending October 31, 2013):

  *Total revenues are expected to be between $69 million and $71 million.
  *Non-GAAP operating margin is expected to be between zero and negative 2%.

The company is updating its previous guidance for its fiscal year 2014 (ending
January 31, 2014):

  *Total revenues are expected to be between $275 million and $281 million
    (were previously expected to be between $266 million and $274 million as
    of May 30, 2013).
  *Non-GAAP operating margin is expected to be approximately zero (unchanged
    from May 30, 2013).

All forward-looking non-GAAP financial measures contained in this section
“Financial Outlook” exclude estimates for stock-based compensation expenses
and employer payroll tax expense related to employee stock plans.

While a reconciliation of non-GAAP guidance measures to corresponding GAAP
measures is not available on a forward-looking basis, the company has provided
a reconciliation of GAAP to non-GAAP financial measures in the financial
statement tables for its fiscal second quarter 2014 and fiscal first half 2014
non-GAAP results included in this press release.

Conference Call and Webcast

Splunk’s executive management team will host a conference call today beginning
at 1:30 p.m. PT (4:30 p.m. ET) to discuss the company’s financial results and
business highlights. Interested parties may access the call by dialing (866)
501-1535. International parties may access the call by dialing (216) 672-5582.
A live audio webcast of the conference call will be available through Splunk’s
Investor Relations website at http://investors.splunk.com/events.cfm. A replay
of the call will be available through September 5, 2013 by dialing (855)
859-2056 and referencing Conference ID# 25448696.

Safe Harbor Statement

This press release contains forward-looking statements that involve risks and
uncertainties, including statements regarding Splunk’s revenue and non-GAAP
operating margin targets for the company’s fiscal third quarter and fiscal
year 2014 in the paragraphs under “Financial Outlook” above and other
statements regarding momentum in the company’s business, growth in the number
of new customers, new product offerings, expansion of existing customer usage,
and product investments and developments. There are a significant number of
factors that could cause actual results to differ materially from statements
made in this press release, including: Splunk’s limited operating history,
particularly as a relatively new public company; risks associated with
Splunk’s rapid growth, particularly outside of the U.S.; Splunk’s inability to
realize value from its significant investments in its business; and general
market, political, economic and business conditions.

Additional information on potential factors that could affect Splunk’s
financial results is included in the company’s Quarterly Report on Form 10-Q
for the quarter ended April 30, 2013, which is on file with the U.S.
Securities and Exchange Commission. Splunk does not assume any obligation to
update the forward-looking statements provided to reflect events that occur or
circumstances that exist after the date on which they were made.

About Splunk Inc.

Splunk Inc. (NASDAQ: SPLK) provides the engine for machine data™. Splunk®
software collects, indexes and harnesses the machine-generated big data coming
from the websites, applications, servers, networks, sensors and mobile devices
that power business. Splunk software enables organizations to monitor, search,
analyze, visualize and act on massive streams of real-time and historical
machine data. More than 6,000 enterprises, universities, government agencies
and service providers in over 90 countries use Splunk Enterprise to gain
Operational Intelligence that deepens business and customer understanding,
improves service and uptime, reduces cost and mitigates cyber-security risk.
Splunk Storm™, a cloud-based subscription service, is used by organizations
developing applications in the cloud.

To learn more, please visit www.splunk.com/company.

Splunk, Splunk>, Splunk Storm, Listen to Your Data, SPL and The Engine for
Machine Data 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. © 2013 Splunk Inc. All rights
reserved.

SPLUNK INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
                                                              
                                                                   
                          Three Months Ended         Six Months Ended
                          July 31,      July 31,     July 31,      July 31,
                          2013          2012         2013          2012
Revenues
License                   $ 43,185      $ 30,203     $ 79,357      $ 54,589
Maintenance and            23,688      14,280     44,723      27,085  
services
Total revenues             66,873      44,483     124,080     81,674  
                                                                   
Cost of revenues
License                     76            92           145           221
Maintenance and            7,345       4,553      13,957      8,689   
services
Total cost of revenues     7,421       4,645      14,102      8,910   
^1, 2
Gross profit               59,452      39,838     109,978     72,764  
                                                                   
Operating expenses
Research and                16,210        9,391        30,674        17,494
development ^1, 2
Sales and marketing ^1,     44,634        27,740       85,947        51,906
2
General and                11,912      7,247      22,358      14,093  
administrative ^1, 2
Total operating            72,756      44,378     138,979     83,493  
expenses
Operating loss             (13,304 )    (4,540 )    (29,001 )    (10,729 )
                                                                   
Interest and other
income (expense), net
Interest income, net        58            101          119           82
Other income (expense),     (82     )     -            (176    )     2
net
Change in fair value of
preferred stock            -           -          -           (14,087 )
warrants
Total interest and
other income (expense),    (24     )    101        (57     )    (14,003 )
net
Loss before income          (13,328 )     (4,439 )     (29,058 )     (24,732 )
taxes
Provision for income       365         136        769         313     
taxes
Net loss                  $ (13,693 )   $ (4,575 )   $ (29,827 )   $ (25,045 )
                                                                   
                                                                   
Basic and diluted net     $ (0.13   )   $ (0.05  )   $ (0.29   )   $ (0.40   )
loss per share
                                                                   
Weighted-average shares
used in computing basic    104,100     95,518     103,075     62,466  
and diluted net loss
per share

^1 Includes stock-based
compensation expense as
follows:
Cost of revenues          $ 865         $ 267        $ 1,570       $ 375
Research and                3,547         1,267        6,590         2,162
development
Sales and marketing         5,156         1,505        9,478         2,363
General and                2,389       827        4,154       1,638   
administrative
                          $ 11,957     $ 3,866     $ 21,792     $ 6,538   
                                                                   
^2 Includes employer
payroll tax on employee
stock plans as follows:
Cost of revenues          $ 22          $ -          $ 44          $ -
Research and                49            -            191           -
development
Sales and marketing         314           48           592           48
General and                201         214        339         214     
administrative
                          $ 586        $ 262       $ 1,166      $ 262     
                                                                             

SPLUNK INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
                                                         
                                                            
                                             July 31,       January 31,
                                             2013           2013
                                                            
ASSETS
                                                            
Current assets
Cash and cash equivalents                    $ 347,114      $ 305,939
Accounts receivable, net                       40,746         63,948
Prepaid expenses and other current assets     10,547       6,861   
Total current assets                          398,407      376,748 
                                                            
Property and equipment, net                    13,855         13,205
Other assets                                  403          492     
Total assets                                 $ 412,665     $ 390,445 
                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY
                                                            
Current liabilities
Accounts payable                             $ 1,805        $ 1,632
Accrued payroll and compensation               21,888         28,123
Accrued expenses and other liabilities         12,224         7,636
Deferred revenue, current portion             96,908       79,568  
Total current liabilities                     132,825      116,959 
                                                            
Deferred revenue, non-current                  30,727         35,144
Other liabilities, non-current                1,302        798     
Total non-current liabilities                 32,029       35,942  
Total liabilities                             164,854      152,901 
                                                            
                                                            
Stockholders' equity:
Common stock                                   105            101
Accumulated other comprehensive loss           (243     )     (135    )
Additional paid-in capital                     368,475        328,277
Accumulated deficit                           (120,526 )    (90,699 )
Total stockholders' equity                    247,811      237,544 
Total liabilities and stockholders' equity   $ 412,665     $ 390,445 
                                                                      

SPLUNK INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
                                                              
                         Three Months Ended          Six Months Ended
                         July 31,      July 31,      July 31,      July 31,
                         2013          2012          2013          2012
                                                                   
Cash Flows From
Operating Activities
Net loss                 $ (13,693 )   $ (4,575  )   $ (29,827 )   $ (25,045 )
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and           1,455         1,218         2,880         2,149
amortization
Change in fair value
of preferred stock         -             -             -             14,087
warrants
Stock-based                11,957        3,866         21,792        6,538
compensation
Excess tax benefits
from employee stock        (157    )     -             (268    )     -
plans
Changes in operating
assets and liabilities
Accounts receivable,       (2,830  )     (10,201 )     23,202        814
net
Prepaid expenses,
other current and          (3,299  )     (1,184  )     (3,597  )     (1,172  )
non-current assets
Accounts payable           (1,065  )     (706    )     (147    )     300
Accrued payroll and        697           7,020         (6,235  )     2,563
compensation
Accrued expenses and       2,888         (128    )     5,379         167
other liabilities
Deferred revenue          10,298      8,526       12,923      15,003  
Net cash provided by      6,251       3,836       26,102      15,404  
operating activities
                                                                   
Cash Flow From
Investing Activities
Purchases of property     (1,967  )    (1,597  )    (3,230  )    (3,474  )
and equipment
Net cash used in          (1,967  )    (1,597  )    (3,230  )    (3,474  )
investing activities
                                                                   
Cash Flow From
Financing Activities
Repayments of term         -             -             -             (2,289  )
debt
Proceeds from initial
public offering, net       -             (1,161  )     -             225,225
of offering costs
Issuance of common
stock from exercise of     5,916         1,153         12,523        1,825
stock options
Excess tax benefits
from employee stock        157           -             268           -
plans
Proceeds from employee     6,076         -             6,076         -
stock purchase plan
Taxes paid related to
net share settlement      (513    )    -           (513    )    -       
of equity awards
Net cash provided by
(used in) financing       11,636      (8      )    18,354      224,761 
activities
                                                                   
Effect of exchange
rate changes on cash      (58     )    (30     )    (51     )    (12     )
and cash equivalents
Net increase in cash       15,862        2,201         41,175        236,679
and cash equivalents
Cash and cash
equivalents at            331,252     266,077     305,939     31,599  
beginning of period
Cash and cash
equivalents at end of    $ 347,114    $ 268,278    $ 347,114    $ 268,278 
period
                                                                   

                                 SPLUNK INC.

               Non-GAAP financial measures and reconciliations

To supplement Splunk’s consolidated financial statements, which are prepared
and presented in accordance with generally accepted accounting principles in
the United States (“GAAP”), Splunk provides investors with certain non-GAAP
financial measures, including non-GAAP operating income (loss), non-GAAP net
income (loss), non-GAAP operating margin and non-GAAP income loss per share
(collectively the “non-GAAP financial measures”). These non-GAAP financial
measures exclude stock-based compensation expense, employer payroll tax
expense related to employee stock plans and the change in fair value of
certain preferred stock warrants previously issued by Splunk. In addition,
non-GAAP financial measures include free cash flow, which represents cash from
operations less purchases of property and equipment. The presentation of the
non-GAAP financial measures is not intended to be considered in isolation or
as a substitute for, or superior to, the financial information prepared and
presented in accordance with GAAP. Splunk uses these non-GAAP financial
measures for financial and operational decision-making purposes and as a means
to evaluate period-to-period comparisons. Splunk believes that these non-GAAP
financial measures provide useful information about Splunk’s operating
results, enhance the overall understanding of past financial performance and
future prospects and allow for greater transparency with respect to key
metrics used by management in its financial and operational decision making.
In addition, these non-GAAP financial measures facilitate comparisons to
competitors’ operating results.

Splunk excludes stock-based compensation expense and employer payroll tax
expense related to employee stock plans from its non-GAAP operating income
(loss), non-GAAP net income (loss), non-GAAP operating margin and non-GAAP
income (loss) per share. Splunk excludes stock-based compensation expense
because it is non-cash in nature and excluding this expense provides
meaningful supplemental information regarding Splunk’s operational
performance. In particular, because of varying available valuation
methodologies, subjective assumptions and the variety of award types that
companies can use under FASB ASC Topic 718, Splunk believes that providing
non-GAAP financial measures that exclude this expense allows investors the
ability to make more meaningful comparisons between Splunk’s operating results
and those of other companies. Splunk excludes employer payroll tax expense
related to employee stock plans in order for investors to see the full effect
that excluding that stock-based compensation expense had on Splunk’s operating
results. These expenses are tied to the exercise or vesting of underlying
equity awards and the price of Splunk’s common stock at the time of vesting or
exercise, which may vary from period to period independent of the operating
performance of Splunk’s business. Splunk also excludes expense attributable to
the change in fair value of certain preferred stock warrants from its non-GAAP
financial measures because it is a non-recurring, non-cash expense.
Accordingly, Splunk believes that excluding these expenses provides investors
and management with greater visibility to the underlying performance of its
business operations, facilitates comparison of its results with other periods
and may also facilitate comparison with the results of other companies in its
industry. Splunk considers free cash flow to be a liquidity measure that
provides useful information to management and investors about the amount of
cash generated by the business that can be used for strategic opportunities,
including investing in its business, making strategic acquisitions and
strengthening its balance sheet.

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

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

SPLUNK INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)
(Unaudited)
                                                                
                                                                                  
                       Three Months Ended            Six Months Ended
                       July 31,        July 31,       July 31,        July 31,
                       2013            2012           2013            2012
                                                                                  
Reconciliation of cash provided by operating activities to free cash flow:
Net cash
provided by            $ 6,251         $ 3,836        $ 26,102        $ 15,404
operating
activities
Less purchases
of property and         (1,967  )      (1,597 )      (3,230  )      (3,474  )
equipment
Free cash flow         $ 4,284        $ 2,239       $ 22,872       $ 11,930  
(Non-GAAP)
                                                                                  
Net cash used in
investing              $ (1,967  )     $ (1,597 )     $ (3,230  )     $ (3,474  )
activities
Net cash
provided by
(used in)              $ 11,636       $ (8     )     $ 18,354       $ 224,761 
financing
activities
                                                                                  
Operating loss
reconciliation:
GAAP operating         $ (13,304 )     $ (4,540 )     $ (29,001 )     $ (10,729 )
loss
Stock-based
compensation       A     11,957          3,866          21,792          6,538
expense
Employer payroll
tax on employee    C    586           262          1,166         262     
stock plans
Non-GAAP               $ (761    )     $ (412   )     $ (6,043  )     $ (3,929  )
operating loss
                                                                                  
Operating margin
reconciliation:
GAAP operating           (19.9   ) %     (10.2  ) %     (23.4   ) %     (13.1   ) %
margin
Stock-based
compensation       A     17.9            8.7            17.6            8.0
expense
Employer payroll
tax on employee    C    0.9           0.6          0.9           0.3     
stock plans
Non-GAAP                (1.1    ) %    (0.9   ) %    (4.9    ) %    (4.8    ) %
operating margin
                                                                                  
Net loss
reconciliation:
GAAP net loss          $ (13,693 )     $ (4,575 )     $ (29,827 )     $ (25,045 )
Stock-based
compensation       A     11,957          3,866          21,792          6,538
expense
Change in fair
value of           B     -               -              -               14,087
preferred stock
warrants
Employer payroll
tax on employee    C    586           262          1,166         262     
stock plans
Non-GAAP net           $ (1,150  )     $ (447   )     $ (6,869  )     $ (4,158  )
loss
                                                                                  
Net loss per
share
reconciliation:
GAAP net loss          $ (0.13   )     $ (0.05  )     $ (0.29   )     $ (0.40   )
Stock-based
compensation       A     0.11            0.04           0.21            0.10
expense
Change in fair
value of           B     -               -              -               0.23
preferred stock
warrants
Employer payroll
tax on employee    C    0.01          -            0.01          -       
stock plans
Non-GAAP basic
and diluted net        $ (0.01   )     $ (0.01  )     $ (0.07   )     $ (0.07   )
loss per share
                                                                   
Weighted-average
shares used in
computing               104,100       95,518       103,075       62,466  
Non-GAAP basic
and diluted net
loss per share
                                                                                  
Notes:
                                                                                  
(A) To eliminate stock-based compensation expense.
                                                                                  
(B) To eliminate warrant expense related to the change in the fair value of our
outstanding preferred stock warrants. The final measurement of the warrants was
recorded upon the closing of Splunk's initial public offering during the three
months ended April 30, 2012.
                                                                                  
(C) To eliminate employer payroll tax expense related to employee stock plans.

Contact:

Investor Contact
Splunk Inc.
Ken Tinsley, 415-848-8476
ktinsley@splunk.com
or
Press Contact
Splunk Inc.
Sherry Lowe, 415-852-5529
slowe@splunk.com
or
LEWIS PR
Scott Blevins, 415-432-2400
Splunk@lewispr.com
 
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