Splunk Inc. Announces Fiscal Fourth Quarter and Full Year 2014 Financial Results Full Year Revenues Grow 52%; Company Surpasses 7,000 Customer Mark Business Wire SAN FRANCISCO -- February 27, 2014 Splunk Inc. (NASDAQ: SPLK), provider of the leading software platform for real-time operational intelligence, today announced results for its fiscal fourth quarter and year ended January 31, 2014. Fourth Quarter 2014 Financial Highlights *Total revenues were $99.9 million, up 53% year-over-year. *License revenues were $68.8 million, up 47% year-over-year. *GAAP operating loss was $32.5 million; GAAP operating margin was negative 32.5%. *Non-GAAP operating income was $4.0 million; non-GAAP operating margin was 4.0%. *GAAP loss per share was $0.30; non-GAAP income per share was $0.03. *Operating cash flow was $34.4 million with free cash flow of $32.4 million. Full Year 2014 Financial Highlights *Total revenues were $302.6 million, up 52% year-over-year. *License revenues were $199.0 million, up 46% year-over-year. *GAAP operating margin was negative 25.9%; non-GAAP operating margin was negative 0.4%. *Operating cash flow was $73.8 million with free cash flow of $64.5 million. “We are delighted to welcome more than 500 new customers to the Splunk family and now have more than 7,000 customers worldwide,” said Godfrey Sullivan, Chairman and CEO, Splunk. “Customers are choosing Splunk as their standard for operational intelligence at a faster pace than we have ever seen. We recognize and appreciate the contribution that both partners and our new and existing customers have played in our growth.” Fourth Quarter 2014 and Recent Business Highlights Customers: *New and Expansion Customers Include: Air France, Ascension Health, Auburn University, AURIZON (Australia), Boston Public Library, Chevron Australia, ChungHwa Telecom-Mobile (Taiwan), City of Austin, Cornerstone OnDemand, DATEV eG (Germany), Denver International Airport, DZ BANK AG (Germany), Finanz Informatik, General Electric, Hospital Corporation of America (HCA), John Lewis (UK), Major League Baseball Advanced Media, Nottinghamshire Police (UK), Panasonic Avionics, Paycorp (Australia), PetroChina Tarim Oilfield Company, Phillips 66, Polycom, Press Association (UK), PT Kalbe Farma Tbk (Indonesia), Ramsay Health Care (Australia), Shanghai Pudong Development Bank, Singapore Workforce Development Agency, State of New Mexico Human Services, SunGard Availability Services, Svyaznoy Bank (Russia), Symantec, Telenor Group (Norway), United Health Group Inc., Viet A Bank (Vietnam), WorldPay (UK) and World Vision Australia. Product: *Announced general availability (GA) of the Splunk App for Enterprise Security 3.0, which provides enhancements to help find unknown threats, while continually monitoring for known threats detected by traditional security infrastructure products. *Announced the Splunk ODBC Driver that allows customers to interact with, manipulate and visualize machine data stored in Splunk Enterprise using existing business software tools, such as Microsoft Excel or Tableau Desktop. *Updated the Splunk SDK for Python and released the Splunk Plug-in for Eclipse to help developers build applications that use and extend Splunk Enterprise. *Released the Splunk App for NetApp to provide comprehensive visibility into the operational health of NetApp Data ONTAP storage systems. Acquisitions *Announced the acquisition of Cloudmeter, a provider of network data capture technologies. The addition of Cloudmeter will enhance the ability of Splunk customers to analyze machine data directly from their networks and correlate it with other machine-generated data to gain insights across Splunk's core use cases in application and infrastructure management, IT operations, security and business analytics. Partners *Announced a strategic agreement with Internet2 to bring Splunk technology to hundreds of potential new U.S. higher-education customers. *Announced a combined solution with Cisco Identity Services Engine (ISE) data. The software provides users with a scalable security intelligence platform to quickly discover and identify the source of a suspicious event. Recognition *Splunk Enterprise named the Best Big Data Analytics Solution in the GSN: Government Security News 2013 Homeland Security Awards. *The Splunk App for VMware won the Editor's Choice award for the Server Virtualization category in Virtualization Review's 2014 Reader's Choice Awards. Financial Outlook The company is providing the following guidance for its fiscal first quarter 2015 (ending April 30, 2014): *Total revenues are expected to be between $78 million and $80 million. *Non-GAAP operating margin is expected to be between negative 8% and 10%. The company is providing the following guidance for its fiscal year 2015 (ending January 31, 2015): *Total revenues are expected to be approximately $400 million. *Non-GAAP operating margin is expected to be approximately zero. All forward-looking non-GAAP financial measures contained in this section “Financial Outlook” exclude estimates for stock-based compensation expenses, employer payroll tax expense related to employee stock plans and amortization of acquired intangible assets. While a reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis, the company has provided a reconciliation of GAAP to non-GAAP financial measures in the financial statement tables for its fiscal fourth quarter 2014 and fiscal year 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 March 6, 2014 by dialing (855) 859-2056 and referencing Conference ID# 45279544. Safe Harbor Statement This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding Splunk’s revenue and non-GAAP operating margin targets for the company’s fiscal first quarter and fiscal year 2015 in the paragraphs under “Financial Outlook” above and other statements regarding momentum in the company’s business, growth in the number of new customers, customer value and standardization, expansion of existing customer usage, new product offerings, expected benefits of our recent acquisitions, intended use and success of acquired products, product investments and developments, and expected benefits of strategic and partner relationships. 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; 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; Splunk’s transition to a multi-product software and services business; Splunk’s inability to successfully integrate acquired businesses and technologies; and general market, political, economic and business conditions. Additional information on potential factors that could affect Splunk’s financial results is included in the company’s Quarterly Report on Form 10-Q for the quarter ended October 31, 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 leading software platform for real-timeOperational Intelligence.Splunk® software and cloud services enable organizations to search, monitor, analyze and visualize machine-generated big data coming from websites, applications, servers, networks, sensors and mobile devices. More than 7,000 enterprises, government agencies, universities and service providers in over 90 countries use Splunksoftware to deepen business and customer understanding, mitigate cybersecurity risk, prevent fraud, improve service performance and reduce cost.Splunk products includeSplunk® Enterprise,Splunk Cloud™,Splunk Storm®,Hunk™: Splunk Analytics for Hadoopand premium Splunk Apps.To learn more, please visithttp://www.splunk.com/company. Social Media:Twitter |LinkedIn |YouTube |Facebook Splunk, Splunk>, Listen to Your Data, The Engine for Machine Data, Hunk, Splunk Cloud, Splunk Storm and SPL 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. © 2014 Splunk Inc. All rights reserved. SPLUNK INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended Fiscal Year Ended January 31, January January 31, January 31, 2014 31, 2014 2013 2013 Revenues License $ 68,794 $ 46,776 $ 199,024 $ 135,922 Maintenance and 31,116 18,449 103,599 63,022 services Total revenues 99,910 65,225 302,623 198,944 Cost of revenues License 101 444 330 727 Maintenance and 11,097 6,191 35,495 20,697 services ^1, 2 Total cost of 11,198 6,635 35,825 21,424 revenues ^4, 5 Gross profit 88,712 58,590 266,798 177,520 Operating expenses Research and development ^1, 3, 26,260 13,285 75,895 41,853 4, 5 Sales and marketing 76,336 40,345 215,335 125,098 ^1, 4, 5 General and administrative ^3, 18,600 10,884 53,875 32,602 4, 5 Total operating 121,196 64,514 345,105 199,553 expenses Operating loss (32,484 ) (5,924 ) (78,307 ) (22,033 ) Interest and other income (expense), net Interest income, 51 37 225 152 net Other income (461 ) - (920 ) - (expense), net Change in fair value of preferred - - - (14,087 ) stock warrants Total interest and other income (410 ) 37 (695 ) (13,935 ) (expense), net Loss before income (32,894 ) (5,887 ) (79,002 ) (35,968 ) taxes Income tax provision (benefit) (263 ) 275 6 713 ^6 Net loss $ (32,631 ) $ (6,162 ) $ (79,008 ) $ (36,681 ) Basic and diluted $ (0.30 ) $ (0.06 ) $ (0.75 ) $ (0.46 ) net loss per share Weighted-average shares used in computing basic and 108,047 98,996 105,067 80,246 diluted net loss per share ^1 Includes amortization of acquired intangible assets as follows: Cost of revenues $ 566 $ - $ 648 $ - Research and 58 - 70 - development Sales and marketing 146 - 188 - $ 770 $ - $ 906 $ - ^2 Includes charge related to $ - $ - $ 2,128 $ - impairment of long-lived asset ^3 Includes acquisition-related costs as follows: Research and $ - $ - $ 408 $ - development General and 314 - 314 - administrative $ 314 $ - $ 722 $ - ^4 Includes stock-based compensation expense as follows: Cost of revenues $ 2,548 $ 520 $ 5,283 $ 1,217 Research and 9,834 2,448 20,829 6,170 development Sales and marketing 14,587 3,637 30,012 8,093 General and 6,275 1,652 13,244 4,000 administrative $ 33,244 $ 8,257 $ 69,368 $ 19,480 ^5 Includes employer payroll tax on employee stock plans as follows: Cost of revenues $ 74 $ 7 $ 171 $ 7 Research and 874 180 1,151 180 development Sales and marketing 781 458 1,688 506 General and 385 248 961 462 administrative $ 2,114 $ 893 $ 3,971 $ 1,155 ^6 Includes a partial release of the valuation $ (427 ) $ - $ (1,174 ) $ - allowance due to acquisitions: SPLUNK INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) January 31, January 31, 2014 2013 ASSETS Current assets Cash and cash equivalents $ 897,453 $ 305,939 Accounts receivable, net 83,348 63,948 Prepaid expenses and other current 12,019 6,861 assets Total current assets 992,820 376,748 Property and equipment, net 15,505 13,205 Intangible assets, net 12,294 - Goodwill 19,070 - Other assets 642 492 Total assets $ 1,040,331 $ 390,445 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 2,079 $ 1,632 Accrued payroll and compensation 43,876 28,123 Accrued expenses and other liabilities 12,743 7,636 Deferred revenue, current portion 149,156 79,568 Total current liabilities 207,854 116,959 Deferred revenue, non-current 43,165 35,144 Other liabilities, non-current 4,404 798 Total non-current liabilities 47,569 35,942 Total liabilities 255,423 152,901 Stockholders' equity Common stock 116 101 Accumulated other comprehensive loss 58 (135 ) Additional paid-in capital 954,441 328,277 Accumulated deficit (169,707 ) (90,699 ) Total stockholders' equity 784,908 237,544 Total liabilities and stockholders' $ 1,040,331 $ 390,445 equity SPLUNK INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended Fiscal Year Ended January 31, January 31, January 31, January 31, 2014 2013 2014 2013 Cash Flows From Operating Activities Net loss $ (32,631 ) $ (6,162 ) $ (79,008 ) $ (36,681 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and 2,192 1,317 6,692 4,674 amortization Impairment of long-lived - - 2,128 - asset Change in fair value of preferred - - - 14,087 stock warrants Stock-based 33,244 8,257 69,368 19,480 compensation Excess tax benefits from 188 (462 ) (351 ) (462 ) employee stock plans Changes in operating assets and liabilities Accounts receivable, (29,353 ) (23,770 ) (19,400 ) (29,453 ) net Prepaid expenses, other current (558 ) (1,378 ) (1,380 ) (2,658 ) and non-current assets Accounts (96 ) 455 171 187 payable Accrued payroll and 13,221 2,408 15,753 11,981 compensation Accrued expenses and (2,766 ) 3,380 2,454 3,446 other liabilities Deferred 50,988 40,746 77,421 62,047 revenue Net cash provided by 34,429 24,791 73,848 46,648 operating activities Cash Flow From Investing Activities Acquisitions, net of cash (20,780 ) - (29,738 ) - acquired Change in restricted - - - 514 cash Purchases of property and (2,043 ) (3,357 ) (9,308 ) (9,077 ) equipment Net cash used in investing (22,823 ) (3,357 ) (39,046 ) (8,563 ) activities Cash Flow From Financing Activities Repayments of - - - (2,289 ) term debt Proceeds from initial public - - - 225,225 offering, net of offering costs Proceeds from issuance of common stock 4,866 4,773 23,731 6,896 from employee stock options Proceeds from exercise of - 630 - 630 warrant Excess tax benefits from (188 ) 462 351 462 employee stock plans Proceeds from employee 5,358 5,311 11,434 5,311 stock purchase plan Proceeds from follow-on offering, net 539,339 - 539,339 - of offering costs Taxes paid related to net share (15,404 ) - (18,156 ) - settlement of equity awards Net cash provided by 533,971 11,176 556,699 236,235 financing activities Effect of exchange rate changes on (19 ) 5 13 20 cash and cash equivalents Net increase in cash and 545,558 32,615 591,514 274,340 cash equivalents Cash and cash equivalents 351,895 273,324 305,939 31,599 at beginning of period Cash and cash equivalents $ 897,453 $ 305,939 $ 897,453 $ 305,939 at end of 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 gross margin, non-GAAP operating income (loss), non-GAAP net income (loss), non-GAAP operating margin and non-GAAP net 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, the change in fair value of certain preferred stock warrants previously issued by Splunk, impairment of a long-lived asset, acquisition-related costs, amortization of acquired intangible assets and the partial release of the valuation allowance due to acquisitions. In addition, non-GAAP financial measures include free cash flow, which represents cash from operations less purchases of property and equipment. The presentation of the non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Splunk uses these non-GAAP financial measures for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. Splunk believes that these non-GAAP financial measures provide useful information about Splunk’s operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. In addition, these non-GAAP financial measures facilitate comparisons to competitors’ operating results. Splunk excludes stock-based compensation expense because it is non-cash in nature and excluding this expense provides meaningful supplemental information regarding Splunk’s operational performance. In particular, because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under FASB ASC Topic 718, Splunk believes that providing non-GAAP financial measures that exclude this expense allows investors the ability to make more meaningful comparisons between Splunk’s operating results and those of other companies. Splunk excludes employer payroll tax expense related to employee stock plans in order for investors to see the full effect that excluding that stock-based compensation expense had on Splunk’s operating results. These expenses are tied to the exercise or vesting of underlying equity awards and the price of Splunk’s common stock at the time of vesting or exercise, which may vary from period to period independent of the operating performance of Splunk’s business. Splunk 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. Splunk also excludes the non-cash charge for previously capitalized Storm research and development expense (reflected as an impairment of a long-lived asset) as a result of its strategic decision to start making its Storm product available at no cost to customers, a decision that Splunk expects to be infrequent in nature. Splunk also excludes acquisition-related costs and amortization of acquired intangible assets from its non-GAAP financial measures because they are considered by management to be outside of Splunk’s core operating results. Splunk further excludes the partial release of the valuation allowance due to acquisitions from non-GAAP net income (loss) and non-GAAP net income (loss) per share because it is also considered by management to be outside Splunk’s core operating results. Accordingly, Splunk believes that excluding these expenses provides investors and management with greater visibility to the underlying performance of its business operations, facilitates comparison of its results with other periods and may also facilitate comparison with the results of other companies in its industry. Splunk considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including investing in its business, making strategic acquisitions and strengthening its balance sheet. There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by Splunk’s competitors and exclude expenses that may have a material impact upon Splunk’s reported financial results. Further, stock-based compensation expense has been and will continue to be for the foreseeable future a significant recurring expense in Splunk’s business and an important part of the compensation provided to Splunk’s employees. The non-GAAP financial measures are meant to supplement and be viewed in conjunction with, GAAP financial measures. The following table reconciles Splunk’s non-GAAP results to Splunk’s GAAP results included in this press release. SPLUNK INC. Reconciliation of GAAP to Non-GAAP Financial Measures (In thousands, except per share data) (Unaudited) Three Months Ended Fiscal Year Ended January 31, January 31, January 31, January 31, 2014 2013 2014 2013 Reconciliation of cash provided by operating activities to free cash flow: Net cash provided by operating $ 34,429 $ 24,791 $ 73,848 $ 46,648 activities Less purchases of property and (2,043 ) (3,357 ) (9,308 ) (9,077 ) equipment Free cash flow $ 32,386 $ 21,434 $ 64,540 $ 37,571 (Non-GAAP) Net cash used in investing $ (22,823 ) $ (3,357 ) $ (39,046 ) $ (8,563 ) activities Net cash provided by financing $ 533,971 $ 11,176 $ 556,699 $ 236,235 activities Gross margin reconciliation: GAAP gross margin 88.8 % 89.8 % 88.2 % 89.2 % Stock-based compensation 2.6 0.8 1.7 0.6 expense Employer payroll tax on employee 0.1 - 0.1 - stock plans Amortization of acquired intangible 0.6 - 0.2 - assets Impairment of - - 0.7 - long-lived asset Non-GAAP gross 92.1 % 90.6 % 90.9 % 89.8 % margin Operating income (loss) reconciliation: GAAP operating loss $ (32,484 ) $ (5,924 ) $ (78,307 ) $ (22,033 ) Stock-based compensation 33,244 8,257 69,368 19,480 expense Employer payroll tax on employee 2,114 893 3,971 1,155 stock plans Amortization of acquired intangible 770 - 906 - assets Impairment of - - 2,128 - long-lived asset Acquisition-related 314 - 722 - costs Non-GAAP operating $ 3,958 $ 3,226 $ (1,212 ) $ (1,398 ) income (loss) Operating margin reconciliation: GAAP operating (32.5 ) % (9.1 ) % (25.9 ) % (11.1 ) % margin Stock-based compensation 33.3 12.7 22.9 9.8 expense Employer payroll tax on employee 2.1 1.4 1.3 0.6 stock plans Amortization of acquired intangible 0.8 - 0.3 - assets Impairment of - - 0.7 - long-lived asset Acquisition-related 0.3 - 0.3 - costs Non-GAAP operating 4.0 % 5.0 % (0.4 ) % (0.7 ) % margin Net income (loss) reconciliation: GAAP net loss $ (32,631 ) $ (6,162 ) $ (79,008 ) $ (36,681 ) Stock-based compensation 33,244 8,257 69,368 19,480 expense Change in fair value of preferred - - - 14,087 stock warrants Employer payroll tax on employee 2,114 893 3,971 1,155 stock plans Amortization of acquired intangible 770 - 906 - assets Impairment of - - 2,128 - long-lived asset Acquisition-related 314 - 722 - costs Partial release of the valuation (427 ) - (1,174 ) - allowance due to acquisitions Non-GAAP net income $ 3,384 $ 2,988 $ (3,087 ) $ (1,959 ) (loss) Reconciliation of shares used in computing basic and diluted net income (loss) per share: Weighted-average shares used in computing GAAP 108,047 98,996 105,067 80,246 basic net loss per share Effect of dilutive securities: 10,685 16,619 - - Employee stock awards and ESPP Weighted-average shares used in computing Non-GAAP 118,732 115,615 105,067 80,246 basic and diluted net income (loss) per share GAAP basic and diluted net loss $ (0.30 ) $ (0.06 ) $ (0.75 ) $ (0.46 ) per share Non-GAAP basic and diluted net income $ 0.03 $ 0.03 $ (0.03 ) $ (0.02 ) (loss) per share Contact: For more information, please contact: Splunk Inc. Sherry Lowe, 415-852-5529 email@example.com or Investor Contact Splunk Inc. Ken Tinsley, 415-848-8476 firstname.lastname@example.org
Splunk Inc. Announces Fiscal Fourth Quarter and Full Year 2014 Financial Results
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