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| 8-K - 8-K - SPLUNK INC | q3188-k.htm |
Exhibit 99.1
P R E S S R E L E A S E
Splunk Inc. Announces Fiscal Third Quarter 2018 Financial Results
Total Revenues Grew 34%; Company Boosts Full Year Outlook
SAN FRANCISCO - November 16, 2017 - Splunk Inc. (NASDAQ: SPLK), first in delivering “aha” moments from machine data, today announced results for its fiscal third quarter ended October 31, 2017.
Third Quarter 2018 Financial Highlights
• | Total revenues were $328.7 million, up 34% year-over-year. |
• | Total billings were $381.6 million, up 38% year-over-year. |
• | GAAP operating loss was $50.8 million; GAAP operating margin was negative 15.5%. |
• | Non-GAAP operating profit was $32.3 million; non-GAAP operating margin was positive 9.8%. |
• | GAAP loss per share was $0.36; non-GAAP earnings per share was $0.17. |
• | Operating cash flow was $52.3 million with free cash flow of $46.9 million. |
“I’m proud of our global performance for the quarter and our increased outlook through the rest of the year,” said Doug Merritt, President and CEO, Splunk. “Splunk announced a wide range of innovations at .conf2017 including native support for metrics and machine learning updates to Splunk® Enterprise and Splunk Cloud; new event analytics capabilities in Splunk IT Service Intelligence; new content updates for Splunk Enterprise Security; and a host of new use case-specific solutions. Splunk customers are seizing upon the growing opportunity machine data presents and only Splunk can help them get answers on-premises, in the cloud or across hybrid environments.”
Third Quarter 2018 and Recent Business Highlights:
Customers:
• | Signed more than 450 new enterprise customers. |
• | New and Expansion Customers Include: 21st Century Fox, Arizona State University, ATB Financial, Atlassian, Banner Health, BCD Travel, Blackbaud, Blucora, CallidusCloud, Cincinnati Children's Hospital Medical Center, Daimler (Germany), Deakin University (Australia), Defense Health Agency, Derbyshire Fire & Rescue (England), The E.W. Scripps Company, Johns Hopkins University, Li & Fung (Hong Kong), Nutanix, Norsk Helsenett (Norway), PIMCO, Purdue University, SAS, Smithsonian Institution, Texas Department of Transportation, U.S. Army, U.S. Department of Homeland Security Data Center, Vodafone Egypt, Yahoo! JAPAN |
Products:
• | Announced at .conf2017 a new suite of solutions and expanded machine learning capabilities across Splunk’s product portfolio to bring machine learning to the mainstream. |
• | Announced Splunk Enterprise 7.0 with advancements in machine learning and support for metrics to accelerate monitoring and alerting by at least 20x. |
• | Announced Splunk IT Service Intelligence (ITSI) 3.0 to revolutionize event monitoring by combining service context with machine learning. |
• | Announced Splunk User Behavior Analytics (UBA) 4.0, enabling customers to create and load their own machine learning models to identify custom anomalies and threats via a new software development kit (SDK). |
• | Announced Splunk Enterprise Security (ES) Content Update, a new subscription service that regularly delivers dynamic, pre-packaged security content to Splunk ES customers. |
• | Announced Splunk Essentials for Fraud Detection, a free Splunk app that guides customers on how to use Splunk to identify and investigate different types of fraud. |
Corporate:
• | Acquired selected assets of Rocana Inc., a company providing analytics solutions for the IT market, to extend Splunk’s IT operations leadership. |
• | Acquired SignalSense Inc., a company offering cloud-based advanced data collection and breach detection solutions, further advancing Splunk’s machine learning capabilities. |
• | Showcased flexible pricing programs tailored to fit the needs of all customers and deliver value no matter where |
Splunk Inc. | www.splunk.com
organizations are in their Splunk journey.
• | Unveiled new, free training programs to help military veterans and youth train for careers in technology through Splunk4Good in partnership with nonprofits AWS re:Start, NPower, Wounded Warrior Project and Year Up. |
• | Inducted 42 members of the 2018 cohort of the SplunkTrust program to recognize some of the most dedicated members of the Splunk Community. |
Strategic and Channel Partners:
• | Showcased rapid growth of the company’s global partner ecosystem at .conf2017, with the Partner+ Program helping 950 partners worldwide drive market opportunity and profitability. |
• | Introduced new versions of the Splunk Add-on for Amazon Web Services (AWS) and Splunk App for AWS with major enhancements around ingestion speed and setup usability. |
• | Announced the general availability of Booz Allen Hamilton Cyber4Sight for Splunk, a solution empowering security analysts and threat hunters with actionable threat intelligence. |
• | Released the new Splunk App for Puppet Enterprise and Splunk ITSI Module for Puppet Enterprise in partnership with Puppet Labs to help customers address issues in real-time through machine learning. |
• | Expanded partnership with Dell EMC with the new Dell EMC Ready Systems for Splunk, a pre-engineered portfolio of purpose-built systems for Splunk Enterprise. |
Recognition:
• | Named to Fortune Magazine’s inaugural Future 50 list, which highlights the most forward-looking, innovative companies in the world. |
• | Named to the 2017 Technology Fast 500 for the fifth consecutive year. Sponsored by Deloitte, the list recognizes 500 of the fastest-growing companies in North America. |
• | Listed as a “Vendor to Watch” in the Gartner 2017 Magic Quadrant for Digital Marketing Analytics. |
Events:
• | Hosted .conf2017: the 8th Annual Splunk Conference in Washington, drawing more than 7,000 Splunk enthusiasts, customers and partners. |
• | Honored the winners of the 2017 Revolution Awards at .conf2017, recognizing spectacular achievements from Splunk’s worldwide customers and partners. |
• | Hosted the first-ever SplunkLive! in Montreal and additional SplunkLive! events in cities worldwide, including Beijing, Seattle, Shanghai and Singapore. Presentations can be found on the SplunkLive! website. |
Appointments:
• | Appointed Sara Baack, chief marketing officer of Equinix, and Elisa Steele, former CEO and president of Jive Software, to Splunk’s Board of Directors. |
• | Promoted Susan St. Ledger to the newly created role of president, worldwide field operations. |
Financial Outlook
The company is providing the following guidance for its fiscal fourth quarter 2018 (ending January 31, 2018):
• | Total revenues are expected to be between $388 million and $390 million. |
• | Non-GAAP operating margin is expected to be approximately 16%. |
The company is updating its previous guidance provided on August 24, 2017 for its fiscal year 2018 (ending January 31, 2018):
• | Total billings are expected to be approximately $1.485 billion (was approximately $1.450 billion). |
• | Total revenues are expected to be between $1.239 and $1.241 billion (was between $1.210 and $1.215 billion). |
• | Non-GAAP operating margin is expected to be approximately 8.5% (was approximately 8%). |
The company is providing the following guidance for its fiscal year 2019 (ending January 31, 2019):
• | Total revenues are expected to be approximately $1.550 billion. |
• | Non-GAAP operating margin is expected to be approximately 10.5%. |
All forward-looking non-GAAP financial measures contained in this section “Financial Outlook” exclude estimates for expenses related to stock-based compensation and related employer payroll tax, amortization of acquired intangible assets, adjustments related to a financing lease obligation, adjustments related to facility exits and acquisition-related adjustments.
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 the excluded costs and expenses that may be incurred in the future. The company has provided a reconciliation of GAAP to non-GAAP financial
Splunk Inc. | www.splunk.com
measures in the financial statement tables for its fiscal third quarter 2018 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 November 23, 2017 by dialing (855) 859-2056 and referencing Conference ID 8994427.
Safe Harbor Statement
This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding Splunk’s revenue, billings, and non-GAAP operating margin targets for the company’s fiscal fourth quarter, fiscal year 2018 and/or fiscal year 2019 in the paragraphs under “Financial Outlook” above and other statements regarding future growth, strategy, including with respect to our acquisitions, pricing programs and their expected benefits, our partner programs and their expected benefits, customer demand and penetration, expanding use of Splunk by customers, size of machine data opportunity, Splunk’s ability to capture market share, and expected benefits of new products and product innovations as well as existing products and services. 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 and experience developing and introducing new products, including its cloud offerings; risks associated with Splunk’s rapid growth, particularly outside of the United States; Splunk’s inability to realize value from its significant investments in its business, including product and service innovations; 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, business and competitive market conditions.
Additional information on potential factors that could affect Splunk’s financial results is included in the company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2017, 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) turns machine data into answers. Organizations use market-leading Splunk solutions with machine learning to solve their toughest IT, Internet of Things and security challenges. Join millions of passionate users and discover your “aha” moment with Splunk today: http://www.splunk.com.
Social Media: Twitter | LinkedIn | YouTube | Facebook
Splunk, Splunk>, Listen to Your Data, The Engine for Machine Data, Splunk Cloud, Splunk Light 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. © 2017 Splunk Inc. All rights reserved.
For more information, please contact:
Media Contact
Tom Stilwell
Splunk Inc.
415.852.5561
tstilwell@splunk.com
Investor Contact
Ken Tinsley
Splunk Inc.
415.848.8476
ktinsley@splunk.com
Splunk Inc. | www.splunk.com
SPLUNK INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
October 31, | October 31, | October 31, | October 31, | |||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues | ||||||||||||||||
License | $ | 179,829 | $ | 139,725 | $ | 439,406 | $ | 356,412 | ||||||||
Maintenance and services | 148,824 | 105,064 | 411,659 | 287,082 | ||||||||||||
Total revenues | 328,653 | 244,789 | 851,065 | 643,494 | ||||||||||||
Cost of revenues | ||||||||||||||||
License | 3,013 | 2,883 | 9,100 | 8,713 | ||||||||||||
Maintenance and services | 61,154 | 45,791 | 173,106 | 124,077 | ||||||||||||
Total cost of revenues | 64,167 | 48,674 | 182,206 | 132,790 | ||||||||||||
Gross profit | 264,486 | 196,115 | 668,859 | 510,704 | ||||||||||||
Operating expenses | ||||||||||||||||
Research and development | 74,080 | 85,659 | 217,152 | 220,254 | ||||||||||||
Sales and marketing | 205,364 | 167,330 | 570,596 | 462,709 | ||||||||||||
General and administrative | 35,857 | 34,079 | 111,492 | 100,464 | ||||||||||||
Total operating expenses | 315,301 | 287,068 | 899,240 | 783,427 | ||||||||||||
Operating loss | (50,815 | ) | (90,953 | ) | (230,381 | ) | (272,723 | ) | ||||||||
Interest and other income (expense), net | ||||||||||||||||
Interest income (expense), net | 270 | (823 | ) | (422 | ) | (2,023 | ) | |||||||||
Other income (expense), net | (289 | ) | (348 | ) | (1,771 | ) | (2,536 | ) | ||||||||
Total interest and other income (expense), net | (19 | ) | (1,171 | ) | (2,193 | ) | (4,559 | ) | ||||||||
Loss before income taxes | (50,834 | ) | (92,124 | ) | (232,574 | ) | (277,282 | ) | ||||||||
Income tax provision (benefit) | (232 | ) | 1,367 | 1,459 | 3,702 | |||||||||||
Net loss | $ | (50,602 | ) | $ | (93,491 | ) | $ | (234,033 | ) | $ | (280,984 | ) | ||||
Basic and diluted net loss per share | $ | (0.36 | ) | $ | (0.69 | ) | $ | (1.68 | ) | $ | (2.11 | ) | ||||
Weighted-average shares used in computing basic and diluted net loss per share | 140,413 | 134,677 | 139,111 | 133,273 | ||||||||||||
Splunk Inc. | www.splunk.com
SPLUNK INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
October 31, 2017 | January 31, 2017 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 393,314 | $ | 421,346 | ||||
Investments, current portion | 665,075 | 662,096 | ||||||
Accounts receivable, net | 264,497 | 238,281 | ||||||
Prepaid expenses and other current assets | 44,545 | 38,650 | ||||||
Total current assets | 1,367,431 | 1,360,373 | ||||||
Investments, non-current | 5,000 | 5,000 | ||||||
Property and equipment, net | 161,249 | 166,395 | ||||||
Intangible assets, net | 52,434 | 37,713 | ||||||
Goodwill | 161,382 | 124,642 | ||||||
Other assets | 28,284 | 24,423 | ||||||
Total assets | $ | 1,775,780 | $ | 1,718,546 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 12,409 | $ | 7,503 | ||||
Accrued payroll and compensation | 115,733 | 100,092 | ||||||
Accrued expenses and other liabilities | 74,680 | 81,071 | ||||||
Deferred revenue, current portion | 516,401 | 478,707 | ||||||
Total current liabilities | 719,223 | 667,373 | ||||||
Deferred revenue, non-current | 185,712 | 146,752 | ||||||
Other liabilities, non-current | 99,140 | 99,260 | ||||||
Total non-current liabilities | 284,852 | 246,012 | ||||||
Total liabilities | 1,004,075 | 913,385 | ||||||
Stockholders’ equity | ||||||||
Common stock | 141 | 137 | ||||||
Accumulated other comprehensive loss | (2,074 | ) | (3,013 | ) | ||||
Additional paid-in capital | 2,028,455 | 1,828,821 | ||||||
Accumulated deficit | (1,254,817 | ) | (1,020,784 | ) | ||||
Total stockholders’ equity | 771,705 | 805,161 | ||||||
Total liabilities and stockholders’ equity | $ | 1,775,780 | $ | 1,718,546 | ||||
Splunk Inc. | www.splunk.com
SPLUNK INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
October 31, | October 31, | October 31, | October 31, | |||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Cash flows from operating activities | ||||||||||||||||
Net loss | $ | (50,602 | ) | $ | (93,491 | ) | $ | (234,033 | ) | $ | (280,984 | ) | ||||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 10,123 | 8,279 | 30,039 | 22,914 | ||||||||||||
Amortization of investment premiums | 31 | 173 | 373 | 620 | ||||||||||||
Stock-based compensation | 84,111 | 105,014 | 266,533 | 285,247 | ||||||||||||
Deferred income taxes | (1,811 | ) | 78 | (2,677 | ) | (620 | ) | |||||||||
Excess tax benefits from employee stock plans | — | 476 | — | (551 | ) | |||||||||||
Non-cash facility exit adjustment | (5,191 | ) | — | (5,191 | ) | — | ||||||||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||||||||||
Accounts receivable, net | (56,415 | ) | (41,227 | ) | (26,216 | ) | 9,176 | |||||||||
Prepaid expenses, other current and non-current assets | (618 | ) | (4,951 | ) | (8,501 | ) | (8,128 | ) | ||||||||
Accounts payable | 2,956 | 1,265 | 4,919 | 1,530 | ||||||||||||
Accrued payroll and compensation | 21,890 | 18,447 | 15,626 | (12,538 | ) | |||||||||||
Accrued expenses and other liabilities | (5,100 | ) | 19,413 | (693 | ) | 32,992 | ||||||||||
Deferred revenue | 52,913 | 31,796 | 76,654 | 49,652 | ||||||||||||
Net cash provided by operating activities | 52,287 | 45,272 | 116,833 | 99,310 | ||||||||||||
Cash flows from investing activities | ||||||||||||||||
Purchases of investments | (177,207 | ) | (207,255 | ) | (517,904 | ) | (523,783 | ) | ||||||||
Maturities of investments | 175,745 | 156,000 | 514,010 | 446,275 | ||||||||||||
Acquisitions, net of cash acquired | (42,127 | ) | — | (59,350 | ) | — | ||||||||||
Purchases of property and equipment | (5,418 | ) | (12,969 | ) | (13,931 | ) | (27,219 | ) | ||||||||
Other investment activities | — | — | — | (3,500 | ) | |||||||||||
Net cash used in investing activities | (49,007 | ) | (64,224 | ) | (77,175 | ) | (108,227 | ) | ||||||||
Cash flows from financing activities | ||||||||||||||||
Proceeds from the exercise of stock options | 501 | 1,752 | 2,474 | 7,355 | ||||||||||||
Excess tax benefits from employee stock plans | — | (476 | ) | — | 551 | |||||||||||
Proceeds from employee stock purchase plan | — | — | 19,282 | 15,183 | ||||||||||||
Taxes paid related to net share settlement of equity awards | (29,542 | ) | (26,533 | ) | (88,651 | ) | (73,355 | ) | ||||||||
Repayment of financing lease obligation | (497 | ) | — | (1,299 | ) | — | ||||||||||
Net cash used in financing activities | (29,538 | ) | (25,257 | ) | (68,194 | ) | (50,266 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | (238 | ) | (147 | ) | 504 | 235 | ||||||||||
Net decrease in cash and cash equivalents | (26,496 | ) | (44,356 | ) | (28,032 | ) | (58,948 | ) | ||||||||
Cash and cash equivalents at beginning of period | 419,810 | 409,949 | 421,346 | 424,541 | ||||||||||||
Cash and cash equivalents at end of period | $ | 393,314 | $ | 365,593 | $ | 393,314 | $ | 365,593 | ||||||||
Splunk Inc. | www.splunk.com
SPLUNK INC.
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 certain non-GAAP financial measures, including non-GAAP cost of revenues, non-GAAP gross margin, non-GAAP research and development expense, non-GAAP sales and marketing expense, non-GAAP general and administrative expense, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss) and non-GAAP net income (loss) per share (collectively the “non-GAAP financial measures”). These non-GAAP financial measures exclude all or a combination of the following (as reflected in the following reconciliation tables): expenses related to stock-based compensation and related employer payroll tax, amortization of acquired intangible assets, adjustments related to a financing lease obligation, adjustments related to facility exits and acquisition-related adjustments, including the partial release of the valuation allowance due to acquisitions. The adjustments for the financing lease obligation are to reflect the expense Splunk would have recorded if its build-to-suit lease arrangement had been deemed an operating lease instead of a financing lease and is calculated as the net of actual ground lease expense, depreciation and interest expense over estimated straight-line rent expense. The non-GAAP financial measures are also adjusted for Splunk's estimated tax rate on non-GAAP income (loss). To determine the annual non-GAAP tax rate, Splunk evaluates a financial projection based on its non-GAAP results. The annual non-GAAP tax rate takes into account other factors including Splunk's current operating structure, its existing tax positions in various jurisdictions and key legislation in major jurisdictions where Splunk operates. The annual non-GAAP tax rate applied to the three and nine months ended October 31, 2017 was 27%. Splunk will utilize this annual non-GAAP tax rate in fiscal 2018 and will provide updates to this rate on an annual basis, or more frequently if material changes occur. In addition, non-GAAP financial measures include free cash flow, which represents cash from operations less purchases of property and equipment, and billings, which represents revenues plus the change in deferred revenue during the period. The presentation of the non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Splunk uses these non-GAAP financial measures for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. Splunk believes that these non-GAAP financial measures provide useful information about Splunk’s operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. In addition, these non-GAAP financial measures facilitate comparisons to competitors’ operating results.
Splunk excludes stock-based compensation expense because it is non-cash in nature and excluding this expense provides meaningful supplemental information regarding Splunk’s operational performance and allows investors the ability to make more meaningful comparisons between Splunk’s operating results and those of other companies. Splunk excludes employer payroll tax expense related to employee stock plans in order for investors to see the full effect that excluding that stock-based compensation expense had on Splunk’s operating results. These expenses are tied to the exercise or vesting of underlying equity awards and the price of Splunk’s common stock at the time of vesting or exercise, which may vary from period to period independent of the operating performance of Splunk’s business. Splunk also excludes amortization of acquired intangible assets, adjustments related to facility exits, acquisition-related costs, including the partial release of the valuation allowance due to acquisitions, and makes adjustments related to a financing lease obligation from its non-GAAP financial measures because these are considered by management to be outside of Splunk’s core operating results. Accordingly, Splunk believes that excluding these expenses provides investors and management with greater visibility to the underlying performance of its business operations, facilitates comparison of its results with other periods and may also facilitate comparison with the results of other companies in its industry. Splunk considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including investing in its business, making strategic acquisitions and strengthening its balance sheet. Splunk considers billings to be a useful measure for management and investors because it provides visibility into Splunk’s sales activity for a particular period, which is not necessarily reflected in its revenues given that Splunk recognizes term licenses and subscriptions for cloud services ratably.
There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by Splunk’s competitors and exclude expenses that may have a material impact upon Splunk’s reported financial results. Further, stock-based compensation expense has been and will continue to be for the foreseeable future a significant recurring expense in Splunk’s business and an important part of the compensation provided to Splunk’s employees. The non-GAAP financial measures are meant to supplement and be viewed in conjunction with GAAP financial measures.
The following tables reconcile Splunk’s GAAP results to Splunk’s non-GAAP results included in this press release.
Splunk Inc. | 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 Operating Activities to Free Cash Flow
Three Months Ended | Nine Months Ended | ||||||||||||||
October 31, | October 31, | October 31, | October 31, | ||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net cash provided by operating activities | $ | 52,287 | $ | 45,272 | $ | 116,833 | $ | 99,310 | |||||||
Less purchases of property and equipment | (5,418 | ) | (12,969 | ) | (13,931 | ) | (27,219 | ) | |||||||
Free cash flow (non-GAAP) | $ | 46,869 | $ | 32,303 | $ | 102,902 | $ | 72,091 | |||||||
Net cash used in investing activities | $ | (49,007 | ) | $ | (64,224 | ) | $ | (77,175 | ) | $ | (108,227 | ) | |||
Net cash used in financing activities | $ | (29,538 | ) | $ | (25,257 | ) | $ | (68,194 | ) | $ | (50,266 | ) | |||
Reconciliation of GAAP to Non-GAAP Financial Measures
Three Months Ended October 31, 2017
GAAP | Stock-based compensation and related employer payroll tax | Amortization of acquired intangible assets | Adjustments related to financing lease obligation | Adjustments related to facility exits | Acquisition-related adjustments | Income tax effects related to non-GAAP adjustments (3) | Non-GAAP | ||||||||||||||||||||||||||
Cost of revenues | $ | 64,167 | $ | (8,116 | ) | $ | (2,873 | ) | $ | 316 | $ | — | $ | — | $ | — | $ | 53,494 | |||||||||||||||
Gross margin | 80.5 | % | 2.4 | % | 0.9 | % | (0.1 | )% | — | % | — | % | — | % | 83.7 | % | |||||||||||||||||
Research and development | 74,080 | (25,502 | ) | (130 | ) | 489 | — | — | — | 48,937 | |||||||||||||||||||||||
Sales and marketing | 205,364 | (37,789 | ) | (561 | ) | 1,170 | — | — | — | 168,184 | |||||||||||||||||||||||
General and administrative | 35,857 | (14,882 | ) | — | 230 | 5,191 | (643 | ) | — | 25,753 | |||||||||||||||||||||||
Operating income (loss) | (50,815 | ) | 86,289 | 3,564 | (2,205 | ) | (5,191 | ) | 643 | — | 32,285 | ||||||||||||||||||||||
Operating margin | (15.5 | )% | 26.3 | % | 1.1 | % | (0.7 | )% | (1.6 | )% | 0.2 | % | — | % | 9.8 | % | |||||||||||||||||
Income tax provision | (232 | ) | — | — | — | 1,995 | 7,514 | 9,277 | |||||||||||||||||||||||||
Net income (loss) | $ | (50,602 | ) | $ | 86,289 | $ | 3,564 | $ | (111 | ) | (2 | ) | $ | (5,191 | ) | $ | (1,352 | ) | $ | (7,514 | ) | $ | 25,083 | ||||||||||
Net income (loss) per share(1) | $ | (0.36 | ) | $ | 0.17 | ||||||||||||||||||||||||||||
_________________________
(1) GAAP net loss per share calculated based on 140,413 weighted-average shares of common stock. Non-GAAP net income per share calculated based on 144,415 diluted weighted-average shares of common stock, which includes 4,002 potentially dilutive shares related to employee stock awards. GAAP to non-GAAP net income (loss) per share is not reconciled due to the difference in the number of shares used to calculate basic and diluted weighted-average shares of common stock.
(2) Includes $2.1 million of interest expense related to the financing lease obligation.
(3) Represents the tax effect of the non-GAAP adjustments based on the estimated annual effective tax rate of 27%.
Reconciliation of GAAP to Non-GAAP Financial Measures
Three Months Ended October 31, 2016
GAAP | Stock-based compensation and related employer payroll tax | Amortization of acquired intangible assets | Adjustments related to financing lease obligation | Income tax effects related to non-GAAP adjustments (3) | Non-GAAP | |||||||||||||||||||
Cost of revenues | $ | 48,674 | $ | (7,740 | ) | $ | (2,814 | ) | $ | 276 | $ | — | $ | 38,396 | ||||||||||
Gross margin | 80.1 | % | 3.2 | % | 1.1 | % | (0.1 | )% | — | % | 84.3 | % | ||||||||||||
Research and development | 85,659 | (45,889 | ) | (63 | ) | 559 | — | 40,266 | ||||||||||||||||
Sales and marketing | 167,330 | (39,462 | ) | (110 | ) | 1,124 | — | 128,882 | ||||||||||||||||
General and administrative | 34,079 | (13,803 | ) | — | 236 | — | 20,512 | |||||||||||||||||
Operating income (loss) | (90,953 | ) | 106,894 | 2,987 | (2,195 | ) | — | 16,733 | ||||||||||||||||
Operating margin | (37.2 | )% | 43.7 | % | 1.2 | % | (0.9 | )% | — | % | 6.8 | % | ||||||||||||
Income tax provision | 1,367 | — | — | — | 2,336 | 3,703 | ||||||||||||||||||
Net income (loss) | $ | (93,491 | ) | $ | 106,894 | $ | 2,987 | $ | (123 | ) | (2) | $ | (2,336 | ) | $ | 13,931 | ||||||||
Net income (loss) per share(1) | $ | (0.69 | ) | $ | 0.10 | |||||||||||||||||||
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(1) GAAP net loss per share calculated based on 134,677 weighted-average shares of common stock. Non-GAAP net income per share calculated based on 138,401 diluted weighted-average shares of common stock, which includes 3,724 potentially dilutive shares related to employee stock awards. GAAP to Non-GAAP net income (loss) per share is not reconciled due to the difference in the number of shares used to calculate basic and diluted weighted-average shares of common stock.
(2) Includes $2.1 million of interest expense related to the financing lease obligation.
(3) For consistency, prior year non-GAAP net loss has been adjusted to reflect the tax effect of the non-GAAP adjustments based on the annual effective tax rate of 21%.
Reconciliation of GAAP to Non-GAAP Financial Measures
Nine Months Ended October 31, 2017
GAAP | Stock-based compensation and related employer payroll tax | Amortization of acquired intangible assets | Adjustments related to financing lease obligation | Adjustments related to facility exits | Acquisition-related adjustments | Income tax effects related to non-GAAP adjustments (3) | Non-GAAP | ||||||||||||||||||||||||||
Cost of revenues | $ | 182,206 | $ | (25,436 | ) | $ | (8,392 | ) | $ | 931 | $ | — | $ | — | $ | — | $ | 149,309 | |||||||||||||||
Gross margin | 78.6 | % | 3.0 | % | 1.0 | % | (0.1 | )% | — | % | — | % | — | % | 82.5 | % | |||||||||||||||||
Research and development | 217,152 | (80,100 | ) | (213 | ) | 1,515 | — | — | — | 138,354 | |||||||||||||||||||||||
Sales and marketing | 570,596 | (124,041 | ) | (1,893 | ) | 3,514 | — | — | — | 448,176 | |||||||||||||||||||||||
General and administrative | 111,492 | (45,673 | ) | — | 694 | 5,191 | (643 | ) | — | 71,061 | |||||||||||||||||||||||
Operating income (loss) | (230,381 | ) | 275,250 | 10,498 | (6,654 | ) | (5,191 | ) | 643 | — | 44,165 | ||||||||||||||||||||||
Operating margin | (27.1 | )% | 32.4 | % | 1.2 | % | (0.8 | )% | (0.6 | )% | 0.1 | % | — | % | 5.2 | % | |||||||||||||||||
Income tax provision | 1,459 | — | — | — | — | 2,540 | 9,038 | 13,037 | |||||||||||||||||||||||||
Net income (loss) | $ | (234,033 | ) | $ | 275,250 | $ | 10,498 | $ | (339 | ) | (2 | ) | $ | (5,191 | ) | $ | (1,897 | ) | $ | (9,038 | ) | $ | 35,250 | ||||||||||
Net income (loss) per share(1) | $ | (1.68 | ) | $ | 0.25 | ||||||||||||||||||||||||||||
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(1) GAAP net loss per share calculated based on 139,111 weighted-average shares of common stock. Non-GAAP net income per share calculated based on 143,552 diluted weighted-average shares of common stock, which includes 4,441 potentially dilutive shares related to employee stock awards. GAAP to non-GAAP net income (loss) per share is not reconciled due to the difference in the number of shares used to calculate basic and diluted weighted-average shares of common stock.
(2) Includes $6.3 million of interest expense related to the financing lease obligation.
(3) Represents the tax effect of the non-GAAP adjustments based on the estimated annual effective tax rate of 27%.
Reconciliation of GAAP to Non-GAAP Financial Measures
Nine Months Ended October 31, 2016
GAAP | Stock-based compensation and related employer payroll tax | Amortization of acquired intangible assets | Adjustments related to financing lease obligation | Income tax effects related to non-GAAP adjustments (3) | Non-GAAP | |||||||||||||||||||
Cost of revenues | $ | 132,790 | $ | (23,075 | ) | $ | (8,612 | ) | $ | 561 | $ | — | $ | 101,664 | ||||||||||
Gross margin | 79.4 | % | 3.6 | % | 1.3 | % | (0.1 | )% | — | % | 84.2 | % | ||||||||||||
Research and development | 220,254 | (104,269 | ) | (193 | ) | 1,172 | — | 116,964 | ||||||||||||||||
Sales and marketing | 462,709 | (120,883 | ) | (412 | ) | 2,373 | — | 343,787 | ||||||||||||||||
General and administrative | 100,464 | (43,448 | ) | — | 513 | — | 57,529 | |||||||||||||||||
Operating income (loss) | (272,723 | ) | 291,675 | 9,217 | (4,619 | ) | — | 23,550 | ||||||||||||||||
Operating margin | (42.4 | )% | 45.4 | % | 1.4 | % | (0.7 | )% | — | % | 3.7 | % | ||||||||||||
Income tax provision | 3,702 | — | — | — | 1,465 | 5,167 | ||||||||||||||||||
Net income (loss) | $ | (280,984 | ) | $ | 291,675 | $ | 9,217 | $ | 994 | (2) | $ | (1,465 | ) | $ | 19,437 | |||||||||
Net income (loss) per share(1) | $ | (2.11 | ) | $ | 0.14 | |||||||||||||||||||
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(1) GAAP net loss per share calculated based on 133,273 weighted-average shares of common stock. Non-GAAP net income per share calculated based on 136,690 diluted weighted-average shares of common stock, which includes 3,417 potentially dilutive shares related to employee stock awards. GAAP to Non-GAAP net income (loss) per share is not reconciled due to the difference in the number of shares used to calculate basic and diluted weighted-average shares of common stock.
(2) Includes $5.6 million of interest expense related to the financing lease obligation.
(3) For consistency, prior year non-GAAP net loss has been adjusted to reflect the tax effect of the non-GAAP adjustments based on the annual effective tax rate of 21%.
Reconciliation of Total Billings
Three Months Ended | Nine Months Ended | |||||||||||||||
October 31, | October 31, | October 31, | October 31, | |||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Total revenues | $ | 328,653 | $ | 244,789 | $ | 851,065 | $ | 643,494 | ||||||||
Increase in deferred revenue | 52,913 | 31,796 | 76,654 | 49,652 | ||||||||||||
Billings (non-GAAP) | $ | 381,566 | $ | 276,585 | $ | 927,719 | $ | 693,146 | ||||||||
Splunk Inc. | www.splunk.com