Splunk, Inc. Proves Its Worth as Enterprise Digitization Accelerates

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Splunk Inc. (NASDAQ: SPLK) announced fiscal second-quarter 2019 results on Thursday after the markets closed, with accelerated revenue growth helping the operational-intelligence platform leader exceed its own guidance for the 15th consecutive quarter.

With shares up 8% in after-hours trading as the market absorbs the news, let's take a closer look at what drove Splunk over the past few months and what investors can expect in the coming quarters.

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Splunk results: The raw numbers

Metric

Fiscal Q2 2019*

Fiscal Q2 2018

Year-Over-Year Growth

Revenue

$388.3 million

$280.2 million

38.6%

GAAP net income (loss)

($103.5 million)

($78.6 million)

N/A

GAAP earnings (loss) per share

($0.71)

($0.57)

N/A

What happened with Splunk this quarter?

  • The top line arrived well above the high end of Splunk's guidance provided in May, which called for revenue between $356 million and $358 million.
  • License revenue grew 36.3% year over year, to $200.7 million, while maintenance and services revenue increased 41.1%, to $187.6 million.
  • On an adjusted (non-GAAP) basis, which excludes stock-based compensation and acquisition costs, Splunk generated net income of $11.7 million, or $0.08 per share, above consensus estimates for adjusted earnings of $0.05 per share.
  • Adjusted operating margin was 2.9%, also above guidance for 2%.
  • Generated operating cash flow of $33.5 million and free cash flow of $28 million.
  • Signed over 550 new enterprise customers, with new and expanded relationships including the likes of ADP, the U.K. Ministry of Defence, the U.S. Department of Defense, Dartmouth College, and Southwestern Energy. Splunk also announced a new collaboration with BAE Systems to use machine learning to secure U.S. government cloud infrastructures and respond to security threats.
  • Notable new product releases include Splunk User Behavior Analytics (UBA) 4.1, which employs machine learning to identify unknown threats and anomalous behavior, and updated versions of the Splunk Machine Learning Toolkit with new visualizations, an out-of-the-box neural network algorithm, and faster investigation and anomaly detection.

What management had to say

Splunk CEO Doug Merritt stated:

Looking forward

For the current third quarter of fiscal 2019, Splunk expects revenue of between $430 million and $432 million -- or roughly 31.1% growth at the midpoint -- with adjusted operating margin of 13%. Splunk boosted its full fiscal-year 2019 guidance to call for revenue of roughly $1.685 billion (compared with its previous outlook for $1.645 billion), and reiterated its target for full-year adjusted operating margin of 11.5%.

All things considered, this was another straightforward quarterly beat and raise from Splunk, and in response, the stock rightly is rallying to challenge its all-time high.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Splunk. The Motley Fool has a disclosure policy.