) reported a better-than-expected second quarter of 2013. The data
monitoring and analyzing software solutions provider posted a loss
of 5 cents per share, narrower than the Zacks Consensus Estimate of
a loss of 6 cents. Shares were up 15.6% ($4.75) in after-hours
Revenue growth was impressive in the reported quarter, which
jumped 73.2% year over year to $44.5 million, well ahead of the
Zacks Consensus Estimate of $40.0 million.
The strong growth was primarily driven by a 61% annual surge in
license revenue (68% of the total revenue) and 98% year-over-year
jump in maintenance and services revenue (32% of the total
International operations contributed 20% of the total revenue in
the quarter. Customer base were approximately 1,600 at the end of
In the reported quarter, Splunk signed deals with more than 400
new customers. Splunk continues to experience strong growth in its
existing customer base as more than 71% of the quarter's license
booking came from them.
In the second quarter, Splunk signed 98 orders worth more than
$100,000, compared with 65 in the prior-year quarter and 73 in the
previous quarter. Renewal rate was 91% higher than the management's
guided range of 85% to 90%.
Splunk continues to increase its sales personnel, ending the
quarter with 117 quota carriers compared with 101 in the previous
quarter. Of the newly added 16 quota carriers, 10 were
Gross profit soared 73.3% year over year to $39.8 million. Gross
margin expanded 110 basis points to 89.6%, primarily driven by
strong performance from the high margin license business.
Splunk continues to invest in research & development
("R&D"), which jumped 73.5% year over year to $9.4 million in
the quarter. Sales & marketing ("S&M") expense surged 69.2%
from the prior-year quarter to $27.7 million, while general &
administrative expense (G&A) increased 63.0% year over year to
This strong surge in expense line items had a negative impact on
profitability in the quarter. Operating loss (including stock-based
compensation) was $4.5 million compared with $3.3 million in the
Net loss (including stock-based compensation) was $4.6 million
or 5 cents per share compared with net loss of $3.3 million or 17
cents per share in the year-ago quarter.
Splunk exited the second quarter with $268.3 million in cash
& cash equivalents. Cash flow from operations was $3.8 million
in the quarter.
Splunk expects revenue in the range of $45.0 million to $47.0
million for the third quarter of 2013. The company raised its full
year revenue and non-GAAP operating margin guidance. Splunk now
expects revenue to be in the range of $183.0 million to $186.0
million (from $174.0 million to $177.0 million) for the full year
2013. Operating margin is expected to be in the range of negative
2.0% to 3.0% (was previously negative 4% to 5.0%).
Splunk's revenue growth is expected to benefit from a strong
growth in user base, higher renewal rates and expansions into new
markets. We believe that Splunk's strong product pipeline will also
boost top-line growth going forward.
However, increasing investments on product development are
expected to drag profitability in the near term. As Splunk
continues to explore and expand into new markets, sales &
marketing expenditure is expected to increase significantly,
thereby hurting margins going forward.
We are Neutral on Splunk over the long term (6-12 months).
Currently, Splunk has a Zacks #3 Rank, which implies a Hold rating
over the short term.
SPLUNK INC (SPLK): Free Stock Analysis Report
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