Splunk Inc. (
reported fourth-quarter 2013 loss of 6 cents per share, which was
wider than the Zacks Consensus Estimate of 2 cents loss. Loss per
share remained flat on both year-over-year and sequential
Revenues surged 51.0% year over year and 25.3% sequentially to
$65.2 million and were ahead of management's guided range of
$58.0 million to $60.0 million. Revenues also beat the Zacks
Consensus Estimate of $60.0 million. The better-than-expected
result was primarily driven by strong license sales and
maintenance & services revenues.
License sales (71.7% of revenues) jumped 42.5% year over year
and 35.4% quarter over quarter to $46.8 million. Maintenance and
services revenues (28.3% of revenues) increased 77.7% from the
year-ago quarter and 5.5% from the previous quarter to $18.4
Splunk continues to generate majority of its revenues from
core markets, which include App management, infrastructure and
operations, and security compliance. Splunk introduced a number
of new products during the quarter that include
Splunk App for Enterprise Security 2.2
App for VMWare 2.0
App for Palo Alto Networks 3.0
and many more.
These new products are expected to boost Splunk's market share
in the emerging fields of web intelligence, business analytics
and industrial data. The company's cloud and Storm platform had
more than 160 customers and 200 paid projects, which include
enterprise customers such as
Electronic Arts (
. Splunk's total customer base was approximately 5,200 at the end
of the fourth quarter.
During the quarter, Splunk signed deals with more than 400 new
customers, which include the likes of
. Splunk also expanded its existing customer base, as more than
18 customers, such as
extended their agreements with the company. Splunk continues to
experience strong growth in its existing customer base as over
70.0% of the quarter's license booking came from them.
In the fourth quarter, Splunk signed 171 orders, worth more
than $100,000, compared with 94 in the prior-year quarter and 125
in the previous quarter. Deferred revenues increased to $115.0
million from $74.0 million reported in the previous quarter. This
included a $20.0 million order and 117 figure transactions.
Maintenance renewal rate was 92% in the reported quarter.
Term-base and perpetual license sales mix was 13.0% in the
quarter compared with 8.0% in the year-ago quarter and within the
historical range of 10.0% to 20.0%.
International operations represented 26.0% of revenues as
Asia-Pacific ("APAC") and Europe Middle East and Africa ("EMEA")
jumped over 60% from the year-ago quarter.
Gross margin contracted 220 basis points ("bps") from the
year-ago quarter but expanded a modest 10 bps sequentially. Both
license and maintenance & services gross profit contracted on
a year-over-year basis. The sequential expansion was primarily
due to better product mix.
Splunk continues to invest in research & development
("R&D"), which jumped 81.1% year over year and 20.0%
sequentially to $13.3 million in the quarter. Sales &
marketing ("S&M") expense surged 52.6% from the prior-year
quarter and 22.8% from the previous quarter to $40.3 million.
General & administrative expense ("G&A") increased 65.2%
year over year and 42.7% quarter over quarter to $10.9
The sharp jump in operating expenses (up 59.8% year over year
and 25.2% sequentially) negatively hurt profitability in the
quarter. Operating loss was $5.9 million compared with a loss of
$0.6 million in the prior-year quarter and a loss of $5.4 million
in the previous quarter.
Net loss was $6.2 million compared with a loss of $1.3 million
in the prior-year quarter and a loss of $5.5 million in the
Balance Sheet and Cash Flow
Splunk exited the fourth quarter with $305.9 million in cash
& cash equivalents compared with $273.3 million in the
previous quarter and $31.6 million in the year-ago quarter.
Cash flow from operations was $24.8 million compared with $6.5
million in the previous quarter and $10.0 million in the year-ago
quarter. Free cash flow improved significantly to $21.4 million
compared with $4.2 million in the previous quarter and $7.9
million in the year-ago quarter.
Splunk expect revenues in the range of $260.0 million to
$270.0 million and break-even operational result for fiscal 2014.
For first quarter of 2014, revenues are likely to be in the range
of $52.0 to $54.0 million. Operating margin is expected to be
negative 10.0% to 12.0% in the first quarter.
Operating margin is expected to improve gradually in the
second and third quarter and management expects to report
positive figures in the fourth quarter. Headcount is expected to
increase by 250 in fiscal 2014.
Splunk's revenue growth is expected to benefit from 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 for 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 in the near term.
Currently, Splunk has a Zacks Rank #4 (Sell).
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