) reported fiscal second-quarter 2014 loss of 13 cents per share,
which was wider than the Zacks Consensus Estimate of a loss of 11
cents and the year-ago quarter loss of 5 cents per share.
Revenues surged 50.3% year over year to $66.9 million and were
above management's guided range of $61.0 to $63.0 million.
Revenues beat the Zacks Consensus Estimate of $63.0 million.
International operations represented 21.0% of revenues.
Strong license sales and maintenance & services revenues
primarily drove the better-than-expected year-over-year result.
License sales (64.6% of revenues) jumped 48.0% year over year to
$43.2 million. Maintenance and services revenues (35.4% of
revenues) increased 65.9% from the year-ago quarter to $23.7
Splunk's results were mainly driven by continuous adoption and
implementation of its products within the enterprises. Moreover,
Splunk generated 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, which include the beta version of Hunk:
Splunk Analytics for Hadoop.
These new products are expected to boost Splunk's market share
in the emerging fields of web business analytics and processing
of industrial data. The company also added more than 400 new
customers. During the second quarter, Splunk received 163 new
orders, worth more than $100K.
Gross margin contracted 320 basis points ("bps") from the
year-ago quarter. This was primarily due to an unfavorable
Splunk continues to invest in research & development
("R&D"), which jumped 72.6% year over year to $16.2 million
in the quarter. Sales & marketing ("S&M") expense surged
60.9% from the prior-year quarter to $44.6 million. General &
administrative expense ("G&A") increased 64.4% year over year
to $11.9 million.
The sharp jump in operating expenses (up 63.9% year over year)
hurt profitability in the quarter. Operating loss was $13.3
million compared with a loss of $4.5 million in the prior-year
Net loss was $13.7 million or 13 cents per share compared with
a loss of $4.6 million or 5 cents per share in the prior-year
Balance Sheet and Cash Flow
Splunk exited the second quarter with $347.1 million in cash
& cash equivalents compared with $331.3 million in the
Cash flow from operations was $6.2 million compared with $3.8
million in the previous quarter and $11.6 million in the year-ago
quarter. Free cash flow was $4.3 million compared with $2.2
million in the year-ago quarter.
Days sales outstanding were 56 days.
Splunk expects revenues in the range of $275 million to $281
million (up from the previously guided range $266 million and
$274 million) and break-even operational result for fiscal 2014.
For fiscal third quarter of 2014, revenues are likely to be in
the range of $69 million and $71 million. Operating margin is
expected to be 0% to negative 2.0% in the third quarter.
Splunk reported mixed fiscal second quarter 2014 results.
Splunk's revenues are expected to benefit from a strong growth in
user base, higher renewal rates and expansion 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.
Moreover, the company continues to face tough competition from
established players such as
BMC Software Inc.
), International Business Machines
Splunk Inc. has a Zacks Rank #2 (Buy).
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