Splunk, Inc. Proves Its Worth as Enterprise Digitization Accelerates

Steve Symington, The Motley Fool

Updated Thu, Aug 23, 2018, 6:41 PM

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.

Laptop displaying Splunk software interface

IMAGE SOURCE: SPLUNK

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

DATA SOURCE: SPLUNK. *FOR THE QUARTER ENDED JULY 31, 2018. GAAP = generally accepted accounting principles.

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:

The rapid digitization of every organization, coupled with Splunk's increasing innovation, is driving our continued momentum. Every organization needs to monitor, analyze and investigate data to make faster decisions and take action, and I am pleased that Splunk is the platform of choice. I am looking forward to .conf18 where we'll reveal the next generation of product innovations to help our customers succeed during this exciting time in their digital evolution.