Splunk Inc. Announces Fiscal Fourth Quarter and Full Year 2021 Financial Results

Cloud ARR Growth Accelerates to 83%; Total ARR up 41%

SAN FRANCISCO–(BUSINESS WIRE)–Splunk Inc. (NASDAQ: SPLK), provider of the Data-to-Everything Platform, today announced results for its fiscal fourth quarter and full year ended January 31, 2021.

Fourth Quarter 2021 Financial Highlights

  • Cloud ARR was $810 million, up 83% year-over-year.
  • Total ARR was $2.36 billion, up 41% year-over-year.
  • Cloud revenue was $171 million, up 72% year-over-year.
  • Total revenues were $745 million, down 6% year-over-year.
  • 510 customers with ARR greater than $1 million, up 44% year-over-year.

Full Year 2021 Financial Highlights

  • Cloud revenue was $554 million, up 77% year-over-year.
  • Total revenues were $2.23 billion, down 5% year-over-year.
  • GAAP operating loss was $780 million; GAAP operating margin was negative 35%.
  • Non-GAAP operating loss was $85 million; non-GAAP operating margin was negative 3.8%.
  • GAAP loss per share was $5.68; non-GAAP loss per share was $0.55.
  • Operating cash flow was negative $191 million with free cash flow of negative $228 million.

Just three years ago, we set out to radically transform Splunk to better help our customers put data at the heart of their own organizations and strategy,” said Doug Merritt, President and CEO, Splunk. “I’ve been incredibly proud of our progress through our transformation, and this quarter’s performance is no exception.”

The market’s demand for data-driven solutions that enable digital and cloud transformation has never been higher,” Merritt continued. “We now have more than 500 customers investing over $1 million annually in our platform and solutions. At our size, Splunk is one of the fastest growing companies in the history of enterprise software.”

With Total ARR growing 41% year-over-year and $810M of Cloud ARR accelerating to 83% growth, we are extremely proud of the team’s execution and the company’s business fundamentals, both of which remain strong,” said Jason Child, chief financial officer, Splunk. “As organizations continue to reinvent towards the cloud, I’m confident that our ability to support them across IT, Security and Developer operations positions Splunk for long-term success.”

Fiscal Year 2021 & Recent Business Highlights:

New and Expansion Customers Include: California Pizza Kitchen, Cornerstone OnDemand, Europcar (France), Ghana International Bank, Lockheed Martin Space, Nationwide Building Society (United Kingdom), NATO Communications and Information Agency (Belgium), The New York City Fire Department (FDNY), Nvidia, Okta, Shopify, Strava, Tesco (United Kingdom), Tide, United States Census Bureau

  • Splunk’s Data-to-Everything Platform Helps Customers Thrive in the Data Age: New enhancements to Splunk Cloud and Splunk Enterprise power Splunk’s Data-to-Everything Platform, allowing customers to bring data to every decision, question and action across IT, Security and Observability. With updates to Splunk Data Stream Processor, Splunk Connected Experiences and Splunk’s Machine Learning Environment (SMLE), organizations around the world can improve the speed, scale and flexibility of Splunk, with new search and mobile capabilities that enable faster cloud transformation.
  • Splunk’s Industry-Leading IT & Security Platforms Accelerate the Cloud Journey: Splunk announced a series of cloud-centric updates to its market-shaping IT and Security offerings, Splunk IT Service Intelligence (ITSI) and Splunk Enterprise Security. New updates to Splunk Mission Control helps security teams unify and modernize security operations in the cloud; while the latest version of Splunk IT Service Intelligence gives teams end-to-end visibility, operational efficiency and business intelligence so organizations can predict incidents before they impact customers.
  • Splunk Customers Go All-In On Cloud: Parallel to Splunk’s significant Cloud products transformation, businesses using Splunk around the world are embracing Splunk Cloud to modernize their data strategies and embrace The Data Age. Across 2020, Splunk’s cloud business represented nearly half of the company’s software bookings, enabling organizations to migrate workloads and applications to the cloud, manage colossal spikes in data volume or increase visibility into cloud security risks.
  • Splunk Launches the World’s Most Comprehensive Observability Suite: Announced at .conf20, Splunk’s Observability Suite combines the power of Splunk’s Data-to-Everything Platform with acquired technologies including SignalFx, Ominition, Streamlio, Plumbr, Rigor and Flowmill. By aligning best-in-class solutions for infrastructure monitoring, application performance monitoring, digital experience monitoring, log investigation and incident response into a single, tightly integrated suite of products, Splunk’s Observability Suite helps IT and DevOps teams tackle new monitoring challenges that other tools simply can’t effectively address.
  • Splunk’s World-Renowned Partners Help Fuel Digital Transformation Initiatives: Spawned by the world’s rapidly accelerating shift to the cloud, Splunk’s Splunk Partner+ ecosystem continued to expand, helping customers bring data to everything. This year, Splunk Cloud launched on Google Cloud, helping organizations achieve actionable insights from their data that enable fast decisions and real-time visibility across the enterprise. Splunk also built on its strong partnership and demonstrated increased mutual investment and resourcing with AWS by signing a new 3-year strategic collaboration agreement.
  • Splunk Recognized Globally as a Career-Defining, Destination Workplace: In spite of the ongoing COVID-19 pandemic, Splunk continued to grow its global workforce to over 6,000 Splunkers, united in one mission to turn data into doing. Throughout the year, the company was recognized as a leader in corporate culture, being named by Fortune as a Most Admired Company, Future 50 Company, Best Workplace for Women and Best Workplace for Millennials, amongst other technology and workplace awards.

Financial Outlook

The company is providing the following guidance for its fiscal first quarter 2022 (ending April 30, 2021):

  • Total ARR is expected to be between $2.42 billion and $2.44 billion.
  • Total revenues are expected to be between $480 million and $500 million.
  • Non-GAAP operating margin is expected to be approximately negative 30%.

All forward-looking non-GAAP financial measures contained in this section “Financial Outlook” exclude estimates for stock-based compensation and related employer payroll tax, acquisition-related adjustments, amortization of intangible assets and capitalized software costs.

A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, many of these costs and expenses that may be incurred in the future. The company has provided a reconciliation of GAAP to non-GAAP financial measures in the financial statement tables for its fiscal fourth quarter and full year 2021 non-GAAP results included in this press release.

Conference Call and Webcast

Splunk’s executive management team will host a conference call today beginning at 1:30 p.m. PT (4:30 p.m. ET) to discuss the company’s financial results and business highlights. Interested parties may access the call by dialing (866) 501-1535. International parties may access the call by dialing (216) 672-5582. A live audio webcast of the conference call will be available through Splunk’s Investor Relations website at http://investors.splunk.com/events-presentations. A replay of the call will be available through March 10, 2021 by dialing (855) 859-2056 and referencing Conference ID 1086748.

Safe Harbor Statement

This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding Splunk’s total ARR, revenue and non-GAAP operating margin targets for the company’s fiscal first quarter in the paragraphs under “Financial Outlook” above and other statements regarding our market opportunity, including the impact of the COVID-19 pandemic on the business environment, such as the pace of customer digital and cloud transformation and the importance of data; the growth of our cloud business; the market for data-related products and trends in this market, future growth and related targets, including trends in our cloud software business mix, customer renewals, momentum, growth rate, strategy, technology and product innovation; expectations for our industry and business, such as our business model, customer demand, our partner relationships, customer success and feedback, expanding use of Splunk by customers, and expected benefits and scale of our products. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: risks associated with Splunk’s rapid growth, particularly outside of the United States; Splunk’s inability to realize value from its significant investments in its business, including product and service innovations and through acquisitions; Splunk’s shift from sales of perpetual licenses in favor of sales of term licenses and subscription agreements for our cloud services which impact the timing of revenue, cash collections and margins; a shift from sales of term licenses in favor of sales of subscription agreements for our cloud services which impact the timing of revenue and margins; Splunk’s transition to a multi-product software and services business; Splunk’s inability to successfully integrate acquired businesses and technologies, such as Plumbr, Rigor and Flowmill; Splunk’s inability to service its debt obligations or other adverse effects related to our convertible notes; the impact of the COVID-19 pandemic and related public health measures on our business, as well as the impact of the COVID-19 pandemic on the overall economic environment, including customer buying capacity, urgency and patterns; and general market, political, economic, business and competitive market conditions.

Additional information on potential factors that could affect Splunk’s financial results is included in the company’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2020, which is on file with the U.S. Securities and Exchange Commission (“SEC”) and Splunk’s other filings with the SEC. Splunk does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

About Splunk Inc.

Splunk Inc. (NASDAQ: SPLK) turns data into doing with the Data-to-Everything Platform. Splunk technology is designed to investigate, monitor, analyze and act on data at any scale.

Splunk, Splunk>, Data-to-Everything, D2E and Turn Data Into Doing are trademarks and registered trademarks of Splunk Inc. in the United States and other countries. All other brand names, product names, or trademarks belong to their respective owners. © 2021 Splunk Inc. All rights reserved.

Splunk Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
 
 

Three Months Ended January 31,

Fiscal Year Ended January 31,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 
Revenues
License

$

405,954

 

$

517,542

 

$

971,378

 

$

1,373,367

 

Cloud services

 

171,396

 

 

99,413

 

 

554,132

 

 

312,358

 

Maintenance and services

 

167,728

 

 

174,227

 

 

703,875

 

 

673,201

 

Total revenues

 

745,078

 

 

791,182

 

 

2,229,385

 

 

2,358,926

 

Cost of revenues
License

 

4,315

 

 

6,702

 

 

20,864

 

 

24,116

 

Cloud services

 

75,718

 

 

52,985

 

 

252,290

 

 

161,510

 

Maintenance and services

 

69,863

 

 

68,151

 

 

274,191

 

 

244,162

 

Total cost of revenues

 

149,896

 

 

127,838

 

 

547,345

 

 

429,788

 

Gross profit

 

595,182

 

 

663,344

 

 

1,682,040

 

 

1,929,138

 

Operating expenses
Research and development

 

211,383

 

 

197,513

 

 

791,026

 

 

619,800

 

Sales and marketing

 

369,999

 

 

367,116

 

 

1,336,056

 

 

1,263,873

 

General and administrative

 

100,398

 

 

106,484

 

 

335,144

 

 

332,602

 

Total operating expenses

 

681,780

 

 

671,113

 

 

2,462,226

 

 

2,216,275

 

Operating loss

 

(86,598

)

 

(7,769

)

 

(780,186

)

 

(287,137

)

Interest and other income (expense), net
Interest income

 

1,412

 

 

8,769

 

 

13,850

 

 

54,142

 

Interest expense

 

(34,519

)

 

(24,722

)

 

(123,076

)

 

(96,249

)

Other income (expense), net

 

(16,169

)

 

(999

)

 

(11,636

)

 

(2,407

)

Total interest and other income (expense), net

 

(49,276

)

 

(16,952

)

 

(120,862

)

 

(44,514

)

Loss before income taxes

 

(135,874

)

 

(24,721

)

 

(901,048

)

 

(331,651

)

Income tax provision (benefit)

 

3,674

 

 

(1,993

)

 

6,932

 

 

5,017

 

Net loss

$

(139,548

)

$

(22,728

)

$

(907,980

)

$

(336,668

)

 
Basic and diluted net loss per share

$

(0.86

)

$

(0.15

)

$

(5.68

)

$

(2.22

)

 
Weighted-average shares used in computing basic and diluted net loss per share

 

162,009

 

 

155,915

 

 

159,744

 

 

151,949

 

Splunk Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
 
January 31, 2021 January 31, 2020
 
Assets
Current assets
Cash and cash equivalents

$

1,771,064

 

$

778,653

 

Investments, current

 

87,847

 

 

976,508

 

Accounts receivable, net

 

1,114,199

 

 

838,743

 

Prepaid expenses and other current assets

 

162,939

 

 

129,839

 

Deferred commissions, current

 

136,331

 

 

99,072

 

Total current assets

 

3,272,380

 

 

2,822,815

 

Investments, non-current

 

13,728

 

 

35,370

 

Accounts receivable, non-current

 

347,202

 

 

468,934

 

Operating lease right-of-use assets

 

356,296

 

 

267,086

 

Property and equipment, net

 

182,780

 

 

156,928

 

Intangible assets, net

 

206,153

 

 

238,415

 

Goodwill

 

1,334,888

 

 

1,292,840

 

Deferred commissions, non-current

 

69,637

 

 

88,990

 

Other assets

 

85,422

 

 

68,093

 

Total assets

$

5,868,486

 

$

5,439,471

 

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable

$

9,319

 

$

18,938

 

Accrued compensation

 

281,986

 

 

286,159

 

Accrued expenses and other liabilities

 

202,959

 

 

177,822

 

Deferred revenue, current

 

1,030,484

 

 

829,377

 

Total current liabilities

 

1,524,748

 

 

1,312,296

 

Convertible senior notes, net

 

2,302,635

 

 

1,714,630

 

Operating lease liabilities

 

330,970

 

 

235,631

 

Deferred revenue, non-current

 

110,418

 

 

176,832

 

Other liabilities, non-current

 

5,710

 

 

653

 

Total non-current liabilities

 

2,749,733

 

 

2,127,746

 

Total liabilities

 

4,274,481

 

 

3,440,042

 

Stockholders’ equity
Common stock

 

163

 

 

157

 

Accumulated other comprehensive loss

 

(592

)

 

(5,312

)

Additional paid-in capital

 

4,063,885

 

 

3,566,055

 

Accumulated deficit

 

(2,469,451

)

 

(1,561,471

)

Total stockholders’ equity

 

1,594,005

 

 

1,999,429

 

Total liabilities and stockholders’ equity

$

5,868,486

 

$

5,439,471

 

Splunk Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
Three Months Ended January 31, Fiscal Year Ended January 31,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 
Cash flows from operating activities
Net loss

$

(139,548

)

$

(22,728

)

$

(907,980

)

$

(336,668

)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization

 

26,397

 

 

21,582

 

 

93,666

 

 

67,661

 

Amortization of deferred commissions

 

42,878

 

 

29,275

 

 

142,095

 

 

104,353

 

Amortization of investment premiums (accretion of discounts), net

 

223

 

 

(1,584

)

 

(667

)

 

(9,553

)

Loss on strategic investment

 

4,500

 

 

 

 

4,500

 

 

 

Amortization of debt discount and issuance costs

 

27,322

 

 

20,679

 

 

98,977

 

 

80,156

 

Gain on extinguishment of convertible senior notes

 

 

 

 

 

(6,952

)

 

 

Repurchase of convertible senior notes attributable to the accreted interest related to debt discount

 

 

 

 

 

(22,149

)

 

 

Non-cash operating lease costs

 

9,627

 

 

(6,313

)

 

25,410

 

 

1,198

 

Stock-based compensation

 

166,174

 

 

166,496

 

 

618,655

 

 

545,424

 

Disposal of property and equipment

 

64

 

 

1,974

 

 

1,045

 

 

1,974

 

Deferred income taxes

 

(1,581

)

 

(5,722

)

 

(3,590

)

 

(6,120

)

Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net

 

(344,617

)

 

(365,503

)

 

(153,724

)

 

(679,891

)

Prepaid expenses and other assets

 

(31,020

)

 

(37,027

)

 

(45,476

)

 

(69,575

)

Deferred commissions

 

(60,230

)

 

(64,965

)

 

(160,001

)

 

(149,426

)

Accounts payable

 

(3,903

)

 

(4,312

)

 

(9,082

)

 

(5,441

)

Accrued compensation

 

(4,115

)

 

71,719

 

 

(3,805

)

 

58,898

 

Accrued expenses and other liabilities

 

17,311

 

 

(13,011

)

 

3,814

 

 

(10,392

)

Deferred revenue

 

266,752

 

 

150,609

 

 

134,402

 

 

119,766

 

Net cash used in operating activities

 

(23,766

)

 

(58,831

)

 

(190,862

)

 

(287,636

)

Cash flows from investing activities
Purchases of investments

 

 

 

(270,632

)

 

(87,135

)

 

(1,086,317

)

Maturities of investments

 

252,558

 

 

274,841

 

 

995,878

 

 

1,080,812

 

Acquisitions, net of cash acquired

 

(44,625

)

 

(18,574

)

 

(56,383

)

 

(594,870

)

Purchases of property and equipment

 

(8,800

)

 

(47,595

)

 

(37,107

)

 

(101,119

)

Capitalized software development costs

 

(3,899

)

 

(2,589

)

 

(14,602

)

 

(2,589

)

Other investment activities

 

 

 

(148

)

 

(3,461

)

 

(3,898

)

Net cash provided by (used in) investing activities

 

195,234

 

 

(64,697

)

 

797,190

 

 

(707,981

)

Cash flows from financing activities
Proceeds from the exercise of stock options

 

389

 

 

2,919

 

 

3,473

 

 

3,543

 

Proceeds from employee stock purchase plan

 

35,735

 

 

25,901

 

 

79,949

 

 

60,383

 

Proceeds from the issuance of convertible senior notes, net of issuance costs

 

 

 

 

 

1,246,544

 

 

 

Purchase of capped calls

 

 

 

 

 

(137,379

)

 

 

Partial repurchase of convertible senior notes

 

 

 

 

 

(668,929

)

 

 

Taxes paid related to net share settlement of equity awards

 

(91,541

)

 

 

 

(140,776

)

 

(164,160

)

Net cash provided by (used in) financing activities

 

(55,417

)

 

28,820

 

 

382,882

 

 

(100,234

)

Effect of exchange rate changes on cash and cash equivalents

 

2,750

 

 

(109

)

 

3,201

 

 

(1,661

)

Net increase (decrease) in cash and cash equivalents

 

118,801

 

 

(94,817

)

 

992,411

 

 

(1,097,512

)

Cash and cash equivalents at beginning of period

 

1,652,263

 

 

873,470

 

 

778,653

 

 

1,876,165

 

Cash and cash equivalents at end of period

$

1,771,064

 

$

778,653

 

$

1,771,064

 

$

778,653

 

Splunk Inc.

Operating Metrics

Total Annual Recurring Revenue (“Total ARR”) represents the annualized revenue run-rate of active subscription, term license, and maintenance contracts at the end of a reporting period. Cloud Annual Recurring Revenue (“Cloud ARR”) represents the annualized revenue run-rate of active subscription contracts at the end of a reporting period. Contracts are annualized by dividing the total contract value by the number of days in the contract term and then multiplying by 365.

Non-GAAP Financial Measures and Reconciliations

To supplement Splunk’s condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States (“GAAP”), Splunk provides investors with the following non-GAAP financial measures: cloud services cost of revenues, cloud services gross margin, cost of revenues, gross margin, research and development expense, sales and marketing expense, general and administrative expense, operating income (loss), operating margin, income tax provision (benefit), net income (loss), net income (loss) per share and free cash flow (collectively the “non-GAAP financial measures”). These non-GAAP financial measures exclude all or a combination of the following (as reflected in the following reconciliation tables): expenses related to stock-based compensation and related employer payroll tax, amortization of intangible assets, restructuring and facility exit charges, acquisition-related adjustments, capitalized software development costs, a legal settlement charge, non-cash interest expense related to convertible senior notes, a gain on extinguishment of convertible senior notes and a strategic investment impairment. The non-GAAP financial measures are also adjusted for Splunk’s estimated tax rate on non-GAAP income (loss). To determine the estimated non-GAAP tax rate, Splunk evaluates financial projections based on its non-GAAP results and the tax effect of those projections. The estimated non-GAAP tax rate takes into account many factors including our operating structure and tax positions. The non-GAAP tax rate applied to the three and twelve months ended January 31, 2021 was 20%. The applicable fiscal 2020 tax rates are noted in the reconciliations. In addition, non-GAAP financial measures include free cash flow, which represents operating cash flow less purchases of property and equipment. Splunk considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated or used by the business.

Splunk excludes stock-based compensation expense because it is non-cash in nature and excluding this expense provides meaningful supplemental information regarding Splunk’s operational performance and allows investors the ability to make more meaningful comparisons between Splunk’s operating results and those of other companies. Splunk excludes employer payroll tax expense related to employee stock plans in order for investors to see the full effect that excluding that stock-based compensation expense had on Splunk’s operating results. These expenses are tied to the exercise or vesting of underlying equity awards and the price of Splunk’s common stock at the time of vesting or exercise, which may vary from period to period independent of the operating performance of Splunk’s business. Splunk also excludes amortization of intangible assets, restructuring and facility exit charges, acquisition-related adjustments, capitalized software development costs, a legal settlement charge, non-cash interest expense related to convertible senior notes, a gain on extinguishment of convertible senior notes and a strategic investment impairment from the applicable non-GAAP financial measures because these adjustments are considered by management to be outside of Splunk’s core operating results.

There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by Splunk’s competitors and exclude expenses that may have a material impact upon Splunk’s reported financial results. Further, stock-based compensation expense has been and will continue to be, for the foreseeable future, a significant recurring expense in Splunk’s business and an important part of the compensation provided to Splunk’s employees. The presentation of the non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Splunk uses these non-GAAP financial measures for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. Splunk believes that these non-GAAP financial measures provide useful information about Splunk’s operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.

Contacts

Media Contact
Bill Bode

Splunk Inc.

press@splunk.com

Investor Contact
Ken Tinsley

Splunk Inc.

IR@splunk.com

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