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Let's take a closer look at how Splunk finished the first half, as well as what we should watch over the next few quarters.
Woman pulling a big yellow fish eating a smaller yellow fish on a concrete wall.
SOURCE OF IMAGE: GETTY IMAGES.
Splunk results: raw numbers
| Metric | Q2 fiscal year 2020 * | Q2 2019 | Growth |
|---|---|---|---|
|
Returned |
$ 516.6 million |
$ 388.3 million |
33% |
|
GAAP net income |
($ 100.9 million) |
($ 103.5 million) |
N / A |
|
Earnings (loss) GAAP per share |
($ 0.67) |
($ 0.71) |
N / A |
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Data source: Splunk. * For the quarter ended on July 31, 2019. GAAP = generally accepted accounting principles. & Nbsp;& nbsp;"data-reactid =" 28 "> Data source: Splunk. * For the quarter ended July 31, 2019. GAAP = generally accepted accounting principles.
What happened to Splunk this quarter?
- Revenues were well above the May forecast of about $ 485 million.
- After adjusting for items such as stock-based compensation and acquisition costs, the net income generated by Splunk (not defined by GAAP) is high at $ 46.6 million, or $ 0.30 per share – which is also well above estimates of $ 0.12 per share.
- The adjusted operating margin was 9%, so Splunk's forecasts were not optimized to reach around 3%.
- Licensing revenues increased 39.2% to $ 279.3 million, while maintenance and service revenues jumped 26.5% to $ 237.3 million. In these totals, software revenues grew 46% to $ 350 million.
- Splunk generated operating cash flow from negative $ 129 million and free cash flow from negative $ 141 million.
- Splunk added nearly 500 new business customers during the quarter.
- Notable new and expanded relationships with customers included ABB, Denny, Duke University, Harvard Business School, DoorDash, Penn State University, Verizon Media Group, and Zoom.
- In a separate press release on Wednesday, Splunk announced its agreement to acquire the cloud surveillance specialist, SignalFX, for a total price of $ 1.05 billion, to be paid with approximately 60% in cash and 40 % in common shares of Splunk. Assuming the regulation is respected, the purchase should be finalized in the second half of this year.
What management had to say
"I am excited about our strong quarter, our phenomenal growth in the cloud and our acquisition agreement with SignalFx," said Splunk CEO Doug Merritt. "I am particularly pleased with the speed with which we are accelerating the transformation of our business into the cloud and the impact of the cloud on our customers."
With particular regard to the SignalFX agreement, Merritt said:
The data feeds modern operations and the acquisition of SignalFX clearly places Splunk in a leading position in large-scale monitoring and observability. SignalFx will support our ongoing commitment to provide customers with a platform that can monitor the complete lifecycle of enterprise applications. We are also extremely impressed with SignalFx's team and leadership, whose expertise and professionalism are a major asset to the Splunk family.
"With revenue growth of 80% over the previous year and total revenue estimated at more than $ 300 million, the strength of our cloud computing business is leading to a faster transition to a software model renewable, "added Jason Child, CFO of Splunk. "By the end of the year, we expect that virtually all new software sales will be cloud-based or term licenses."
Looking forward to
For the third quarter of fiscal year 2020, Splunk's revenues reach about $ 600 million, or about $ 10 million more than expected by most investors, with an adjusted operating margin of up to $ 16 million. %.
Unsurprisingly, Splunk then increased its outlook for the full year with revenues of $ 2.30 billion (previously $ 2.25 billion). Splunk also reiterated its target operating margin adjusted for fiscal year 2020, namely about 14%.
From its quarterly outperformance to a rise in expectations and an exciting acquisition, this Splunk report is of little value – aside, perhaps, from the modest dilution that shareholders will suffer for the equity portion of the price. purchase helping to finance the last one. And while it remains to be seen how the market will react with stocks that are already trading at a record high before yesterday's close, there is no denying the enviable dynamism of Splunk's underlying business.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "More from The Motley Fool"data-reactid =" 49 ">More from The Motley Fool
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Steve Symington has no position in any of the actions mentioned. Motley Fool owns shares and recommends Splunk and Zoom Video Communications. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy."data-reactid =" 57 ">Steve Symington has no position in any of the mentioned actions. Motley Fool owns shares and recommends Splunk and Zoom Video Communications. The Motley Fool recommends Verizon Communications. Motley Fool has a disclosure policy.
<p class = "canvas-atom-text-canvas Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "This article was originally published on Fool.com"data-reactid =" 58 "> This article was originally published on Fool.com.
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