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Splunk Marks 27 Straight Quarters of Beating Guidance

By Steve Symington – Updated Dec 3, 2018 at 2:34PM

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The operational intelligence platform absolutely crushed quarterly estimates yet again. Here's what investors need to know.

Splunk Inc. (SPLK -4.54%) announced strong fiscal third-quarter 2019 results on Thursday after the markets closed, adding hundreds of new enterprise customers and marking its 16th straight quarter of exceeding expectations.

With shares up around 5% in after-hours trading as of this writing, let's dig deeper to better understand how Splunk started the second half, as well as what investors should be watching going forward.

Splunk logo displayed at headquarters office on an array of flat-screen TVs.

IMAGE SOURCE: THE MOTLEY FOOL (WITH SPLUNK'S PERMISSION)

Splunk results: The raw numbers

Metric

Fiscal Q3 2019*

Fiscal Q3 2018

Year-Over-Year Growth

Revenue

$481 million

$342.5 million

40.4%

GAAP net income (loss)

($55.7 million)

($29.7 million)

N/A

GAAP earnings (loss) per share

($0.38)

($0.21)

N/A

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

What happened with Splunk this quarter?

  • By comparison, three months ago Splunk told investors to expect significantly lower revenue of between $430 million and $432 million.
  • License revenue climbed 44.3% year over year to $279.6 million.
  • Maintenance & services revenue grew 35.4% to $201.4 million.
  • Adjusted for items like stock-based compensation and acquisition expenses, Splunk generated (non-GAAP) net income of $57.6 million, or $0.38 per share, also above consensus estimates for adjusted earnings of $0.32 per share.
  • Adjusted operating margin was 13.6%, above guidance for 13%.
  • Splunk generated quarterly cash flow from operations of $59.1 million, and free cash flow of $51.8 million.
  • Added over 500 new enterprise customers, with new and expanded relationships with companies and organizations including Jabil, Norfolk Southern, Japan's Softbank, and Australia's Department of Home Affairs.
  • Notable new product releases and updates include Splunk Enterprise 7.2 and a new version of Splunk Cloud, Splunk for Industrial (its first Internet of Things product), Splunk ITSI 4.0, and new versions of Splunk Enterprise Security (5.2), Splunk User Behavior Analytics (4.2), Splunk Phantom (4.0), and Splunk Next.
  • Splunk announced today that its CFO, David Conte, has decided to retire in March 2020 after eight years with the company.

What management had to say

Splunk CEO Doug Merritt stated:

The strength of our results is a testament to Splunk's pioneering innovation and the rising demand for data-driven insights across all industries. At .conf18, we announced the largest wave of product innovation in our history, unveiled Splunk Next -- our vision to take Splunk beyond IT and security at scale, and released our first Internet of Things product, Splunk for Industrial IoT. Customer feedback is overwhelmingly positive, and Splunk is positioned to continue to lead through this data revolution.

Mr. Conte added:

After so many years with the company, I'm proud of everything we've accomplished including transforming our business model to one that is primarily renewable on our way to delivering more than $2 billion in revenue. Splunk has never been better positioned for success, and I'm looking forward to continuing our execution over the next year.

Looking forward

For the current fourth quarter of fiscal 2019, Splunk expects revenue of roughly $560 million -- good for growth of 33.4% and slightly above the $557 million most investors were anticipating -- with adjusted operating margin expanding to between 25% and 26%. As such, Splunk increased its full fiscal-year 2019 outlook to call for revenue of roughly $1.74 billion, up from its prior guidance for $1.685 billion.

Finally, Splunk followed by raising its guidance for fiscal 2020 revenue to climb to approximately $2.15 billion, marking an increase of roughly $150 million from its previous target.

In the end, while it remains to be seen how the market will react tomorrow to Splunk's latest beat and raise, this was a report with which any investor should be more than pleased. As Splunk rapidly grows the number of enterprise customers and use cases revolving around its continuously expanding portfolio of products, the stock should ultimately respond in kind.

Editor's note: This article has been corrected to note this was Splunk's 27th straight quarter of beating its guidance.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Splunk. The Motley Fool has a disclosure policy.

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