Splunk (NASDAQ:SPLK) released significantly better-than-expected fiscal third-quarter 2020 results on Wednesday after the markets closed. Shares of the operational-intelligence platform company are up around 6% in after-hours trading as the company demonstrated the fruits of recent acquisitions, the addition of hundreds of new enterprise customers to its already massive base, and its rapid -- albeit nearly complete -- shift toward a renewable revenue model.

Let's take a closer look at what Splunk accomplished over the past few months, starting with how its top and bottom lines fared relative to the same year-ago period:

Metric Fiscal Q3 2020* Fiscal Q3 2019 Growth

Revenue

$626.3 million

$481.0 million

30.2%

GAAP net income (loss)

($57.6 million)

($55.7 million)

N/A

GAAP earnings (loss) per share

($0.38)

($0.38)

N/A

Data source: Splunk. *For the quarter ended Oct. 31, 2019. GAAP = generally accepted accounting principles.

"Turning data into doing"

First, keep in mind the above GAAP results include the impact of items like stock-based compensation and acquisition expenses. Adjusted for those items, Splunk generated (non-GAAP) net income of $91.1 million, or $0.58 per share. Trending toward that bottom line, adjusted operating margin was 16.8%. For perspective, in August Splunk provided guidance calling for significantly lower revenue of $600 million, and for lower adjusted operating margin of 16%. And most analysts were modeling adjusted earnings of $0.54 per share on revenue closer to $604 million.

Digging deeper into Splunk's exceptional top-line growth, license revenue grew 33.6% year over year to $373.7 million, while maintenance & services revenue climbed 25.5% to just under $252.7 million. Within those totals, Splunk says its software revenue increased 40% to $454 million this quarter.

"Splunk continues to show the world how our Data-to-Everything Platform is uniquely positioned to bring data to every question, decision and action," said Doug Merritt, Splunk's president and CEO. "Whether through our groundbreaking innovations like Splunk Data Fabric Search and Splunk Data Stream Processor or aggressive acquisition strategy, Splunk is transforming the way our customers around the world turn data into doing."

The proof is in the pudding: Splunk added 440 new enterprise customers during the quarter, with new and expanded relationships including the likes of Airbus in Germany, Carnival Cruise Lines, Chegg, CrowdStrike, NEC, and the U.S. Census Bureau.

On cash flows, forward guidance

But Splunk also continued to burn cash this quarter, generating negative operating cash flow of $135 million and negative free cash flow of $162 million. Note, however -- as management has outlined in each of its previous two quarterly reports -- this was an expected result, given the negative impact on the timing of cash collections spurred by Splunk's far faster-than-expected transition away from perpetual licenses and toward a cloud-based, renewable model.

"With the shift to a renewable model largely complete, momentum in our term license and cloud offerings drove 53% growth in total [annual recurring revenue] during the quarter," elaborated Splunk CFO Jason Child.

For the fourth quarter, Splunk says it expects revenue of roughly $780 million (roughly $12 million above analysts' consensus models), with adjusted operating margin expanding to 23%.

As such, Splunk raised its full fiscal-year 2020 guidance to call for revenue of $2.35 billion (up from $2.30 billion previously), and reiterated its target for full-year adjusted operating margin of 14%.

In the end -- at least now that the market has come to terms with Splunk's temporary cash flow headwinds -- there was little not to love about this quarterly beat-and-raise performance. And I think investors are right to bid up Splunk stock in response.