Credit: Splunk.

Splunk (NASDAQ:SPLK) has made a habit of under promising and over delivering of late, and its latest quarter was no different. But the operational intelligence also threw a bit of a curve ball at investors in the form of a new CEO succession plan -- effective today. Let's take a closer look at what Splunk accomplished this quarter.

The headline numbers
During Splunk's fiscal third-quarter 2016, revenue climbed 50% year over year, to $174.4 million, including a 45.2% increase in license revenue, to $104.2 million, and 58.7% growth in maintenance and services revenue to just below $70.3 million. As per usual, that's well above Splunk's guidance, which called for revenue between $158 million and $160 million.

Based on generally accepted accounting principles, that resulted in an operating loss of $72.3 million, and a net loss of $0.57 per share. On a non-GAAP (adjusted) basis -- which excludes items like stock-based compensation and acquisition expenses -- Splunk achieved operating income of $6.6 million -- good for adjusted operating margin of 3.8% -- and adjusted earnings of $0.05 per share. Here again, Splunk's guidance was significantly less optimistic, calling for adjusted operating margin in the range of 1% to 2%.

On cash flow, investing for growth
As I suggested in my earnings preview earlier this week, investors should also watch for Splunk to generate healthy cash flow. And it did: Operating cash flow came in at $36.4 million, or roughly 20.9% of revenue, and slightly above Splunk's full-year target for operating cash flow margin of 20%. After accounting for $15.3 million in property and equipment purchases, free cash flow was $21.1 million.

Meanwhile, as Splunk continues to forego bottom-line profits in favor of driving top-line growth, it continued piling money into both sales and marketing (up 51.8% year over year, to $130.1 million in Q3), and research and development (up 42.1%, to $56.2 million).

Those investments continued to manifest in the form of new customers and products. Regarding the former (and similar to last quarter), Splunk added more than 500 new enterprise customers during the past three months. Notable new and expanded customer relationships include the likes of Cisco, Groupon, Jabil Circuit, the U.S. Department of Energy, the U.S. Postal Service, and Zillow.

Regarding the latter, Splunk unveiled a slew of new product offerings, including a new version of Splunk Enterprise 6.3, as well as the launches of:

  • Splunk Enterprise Security 4.0 (streamlined attacker event tracking)
  • Splunk IT Service Intelligence (IT monitoring and analytics)
  • Splunk User Behavior Analytics (for detecting advanced cyberattacks and insider threats)
  • Hunk 6.3 (an integrated platform for analyzing and visualizing big data)

Splunk also released the latest version of the Splunk App for AWS, and struck a strategic alliance for predictive security analytics with Booz Allen Hamilton.

A new CEO
In addition, Splunk announced CEO Godfrey Sullivan has informed the company he will retire from his post effective today. As a result, Splunk's board has appointed Doug Merritt as CEO. Merritt joined Splunk as senior VP of field operations in May, 2014, and previously served in several other executive roles including CEO of Baynote, senior VP of product and solutions marketing at Cisco, and executive VP of global on-demand applications at SAP.

Sullivan will remain on Splunk's board, and serve as non-executive board chair, where he'll continue to work closely with Merritt to ensure a smooth transition. "We will continue our laser focus on becoming the data fabric for businesses, government agencies, universities, and organizations," added Merritt. "Our innovative products, outstanding people, and over 10,000 enthusiastic customers form a solid foundation upon which to build our future growth and success."

Looking forward
For the current quarter, Splunk expects revenue between $200 million and $202 million, and adjusted operating margin between 5% and 6%. By contrast, analysts' consensus estimates called for lower revenue of $198.3 million, and adjusted earnings of $0.08 per share. Don't be surprised, though, if Wall Street again ratchets up its expectations given Splunk's past history of lowballing guidance.

Consequentially, Splunk again raised its outlook for the full-fiscal-year 2016, calling for revenue of approximately $650 million (up from prior guidance for a range of $628 million to $632 million), and adjusted operating margin of 3% (the top-end of Splunk's previous range of 2% to 3%). Wall Street was modeling lower fiscal 2016 revenue of $632.6 million, and adjusted earnings of $0.13 per share.

Finally, Splunk provided investors with their first look at next year, calling for fiscal 2017 revenue to increase 30.8% over fiscal 2016, to $850 million. Analysts, on average, were anticipating lower fiscal 2017 revenue of $832.3 million.

In the end -- notwithstanding its sudden, albeit seemingly unalarming CEO departure -- this was another solid report from Splunk as it works to secure as much share of its burgeoning industry as possible in these early stages.

Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Splunk, Zillow Group (A shares), and Zillow Group (C shares). The Motley Fool recommends Cisco Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.