Market Overview

Splunk Inc. Announces Fiscal Second Quarter 2019 Financial Results

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Software Revenues Up 43%; Total Revenues Grew 39%

Splunk
Inc.
(NASDAQ:SPLK), first in delivering "aha" moments from machine
data, today announced results for its fiscal second quarter ended July
31, 2018.

Second Quarter 2019 Financial Highlights

  • Total revenues were $388.3 million, up 39% year-over-year.
  • Software revenues were $239.7 million, up 43% year-over-year.
  • GAAP operating loss was $103.9 million; GAAP operating margin was
    negative 26.7%.
  • Non-GAAP operating income was $11.4 million; non-GAAP operating margin
    was 2.9%.
  • GAAP loss per share was $0.71; non-GAAP income per share was $0.08.
  • Operating cash flow was $33.5 million with free cash flow of $28.0
    million.

"The rapid digitization of every organization, coupled with Splunk's
increasing innovation, is driving our continued momentum," said Doug
Merritt, President and CEO, Splunk. "Every organization needs to
monitor, analyze and investigate data to make faster decisions and take
action, and I am pleased that Splunk is the platform of choice. I am
looking forward to .conf18 where we'll reveal the next generation of
product innovations to help our customers succeed during this exciting
time in their digital evolution."

Second Quarter 2019 and Recent Business
Highlights:

Customers:

  • Signed more than 550 new enterprise customers.
  • New and Expansion Customers Include: ADP, Dartmouth College,
    California Department of Technology, Grab (Singapore), Nordea
    (Sweden), Sheetz, SMSGlobal (Australia), Southwestern Energy Company
    Inc., UK Ministry of Defence, UNC Greensboro, University Hospitals
    Bristol (UK), U.S. Department of Defense, Worldpay

Products:

Corporate:

  • Acquired VictorOps,
    a leader in DevOps incident management, to help modern development
    teams innovate faster.
  • Announced the speaker
    and presentation lineup for .conf18
    , which takes place from
    October 1-4 at the Walt Disney World Swan and Dolphin Resort in
    Orlando, Florida.
  • Celebrated Pride globally and sponsored San
    Francisco's 2018 Pride Parade
    , in which over 500 Splunkers
    participated, aligning with Splunk's commitment to diversity and
    inclusion.

Strategic and Channel Partners:

  • BAE Systems announced a new collaboration with Splunk to use machine
    learning to help secure U.S. Government cloud infrastructures and
    respond to security threats. Federated
    Secure Cloud
    , developed by BAE Systems and Dell EMC, integrates
    Splunk Enterprise into its government cloud solution.
  • Announced Splunk
    Connect for Kubernetes
    , a new Splunk integration with Amazon Web
    Services that makes it easy for Splunk customers to deploy, manage and
    scale containerized applications Kubernetes on AWS.

Recognition:

Financial Outlook

The company is providing the following guidance for its fiscal third
quarter 2019 (ending October 31, 2018):

  • Total revenues are expected to be between $430 million and $432
    million.
  • Non-GAAP operating margin is expected to be approximately 13%.

The company is updating its previous guidance provided on May 24, 2018
for its fiscal year 2019 (ending January 31, 2019):

  • Total revenues are expected to be approximately $1.685 billion (was
    approximately $1.645 billion).
  • Non-GAAP operating margin is expected to be approximately 11.5%
    (unchanged from prior guidance).

All forward-looking non-GAAP financial measures contained in this
section "Financial Outlook" exclude estimates for stock-based
compensation and related employer payroll tax, amortization of acquired
intangible assets, adjustments related to a financing lease obligation
and acquisition-related adjustments.

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 second quarter 2019 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 August 30, 2018 by
dialing (855) 859-2056 and referencing Conference ID 1282768.

Safe Harbor Statement

This press release contains forward-looking statements that involve
risks and uncertainties, including statements regarding Splunk's revenue
and non-GAAP operating margin targets for the company's fiscal third
quarter and fiscal year 2019 in the paragraphs under "Financial Outlook"
above and other statements regarding our market opportunity, future
growth, current momentum, strategy, innovation, expectations for our
industry and business, customer demand and penetration, our partner
relationships, customer success, expanding use of Splunk by customers,
and expected benefits of new products, product innovations and
acquisitions, in particular VictorOps. There are a significant number of
factors that could cause actual results to differ materially from
statements made in this press release, including: Splunk's limited
operating history and experience developing and introducing new
products, including its cloud offerings; 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; Splunk's transition to a multi-product software and services
business; Splunk's inability to successfully integrate acquired
businesses and technologies; 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 April 30, 2018, 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 machine data into answers.
Organizations use market-leading Splunk solutions with machine learning
to solve their toughest IT, Internet of Things and security challenges.
Join millions of passionate users and discover your "aha" moment with
Splunk today: http://www.splunk.com.

Social Media: Twitter
| LinkedIn
| YouTube
| Facebook

Splunk, Splunk>, Listen to Your Data, The Engine for Machine Data,
Splunk Cloud, Splunk Light and SPL 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. © 2018 Splunk Inc. All rights reserved.

 
SPLUNK INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
       
 
Three Months Ended July 31, Six Months Ended July 31,
2018

2017
*As Adjusted

  2018

2017
*As Adjusted

Revenues
License $ 200,668 $ 147,231 $ 339,643 $ 249,793
Maintenance and services   187,635     132,993     360,299     257,199  
Total revenues   388,303     280,224     699,942     506,992  
 
Cost of revenues
License 5,671 3,159 10,795 6,087
Maintenance and services   78,077     56,717     150,923     111,952  
Total cost of revenues   83,748     59,876     161,718     118,039  
Gross profit   304,555     220,348     538,224     388,953  
 
Operating expenses
Research and development 106,739 71,774 193,096 143,072
Sales and marketing 243,830 186,637 461,866 360,098
General and administrative   57,844     39,139     108,586     75,635  
Total operating expenses   408,413     297,550     763,548     578,805  
Operating loss   (103,858 )   (77,202 )   (225,324 )   (189,852 )
 
Interest and other income (expense), net
Interest income (expense), net 1,506 (164 ) 2,620 (692 )
Other income (expense), net   (336 )   (874 )   (471 )   (1,482 )

Total interest and other income (expense), net

  1,170     (1,038 )   2,149     (2,174 )
Loss before income taxes (102,688 ) (78,240 ) (223,175 ) (192,026 )
Income tax provision (benefit)   811     353     (1,177 )   1,691  
Net loss $ (103,499 ) $ (78,593 ) $ (221,998 ) $ (193,717 )
 
 
Basic and diluted net loss per share $ (0.71 ) $ (0.57 ) $ (1.54 ) $ (1.40 )
 

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

  145,030     139,063     144,306     138,436  
 

* Prior-period information has been adjusted to reflect the
adoption of ASU No. 2014-09, Revenue from Contracts with Customers
(Topic 606), which Splunk adopted on February 1, 2018.

 
SPLUNK INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
   
 
July 31, 2018

January 31, 2018
*As Adjusted

 
Assets
 
Current assets
Cash and cash equivalents $ 419,681 $ 545,947
Investments, current 471,902 619,203
Accounts receivable, net 247,827 396,413
Prepaid expenses and other current assets 65,837 70,021
Deferred commissions, current   57,419     52,451  
Total current assets   1,262,666     1,684,035  
 
Investments, non-current 9,750 5,375
Property and equipment, net 156,409 160,880
Intangible assets, net 105,865 48,142
Goodwill 503,388 161,382
Deferred commissions, non-current 43,435 37,920
Other assets   70,004     41,711  
Total assets $ 2,151,517   $ 2,139,445  
 
Liabilities and Stockholders' Equity
 
Current liabilities
Accounts payable $ 14,470 $ 11,040
Accrued compensation 133,015 145,365
Accrued expenses and other liabilities 99,251 84,631
Deferred revenue, current   494,610     489,913  
Total current liabilities   741,346     730,949  
 
Deferred revenue, non-current 166,976 178,792
Other liabilities, non-current   96,359     98,383  
Total non-current liabilities   263,335     277,175  
Total liabilities   1,004,681     1,008,124  
 
Stockholders' equity
Common stock 146 143
Accumulated other comprehensive income (loss) (2,730 ) 156
Additional paid-in capital 2,327,885 2,086,893
Accumulated deficit   (1,178,465 )   (955,871 )
Total stockholders' equity   1,146,836     1,131,321  
Total liabilities and stockholders' equity $ 2,151,517   $ 2,139,445  
 

* Prior-period information has been adjusted to reflect the
adoption of ASU No. 2014-09, Revenue from Contracts with Customers
(Topic 606), which Splunk adopted on February 1, 2018.

 
SPLUNK INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
       
 
Three Months Ended July 31, Six Months Ended July 31,
2018

2017
*As Adjusted

2018

2017
*As Adjusted

 
Cash flows from operating activities
Net loss $ (103,499 ) $ (78,593 ) $ (221,998 ) $ (193,717 )
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 12,751 10,813 24,167 19,916
Amortization of deferred commissions 17,089 10,336 32,877 20,653
Amortization of investment premiums (accretion of discounts) (361 ) 125 (537 ) 342
Stock-based compensation 105,043 92,367 199,664 182,422
Deferred income taxes 114 (967 ) (125 ) (866 )
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net (39,214 ) (34,350 ) 156,362 31,706
Prepaid expenses and other assets 1,362 (826 ) (21,937 ) (7,883 )
Deferred commissions (28,644 ) (14,046 ) (43,360 ) (24,322 )
Accounts payable 4,068 1,249 2,990 1,963
Accrued compensation 32,602 4,724 (11,833 ) (6,264 )
Accrued expenses and other liabilities 20,599 16,012 6,259 8,107
Deferred revenue   11,614     16,344     (12,518 )   32,489  
Net cash provided by operating activities   33,524     23,188     110,011     64,546  
 
Cash flows from investing activities
Purchases of investments (175,756 ) (218,224 ) (198,631 ) (340,697 )
Maturities of investments 173,051 175,200 347,176 338,265
Acquisitions, net of cash acquired (110,740 ) (17,223 ) (394,910 ) (17,223 )
Purchases of property and equipment (5,562 ) (2,908 ) (7,858 ) (8,513 )
Other investment activities   -     -     (4,375 )   -  
Net cash used in investing activities   (119,007 )   (63,155 )   (258,598 )   (28,168 )
 
Cash flows from financing activities
Proceeds from the exercise of stock options 241 486 1,354 1,973
Proceeds from employee stock purchase plan 24,201 19,282 24,201 19,282
Taxes paid related to net share settlement of equity awards - (26,647 ) (779 ) (59,109 )
Repayment of financing lease obligation   (629 )   (485 )   (1,218 )   (802 )
Net cash provided by (used in) financing activities   23,813     (7,364 )   23,558     (38,656 )
 
Effect of exchange rate changes on cash and cash equivalents   (475 )   714     (1,237 )   742  
Net decrease in cash and cash equivalents (62,145 ) (46,617 ) (126,266 ) (1,536 )
Cash and cash equivalents at beginning of period   481,826     466,427     545,947     421,346  
Cash and cash equivalents at end of period $ 419,681   $ 419,810   $ 419,681   $ 419,810  
 

* Prior-period information has been adjusted to reflect the
adoption of ASU No. 2014-09, Revenue from Contracts with Customers
(Topic 606), which Splunk adopted on February 1, 2018.

 

SPLUNK INC.

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 certain non-GAAP financial measures, including non-GAAP
cost of revenues, non-GAAP gross margin, non-GAAP research and
development expense, non-GAAP sales and marketing expense, non-GAAP
general and administrative expense, non-GAAP operating income (loss),
non-GAAP operating margin, non-GAAP net income (loss) and non-GAAP net
income (loss) per share (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 acquired intangible
assets, adjustments related to a financing lease obligation and
acquisition-related adjustments, including the partial release of the
valuation allowance due to acquisitions. The adjustments for the
financing lease obligation are to reflect the expense Splunk would have
recorded if its build-to-suit lease arrangement had been deemed an
operating lease instead of a financing lease and is calculated as the
net of actual ground lease expense, depreciation and interest expense
over estimated straight-line rent expense. The non-GAAP financial
measures are also adjusted for Splunk's estimated tax rate on non-GAAP
income (loss). To determine the annual non-GAAP tax rate, Splunk
evaluates a financial projection based on its non-GAAP results. The
annual non-GAAP tax rate takes into account other factors including
Splunk's current operating structure, its existing tax positions in
various jurisdictions and key legislation in major jurisdictions where
Splunk operates. The non-GAAP tax rate applied to the three and six
months ended July 31, 2018 was 20%. Splunk will utilize this annual
non-GAAP tax rate in fiscal 2019 and will provide updates to this rate
on an annual basis, or more frequently if material changes occur. In
addition, non-GAAP financial measures includes free cash flow, which
represents cash from operations less purchases of property and
equipment. 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. In addition, these non-GAAP financial
measures facilitate comparisons to competitors' operating results.

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 acquired
intangible assets, acquisition-related costs, including the partial
release of the valuation allowance due to acquisitions, and makes
adjustments related to a financing lease obligation from its non-GAAP
financial measures because these are considered by management to be
outside of Splunk's core operating results. Accordingly, Splunk believes
that excluding these expenses provides investors and management with
greater visibility to the underlying performance of its business
operations, facilitates comparison of its results with other periods and
may also facilitate comparison with the results of other companies in
its industry. Splunk considers free cash flow to be a liquidity measure
that provides useful information to management and investors about the
amount of cash generated by the business that can be used for strategic
opportunities, including investing in its business, making strategic
acquisitions and strengthening its balance sheet.

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 non-GAAP
financial measures are meant to supplement and be viewed in conjunction
with GAAP financial measures.

The following tables reconcile Splunk's GAAP results to Splunk's
non-GAAP results included in this press release.

 
SPLUNK INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)
(Unaudited)
   
 
 

Reconciliation of Cash Provided by
Operating Activities to Free Cash Flow

           
Three Months Ended Six Months Ended
July 31, July 31, July 31, July 31,
2018 2017 2018 2017
Net cash provided by operating activities $ 33,524 $ 23,188 $ 110,011 $ 64,546
Less purchases of property and equipment   (5,562 )   (2,908 )   (7,858 )   (8,513 )
Free cash flow (non-GAAP) $ 27,962   $ 20,280   $ 102,153   $ 56,033  
Net cash used in investing activities $ (119,007 ) $ (63,155 ) $ (258,598 ) $ (28,168 )
Net cash provided by (used in) financing activities $ 23,813   $ (7,364 ) $ 23,558   $ (38,656 )
 
 
 

Reconciliation of GAAP to Non-GAAP
Financial Measures

Three Months Ended July 31, 2018

GAAP

Stock-based
compensation and
related
employer

payroll tax

Amortization of
acquired
intangible
assets

Adjustments
related to
financing lease
obligation

Acquisition-
related
adjustments

Income tax
effects related to
non-GAAP
adjustments
(3)

Non-GAAP
 
Cost of revenues $ 83,748 $ (9,438 ) $ (5,353 ) $ 304 $ - $ - $ 69,261
Gross margin 78.4 % 2.5 % 1.4 % (0.1 )% - % - % 82.2

%

 

 
Research and development 106,739 (34,518 ) (268 ) 507 - - 72,460
Sales and marketing 243,830 (47,020 ) (652 ) 1,147 - - 197,305
General and administrative 57,844 (17,440 ) - 248 (2,730 ) - 37,922
Operating income (loss) (103,858 ) 108,416 6,273 (2,206 ) 2,730 - 11,355
Operating margin (26.7 )% 27.9 % 1.6 % (0.6 )% 0.7 % - % 2.9

%

 

 
Income tax provision 811 - - - - 2,105 2,916
Net income (loss) $ (103,499 ) $ 108,416 $ 6,273 $ (151 )(2) $ 2,730 $ (2,105 ) $ 11,664
Net income (loss) per share(1) $ (0.71 ) $ 0.08
 
(1) GAAP net loss per share calculated based on 145,030
weighted-average shares of common stock. Non-GAAP net income per
share calculated based on 151,441 diluted weighted-average shares of
common stock, which includes 6,411 potentially dilutive shares
related to employee stock awards. GAAP to non-GAAP net income (loss)
per share is not reconciled due to the difference in the number of
shares used to calculate basic and diluted weighted-average shares
of common stock.
(2) Includes $2.1 million of interest expense related to
the financing lease obligation.
(3) Represents the tax effect of the non-GAAP adjustments
based on the estimated annual effective tax rate of 20%.
 
 

Reconciliation of GAAP to Non-GAAP
Financial Measures

Three Months Ended July 31, 2017

GAAP
*As Adjusted

Stock-based
compensation and
related
employer

payroll tax

Amortization of
acquired
intangible
assets

Adjustments
related to
financing lease
obligation

Partial release
of the valuation
allowance
due to

acquisition

Income tax
effects related to
non-GAAP
adjustments
(3)

Non-GAAP
*As Adjusted

 
Cost of revenues $ 59,876 $ (8,687 ) $ (2,870 ) $ 309 $ - $ - $ 48,628
Gross margin 78.6 % 3.1 % 1.0 % (0.1 )% - % - %

82.6

%

 

 
Research and development 71,774 (26,550 ) (55 ) 495 - - 45,664
Sales and marketing 186,637 (43,837 ) (1,316 ) 1,174 - - 142,658
General and administrative 39,139 (15,691 ) - 227 - - 23,675
Operating income (loss) (77,202 ) 94,765 4,241 (2,205 ) - - 19,599
Operating margin (27.6 )% 33.9 % 1.5 % (0.8 )% - % - %

7.0

%

 

 
Income tax provision 353 - - - 546 4,681 5,580
Net income (loss) $ (78,593 ) $ 94,765 $ 4,241 $ (99 )(2) $ (546 ) $ (4,681 ) $ 15,087
Net income (loss) per share(1) $ (0.57 ) $ 0.11
 

* Prior-period information has been adjusted to reflect the
adoption of ASU No. 2014-09, Revenue from Contracts with Customers
(Topic 606), which Splunk adopted on February 1, 2018.

 
(1) GAAP net loss per share calculated based on 139,063
weighted-average shares of common stock. Non-GAAP net income per
share calculated based on 142,852 diluted weighted-average shares of
common stock, which includes 3,789 potentially dilutive shares
related to employee stock awards. GAAP to non-GAAP net income (loss)
per share is not reconciled due to the difference in the number of
shares used to calculate basic and diluted weighted-average shares
of common stock.
(2) Includes $2.1 million of interest expense related to
the financing lease obligation.
(3) Represents the tax effect of the non-GAAP adjustments
based on the estimated annual effective tax rate of 27%.
 
 

Reconciliation of GAAP to Non-GAAP
Financial Measures

Six Months Ended July 31, 2018

GAAP

Stock-based
compensation and
related
employer

payroll tax

Amortization of
acquired
intangible
assets

Adjustments
related to
financing lease
obligation

Acquisition-
related
adjustments

Partial release
of the valuation
allowance
due to

acquisition

Income tax
effects related to
non-GAAP
adjustments
(3)

Non-GAAP

 
Cost of revenues $ 161,718 $ (18,987 ) $ (9,603 ) $ 616 $ - $ -

-

$

133,744

Gross margin 76.9 % 2.7 % 1.4 % (0.1 )% - % - % -

%

80.9

%

 
Research and development 193,096 (62,756 ) (546 ) 996 - -

-

130,790

Sales and marketing 461,866 (92,860 ) (830 ) 2,317 - -

-

370,493

General and administrative 108,586 (34,727 ) - 482 (6,034 ) -

-

68,307

Operating loss (225,324 ) 209,330 10,979 (4,411 ) 6,034 -

-

 

(3,392

)

Operating margin (32.2 )% 29.8 % 1.6 % (0.6 )% 0.9 % - % -

%

(0.5

)%

 
Income tax provision (benefit) (1,177 ) - - - - 3,313 (1,560

)

576

Net income (loss) $ (221,998 ) $ 209,330 $ 10,979 $ (287 )(2) $ 6,034 $ (3,313 )

1,560

$

2,305

Net income (loss) per share(1) $ (1.54 )

 

$

0.02

 
(1) GAAP net loss per share calculated based on 144,306
weighted-average shares of common stock. Non-GAAP net income per
share calculated based on 150,537 diluted weighted-average shares of
common stock, which includes 6,231 potentially dilutive shares
related to employee stock awards. GAAP to non-GAAP net income (loss)
per share is not reconciled due to the difference in the number of
shares used to calculate basic and diluted weighted-average shares
of common stock.
(2) Includes $4.1 million of interest expense related to
the financing lease obligation.
(3) Represents the tax effect of the non-GAAP adjustments
based on the estimated annual effective tax rate of 20%.
 
 

Reconciliation of GAAP to Non-GAAP
Financial Measures

Six Months Ended July 31, 2017

GAAP
*As Adjusted

Stock-based
compensation and
related
employer

payroll tax

Amortization of
acquired
intangible
assets

Adjustments
related to
financing lease
obligation

Partial release
of the valuation
allowance
due to

acquisition

Income tax
effects related to
non-GAAP
adjustments
(3)

Non-GAAP
*As Adjusted

 
Cost of revenues $ 118,039 $ (17,320 ) $ (5,519 ) $ 615 $ - $ - $ 95,815
Gross margin 76.7 % 3.4 % 1.1 % (0.1 )% - % - % 81.1

%

 

 
Research and development 143,072 (54,598 ) (83 ) 1,026 - - 89,417
Sales and marketing 360,098 (86,252 ) (1,332 ) 2,344 - - 274,858
General and administrative 75,635 (30,791 ) - 464 - - 45,308
Operating income (loss) (189,852 ) 188,961 6,934 (4,449 ) - - 1,594
Operating margin (37.4 )% 37.2 % 1.4 % (0.9 )% - % - % 0.3

%

 

 
Income tax provision 1,691 - - - 546 (1,254 ) 983
Net income (loss) $ (193,717 ) $ 188,961 $ 6,934 $ (229 )(2) $ (546 ) $ 1,254 $ 2,657
Net income (loss) per share(1) $ (1.40 ) $ 0.02
 

* Prior-period information has been adjusted to reflect the
adoption of ASU No. 2014-09, Revenue from Contracts with Customers
(Topic 606), which Splunk adopted on February 1, 2018.

 
(1) GAAP net loss per share calculated based on 138,436
weighted-average shares of common stock. Non-GAAP net income per
share calculated based on 142,602 diluted weighted-average shares of
common stock, which includes 4,166 potentially dilutive shares
related to employee stock awards. GAAP to non-GAAP net income (loss)
per share is not reconciled due to the difference in the number of
shares used to calculate basic and diluted weighted-average shares
of common stock.
(2) Includes $4.2 million of interest expense related to
the financing lease obligation.
(3) Represents the tax effect of the non-GAAP adjustments
based on the estimated annual effective tax rate of 27%.

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