uploads///Earnings Analysis

Splunk’s Earnings Beat Analysts’ Expectations


Sep. 14 2015, Updated 2:55 a.m. ET

Performance is down despite strong 2Q15 results

Splunk (SPLK) shares fell by 5.10% to $60.98 despite strong 2Q15 results. It reported total revenue of $148.3 million over $101.5 million in the same period last year. Splunk crossed 10,000 customers worldwide and signed more than 500 new customers this quarter. Splunk made inorganic growth by acquiring Metafor Software. It also announced the acquisition of Caspida. This acquisition will help Splunk extend security analytics by adding behavioral and machine learning to better detect advanced and insider threats.


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Growth from the non-GAAP (generally accepted accounting principles) operating margin remained at 3.20% and non-GAAP EPS (earnings per share) stood at $0.03. This is higher than analysts’ expectations of $0.02. The operating cash flow remained at $13.6 million. This was a rise of 46.08% over the same quarter last year. Splunk reduced its operating expense relative the revenue generated in 2Q15. The majority of the cost was reduced in sales and marketing. It accounts for 19.39% of the revenue—compared to 32.18% last year.

Compared to its peers in the software application sector, ACI Worldwide (ACIW) and Activision Blizzard (ATVI) generated EPS of $0.26 and $0.13 on a non-GAAP basis.

Financial outlook

Splunk generated a negative cash flow from investing activities of $117 million. This is 3x higher than the same quarter last year. The majority of the company’s investment was $142 million for the acquisition. Inorganic growth will help the company achieve operational efficiency. At the same time, it can reach out to more consumers and expand its customer base.

For the next quarter, the company is expecting the total revenue to be $158–$160 million. The non-GAAP margin is expected to be 1%–2%.

For 1Q16, the total revenue is expected to be $628–$632 million. The non-GAAP operating margin is expected to be 2%–3%.

Splunk (SPLK) accounts for 1.81% of the iShares North American Tech-Software ETF (IGV) and 0.24% of the iShares US Technology ETF (IYW).


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