Total Revenues Grew 40%; Cloud Revenue up 54%
Company Increases Full Year Outlook
Splunk Inc. (NASDAQ: SPLK), the data platform leader for security and observability, today announced results for its fiscal third quarter ended October 31, 2022.
Third Quarter 2023 Financial Highlights
- Total revenues grew 40% to $930 million year-over-year.
- Cloud revenue grew 54% to $374 million year-over-year.
- GAAP operating margin was (2.1%); Non-GAAP operating margin was 21.3%.
- GAAP EPS was $(0.20); Non-GAAP EPS was $0.83.
- Cloud Dollar-Based Net Retention Rate was 127%.
- Customers with total ARR greater than $1 million grew 19% to 754 year-over-year.
“We delivered another solid quarter, with total revenues up 40 percent year-over-year,” said Gary Steele, President and CEO of Splunk. “Our results underscore the value our customers place in Splunk. The world’s largest and most innovative enterprises continue to invest in our platform and make their businesses more resilient through faster insights and action across security, IT and DevOps.”
“We remain focused on balancing long-term durable growth with profitability,” continued Steele. “In addition to our strong top line results, we also made good progress on our expense reduction during the quarter. As a result, we are increasing our full-year outlook for total revenues, profitability and free cash flow.”
Q3 2023 Business Highlights
- Splunk Named a Leader for the Ninth Consecutive Time in 2022 Gartner® Magic Quadrant™ for Security Information and Event Management* (SIEM): Splunk has continued to innovate its flagship security solution, Splunk Enterprise Security, as well as the rest of the organization’s integrated security portfolio including Splunk Intelligence Management, Splunk SOAR Cloud, Splunk Enterprise 9.0 and Splunk Cloud Platform.
- Splunk Among Top Cybersecurity Leaders Contributing to the Open Cybersecurity Schema Framework (OCSF) Project: Eighteen technology and cybersecurity leaders recently launched an open-source project that defines a common standard for cybersecurity data. The OCSF project will help organizations detect, investigate and stop cyberattacks faster and more effectively by removing time-consuming, up-front normalization tasks.
- Splunk Wins Several Awards for Cybersecurity Innovation and Best Places to Work: Splunk won the 2022 SC Award for Best SIEM for Splunk Enterprise Security and six ‘Best of’ awards resulting from customer reviews on TrustRadius for Splunk Enterprise Security, Splunk IT Service Intelligence and Splunk SOAR. Splunk was also selected by Great Place to Work® as one of the 2022 Best Workplaces in Technology and as one of the 2022 Best Workplaces for Women.
- Splunk and AWS Sign a New Five-Year Strategic Collaboration Agreement: The agreement underscores each organization’s commitment to enable joint customers to innovate with confidence, migrate and modernize existing environments with end-to-end cloud and hybrid visibility, and scale without limits. Together, Splunk and AWS elevate customer experiences with real-time, full-stack visibility into applications and AWS services while also providing data-driven SIEM and security automation to improve productivity and protect enterprises from security risks.
- Bridging the Data Divide: Splunk continued to spotlight the data divide’s impacts and possible solutions across multiple events hosted by the United Nations and the Atlantic Council.
- Splunk Names New Chief Information Security Officer, Chief People Officer and Platform General Manager: Splunk appointed Jason Lee as its Chief Information Security Officer (CISO), Sharyl Givens as Chief People Officer and Tom Casey as Senior Vice President and General Manager, Platform.
- Splunk Board of Directors Appointments: Richard P. Wallace, President and CEO of KLA Corporation, and David Tunnell, Partner at Hellman & Friedman, were appointed to the Splunk Board of Directors. It was announced that Stephen G. Newberry will be stepping down from the Board, joining Sara Baack, as previously announced.
Financial Outlook
The company is providing the following guidance for its fiscal fourth quarter 2023 (ending January 31, 2023):
- Total revenues are expected to be between $1.055 billion and $1.085 billion.
- Non-GAAP operating margin is expected to be between 23% and 26%.
The company is updating or reaffirming the following guidance for its fiscal year 2023 (ending January 31, 2023):
- Total revenues are expected to be between $3.455 billion and $3.485 billion (was previously between $3.35 billion and $3.4 billion).
- Non-GAAP operating margin is expected to be between 12% and 13% (was previously 8%).
- Total ARR is expected to be approximately $3.65 billion; Cloud ARR is expected to be between $1.775 billion and $1.8 billion (was previously $1.8 billion).
- Free Cash flow is expected to be at least $420 million (was previously $400 million).
Conference Call and Webcast
Splunk’s executive management team will host a conference call beginning at 1:30 p.m. PT (4:30 p.m. ET) today to discuss financial results and business highlights. Interested parties may access the call by dialing (800) 715-9871 in the U.S. or (646) 307-1963 from international locations and referencing conference ID 5441433. A live audio webcast of the conference call will also be available through Splunk’s Investor Relations website at http://investors.splunk.com/events-presentations. An audio webcast replay of the call will be available for the next 12 months.
Safe Harbor Statement
This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding Splunk’s long-term prospects, including Splunk’s guidance for total revenues and non-GAAP operating margin targets for the company’s fiscal fourth quarter 2023 and total revenues, non-GAAP operating margin, Total ARR, Cloud ARR, and free cash flow for the company’s fiscal year 2023; our global presence and trends in customer demand and engagement; statements regarding our operating expenses, growth and profitability; statements regarding our collaboration agreement with AWS and its benefits to us and our customers; statements regarding our products, projects, technology and ongoing product development; statements regarding our market opportunity; the market for data-related products and the importance of data and our ability to leverage these trends; expectations for our industry, business and products, such as our business model, customer demand and trust, our partner relationships, customer success and feedback, expanding use of Splunk by customers, and expected benefits and scale of our products. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: the macroeconomic environment, including inflationary pressures, economic uncertainty and impacts on information technology spending; risks associated with Splunk’s growth, particularly outside of the United States; Splunk’s inability to realize value from its significant investments in the company’s business, including product and service innovations and through acquisitions; Splunk’s shift from sales of licenses to sales of cloud services which impacts the timing of revenue and margins; a shift from generally invoicing multi-year contracts upfront to invoicing on an annual basis, which impacts cash collections; Splunk’s transition to a multi-product software and services business; Splunk’s inability to successfully integrate acquired businesses and technologies; Splunk’s inability to service its debt obligations or other adverse effects related to the company’s convertible notes; COVID-19 and related public health measures on our business and the business of our customers, as well as the impact of new variants on the overall economic environment, including customer buying capacity, urgency and patterns; 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 July 31, 2022, 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.
*Gartner, Inc., 2022 Gartner Magic Quadrant for Security Information and Event Management, Pete Shoard, Andrew Davies, Mitchell Schneider, October 10, 2022.
Gartner and Magic Quadrant are registered trademarks and service marks of Gartner, Inc. and/or its affiliates in the U.S. and internationally and are used herein with permission. All rights reserved.
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