Splunk (SPLK) reported earnings on Thur 21 Nov 2019 (a/h)

** charts after earnings **

 

Splunk beats by $0.03, beats on revs; guides Q4 revs above consensus

Reports Q3 (Oct) earnings of $0.58 per share, $0.03 better than the S&P Capital IQ Consensus of $0.55; revenues rose 30.1% year/year to $626 mln vs the $605.2 mln S&P Capital IQ Consensus.

Software revenues were $454 million, up 40% yr/yr.

Operating cash flow was ($135) mln with free cash flow of ($162) mln.

Co issues upside guidance for Q4, sees Q4 revs of $780 mln vs. $767.71 mln S&P Capital IQ Consensus. Non-GAAP operating margin is expected to be approximately 23%. 

Splunk (SPLK) : 2-year performance

• 2 years and 4 months

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Splunk (SPLK) : 2-year performance

SPLK is a $5.48 billion technology company that provides software solutions that provide real-time operational intelligence in the United States and internationally.  SPLK has lost 60% of its market cap in just the last two months or so, with its momentum oscillators now in very oversold territory.  These former momentum stocks are under severe selling pressure, but could definitely see a spike this week as May options expire on Friday.  We like entry at the current price and again at $45.00 with a closing stop beneath $44.00.  Consider a short-term target of $53.00 to test price resistance.

Splunk (SPLK) looks like a buy

Brian White of Topeka Capital Markets, initiated coverage of the stock with a Buy rating and a $38.25 price target.

Splunk, in White’s view, is “an emerging software platform vendor focused on turning machine data into real-time operational intelligence,” which he thinks is “an exciting play on the trend toward Big Data.”

That “operational intelligence market” may be worth $32 billion this year, writes White, citing market data from research firm IDC.

** weekly chart Dec 2012 **

below: update 1 year later, Dec 2013

The nine-year-old company may be “the next big thing in IT,” writes White, according to his chats with some customers and resellers of its software:

Described by some as the “Google” for log files, we believe Splunk has the opportunity to leverage its proprietary machine data engine technology to be a disruptive force in the IT world, competing with a host of existing solutions across areas such as business intelligence, relational data base, security and other technologies […] Splunk was founded in 2003 by Michael Baum, Rob Das and Erik Swan. The name Splunk was derived from “spelunking” or exploring caves and analogous to searching through machine data with Splunk’s software […] Essentially, Splunk’s proprietary machine data engine technology is at the core of the platform, taking the machine data and turning it into real-time, operational insights that range from customer buying patterns, potential security risks, website service levels, worker productivity, network utilization and a whole host of other instances. Splunk can better support unstructured data (IDC estimates that ~90% of data is unstructured) better than traditional relational database, enterprise applications, IT management software and security software that are focused on supporting pre-defined data structures. In our view, the biggest competitive threat to Splunk will come in the form of a start-up. […] During our research process, we found that customers begin using Splunk for a single use case and are quickly finding completely, new and different uses for the product that they had never imagined. Use cases for Splunk fall into (but are not limited to) four major buckets that include the following: (1) application management; (2) security & compliance; (3) Infrastructure & IT operations management; and (4) business & web analytics.

White also likes Splunk’s approach to how it prices, with the company letting customers use its “Splunk Enteprise” product to index half a gigabyte of data per day for 60 days for free, and then being asked to pay based on amount of data indexed. He thinks that “allows Splunk’s sales to more closely track the high growth rate of data. The average ASP for Splunk is estimated at approximately $35,000.”

White has Splunk making $193.9 million in revenue this year and losing 3 cents per share, and he offers the following observations about near-term spend and longer-term profit:

During 3QFY13, Splunk was operating at an annual revenue run rate of $208 million and the Company’s medium-term revenue target is $1 billion. In terms of profits, we believe Splunk will continue to run the Company near break-even levels in an effort to invest profits back into the business in order to capitalize on the big growth opportunities that on the horizon. That said, the Company’s long-term financial model includes 85-95% gross margin and a 25-30% operating margin profile.

Splunk (SPLK) started trading on the NASDAQ on April 19, 2012

Splunk (SPLK) is a big data analytics company. Splunk’s software collects and indexes data regardless of format or source, and enables users to search, correlate, analyze, monitor and report on this data, all in real time.

Splunk, based in San Francisco, is a six-year-old software company that helps customers search and analyze data from applications to mobile devices. The 500-person company is led by Chief Executive Godfrey Sullivan, a technology executive with 30 years of experience. Sullivan, 58 years old, had seemingly already reached the peak of his career when he sold Hyperion to Oracle for $3.3 billion. But he decided to take another run at turning a small company into a heavyweight. "After Hyperion, I played about three rounds of golf and realized I wasn't ready to join the graveyard of ex-CEOs," he told Bloomberg yesterday.

His 7.1% stake in Splunk is now worth about $243 million, The Wall Street Journal reports. While the company lost $11 million in its most recent fiscal year, Sullivan has won praise for boosting revenue thirteen-fold since he took over four years ago, to $121 million from $9.07 million.

Now that the company is flush with cash, it plans to hire. Sullivan told Fortune Splunk plans to hire at least 200 additional engineers. While the prospect of IPO riches is gone, if Splunk can make money from big data, new employees will reap rewards from stock options.

IPOs this week (16 April 2012) : 5 companies scheduled

The following are scheduled to IPO this week:

1. Splunk (SPLK);  on the Nasdaq; seeking to raise $135 million
2. Infoblox (BLOX); on the NYSE; wants to raise $106 million
3. Proofpoint Inc.( PFPT);  on the Nasdaq; seeking to raise $74 million
4. Midstates Petroleum (MPO); on the NYSE; wants to raise $432 million
5. Tumi (TUMI );  on the NYSE; wants to raise $320 million

Splunk hopes to raise as much as $135 million. It makes software that allows companies to collect and analyze large quantities of data, especially that generated by machines.

Machine-generated data are produced by nearly every software application and electronic device operating on a company's system, and contains time-stamped records of every event, ranging from user activity to security threats.

Splunk boasts that more than 3,700 customers, including a majority of the Fortune 100, use its software, including Bank of America Corp., BAC +1.27% Harvard University and Zynga Inc. ZNGA -7.64% Its software can search, analyze and monitor data in real time.

Splunk's revenue rose 83% to $121 million in the fiscal year that ended Jan. 31, and it reported a net loss of $11 million, compared with a loss of $3.8 million a year earlier. The company has never been profitable.

Infoblox wants to raise $106 million. The company combines hardware and software in appliances that it sells to automate businesses' computer network functions, such as network discovery and device configuration. Its appliances have been sold to more than 5,400 businesses, including Adobe Systems Inc., (ADBE), Barclays, Caterpillar (CAT), the Federal Aviation Administration and IBM Corp.

When businesses automate network control, they stop using manual processes for routine network tasks and are able to create what Infoblox calls "dynamic networks" that allow data centers to perform virtualization, cloud computing, software-as-a-service and high-speed networking that support multiple business operations. Automating network control becomes more important as networks become bigger and more complicated because of the growth in the number of devices and software applications that need to connect to the network.

Infoblox, which was founded in 1999, says it believes that the market for automated network control will grow as more businesses replace their legacy network controls. For the six months that ended Jan. 31, net revenue increased 31% to $80.7 million, and it reported a net loss of $2.8 million, compared with a loss of $132,000 in the same period a year earlier. The company has a history of losses, although it was profitable in fiscal 2010.

A third software firm, Proofpoint Inc. offers security software for large and midsize businesses to prevent the theft of sensitive data through attacks and phishing messages, to archive information as well as to securely share information with customers and business partners. Its products are used by about 2,400 customers, including 26 of the Fortune 100. Its top-line growth hasn't been quite as swift as Splunk or Infoblox; in 2011, revenue rose 26% to $82 million, and it reported a net loss of $20 million, down slightly from a loss of $21 million in 2010.

Also on deck for the week are two larger nontech deals: oil exploration company Midstates Petroleum Co. and luxury luggage and briefcase maker Tumi Holdings Inc.

Tumi makes carry-on luggage, garment bags, briefcases and totes. Founded in 1975, it sells its wares through its own retail stores and website as well as through luggage retailers, department stores and third-party websites such as Amazon.com Inc. (AMZN). It plans to increase its own retail store base in North America and internationally, aiming to add eight to 16 new ones in each of the next three years, and to expand its wholesale distribution.

Tumi said it believes many consumers deferred purchases of its products during the financial crisis, and postcrisis sales appear to be increasing due in part to these deferred purchases. In 2011, the company's net sales increased 31% to $330 million, and it reported net income of $17 million, compared with $104,000 in 2010.

Midstates focuses on oil fields in Louisiana that were discovered by major oil companies in the 1940s and 1950s, but weren't fully developed due to the price of oil, state taxes and regulatory limitations.

Since the third quarter of 2008, Midstates has drilled 57 wells, 93% of which are in commercial production. The company's average daily production has increased during the period by a compound annual growth rate of 96%, and it aims to drill as many as 67 wells this year. In 2011, Midstates' total revenue more than tripled to $214 million, and the company swung to a profit of $17 million, from a loss of $16 million in 2010.

Though its financials are good, oil-exploration companies are usually considered higher-risk deals due to the volatility of energy prices and the possibility that they may not be able to take all their wells into viable production.

The next wave of tech IPOs

After a year of high-profile consumer Internet IPOs—from Groupon Inc., LinkedIn Corp. and Zynga Inc. last year to Yelp Inc. and Facebook Inc. now—a slew of Silicon Valley companies that sell technology mainly to businesses are also getting ready to hit the stock market.

This new crop of IPO-ready companies are solving problems that businesses are willing to spend money on, such as improved security or better insight into customer behavior.

Splunk Inc., a San Francisco company that helps businesses capture and analyze the data they generate, and Infoblox Inc.(BLOX), a Santa Clara, Calif., maker of network-automation technology, in January both filed to go public in IPOs aiming to raise around $125 million each.

Now other enterprise-tech makers are lining up to get out of the gate. According to people familiar with the matter, security-technology maker Palo Alto Networks Inc., online human resources software company Workday Inc. and tech-management software maker ServiceNow Inc. have picked bankers or are in the final stages of choosing and informing bankers for their IPO process. Atlassian Inc., which provides software building blocks to developers, is also aiming to file for an IPO this year, said another person familiar with the matter.

Spokespeople for Atlassian, Splunk (SPLK), Palo Alto Networks (PANW) and Workday declined to comment, while ServiceNow didn't immediately respond to a request for comment.

While well-known Silicon Valley consumer Web companies could still go public—such as Twitter Inc.—2012 marks "the revenge of the enterprise tech sector," said Jim Goetz, a board member of Palo Alto Networks and a venture capitalist at Sequoia Capital, which also backed ServiceNow.

Start-ups that target businesses traditionally take longer to turn a profit than consumer Web companies. But working in these companies' favor, bankers say, are predictable revenue streams based on recurring monthly subscription fees for their products.

Splunk is still unprofitable but its revenue rose 79% to $77.8 million for the nine months ended Oct. 31 on the backs of big customers such as Bank of America Corp., Comcast Corp. and Harvard University. Palo Alto Networks, meanwhile, said in August that its run rate exceeded $200 million in bookings and that it had been cash flow positive for five consecutive quarters.