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Splunk (SPLK) Outpaces Q2 Earnings and Revenue Estimates
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Splunk Inc. reported relatively healthy second-quarter fiscal 2023 results (ended Jul 31, 2022) with year-over-year improvement in the top line. The company is improving the resilience and security of its critical system and driving efficiencies within its own internal operation.
GAAP loss in the reported quarter was $209.7 million or a loss of $1.30 per share compared with a loss of $384 million or a loss of $2.34 per share in the year-ago quarter. The narrower loss in the quarter was primarily attributable to top-line growth. Non-GAAP income in the reported quarter was 9 cents per share, beating the Zacks Consensus Estimate of a loss of 37 cents.
Total revenues in second-quarter fiscal 2023 improved to $798.8 million from $605.7 million in the prior year, beating the consensus estimate of $747 million. Splunk is benefiting from healthy customer engagement, evident from the consistently high net retention and competitive win rates alongside solid momentum with large orders overall. One of New Zealand’s largest banks expanded its use of Splunk Cloud after using ITSI and enterprise security across the business.
Quarter in Detail
License revenues (35.3% of total revenues) were $281.7 million, up 28.3% year over year. Cloud services revenues (43.4%) surged 59.3% to $346.4 million, driven by the continued adoption of its cloud platform. Maintenance and service revenues (21.3%) increased 1.1% to $170.6 million.
Splunk ended the quarter with total annual recurring revenues (ARR) of $3.33 billion, up 27% year over year. Cloud ARR soared 55% to just over $1.5 billion.
The company had 723 customers with ARR greater than $1 million, up 24% year over year, and 352 of these customers had Cloud ARR of more than $1 million, up 50%.
GAAP gross margin improved to 74.1% from 69.7% year over year, owing to higher revenues. GAAP Cloud services gross margin expanded 960 basis points to 64.5%.
During the first six months of fiscal 2023, the company generated $124.7 million of cash from operating activities compared with $14.7 million a year ago. Free cash flow was $113.1 million compared with $5.2 million in the prior year. As of Jul 31, 2022, it had $747.9 million in cash and cash equivalents with $3,870.2 million of net convertible senior notes.
Guidance
For the third quarter of fiscal 2023 (ending Oct 31, 2022), Splunk expects total revenues in the range of $835-$855 million. Non-GAAP operating margin is likely to be within 6% to 8%.
For fiscal 2023 (ending Jan 31, 2023), the company expects total revenues to be between $3.35 billion and $3.4 billion, up from $3.3 billion and $3.35 billion expected earlier. Non-GAAP operating margin is anticipated to be around 8%, up from prior projection of 2%.
SP Plus Corporation , sporting a Zacks Rank #1, is another key pick for investors. It delivered an earnings surprise of 15.7% in the previous quarter and a stellar earnings surprise of 19.5%, on average, in the trailing four quarters. SP Plus operates in Commercial and Aviation segments. It provides mobility solutions, parking management, ground transportation, baggage, and other ancillary services in North America.
Earnings estimates for the current year have moved up 19.4% since August 2021.
First Bancorp. (FBP - Free Report) , carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 17.1%, on average, in the trailing four quarters. Over the past year, the stock has risen 26.2%.
Earnings estimates for the current year have moved up 16.8% since August 2021. First Bancorp operates in six segments – Commercial and Corporate Banking, Mortgage Banking, Consumer Banking, Treasury and Investments, United States Operations and Virgin Islands Operations.
Graham Corporation (GHM - Free Report) has a Zacks Rank #1. The Zacks Consensus Estimate for Graham’s current-year earnings has been revised downward by 86% since August 2021.
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Splunk (SPLK) Outpaces Q2 Earnings and Revenue Estimates
Splunk Inc. reported relatively healthy second-quarter fiscal 2023 results (ended Jul 31, 2022) with year-over-year improvement in the top line. The company is improving the resilience and security of its critical system and driving efficiencies within its own internal operation.
GAAP loss in the reported quarter was $209.7 million or a loss of $1.30 per share compared with a loss of $384 million or a loss of $2.34 per share in the year-ago quarter. The narrower loss in the quarter was primarily attributable to top-line growth. Non-GAAP income in the reported quarter was 9 cents per share, beating the Zacks Consensus Estimate of a loss of 37 cents.
Total revenues in second-quarter fiscal 2023 improved to $798.8 million from $605.7 million in the prior year, beating the consensus estimate of $747 million. Splunk is benefiting from healthy customer engagement, evident from the consistently high net retention and competitive win rates alongside solid momentum with large orders overall. One of New Zealand’s largest banks expanded its use of Splunk Cloud after using ITSI and enterprise security across the business.
Quarter in Detail
License revenues (35.3% of total revenues) were $281.7 million, up 28.3% year over year. Cloud services revenues (43.4%) surged 59.3% to $346.4 million, driven by the continued adoption of its cloud platform. Maintenance and service revenues (21.3%) increased 1.1% to $170.6 million.
Splunk ended the quarter with total annual recurring revenues (ARR) of $3.33 billion, up 27% year over year. Cloud ARR soared 55% to just over $1.5 billion.
The company had 723 customers with ARR greater than $1 million, up 24% year over year, and 352 of these customers had Cloud ARR of more than $1 million, up 50%.
GAAP gross margin improved to 74.1% from 69.7% year over year, owing to higher revenues. GAAP Cloud services gross margin expanded 960 basis points to 64.5%.
Splunk Inc. Price, Consensus and EPS Surprise
Splunk Inc. price-consensus-eps-surprise-chart | Splunk Inc. Quote
Cash Flow & Liquidity
During the first six months of fiscal 2023, the company generated $124.7 million of cash from operating activities compared with $14.7 million a year ago. Free cash flow was $113.1 million compared with $5.2 million in the prior year. As of Jul 31, 2022, it had $747.9 million in cash and cash equivalents with $3,870.2 million of net convertible senior notes.
Guidance
For the third quarter of fiscal 2023 (ending Oct 31, 2022), Splunk expects total revenues in the range of $835-$855 million. Non-GAAP operating margin is likely to be within 6% to 8%.
For fiscal 2023 (ending Jan 31, 2023), the company expects total revenues to be between $3.35 billion and $3.4 billion, up from $3.3 billion and $3.35 billion expected earlier. Non-GAAP operating margin is anticipated to be around 8%, up from prior projection of 2%.
Zacks Rank & Stocks to Consider
Splunk currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
SP Plus Corporation , sporting a Zacks Rank #1, is another key pick for investors. It delivered an earnings surprise of 15.7% in the previous quarter and a stellar earnings surprise of 19.5%, on average, in the trailing four quarters. SP Plus operates in Commercial and Aviation segments. It provides mobility solutions, parking management, ground transportation, baggage, and other ancillary services in North America.
Earnings estimates for the current year have moved up 19.4% since August 2021.
First Bancorp. (FBP - Free Report) , carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 17.1%, on average, in the trailing four quarters. Over the past year, the stock has risen 26.2%.
Earnings estimates for the current year have moved up 16.8% since August 2021. First Bancorp operates in six segments – Commercial and Corporate Banking, Mortgage Banking, Consumer Banking, Treasury and Investments, United States Operations and Virgin Islands Operations.
Graham Corporation (GHM - Free Report) has a Zacks Rank #1. The Zacks Consensus Estimate for Graham’s current-year earnings has been revised downward by 86% since August 2021.