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Splunk (SPLK) Down 9.7% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Splunk . Shares have lost about 9.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Splunk due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Splunk Q4 Earnings & Revenues Beat Estimates
Splunk reported solid fourth-quarter fiscal 2023 results, beating the bottom- and top-line estimates. The company made significant progress in enhancing operating efficiency by aligning operations and cost structure. Despite macroeconomic challenges, SPLK enjoys a degree of a competitive advantage supported by product innovation, which helped it to secure multiple deals during the quarter and ensure top-line expansion year over year.
The Bottom Line
GAAP net income in the reported quarter was $268.8 million or an income of $1.44 per share against a loss of $140.8 million or a loss of 88 cents per share in the year-ago quarter. The improvement in the quarter was primarily attributable to top-line growth.
Non-GAAP net income in the reported quarter was $380.9 million or $2.04 per share compared with a net income of $ 106.7 million or 66 cents per share in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate by 93 cents.
In fiscal 2023, on a GAAP basis, the company witnessed a net loss of $277.9 million or a loss of $1.71 per share compared with a loss of $1,339.1 million or $8.29 in fiscal 2022. Non-GAAP net income stood at $499.6 million or an income of $2.69 per share against a loss of $202.6 million or a loss of $1.25 per share in the year-ago quarter.
Revenues
Total revenues in fourth-quarter fiscal 2023 rose to $1,251.1 million from $901.1 million in the prior year, beating the consensus estimate of $1,072 million. In an increasingly complex and sprawling cybersecurity landscape, Splunk witnessed a positive demand trend for its security solutions with multiple project wins. These were supported by investments in innovation. The company is also actively investing in strengthening its portfolio of enterprise-grade observability solutions, which provide monitoring in complex conditions environment.
License revenues (53.6% of total revenues) were $670 million, up 50.7% from $444.6 million year over year. Cloud services revenues (33%) surged 43% to $413.9 million from $289.4 million in the year-ago quarter. The uptick was backed by healthy demand for its cloud solutions. Maintenance and service revenues (13.4%) remained relatively flat at $167.2 million.
For fiscal 2023, total revenues stood at $3,653.7 million compared with $2,673.7 million in fiscal 2022.
Splunk ended the quarter with total annual recurring revenues (ARR) of $3.674 billion, up 18% year over year. Cloud ARR increased 33% to $1.778 billion. The company had 790 customers with an ARR of $1 million or more at the end of the fourth quarter.
Other Details
Gross profit rose to 1,045.8 million from $710.8 million in the prior-year quarter, with respective gross margin of 83.6% and 78.9%. The improvement is driven by higher revenues. GAAP Cloud services gross margin increased to 69% from 61.3% in the year-ago period. Non-GAAP operating income aggregated to $474.3 million compared with $144.2 million in the prior-year period, with a non-GAAP operating margin of 37.9% and 16%, respectively.
Cash Flow & Liquidity
During fiscal 2023, the company generated $449.6 million of cash from operating activities compared with the year-ago levels of $128 million. Free cash flow totaled $427 million. As of Jan 31, 2023, it had $690.6 million in cash and cash equivalents with $3,099.3 million of long-term debt compared with respective tallies of $1,428.7 million or $3,137.7 million.
Outlook
For the first quarter of fiscal 2024, Splunk expects total revenues in the range of $710-$725 million. Non-GAAP operating margin is likely to be within negative 3% to 5%. Free cash flow is estimated at $475 million.
For fiscal 2024, the company expects total revenues to be between $3.85 billion and $3.9 billion. Non-GAAP operating margin is anticipated to be within 16.5-17.5%. Free cash flow is projected between $775 million and $795 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted 9.85% due to these changes.
VGM Scores
At this time, Splunk has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Splunk has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Splunk is part of the Zacks Internet - Software industry. Over the past month, HubSpot (HUBS - Free Report) , a stock from the same industry, has gained 5.3%. The company reported its results for the quarter ended December 2022 more than a month ago.
HubSpot reported revenues of $469.66 million in the last reported quarter, representing a year-over-year change of +27.2%. EPS of $1.11 for the same period compares with $0.58 a year ago.
For the current quarter, HubSpot is expected to post earnings of $0.82 per share, indicating a change of +51.9% from the year-ago quarter. The Zacks Consensus Estimate has changed +3.8% over the last 30 days.
HubSpot has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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Splunk (SPLK) Down 9.7% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Splunk . Shares have lost about 9.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Splunk due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Splunk Q4 Earnings & Revenues Beat Estimates
Splunk reported solid fourth-quarter fiscal 2023 results, beating the bottom- and top-line estimates. The company made significant progress in enhancing operating efficiency by aligning operations and cost structure. Despite macroeconomic challenges, SPLK enjoys a degree of a competitive advantage supported by product innovation, which helped it to secure multiple deals during the quarter and ensure top-line expansion year over year.
The Bottom Line
GAAP net income in the reported quarter was $268.8 million or an income of $1.44 per share against a loss of $140.8 million or a loss of 88 cents per share in the year-ago quarter. The improvement in the quarter was primarily attributable to top-line growth.
Non-GAAP net income in the reported quarter was $380.9 million or $2.04 per share compared with a net income of $ 106.7 million or 66 cents per share in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate by 93 cents.
In fiscal 2023, on a GAAP basis, the company witnessed a net loss of $277.9 million or a loss of $1.71 per share compared with a loss of $1,339.1 million or $8.29 in fiscal 2022. Non-GAAP net income stood at $499.6 million or an income of $2.69 per share against a loss of $202.6 million or a loss of $1.25 per share in the year-ago quarter.
Revenues
Total revenues in fourth-quarter fiscal 2023 rose to $1,251.1 million from $901.1 million in the prior year, beating the consensus estimate of $1,072 million. In an increasingly complex and sprawling cybersecurity landscape, Splunk witnessed a positive demand trend for its security solutions with multiple project wins. These were supported by investments in innovation. The company is also actively investing in strengthening its portfolio of enterprise-grade observability solutions, which provide monitoring in complex conditions environment.
License revenues (53.6% of total revenues) were $670 million, up 50.7% from $444.6 million year over year. Cloud services revenues (33%) surged 43% to $413.9 million from $289.4 million in the year-ago quarter. The uptick was backed by healthy demand for its cloud solutions. Maintenance and service revenues (13.4%) remained relatively flat at $167.2 million.
For fiscal 2023, total revenues stood at $3,653.7 million compared with $2,673.7 million in fiscal 2022.
Splunk ended the quarter with total annual recurring revenues (ARR) of $3.674 billion, up 18% year over year. Cloud ARR increased 33% to $1.778 billion. The company had 790 customers with an ARR of $1 million or more at the end of the fourth quarter.
Other Details
Gross profit rose to 1,045.8 million from $710.8 million in the prior-year quarter, with respective gross margin of 83.6% and 78.9%. The improvement is driven by higher revenues. GAAP Cloud services gross margin increased to 69% from 61.3% in the year-ago period. Non-GAAP operating income aggregated to $474.3 million compared with $144.2 million in the prior-year period, with a non-GAAP operating margin of 37.9% and 16%, respectively.
Cash Flow & Liquidity
During fiscal 2023, the company generated $449.6 million of cash from operating activities compared with the year-ago levels of $128 million. Free cash flow totaled $427 million. As of Jan 31, 2023, it had $690.6 million in cash and cash equivalents with $3,099.3 million of long-term debt compared with respective tallies of $1,428.7 million or $3,137.7 million.
Outlook
For the first quarter of fiscal 2024, Splunk expects total revenues in the range of $710-$725 million. Non-GAAP operating margin is likely to be within negative 3% to 5%. Free cash flow is estimated at $475 million.
For fiscal 2024, the company expects total revenues to be between $3.85 billion and $3.9 billion. Non-GAAP operating margin is anticipated to be within 16.5-17.5%. Free cash flow is projected between $775 million and $795 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted 9.85% due to these changes.
VGM Scores
At this time, Splunk has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Splunk has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Splunk is part of the Zacks Internet - Software industry. Over the past month, HubSpot (HUBS - Free Report) , a stock from the same industry, has gained 5.3%. The company reported its results for the quarter ended December 2022 more than a month ago.
HubSpot reported revenues of $469.66 million in the last reported quarter, representing a year-over-year change of +27.2%. EPS of $1.11 for the same period compares with $0.58 a year ago.
For the current quarter, HubSpot is expected to post earnings of $0.82 per share, indicating a change of +51.9% from the year-ago quarter. The Zacks Consensus Estimate has changed +3.8% over the last 30 days.
HubSpot has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.