Yahoo Finance Splunk (SPLK) Q3 Earnings Beat on Solid Revenues, Shares Up
Splunk Inc. SPLK reported solid third-quarter fiscal 2023 results (ended Oct 31, 2022), beating both the bottom-line and top-line estimates driven by healthy demand trends. The company is improving the resilience and security of its critical system and driving efficiencies within its own internal operation. The strong quarterly performance buoyed investor sentiments as share prices soared 17.8% post earnings release to close at $91.49 on Dec 1, 2022.
GAAP loss in the reported quarter was $32.6 million or a loss of 20 cents per share compared with a loss of $343.3 million or a loss of $2.14 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 83 cents per share, which beat the Zacks Consensus Estimate by 60 cents.
Splunk Inc. Price, Consensus and EPS Surprise
Splunk Inc. price-consensus-eps-surprise-chart | Splunk Inc. Quote
Total revenues in third-quarter fiscal 2023 improved to $929.8 million from $664.8 million in the prior year, beating the consensus estimate of $846 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.
Quarter in Detail
License revenues (41.3% of total revenues) were $383.6 million, up 54.1% year over year. Cloud services revenues (40.2%) surged 53.9% to $346.4 million, driven by the continued adoption of its cloud platform. Maintenance and service revenues (18.5%) remained relatively flat at $172.2 million.
Splunk ended the quarter with total annual recurring revenues (ARR) of $3.47 billion, up 23% year over year. Cloud ARR soared 46% to $1.62 billion. The company had 754 customers with ARR greater than $1 million, up 19% year over year.
GAAP gross margin improved to 78.3% from 71.7% year over year, owing to higher revenues. GAAP Cloud services gross margin expanded 920 basis points to 68%.
Cash Flow & Liquidity
During the first nine months of fiscal 2023, the company generated $173.6 million of cash from operating activities against cash utilization of $4.6 million a year ago. Free cash flow was $158.6 million. As of Oct 31, 2022, it had $832.9 million in cash and cash equivalents with $3,097.3 million of long-term debt.
Guidance
For the fourth quarter of fiscal 2023 (ending Jan 31, 2023), Splunk expects total revenues in the range of $1,055-$1,085 million. Non-GAAP operating margin is likely to be within 23% to 26%.
For fiscal 2023 (ending Jan 31, 2023), the company expects total revenues to be between $3,455 million and $3,485 million, up from $3,350 million and $3,400 million expected earlier. Non-GAAP operating margin is anticipated to be within 12-13%, up from the prior projection of 8%.
Zacks Rank & Other Stocks to Consider
Splunk currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
TESSCO Technologies Incorporated TESS, sporting a Zacks Rank #1, delivered an earnings surprise of 126.1%, on average, in the trailing four quarters. Earnings estimates for TESSCO for the current year have moved up 44.3% since November 2021.
TESSCO offers products to the industry’s top manufacturers in mobile communications, Wi-Fi, wireless backhaul and related products. With more than three decades of experience, it delivers complete end-to-end solutions to the wireless industry.
Harmonic Inc. HLIT, carrying a Zacks Rank #2, delivered an earnings surprise of 79.3%, on average, in the trailing four quarters. Earnings estimates for Harmonic for the current year have moved up 48.6% since March 2021.
Harmonic provides video delivery software, products, system solutions, and services worldwide. With more than three decades of experience, it has revolutionized cable access networking via the industry's first virtualized cable access solution, enabling cable operators to more flexibly deploy gigabit internet service to consumers' homes and mobile devices.
AudioCodes Ltd. AUDC, sporting a Zacks Rank #1, is likely to benefit from the secular tailwinds related to IP-based communications. Incorporated in 1992 and headquartered in Lod, Israel, it offers advanced communications software, products and productivity solutions for the digital workplace. It has a long-term earnings growth expectation of 9%.
AudioCodes aims to leverage its long-term partnership with Microsoft to further strengthen its market position. It is also likely to benefit from its continued focus on high-margin businesses.
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