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Splunk Inc. (NASDAQ:SPLK) Q3 2023 Results Conference Call November 30, 2022 4:30 PM ET Company Participants Ken Tinsley - Corporate Treasurer, VP of IR Gary Steele - President, CEO Conference Call Participants Brad Zelnick - Deutsche Bank Brad Sills - B&A Securities John DiFucci – Guggenheim Kash Rangan - Goldman Sachs Matt Hedberg - RBC Capital Markets Mike Cikos - Needham & Company Raimo Lenschow – Barclays Steve Koenig – SMBC Operator Ladies and gentlemen, thank you for standing by, and welcome to the S ...

Table of Contents Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.001 per share SPLK The Nasdaq Stock Market LLC UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF TH ...

Splunk Inc. (NASDAQ:SPLK) Goldman Sachs Communacopia + Technology Conference September 13, 2022 10:30 AM ET Company Participants Gary Steele – President and Chief Executive Officer Ken Tinsley – Investor Relations Conference Call Participants Unidentified Analyst Good, good early morning. Thanks for showing up at such an early time of the day on the second day of our conference. As you may have heard by now, the conference is off to a great start. Thanks for support. We are off to record registrations, offi ...

Financial Data and Key Metrics Changes - Total revenues for Q2 2023 were $799 million, representing a 32% increase year-over-year, exceeding expectations [7][18] - Cloud revenue reached $346 million, up 59% year-over-year, indicating strong adoption of the Cloud Platform [18] - Total annual recurring revenue (ARR) was $3.33 billion, up 27% year-over-year, while Cloud ARR was just over $1.5 billion, up 55% [19] - Operating margin improved to 4%, significantly better than expectations due to top-line performance and expense optimization efforts [20][21] Business Line Data and Key Metrics Changes - Professional services and education accounted for 7% of total revenues in Q2 [18] - The company ended the quarter with 723 customers having ARR greater than $1 million, an increase of 33 customers from the previous quarter [7][19] - Renewal and expansion rates remained strong, with a dollar-based net retention rate (DBNRR) of 129% for cloud [19] Market Data and Key Metrics Changes - RPO bookings were $794 million, up 17% year-over-year, but lower than planned due to customer caution in expansions [19] - The company observed a trend of customers opting for shorter contract durations, down about two months compared to the previous year [19] Company Strategy and Development Direction - The company is focused on balancing growth with profitability, emphasizing the importance of cloud transformation for customers [6][14] - There is a strategic emphasis on strengthening relationships with Chief Security Officers (CSOs) to drive broader business resilience initiatives [14][34] - The company plans to continue investing in R&D to fuel long-term growth while optimizing operational efficiencies [29][52] Management's Comments on Operating Environment and Future Outlook - Management noted that customer hesitance in cloud migrations is primarily due to the complexity of existing environments and macroeconomic uncertainties, not a lack of confidence in Splunk [26][27] - The company is adjusting its full-year total ARR target to $3.65 billion and Cloud ARR to $1.8 billion due to slower customer migrations [21] - Management expressed confidence in the long-term growth potential of the company despite near-term headwinds [17][21] Other Important Information - The company is implementing cost-cutting measures, including rationalizing outside services and optimizing real estate, to improve operational efficiency [22][52] - Free cash flow is now being emphasized as the primary cash generation metric, with expectations to generate at least $400 million this year [23] Q&A Session Summary Question: Why are customers hesitating to shift more to cloud? - Management indicated that the hesitance is due to the complexity of migrations and not a lack of confidence in Splunk [26][27] Question: How does the company view R&D investment? - Management affirmed that innovation is critical and will continue to invest in R&D to drive long-term growth [29] Question: What is the impact of slower cloud migrations on the business? - Management noted that the slowdown is primarily due to macroeconomic factors and complex migrations rather than competitive pressures [37][46] Question: How consistent were new logo wins in the first half? - Management reported consistent new logo wins across the first half, with no significant changes in Q2 compared to Q1 [43] Question: How is the company addressing customer concerns about cloud expansion? - Management is focused on making migrations easier for customers and providing necessary support to facilitate the process [73]

Splunk Inc. (NASDAQ:SPLK) Q1 2023 Earnings Conference Call May 25, 2022 4:30 PM ET Company Participants Ken Tinsley - Corporate Treasurer & Vice President of Investor Relations Gary Steele - Interim Chief Executive Officer Jason Child - Chief Financial Officer Conference Call Participants Kash Rangan - Goldman Sachs Brent Thill - Jefferies Brad Zelnick - Deutsche Bank Raimo Lenschow - Barclays Phil Winslow - Credit Suisse Sanjit Singh - Morgan Stanley Chirag Ved - Evercore ISI Steve Koenig - SMBC Nikko ...

Cloud Services and Revenue Metrics - Cloud Annual Recurring Revenue (Cloud ARR) and Total Annual Recurring Revenue (Total ARR) are key metrics used to monitor the growth of the company's recurring business, with Cloud ARR representing the annualized revenue run-rate of active cloud services contracts and Total ARR including cloud services, term license, and maintenance contracts[134] - The company's revenue mix has shifted from license sales to cloud services, with an increasing percentage of sales being recognized ratably, impacting operating margins and revenue timing[127] - Cloud services revenues grew to $322.9 million, representing 47.9% of total revenues, up from $193.9 million (38.6%) in the same period last year[157] - The company's cloud services annual subscription fees are typically based on the volume of data indexed per day, purchased infrastructure, data storage, and bandwidth, with an increasing share of business based on workload pricing[125] Financial Performance and Cash Flow - Free cash flow for the three months ended April 30, 2022, was $137.7 million, compared to $66.7 million for the same period in 2021[138] - Total revenues increased by $172.0 million, or 34.3%, primarily driven by a $129.0 million (66.5%) increase in cloud services revenues and a $42.5 million (29.7%) increase in license revenues[166] - Net loss improved to $304.3 million (45.1% of revenues) from $471.0 million (93.8% of revenues) in the same period last year[157] - Net cash provided by operating activities increased to $143.3 million for the three months ended April 30, 2022, compared to $70.7 million in the prior year[197] - Net cash used in investing activities was $692.6 million for the three months ended April 30, 2022, primarily due to marketable securities purchases of $681.7 million[198] - Net cash used in financing activities was $65.4 million for the three months ended April 30, 2022, mainly due to taxes paid related to equity awards[199] Remaining Performance Obligations and Deferred Revenue - Total Remaining Performance Obligations (RPO) Bookings for the three months ended April 30, 2022, were $491.5 million, compared to $372.1 million for the same period in 2021[141] - The company expects seasonally higher bookings and billings in the fiscal fourth quarter, with more revenue being recognized ratably, impacting remaining performance obligations and deferred revenue[143] Customer and Market Impact - The company's offerings have been deployed by over 90 of the Fortune 100 companies as of April 30, 2022[143] - The ongoing COVID-19 pandemic has created significant global economic uncertainty, impacting the company's business, customers, partners, and vendors, with potential future impacts on results of operations and cash flows[129] Investments and Capital Allocation - The company continues to invest in product development, sales and marketing, and acquisitions to contribute to long-term growth objectives[128] - The company plans to continue focusing capital expenditures for the remainder of fiscal 2023 to support growth, including acquisitions and product development[192] - In fiscal 2022, the company repurchased 6.9 million shares of common stock for $1.0 billion at an average price of $145.23 per share[193] - The company issued $1.0 billion in 0.75% Convertible Senior Notes due 2026, with net proceeds of $981.7 million after issuance costs[194] Cost and Expense Analysis - Total cost of revenues increased by $30.3 million (17.6%), with cloud services cost of revenues rising by $31.4 million (35.7%) due to higher third-party hosting fees and increased headcount[171] - Research and development expenses increased by $8.5 million (3.4%), primarily due to a $12.1 million rise in salaries and benefits, including $7.8 million in stock-based compensation[184] - Sales and marketing expenses grew by $39.1 million (11.0%), driven by a $32.5 million increase in salaries and benefits, including $17.6 million in stock-based compensation[185] - General and administrative expenses decreased by $49.5 million (30.5%), mainly due to a $54.9 million reduction in facility exit costs[186] Liquidity and Financial Position - The company had $1.8 billion in cash, cash equivalents, and investments as of April 30, 2022, with $392.6 million held by foreign subsidiaries[191] - The company has no significant changes in contractual obligations and commitments as disclosed in its Annual Report on Form 10-K[200] - No off-balance sheet arrangements were established during the three months ended April 30, 2022 and 2021[201] - Indemnification arrangements have not materially impacted the company's financial statements, with no accrual as of April 30, 2022[203] - The company's financial statements are prepared in accordance with GAAP, with estimates based on historical experience and reasonable assumptions[204] Product and Market Strategy - The company's solutions for Security and Observability empower users in technology roles, including DevOps, ITOps, and cybersecurity, to monitor and secure digital systems more efficiently[122] - Maintenance revenues as a percentage of total revenues decreased to 17% in Q2 2022 from 23% in Q2 2021[145]