Splunk (SPLK) Surges 13% on Strong Revenue Growth

Shares of software company Splunk (SPLK: Charts, News) soared on Friday, after the data monitoring software provider reported second quarter earnings that exceeded analyst expectations. Splunk reported a second quarter loss of 5 cents per share, a penny better than the 6 cent loss analysts had expected.

Revenue grew 73.2% to $44.5 million, far higher than the $40 million forecast by analysts. The company attributed its strong earnings to a 61% gain in license revenue, which comprises 68% of Splunk's total revenue, as well as a 98% surge in maintenance and services revenue, which makes up the remaining 32%. The stock, which has approximately doubled from its original IPO price of $17, is still down 2% from its initial day of trading in April, when it closed at $36.20. Daily Chart
During the second quarter, Splunk inked new deals with over 400 new customers. 71% of the company's license revenue came from its existing customer base of approximately 1,600, indicating strong customer loyalty. The company's renewal rate came in at 91%, higher than the 85% to 90% the company had previously forecast. As a show of strength, Splunk has continued to increase its workforce, despite macro economic problems in several key markets. Splunk added 16 new quota carriers, ending the quarter with 117 total carriers. 10 of these 16 carriers were overseas. Splunk's average orders are high priced, with 98 orders during the quarter coming it at over $100,000. In the prior year quarter, it only signed 65 deals exceeding $100,000. In the previous quarter, it signed 73. These consistently more expensive deals suggest strong demand for Splunk's data monitoring services. Splunk's major customers include Zynga (ZNGA: Charts, News), Bank of America (BAC: Charts, News) and Autodesk (ADSK: Charts, News), which use Splunk's services to monitor and analyze data from its web services and mobile devices. The company's services are considered essential to next generation cloud-based computing, in which software and services are streamed from Internet-based servers, rather than installed on end-users' computers. Gross profit surged 73% to $39.8 million, while gross margin rose 110 basis points to 89.6%. The company has also been aggressive in its forward-looking expenses. Its R&D (research & development) costs rose 73.5% to $9.4 million, while its S&M (sales & marketing) costs rose 69.2% to $27.7 million. Its general & administrative expenses also rose 63% to $7.2 million. These high expenses were the primary reason for the net loss for the quarter. However, the loss of 5 cents per share is a vast improvement over the loss of 17 cents per share a year earlier. The company currently has $268.3 million in cash, with a quarterly operating cash flow of $3.8 million. Looking ahead, Splunk expects revenue between $45 and $47 million for the next quarter. It also raised its full year revenue guidance, expecting to generate between $183 million and $186 million for fiscal 2013, up from its prior guidance between $174 million and $177 million. Although many analysts find Splunk's revenue growth encouraging, some have expressed concerns regarding its costly investments and expenditures. The Street is generally neutral regarding the stock, with most analysts rating it as "Neutral" or "Hold." Other News About SPLK Splunk Impresses in 2Q Splunk rallies after spending the past four months in limbo. Splunk Rises On Narrower Loss Than Analysts Expected Splunk's strong revenue growth offsets fears of net losses and high expenses. Other Stocks in the News Facebook Hits New Low After Price Target Cuts There's nothing to "Like" about Facebook these days as the stock plunges deeper into oblivion. Fannie, Freddie to Raise Mortgage Fees Fannie and Freddie increase mortgage fees. Copyright 2012 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Sep 4, 2012
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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