|
Delaware
|
|
86-1106510
|
(State or other jurisdiction of
|
|
(I.R.S. Employer
|
incorporation or organization)
|
|
Identification No.)
|
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 Global Select Market
|
Large accelerated filer
|
ý
|
Accelerated filer
|
¨
|
|
|
|
|
Non-accelerated filer
|
¨
|
Smaller reporting company
|
¨
|
|
|
|
|
Emerging growth company
|
¨
|
|
|
|
|
|
|
Page No.
|
|
|
|
|
|
|
|
|
Item 1.
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
Item 2.
|
|
||
Item 3.
|
|
||
Item 4.
|
|
||
|
|
|
|
|
|
|
|
Item 1.
|
|
||
Item 1A.
|
|
||
Item 6.
|
|
||
|
|
Item 1. Financial Statements (Unaudited)
|
(In thousands, except share and per share amounts)
|
|
April 30, 2019
|
|
January 31, 2019
|
||||
Assets
|
|
|
|
|
|
|
||
Current assets
|
|
|
|
|
|
|
||
Cash and cash equivalents
|
|
$
|
1,835,229
|
|
|
$
|
1,876,165
|
|
Investments, current
|
|
840,215
|
|
|
881,220
|
|
||
Accounts receivable, net
|
|
285,300
|
|
|
469,658
|
|
||
Prepaid expenses and other current assets
|
|
79,102
|
|
|
73,197
|
|
||
Deferred commissions, current
|
|
74,976
|
|
|
78,223
|
|
||
Total current assets
|
|
3,114,822
|
|
|
3,378,463
|
|
||
Investments, non-current
|
|
146,159
|
|
|
110,588
|
|
||
Operating lease right-of-use assets
|
|
201,675
|
|
|
—
|
|
||
Property and equipment, net
|
|
89,615
|
|
|
158,276
|
|
||
Intangible assets, net
|
|
84,497
|
|
|
91,622
|
|
||
Goodwill
|
|
503,388
|
|
|
503,388
|
|
||
Deferred commissions, non-current
|
|
61,433
|
|
|
64,766
|
|
||
Other assets
|
|
205,155
|
|
|
193,140
|
|
||
Total assets
|
|
$
|
4,406,744
|
|
|
$
|
4,500,243
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
||
Current liabilities
|
|
|
|
|
|
|
||
Accounts payable
|
|
$
|
23,407
|
|
|
$
|
20,418
|
|
Accrued compensation
|
|
163,284
|
|
|
226,061
|
|
||
Accrued expenses and other liabilities
|
|
155,145
|
|
|
125,641
|
|
||
Deferred revenue, current
|
|
631,732
|
|
|
673,018
|
|
||
Total current liabilities
|
|
973,568
|
|
|
1,045,138
|
|
||
Convertible senior notes, net
|
|
1,653,479
|
|
|
1,634,474
|
|
||
Operating lease liabilities
|
|
179,227
|
|
|
—
|
|
||
Deferred revenue, non-current
|
|
173,999
|
|
|
204,929
|
|
||
Other liabilities, non-current
|
|
445
|
|
|
95,245
|
|
||
Total non-current liabilities
|
|
2,007,150
|
|
|
1,934,648
|
|
||
Total liabilities
|
|
2,980,718
|
|
|
2,979,786
|
|
||
Commitments and contingencies (Note 3)
|
|
|
|
|
|
|
||
Stockholders’ equity
|
|
|
|
|
|
|
||
Common stock: $0.001 par value; 1,000,000,000 shares authorized; 150,170,702 shares issued and outstanding at April 30, 2019, and 149,167,298 shares issued and outstanding at January 31, 2019
|
|
150
|
|
|
149
|
|
||
Accumulated other comprehensive loss
|
|
(3,165
|
)
|
|
(2,506
|
)
|
||
Additional paid-in capital
|
|
2,809,273
|
|
|
2,754,858
|
|
||
Accumulated deficit
|
|
(1,380,232
|
)
|
|
(1,232,044
|
)
|
||
Total stockholders’ equity
|
|
1,426,026
|
|
|
1,520,457
|
|
||
Total liabilities and stockholders’ equity
|
|
$
|
4,406,744
|
|
|
$
|
4,500,243
|
|
|
|
Three Months Ended April 30,
|
||||||
(In thousands, except per share amounts)
|
|
2019
|
|
2018
|
||||
Revenues
|
|
|
|
|
||||
License
|
|
$
|
202,862
|
|
|
$
|
138,975
|
|
Maintenance and services
|
|
221,988
|
|
|
172,664
|
|
||
Total revenues
|
|
424,850
|
|
|
311,639
|
|
||
Cost of revenues (1)
|
|
|
|
|
||||
License
|
|
5,682
|
|
|
5,124
|
|
||
Maintenance and services
|
|
90,141
|
|
|
72,846
|
|
||
Total cost of revenues
|
|
95,823
|
|
|
77,970
|
|
||
Gross profit
|
|
329,027
|
|
|
233,669
|
|
||
Operating expenses (1)
|
|
|
|
|
||||
Research and development
|
|
129,290
|
|
|
86,357
|
|
||
Sales and marketing
|
|
278,961
|
|
|
218,036
|
|
||
General and administrative
|
|
65,762
|
|
|
50,742
|
|
||
Total operating expenses
|
|
474,013
|
|
|
355,135
|
|
||
Operating loss
|
|
(144,986
|
)
|
|
(121,466
|
)
|
||
Interest and other income (expense), net
|
|
|
|
|
||||
Interest income
|
|
16,346
|
|
|
3,187
|
|
||
Interest expense
|
|
(23,017
|
)
|
|
(2,073
|
)
|
||
Other income (expense), net
|
|
(539
|
)
|
|
(135
|
)
|
||
Total interest and other income (expense), net
|
|
(7,210
|
)
|
|
979
|
|
||
Loss before income taxes
|
|
(152,196
|
)
|
|
(120,487
|
)
|
||
Income tax provision (benefit)
|
|
3,233
|
|
|
(1,988
|
)
|
||
Net loss
|
|
$
|
(155,429
|
)
|
|
$
|
(118,499
|
)
|
|
|
|
|
|
||||
Basic and diluted net loss per share
|
|
$
|
(1.04
|
)
|
|
$
|
(0.83
|
)
|
|
|
|
|
|
||||
Weighted-average shares used in computing basic and diluted net loss per share
|
|
149,060
|
|
|
143,548
|
|
(1)
|
Amounts include stock-based compensation expense, as follows:
|
Cost of revenues
|
|
$
|
10,825
|
|
|
$
|
8,804
|
|
Research and development
|
|
41,268
|
|
|
26,416
|
|
||
Sales and marketing
|
|
50,268
|
|
|
43,047
|
|
||
General and administrative
|
|
20,702
|
|
|
16,354
|
|
|
|
Three Months Ended April 30,
|
||||||
(In thousands)
|
|
2019
|
|
2018
|
||||
Net loss
|
|
$
|
(155,429
|
)
|
|
$
|
(118,499
|
)
|
Other comprehensive loss
|
|
|
|
|
||||
Net unrealized gain (loss) on investments (net of tax)
|
|
332
|
|
|
192
|
|
||
Foreign currency translation adjustments
|
|
(991
|
)
|
|
(1,886
|
)
|
||
Total other comprehensive loss
|
|
(659
|
)
|
|
(1,694
|
)
|
||
Comprehensive loss
|
|
$
|
(156,088
|
)
|
|
$
|
(120,193
|
)
|
|
|
Three Months Ended April 30,
|
||||||
(In thousands)
|
|
2019
|
|
2018
|
||||
Common stock
|
|
|
|
|
||||
Balance, beginning of period
|
|
$
|
149
|
|
|
$
|
143
|
|
Vesting of restricted stock units
|
|
1
|
|
|
1
|
|
||
Balance, end of period
|
|
$
|
150
|
|
|
$
|
144
|
|
Additional paid-in capital
|
|
|
|
|
||||
Balance, beginning of period
|
|
$
|
2,754,858
|
|
|
$
|
2,086,893
|
|
Stock-based compensation
|
|
123,063
|
|
|
94,621
|
|
||
Issuance of common stock upon exercise of options
|
|
359
|
|
|
1,112
|
|
||
Fair value of replacement equity awards attributable to pre-acquisition service
|
|
—
|
|
|
12,274
|
|
||
Taxes paid related to net share settlement of equity awards
|
|
(69,007
|
)
|
|
—
|
|
||
Balance, end of period
|
|
$
|
2,809,273
|
|
|
$
|
2,194,900
|
|
Accumulated other comprehensive loss
|
|
|
|
|
||||
Balance, beginning of period
|
|
$
|
(2,506
|
)
|
|
$
|
156
|
|
Unrealized gain from investments
|
|
332
|
|
|
192
|
|
||
Net change in cumulative translation adjustments
|
|
(991
|
)
|
|
(1,886
|
)
|
||
Balance, end of period
|
|
$
|
(3,165
|
)
|
|
$
|
(1,538
|
)
|
Accumulated deficit
|
|
|
|
|
||||
Balance, beginning of period
|
|
$
|
(1,232,044
|
)
|
|
$
|
(955,871
|
)
|
Cumulative-effect adjustment from adoption of ASU 2016-02
|
|
7,241
|
|
|
—
|
|
||
Cumulative-effect adjustment from adoption of ASU 2016-16
|
|
—
|
|
|
(596
|
)
|
||
Net loss
|
|
(155,429
|
)
|
|
(118,499
|
)
|
||
Balance, end of period
|
|
$
|
(1,380,232
|
)
|
|
$
|
(1,074,966
|
)
|
|
|
|
|
|
||||
Total stockholders’ equity
|
|
$
|
1,426,026
|
|
|
$
|
1,118,540
|
|
|
|
Three Months Ended April 30,
|
||||||
(In thousands)
|
|
2019
|
|
2018
|
||||
Cash flows from operating activities
|
|
|
|
|
|
|
||
Net loss
|
|
$
|
(155,429
|
)
|
|
$
|
(118,499
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
13,415
|
|
|
11,416
|
|
||
Amortization of deferred commissions
|
|
30,032
|
|
|
15,788
|
|
||
Amortization of investment premiums (accretion of discounts)
|
|
(2,859
|
)
|
|
(176
|
)
|
||
Amortization of debt discount and issuance costs
|
|
19,005
|
|
|
—
|
|
||
Stock-based compensation
|
|
123,063
|
|
|
94,621
|
|
||
Deferred income taxes
|
|
(20
|
)
|
|
(239
|
)
|
||
Changes in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
||||
Accounts receivable, net
|
|
184,358
|
|
|
195,576
|
|
||
Prepaid expenses and other assets
|
|
(17,900
|
)
|
|
(23,299
|
)
|
||
Deferred commissions
|
|
(23,452
|
)
|
|
(14,716
|
)
|
||
Accounts payable
|
|
2,925
|
|
|
(1,078
|
)
|
||
Accrued compensation
|
|
(62,777
|
)
|
|
(44,435
|
)
|
||
Accrued expenses and other liabilities
|
|
(3,116
|
)
|
|
(14,340
|
)
|
||
Deferred revenue
|
|
(72,216
|
)
|
|
(24,132
|
)
|
||
Net cash provided by operating activities
|
|
35,029
|
|
|
76,487
|
|
||
Cash flows from investing activities
|
|
|
|
|
||||
Purchases of investments
|
|
(289,425
|
)
|
|
(22,875
|
)
|
||
Maturities of investments
|
|
298,425
|
|
|
174,125
|
|
||
Acquisitions, net of cash acquired
|
|
—
|
|
|
(284,170
|
)
|
||
Purchases of property and equipment
|
|
(14,900
|
)
|
|
(2,296
|
)
|
||
Other investment activities
|
|
(375
|
)
|
|
(4,375
|
)
|
||
Net cash used in investing activities
|
|
(6,275
|
)
|
|
(139,591
|
)
|
||
Cash flows from financing activities
|
|
|
|
|
||||
Proceeds from the exercise of stock options
|
|
360
|
|
|
1,113
|
|
||
Taxes paid related to net share settlement of equity awards
|
|
(69,007
|
)
|
|
(779
|
)
|
||
Repayment of financing lease obligation
|
|
—
|
|
|
(589
|
)
|
||
Net cash used in financing activities
|
|
(68,647
|
)
|
|
(255
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
|
(1,043
|
)
|
|
(762
|
)
|
||
Net decrease in cash and cash equivalents
|
|
(40,936
|
)
|
|
(64,121
|
)
|
||
Cash and cash equivalents at beginning of period
|
|
1,876,165
|
|
|
545,947
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
1,835,229
|
|
|
$
|
481,826
|
|
|
|
|
|
|
||||
Supplemental disclosures
|
|
|
|
|
||||
Cash paid for income taxes
|
|
$
|
8,316
|
|
|
$
|
2,139
|
|
Cash paid for interest
|
|
7,747
|
|
|
2,069
|
|
||
Non-cash investing activities
|
|
|
|
|
||||
Decrease in accrued purchases of property and equipment
|
|
(853
|
)
|
|
(791
|
)
|
Standard
|
|
Description
|
|
Effective Date
|
|
Effect on the Condensed Consolidated Financial Statements (or Other Significant Matters)
|
Accounting Standards Updated (“ASU”) No. 2018-13 (Topic 820), Fair Value Measurement: Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement
|
|
The new standard no longer requires disclosure of the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted-average used to develop significant unobservable inputs for Level 3 fair value measurements.
|
|
We adopted this new standard as of February 1, 2019.
|
|
The adoption of this new standard did not have a material impact on our condensed consolidated financial statements.
|
ASU No. 2016-02 (Topic 842), Leases
|
|
The new standard supersedes the lease recognition requirements in Accounting Standards Codification (“ASC”) Topic 840, Leases. The standard requires an entity to recognize right-of-use assets and lease liabilities arising from a lease for operating leases, initially measured at the present value of the lease payments on the condensed consolidated balance sheets. The impact of such leases on the condensed consolidated statements of operations and cash flows will continue to be treated in a similar manner under current GAAP. The standard also requires additional qualitative and quantitative disclosures. In July 2018, ASU No. 2018-10, Codification Improvements to Topic 842, Leases, was issued which clarifies the codification or corrects unintended application of the guidance.
|
|
We adopted this new standard as of February 1, 2019, using the cumulative-effect transition method recognized as of the date of initial application, as amended by ASU No. 2018-11. Under this method, we are not required to restate or disclose the effects of applying Topic 842 for comparative periods.
|
|
As the result of our adoption, we recognized Operating lease right-of-use assets of $199.8 million and current and non-current Operating lease liabilities of $211.9 million on our condensed consolidated balance sheets at February 1, 2019. Additionally, we recorded a decrease to our opening accumulated deficit of approximately $7.2 million related to the derecognition of build-to-suit lease assets and liabilities.
We have updated our accounting policies, systems, processes and internal controls, and have allocated internal and external resources to assist us during our implementation efforts.
We applied the following practical expedients as permitted under Topic 842: (i) we elected to account for lease and non-lease components as a single lease component, and (ii) we elected the package of practical expedients permitted under the transition guidance, which allowed us to carryforward (1) our historical lease classification, (2) our assessment on whether a contract was or contains a lease, and (3) our initial direct costs for leases that existed prior to January 31, 2019.
|
Standard
|
|
Description
|
|
Effective Date
|
|
Effect on the Condensed Consolidated Financial Statements (or Other Significant Matters)
|
ASU No. 2018-15 (Subtopic 350-40), Intangibles - Goodwill and Other - Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
|
|
The standard aligns the requirements for capitalizing implementation costs in a cloud computing arrangement service contract with the requirements for capitalizing implementation costs incurred for an internal-use software license.
|
|
First quarter of fiscal 2021, although early adoption is permitted.
|
|
We are currently evaluating whether the adoption of this standard will have a material impact on our condensed consolidated financial statements.
|
ASU No. 2016-13 (Topic 326), Financial Instruments - Credit Losses
|
|
The amendments in this update require a financial asset (or a group of financial assets) measured at an amortized cost basis to be presented at the net amount expected to be collected. The new approach to estimating credit losses (referred to as the current expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans and held-to-maturity debt securities.
|
|
First quarter of fiscal 2021, although early adoption is permitted.
|
|
We are currently evaluating whether the adoption of this standard will have a material impact on our condensed consolidated financial statements.
|
|
|
April 30, 2019
|
|
January 31, 2019
|
||||||||||||||||||||||||||||
(In thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
|
$
|
56,371
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
56,371
|
|
|
$
|
46,311
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
46,311
|
|
U.S. treasury securities
|
|
—
|
|
|
817,828
|
|
|
—
|
|
|
817,828
|
|
|
—
|
|
|
980,940
|
|
|
—
|
|
|
980,940
|
|
||||||||
Commercial paper
|
|
—
|
|
|
169,294
|
|
|
—
|
|
|
169,294
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Other
|
|
—
|
|
|
—
|
|
|
4,744
|
|
|
4,744
|
|
|
—
|
|
|
—
|
|
|
4,744
|
|
|
4,744
|
|
||||||||
Reported as:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
$
|
68,363
|
|
|
|
|
|
|
|
|
|
|
|
$
|
46,311
|
|
||||||
Investments, current
|
|
|
|
|
|
|
|
840,215
|
|
|
|
|
|
|
|
|
881,220
|
|
||||||||||||||
Investments, non-current
|
|
|
|
|
|
|
|
139,659
|
|
|
|
|
|
|
|
|
104,463
|
|
||||||||||||||
Total
|
|
|
|
|
|
|
|
|
|
|
$
|
1,048,237
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,031,994
|
|
(In thousands)
|
|
Amortized Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Fair Value
|
||||||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasury securities
|
|
$
|
11,994
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
11,992
|
|
Investments, current:
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasury securities
|
|
795,557
|
|
|
403
|
|
|
(34
|
)
|
|
795,926
|
|
||||
Commercial paper
|
|
44,298
|
|
|
5
|
|
|
(14
|
)
|
|
44,289
|
|
||||
Investments, non-current:
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasury securities
|
|
9,876
|
|
|
34
|
|
|
—
|
|
|
9,910
|
|
||||
Commercial paper
|
|
124,931
|
|
|
101
|
|
|
(27
|
)
|
|
125,005
|
|
||||
Total available-for-sale investments
|
|
$
|
986,656
|
|
|
$
|
543
|
|
|
$
|
(77
|
)
|
|
$
|
987,122
|
|
(In thousands)
|
|
Amortized Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Fair Value
|
||||||||
Investments, current:
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasury securities
|
|
$
|
881,206
|
|
|
$
|
131
|
|
|
$
|
(117
|
)
|
|
$
|
881,220
|
|
Investments, non-current:
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasury securities
|
|
99,597
|
|
|
134
|
|
|
(11
|
)
|
|
99,720
|
|
||||
Total available-for-sale investments
|
|
$
|
980,803
|
|
|
$
|
265
|
|
|
$
|
(128
|
)
|
|
$
|
980,940
|
|
|
|
Less than 12 Months
|
|
12 Months or Greater
|
|
Total
|
||||||||||||||||||
(In thousands)
|
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
|
Fair Value
|
|
Unrealized Losses
|
||||||||||||
April 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. treasury securities
|
|
$
|
295,430
|
|
|
$
|
(36
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
295,430
|
|
|
$
|
(36
|
)
|
Commercial paper
|
|
72,688
|
|
|
(41
|
)
|
|
—
|
|
|
—
|
|
|
72,688
|
|
|
(41
|
)
|
||||||
January 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. treasury securities
|
|
$
|
582,761
|
|
|
$
|
(128
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
582,761
|
|
|
$
|
(128
|
)
|
(In thousands)
|
|
April 30, 2019
|
||
Due within one year
|
|
$
|
852,207
|
|
Due within one to two years
|
|
134,915
|
|
|
Total
|
|
$
|
987,122
|
|
(In thousands)
|
|
April 30, 2019
|
|
January 31, 2019
|
||||
Equity investments without readily determinable fair values
|
|
$
|
5,000
|
|
|
$
|
5,000
|
|
Equity investments under the equity method of accounting
|
|
1,500
|
|
|
1,125
|
|
||
Total
|
|
$
|
6,500
|
|
|
$
|
6,125
|
|
|
|
April 30, 2019
|
|
Weighted-average remaining lease term (in years)
|
|
7.41
|
|
Weighted-average discount rate
|
|
5.98
|
%
|
Fiscal Period (In thousands)
|
|
Future Payments (1)
|
||
Remaining fiscal 2020
|
|
$
|
29,726
|
|
Fiscal 2021
|
|
42,687
|
|
|
Fiscal 2022
|
|
41,719
|
|
|
Fiscal 2023
|
|
36,620
|
|
|
Fiscal 2024
|
|
26,104
|
|
|
Thereafter
|
|
95,714
|
|
|
Total lease payments
|
|
272,570
|
|
|
Less imputed interest
|
|
(54,203
|
)
|
|
Total current and non-current operating lease liabilities (2)
|
|
$
|
218,367
|
|
(1)
|
Amounts based on Topic 842, Leases, which superseded Topic 840, which we adopted on February 1, 2019.
|
(2)
|
The current portion of our operating lease liabilities is included in “Accrued expenses and other liabilities” on our condensed consolidated balance sheets.
|
Fiscal Period (In thousands)
|
|
Future Payments (1)
|
||
Fiscal 2020
|
|
$
|
30,976
|
|
Fiscal 2021
|
|
48,195
|
|
|
Fiscal 2022
|
|
48,126
|
|
|
Fiscal 2023
|
|
44,018
|
|
|
Fiscal 2024
|
|
40,636
|
|
|
Thereafter
|
|
253,856
|
|
|
Total future minimum lease payments (2)
|
|
$
|
465,807
|
|
(1)
|
Amounts based on Topic 840, Leases, which was superseded by Topic 842, which we adopted on February 1, 2019.
|
(2)
|
We entered into sublease agreements for portions of our office space and the future rental income of $2.3 million from these agreements have been included as an offset to our future minimum rental payments.
|
|
|
Three Months Ended
|
||
(In thousands)
|
|
April 30, 2019
|
||
Cash paid for operating lease liabilities
|
|
$
|
9,751
|
|
Operating lease liabilities arising from obtaining right-of-use assets
|
|
9,916
|
|
(In thousands)
|
|
April 30, 2019
|
|
January 31, 2019
|
||||
Computer equipment and software
|
|
$
|
83,865
|
|
|
$
|
79,887
|
|
Furniture and fixtures
|
|
19,417
|
|
|
18,872
|
|
||
Leasehold and building improvements (1)
|
|
88,258
|
|
|
79,064
|
|
||
Building (2)
|
|
—
|
|
|
82,250
|
|
||
Property and equipment, gross
|
|
191,540
|
|
|
260,073
|
|
||
Less: accumulated depreciation and amortization
|
|
(101,925
|
)
|
|
(101,797
|
)
|
||
Property and equipment, net
|
|
$
|
89,615
|
|
|
$
|
158,276
|
|
(1)
|
Includes costs related to assets not yet placed into service of $20.1 million and $11.3 million, as of April 30, 2019 and January 31, 2019, respectively.
|
(2)
|
This relates to the capitalization of construction costs under ASC Topic 840, Leases, in connection with our financing lease obligation, where we were considered the owner of the asset, for accounting purposes only, during the period ended January 31, 2019. The corresponding long-term liability for this obligation is included in our condensed consolidated balance sheets under “Other liabilities, non-current.” As part of our adoption of Topic 842, we derecognized the assets and liabilities related to the financing lease obligation at February 1, 2019. Refer to Note 4 “Leases” for details.
|
(In thousands)
|
|
April 30, 2019
|
|
January 31, 2019
|
||||
United States
|
|
$
|
76,078
|
|
|
$
|
147,659
|
|
International
|
|
13,537
|
|
|
10,617
|
|
||
Total property and equipment, net
|
|
$
|
89,615
|
|
|
$
|
158,276
|
|
(In thousands, except useful life)
|
|
Fair Value
|
|
Useful Life (months)
|
||
Developed technology
|
|
$
|
11,700
|
|
|
84
|
Customer relationships
|
|
9,400
|
|
|
60
|
|
Total intangible assets acquired
|
|
$
|
21,100
|
|
|
|
(In thousands, except useful life)
|
|
Fair Value
|
|
Useful Life (months)
|
||
Developed technology
|
|
$
|
34,400
|
|
|
84
|
Customer relationships
|
|
9,700
|
|
|
60
|
|
Total intangible assets acquired
|
|
$
|
44,100
|
|
|
|
(In thousands, except useful life)
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Weighted-Average Remaining Useful Life
(months)
|
||||||
Developed technology
|
|
$
|
132,100
|
|
|
$
|
(63,518
|
)
|
|
$
|
68,582
|
|
|
51
|
Customer relationships
|
|
20,910
|
|
|
(5,478
|
)
|
|
15,432
|
|
|
49
|
|||
Other acquired intangible assets
|
|
3,270
|
|
|
(2,787
|
)
|
|
483
|
|
|
6
|
|||
Total intangible assets subject to amortization
|
|
$
|
156,280
|
|
|
$
|
(71,783
|
)
|
|
$
|
84,497
|
|
|
|
(In thousands, except useful life)
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Weighted-Average Remaining Useful Life
(months)
|
||||||
Developed technology
|
|
$
|
132,100
|
|
|
$
|
(57,596
|
)
|
|
$
|
74,504
|
|
|
52
|
Customer relationships
|
|
20,910
|
|
|
(4,523
|
)
|
|
16,387
|
|
|
52
|
|||
Other acquired intangible assets
|
|
3,270
|
|
|
(2,539
|
)
|
|
731
|
|
|
9
|
|||
Total intangible assets subject to amortization
|
|
$
|
156,280
|
|
|
$
|
(64,658
|
)
|
|
$
|
91,622
|
|
|
|
Fiscal Period (In thousands)
|
|
Expected Amortization Expense
|
||
Remaining fiscal 2020
|
|
$
|
20,817
|
|
Fiscal 2021
|
|
23,780
|
|
|
Fiscal 2022
|
|
13,701
|
|
|
Fiscal 2023
|
|
10,406
|
|
|
Fiscal 2024
|
|
7,692
|
|
|
Thereafter
|
|
8,101
|
|
|
Total amortization expense
|
|
$
|
84,497
|
|
•
|
during any fiscal quarter commencing after the fiscal quarter ending on January 31, 2019 (and only during such fiscal quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price for the relevant series of Notes on each applicable trading day;
|
•
|
during the five business day period after any 10 consecutive trading day period (the “measurement period”) in which the trading price (as defined in the indenture governing the relevant series of notes) per $1,000 principal amount of the relevant series of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate for the relevant series of Notes on each such trading day;
|
•
|
if we call the relevant series of Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or
|
•
|
upon the occurrence of specified corporate events as set forth in the relevant indenture.
|
(In thousands)
|
|
2023 Notes
|
|
2025 Notes
|
||||
Liability component:
|
|
|
|
|
||||
Principal amount
|
|
$
|
1,265,000
|
|
|
$
|
862,500
|
|
Unamortized discount
|
|
(238,264
|
)
|
|
(220,393
|
)
|
||
Unamortized issuance costs
|
|
(9,299
|
)
|
|
(6,065
|
)
|
||
Net carrying amount
|
|
$
|
1,017,437
|
|
|
$
|
636,042
|
|
|
|
|
|
|
||||
Equity component, net of purchase discounts and issuance costs
|
|
$
|
264,129
|
|
|
$
|
234,712
|
|
|
|
Three Months Ended
|
||
(In thousands)
|
|
April 30, 2019
|
||
2023 Notes:
|
|
|
||
Coupon interest expense
|
|
$
|
1,581
|
|
Amortization of debt discount (conversion option)
|
|
11,595
|
|
|
Amortization of debt issuance costs and purchase discounts
|
|
453
|
|
|
Total interest expense related to the 2023 Notes
|
|
$
|
13,629
|
|
|
|
|
||
2025 Notes:
|
|
|
||
Coupon interest expense
|
|
$
|
2,426
|
|
Amortization of debt discount (conversion option)
|
|
6,771
|
|
|
Amortization of debt issuance costs and purchase discounts
|
|
186
|
|
|
Total interest expense related to the 2025 Notes
|
|
$
|
9,383
|
|
|
|
|
|
Options Outstanding
|
|
RSUs and PSUs
Outstanding
|
|||||||||||||
|
|
Shares Available
for Grant
|
|
Shares
|
|
Weighted-
Average
Exercise
Price
Per Share
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value (1)
|
|
Shares
|
|||||||
|
|
|
|
|
|
|
|
(in years)
|
|
(in thousands)
|
|
|
|||||||
Balances as of January 31, 2019
|
|
17,082,136
|
|
|
409,039
|
|
|
$
|
10.69
|
|
|
3.36
|
|
$
|
46,693
|
|
|
13,098,607
|
|
Additional shares authorized
|
|
7,458,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Options exercised
|
|
|
|
|
(52,844
|
)
|
|
6.80
|
|
|
|
|
|
|
|
|
|
||
Options forfeited and expired
|
|
3,544
|
|
|
(3,544
|
)
|
|
20.68
|
|
|
|
|
|
|
|
|
|
||
RSUs and PSUs granted
|
|
(1,433,124
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
1,433,124
|
|
||
RSUs and PSUs vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,502,079
|
)
|
|||
Shares withheld related to net share settlement of RSUs and PSUs
|
|
551,519
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|||
RSUs and PSUs forfeited and canceled
|
|
472,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(472,098
|
)
|
||
Balances as of April 30, 2019
|
|
24,134,537
|
|
|
352,651
|
|
|
$
|
11.17
|
|
|
3.09
|
|
$
|
44,741
|
|
|
12,557,554
|
|
Vested and expected to vest
|
|
|
|
352,636
|
|
|
$
|
11.17
|
|
|
3.09
|
|
$
|
44,740
|
|
|
12,350,420
|
|
|
Exercisable as of April 30, 2019
|
|
|
|
334,768
|
|
|
$
|
10.42
|
|
|
2.80
|
|
$
|
42,722
|
|
|
|
(1)
|
The intrinsic value is calculated as the difference between the exercise price of the underlying stock option award and the closing market price of our common stock as of April 30, 2019.
|
|
|
Shares
|
|
Outstanding as of January 31, 2019
|
|
824,605
|
|
RSAs vested
|
|
(254,405
|
)
|
Outstanding as of April 30, 2019
|
|
570,200
|
|
|
|
Three Months Ended April 30,
|
||||||
(In thousands)
|
|
2019
|
|
2018
|
||||
Revenues
|
|
|
|
|
||||
License
|
|
$
|
202,862
|
|
|
$
|
138,975
|
|
Maintenance, professional services and training
|
|
159,933
|
|
|
139,118
|
|
||
Cloud services
|
|
62,055
|
|
|
33,546
|
|
||
Total revenues
|
|
$
|
424,850
|
|
|
$
|
311,639
|
|
|
|
Three Months Ended April 30,
|
||||||
(In thousands)
|
|
2019
|
|
2018
|
||||
United States
|
|
$
|
312,356
|
|
|
$
|
227,442
|
|
International
|
|
112,494
|
|
|
84,197
|
|
||
Total revenues
|
|
$
|
424,850
|
|
|
$
|
311,639
|
|
|
|
Three Months Ended April 30,
|
||||||
(In thousands, except per share amounts)
|
|
2019
|
|
2018
|
||||
Numerator:
|
|
|
|
|
|
|
||
Net loss
|
|
$
|
(155,429
|
)
|
|
$
|
(118,499
|
)
|
Denominator:
|
|
|
|
|
|
|
||
Weighted-average common shares outstanding
|
|
149,736
|
|
|
143,609
|
|
||
Less: Weighted-average unvested common shares subject to repurchase or forfeiture
|
|
(676
|
)
|
|
(61
|
)
|
||
Weighted-average shares used to compute net loss per share, basic and diluted
|
|
149,060
|
|
|
143,548
|
|
||
|
|
|
|
|
||||
Net loss per share, basic and diluted
|
|
$
|
(1.04
|
)
|
|
$
|
(0.83
|
)
|
|
|
As of April 30,
|
||||
(In thousands)
|
|
2019
|
|
2018
|
||
Shares subject to outstanding common stock options
|
|
353
|
|
|
493
|
|
Shares subject to outstanding RSUs, PSUs and RSAs
|
|
13,128
|
|
|
13,870
|
|
Employee stock purchase plan
|
|
720
|
|
|
602
|
|
Total
|
|
14,201
|
|
|
14,965
|
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
Extend our technological capabilities.
|
•
|
Continue to expand our direct and indirect sales organization, including our channel relationships, to increase our sales capacity and enable greater market presence.
|
•
|
Further penetrate our existing customer base and drive enterprise-wide adoption.
|
•
|
Enhance our value proposition through a focus on solutions which address core and expanded use cases.
|
•
|
Grow our user communities and partner ecosystem to increase awareness of our brand, target new use cases, drive operational leverage and deliver more targeted, higher value solutions.
|
•
|
Continue to deliver a rich developer environment to enable rapid development of enterprise applications that leverage machine data and the Splunk platform.
|
*
|
Refer to Non-GAAP Financial Results below for further information regarding our GAAP to non-GAAP Financial Measures and related reconciliations.
|
|
|
Three Months Ended April 30,
|
||||||
(In thousands)
|
|
2019
|
|
2018
|
||||
Net cash provided by operating activities
|
|
$
|
35,029
|
|
|
$
|
76,487
|
|
Less purchases of property and equipment
|
|
(14,900
|
)
|
|
(2,296
|
)
|
||
Free cash flow (non-GAAP)
|
|
$
|
20,129
|
|
|
$
|
74,191
|
|
Net cash used in investing activities
|
|
$
|
(6,275
|
)
|
|
$
|
(139,591
|
)
|
Net cash used in financing activities
|
|
$
|
(68,647
|
)
|
|
$
|
(255
|
)
|
(Dollars in thousands, except per share amounts)
|
|
GAAP
|
|
Stock-based compensation and related employer payroll tax
|
|
Amortization of acquired intangible assets
|
|
Non-cash interest expense related to convertible senior notes
|
|
Income tax effects related to non-GAAP adjustments (2)
|
|
Non-GAAP
|
||||||||||||
Cost of revenues
|
|
$
|
95,823
|
|
|
$
|
(11,674
|
)
|
|
$
|
(5,922
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
78,227
|
|
Gross margin
|
|
77.4
|
%
|
|
2.8
|
%
|
|
1.4
|
%
|
|
—
|
%
|
|
—
|
%
|
|
81.6
|
%
|
||||||
Research and development
|
|
129,290
|
|
|
(43,445
|
)
|
|
(249
|
)
|
|
—
|
|
|
—
|
|
|
85,596
|
|
||||||
Sales and marketing
|
|
278,961
|
|
|
(53,403
|
)
|
|
(955
|
)
|
|
—
|
|
|
—
|
|
|
224,603
|
|
||||||
General and administrative
|
|
65,762
|
|
|
(21,546
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
44,216
|
|
||||||
Operating loss
|
|
(144,986
|
)
|
|
130,068
|
|
|
7,126
|
|
|
—
|
|
|
—
|
|
|
(7,792
|
)
|
||||||
Operating margin
|
|
(34.1
|
)%
|
|
30.6
|
%
|
|
1.7
|
%
|
|
—
|
%
|
|
—
|
%
|
|
(1.8
|
)%
|
||||||
Income tax provision
|
|
3,233
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,432
|
)
|
|
801
|
|
||||||
Net income (loss)
|
|
$
|
(155,429
|
)
|
|
$
|
130,068
|
|
|
$
|
7,126
|
|
|
$
|
19,005
|
|
|
$
|
2,432
|
|
|
$
|
3,202
|
|
Net income (loss) per share (1)
|
|
$
|
(1.04
|
)
|
|
|
|
|
|
|
|
|
|
$
|
0.02
|
|
(1)
|
GAAP net loss per share calculated based on 149,060 weighted-average shares of common stock. Non-GAAP net income per share calculated based on 155,247 diluted weighted-average shares of common stock, which includes 6,367 potentially dilutive shares related to employee stock awards. GAAP to non-GAAP net income (loss) per share is not reconciled due to the difference in the number of shares used to calculate basic and diluted weighted-average shares of common stock.
|
(2)
|
Represents the tax effect of the non-GAAP adjustments based on the estimated annual effective tax rate of 20%.
|
(Dollars in thousands, except per share amounts)
|
|
GAAP
|
|
Stock-based compensation and related employer payroll tax
|
|
Amortization of acquired intangible assets
|
|
Adjustments related to financing lease obligation
|
|
Acquisition-related adjustments
|
|
Income tax effects related to non-GAAP adjustments (4)
|
|
Non-GAAP
|
||||||||||||||
Cost of revenues
|
|
$
|
77,970
|
|
|
$
|
(9,549
|
)
|
|
$
|
(4,250
|
)
|
|
$
|
312
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
64,483
|
|
Gross margin
|
|
75.0
|
%
|
|
3.0
|
%
|
|
1.4
|
%
|
|
(0.1
|
)%
|
|
—
|
%
|
|
—
|
%
|
|
79.3
|
%
|
|||||||
Research and development
|
|
86,357
|
|
|
(28,238
|
)
|
|
(278
|
)
|
|
489
|
|
|
—
|
|
|
—
|
|
|
58,330
|
|
|||||||
Sales and marketing
|
|
218,036
|
|
|
(45,840
|
)
|
|
(178
|
)
|
|
1,170
|
|
|
—
|
|
|
—
|
|
|
173,188
|
|
|||||||
General and administrative
|
|
50,742
|
|
|
(17,287
|
)
|
|
—
|
|
|
234
|
|
|
(3,304
|
)
|
|
—
|
|
|
30,385
|
|
|||||||
Operating loss
|
|
(121,466
|
)
|
|
100,914
|
|
|
4,706
|
|
|
(2,205
|
)
|
|
3,304
|
|
|
—
|
|
|
(14,747
|
)
|
|||||||
Operating margin
|
|
(39.0
|
)%
|
|
32.4
|
%
|
|
1.5
|
%
|
|
(0.7
|
)%
|
|
1.1
|
%
|
|
—
|
%
|
|
(4.7
|
)%
|
|||||||
Income tax benefit
|
|
(1,988
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,313
|
|
(3)
|
(3,665
|
)
|
|
(2,340
|
)
|
|||||||
Net loss
|
|
$
|
(118,499
|
)
|
|
$
|
100,914
|
|
|
$
|
4,706
|
|
|
$
|
(136
|
)
|
(2)
|
$
|
(9
|
)
|
|
$
|
3,665
|
|
|
$
|
(9,359
|
)
|
Net loss per share (1)
|
|
$
|
(0.83
|
)
|
|
$
|
0.70
|
|
|
$
|
0.03
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.03
|
|
|
$
|
(0.07
|
)
|
(1)
|
Calculated based on 143,548 basic and diluted weighted-average shares of common stock.
|
(2)
|
Includes $2.1 million of interest expense related to the financing lease obligation.
|
(3)
|
Represents the partial release of the valuation allowance due to acquisition.
|
(4)
|
Represents the tax effect of the non-GAAP adjustments based on the estimated annual effective tax rate of 20%. Application of this annual effective tax rate to the non-GAAP pre-tax loss during the quarter resulted in a non-GAAP tax benefit, which was offset by future tax expense during fiscal 2019.
|
•
|
Maintenance revenues. Typically, when purchasing a perpetual license, a customer also purchases one year of maintenance for which we charge a percentage of the license fee. When a term license is purchased, maintenance is bundled with the license for the term of the license period. Customers with maintenance agreements are entitled to receive support and unspecified upgrades and enhancements when and if they become available during the maintenance period. We recognize the revenues associated with maintenance agreements ratably, on a straight-line basis, over the associated maintenance period.
|
•
|
Cloud services revenues. Cloud services allow customers to use hosted software over the contract period without taking possession of the software. We generally recognize the revenues associated with our cloud services ratably, on a straight-line basis, over the associated subscription term. We expect revenues from cloud services to continue to increase as a percentage of total revenue as we continue our transition to a predominately renewable model.
|
•
|
Professional services and training revenues. We have a professional services organization focused on helping our customers deploy our software in highly complex operational environments and train their personnel. Training and professional services have stated billing rates per service hour or are provided on a subscription basis, accordingly, revenues are recognized as services are delivered or ratably over the subscription period. Professional services and training revenues as a percentage of total revenues, were 10% for each of the three months ended April 30, 2019 and 2018, respectively. We have experienced continued growth in our professional services revenues primarily due to the deployment of our software with some customers that have large, highly complex IT environments.
|
|
|
Three Months Ended April 30,
|
||||||||||||
(In thousands and as % of revenues)
|
|
2019
|
|
2018
|
||||||||||
Revenues
|
|
|
|
|
|
|
|
|
||||||
License
|
|
$
|
202,862
|
|
|
47.7
|
%
|
|
$
|
138,975
|
|
|
44.6
|
%
|
Maintenance and services
|
|
221,988
|
|
|
52.3
|
|
|
172,664
|
|
|
55.4
|
|
||
Total revenues
|
|
424,850
|
|
|
100.0
|
|
|
311,639
|
|
|
100.0
|
|
||
Cost of revenues
|
|
|
|
|
|
|
|
|
|
|||||
License (1)
|
|
5,682
|
|
|
2.8
|
|
|
5,124
|
|
|
3.7
|
|
||
Maintenance and services (1)
|
|
90,141
|
|
|
40.6
|
|
|
72,846
|
|
|
42.2
|
|
||
Total cost of revenues
|
|
95,823
|
|
|
22.6
|
|
|
77,970
|
|
|
25.0
|
|
||
Gross profit
|
|
329,027
|
|
|
77.4
|
|
|
233,669
|
|
|
75.0
|
|
||
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development
|
|
129,290
|
|
|
30.4
|
|
|
86,357
|
|
|
27.7
|
|
||
Sales and marketing
|
|
278,961
|
|
|
65.6
|
|
|
218,036
|
|
|
70.0
|
|
||
General and administrative
|
|
65,762
|
|
|
15.5
|
|
|
50,742
|
|
|
16.3
|
|
||
Total operating expenses
|
|
474,013
|
|
|
111.5
|
|
|
355,135
|
|
|
114.0
|
|
||
Operating loss
|
|
(144,986
|
)
|
|
(34.1
|
)
|
|
(121,466
|
)
|
|
(39.0
|
)
|
||
Interest and other income (expense), net
|
|
|
|
|
|
|
|
|
||||||
Interest income
|
|
16,346
|
|
|
3.8
|
|
|
3,187
|
|
|
1.0
|
|
||
Interest expense
|
|
(23,017
|
)
|
|
(5.4
|
)
|
|
(2,073
|
)
|
|
(0.6
|
)
|
||
Other income (expense), net
|
|
(539
|
)
|
|
(0.1
|
)
|
|
(135
|
)
|
|
—
|
|
||
Total interest and other income (expense), net
|
|
(7,210
|
)
|
|
(1.7
|
)
|
|
979
|
|
|
0.4
|
|
||
Loss before income taxes
|
|
(152,196
|
)
|
|
(35.8
|
)
|
|
(120,487
|
)
|
|
(38.6
|
)
|
||
Income tax provision (benefit)
|
|
3,233
|
|
|
0.8
|
|
|
(1,988
|
)
|
|
(0.6
|
)
|
||
Net loss
|
|
$
|
(155,429
|
)
|
|
(36.6
|
)%
|
|
$
|
(118,499
|
)
|
|
(38.0
|
)%
|
(1)
|
Calculated as a percentage of the associated revenues.
|
Three Months Ended April 30, 2019 and 2018
|
+
|
increase of $63.9 million, or 46.0%, in license revenues
|
+
|
increase of $49.3 million, or 28.6%, in maintenance and services revenues
|
+
|
increase in the total number of orders greater than $1.0 million from 43 to 46
|
+
|
increase in the total number of customers from approximately 15,000 to over 18,000
|
Three Months Ended April 30, 2019 and 2018
|
+
|
increase of $9.8 million in salaries and benefits, which includes a $2.0 million increase in stock-based compensation expense due to increased headcount
|
+
|
increase of $3.7 million in third-party hosting fees to support our cloud services
|
+
|
increase of $1.8 million related to third-party consulting services
|
Three Months Ended April 30, 2019 and 2018
|
+
|
increase of $36.5 million in salaries and benefits, which includes a $14.9 million increase in stock-based compensation expense as we increased headcount as part of our focus on further developing and enhancing our products and services
|
+
|
increase of $2.0 million in third-party hosting fees to support our product development efforts
|
+
|
increase of $2.0 million related to third-party consulting services
|
Three Months Ended April 30, 2019 and 2018
|
+
|
increase of $49.5 million in salaries and benefits, which includes a $7.2 million increase in stock-based compensation expense as we increased headcount to expand our field sales organization
|
+
|
increase of $5.5 million related to overhead expenses, primarily related to rent expense and software subscriptions
|
+
|
increase of $3.9 million in marketing expenses
|
Three Months Ended April 30, 2019 and 2018
|
+
|
increase of $11.3 million in salaries and benefits, which includes a $4.3 million increase in stock-based compensation expense as we increased headcount
|
+
|
increase of $2.0 million related to overhead expenses, primarily related to rent expense and software subscriptions
|
|
|
Three Months Ended April 30,
|
||||||
(In thousands)
|
|
2019
|
|
2018
|
||||
Interest and other income (expense), net
|
|
|
|
|
||||
Interest income
|
|
$
|
16,346
|
|
|
$
|
3,187
|
|
Interest expense
|
|
(23,017
|
)
|
|
(2,073
|
)
|
||
Other income (expense), net
|
|
(539
|
)
|
|
(135
|
)
|
||
Total interest and other income (expense), net
|
|
$
|
(7,210
|
)
|
|
$
|
979
|
|
Three Months Ended April 30, 2019 and 2018
|
|
|
Three Months Ended April 30,
|
||||||
(In thousands)
|
|
2019
|
|
2018
|
||||
Income tax provision (benefit)
|
|
$
|
3,233
|
|
|
$
|
(1,988
|
)
|
Three Months Ended April 30, 2019 and 2018
|
(In thousands)
|
|
April 30, 2019
|
|
January 31, 2019
|
||||
Cash and cash equivalents
|
|
$
|
1,835,229
|
|
|
$
|
1,876,165
|
|
Investments, current
|
|
840,215
|
|
|
881,220
|
|
||
Investments, non-current
|
|
146,159
|
|
|
110,588
|
|
Three Months Ended April 30, 2019 and 2018
|
-
|
reduction in deferred revenue
|
-
|
increase in payments for accrued compensation
|
-
|
reduction in collections from accounts receivable
|
Three Months Ended April 30, 2018 and 2017
|
+
|
increase in collections from accounts receivable
|
Three Months Ended April 30, 2019 and 2018
|
Three Months Ended April 30, 2018 and 2017
|
Three Months Ended April 30, 2019 and 2018
|
Three Months Ended April 30, 2018 and 2017
|
Item 3. Quantitative and Qualitative Disclosures about Market Risk
|
Item 4. Controls and Procedures
|
Item 1. Legal Proceedings
|
Item 1A. Risk Factors
|
•
|
the timing of our sales during the quarter, particularly because a large portion of our sales occur toward the end of the quarter, or the loss or delay of a few large transactions;
|
•
|
the mix of revenues attributable to larger transactions as opposed to smaller transactions and the impact that a few large transactions or a change in mix may have on our overall financial results as well as the overall average selling price (“ASP”) of our offerings;
|
•
|
the mix of revenues attributable to perpetual and term licenses, agreements for our cloud services, enterprise adoption agreements, maintenance and professional services and training, which may impact our revenue, deferred revenue, cash collections, billings, remaining performance obligations, gross margins and operating income;
|
•
|
the renewal and usage rates of our customers;
|
•
|
changes in the competitive dynamics of our market;
|
•
|
changes in customers’ budgets and in the timing of their purchasing decisions;
|
•
|
changes in our pricing policies or those of our competitors;
|
•
|
customers delaying purchasing decisions in anticipation of new offerings or software enhancements by us or our competitors;
|
•
|
customer acceptance of and willingness to pay for new versions of our offerings or new solutions for specific product and end markets;
|
•
|
our ability to successfully introduce and monetize new offerings and licensing and service models for our new offerings;
|
•
|
network outages or actual or perceived security breaches;
|
•
|
the availability and performance of our cloud services, including Splunk Cloud;
|
•
|
our ability to control costs, including our operating expenses;
|
•
|
changes in laws and regulations that impact our business;
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•
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general economic and political conditions and uncertainty, both domestically and internationally, as well as economic and political conditions and uncertainty specifically affecting industries in which our customers participate;
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•
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the amount and timing of our stock-based compensation expenses;
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•
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changes in accounting standards, particularly those related to revenue recognition and sales commissions;
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•
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use of estimates, judgments and assumptions under current accounting standards;
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•
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the timing of satisfying revenue recognition criteria;
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•
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our ability to qualify and successfully compete for government contracts;
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•
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the collectability of receivables from customers and resellers, which may be hindered or delayed; and
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•
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the removal of metered license enforcement via our software, which could lead to customers delaying renewal or purchasing decisions.
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•
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improving our key business applications, processes and IT infrastructure to support our business needs;
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•
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enhancing information and communication systems to ensure that our employees and offices around the world are well-coordinated and can effectively communicate with each other and our growing base of customers and channel partners;
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•
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enhancing our internal controls to ensure timely and accurate reporting of all of our operations and financial results; and
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•
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appropriately documenting our IT systems and our business processes.
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•
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large cloud service providers, as well as small, specialized vendors, that provide complementary and competitive solutions in enterprise data analytics, security offerings, log aggregation and management, data warehousing and big data technologies that may compete with our offerings;
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IT departments of potential customers which have undertaken custom software development efforts to analyze and manage their machine data;
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companies targeting the big data market by commercializing open source software, such as the various Hadoop distributions and NoSQL data stores, including Elastic;
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security, systems management and other IT vendors, including BMC Software, Micro Focus, IBM, Intel, Microsoft and VMware; and
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•
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business intelligence vendors, analytics and visualization vendors, including IBM and Oracle.
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•
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improve the performance and capabilities of our offerings and technology and architecture through research and development;
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•
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continue to develop, enhance, expand adoption of and globally deliver our cloud services, including Splunk Cloud, and comply with applicable laws in each jurisdiction in which we offer such services;
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•
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successfully develop, introduce and expand adoption of new offerings;
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•
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continue to acquire new customers and increase the number of new customers we acquire;
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•
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increase revenues from existing customers through increased or broader use of our offerings within their organizations;
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•
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successfully and continuously expand our business domestically and internationally;
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•
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maintain and expand our customer base and the ways in which our customers use our offerings;
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•
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successfully compete with other companies, open source projects and custom development efforts that are currently in, or may in the future enter, the markets for our offerings;
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•
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successfully provide our customers a compelling business case to purchase our offerings in a time frame that matches our and our customers’ sales and purchase cycles and at a compelling price point;
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•
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respond timely and effectively to competitor offerings and pricing models;
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•
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appropriately price our offerings;
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•
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manage the costs of providing our cloud services;
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•
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generate leads and convert users of the trial versions of our offerings to paying customers;
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•
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prevent users from circumventing the terms of their licenses and cloud subscriptions;
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•
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continue to invest in our platform to deliver additional enhancements and content for our offerings and to foster an ecosystem of developers and users to expand the use cases of our offerings;
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•
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maintain and enhance our website and cloud services infrastructure to minimize interruptions when accessing our offerings;
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•
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process, store and use our employees, customers’ and other third parties’ data in compliance with applicable governmental regulations and other legal obligations related to data privacy, data protection, data transfer, data residency, encryption and security;
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•
|
hire, integrate and retain world-class professional and technical talent; and
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•
|
successfully integrate acquired businesses and technologies.
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•
|
increased management, travel, infrastructure and legal compliance costs associated with having multiple international operations;
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•
|
reliance on channel partners, which may have different incentives or may sell competing products, as well as different approaches with respect to compliance with laws and regulations, business practices and other day-to-day activities;
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•
|
longer payment cycles and difficulties in collecting accounts receivable or satisfying revenue recognition criteria, especially in emerging markets;
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•
|
increased financial accounting and reporting burdens and complexities;
|
•
|
general economic conditions in each country or region;
|
•
|
economic and political uncertainty around the world;
|
•
|
compliance with multiple and changing foreign laws and regulations, including those governing employment, tax, privacy and data protection, data transfer and the risks and costs of non-compliance with such laws and regulations;
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•
|
compliance with laws and regulations for foreign operations, including the United States Foreign Corrupt Practices Act, the United Kingdom Bribery Act, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell our offerings in certain foreign markets, and the risks
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•
|
heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of financial statements and irregularities in financial statements;
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•
|
fluctuations in currency exchange rates and the related effect on our financial results;
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•
|
difficulties in repatriating or transferring funds from or converting currencies in certain countries;
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•
|
the need for localized software and licensing programs;
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•
|
reduced protection for intellectual property rights in some countries and practical difficulties of enforcing intellectual property and contract rights abroad; and
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•
|
compliance with the laws of numerous foreign taxing jurisdictions and overlapping of different tax regimes.
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•
|
our failure to predict market demand accurately in terms of product functionality and to supply offerings that meet this demand in a timely fashion;
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•
|
defects, errors or failures;
|
•
|
negative publicity about their performance or effectiveness;
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•
|
delays in releasing to the market our new offerings or enhancements to our existing offerings to the market;
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•
|
introduction or anticipated introduction of competing products by our competitors;
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•
|
poor business conditions for our end-customers, causing them to delay IT purchases; and
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•
|
reluctance of customers to purchase products incorporating open source software.
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•
|
changes in fiscal or contracting policies;
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•
|
decreases in available government funding;
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•
|
changes in government programs or applicable requirements;
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•
|
changes in government sanctions programs and related policies;
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•
|
the adoption of new laws or regulations or changes to existing laws or regulations;
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•
|
noncompliance with contract provisions or government procurement or other applicable regulations;
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•
|
ability to obtain or maintain any required facility clearances or security clearances for our employees;
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•
|
an extended government shutdown or other potential delays or changes in the government appropriations or other funding authorization processes; and
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•
|
delays in the payment of our invoices by government payment offices.
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•
|
third-party developers may not continue developing or supporting the software apps that they share on Splunkbase;
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•
|
we cannot guarantee that if and as we change the architecture of our products and services, third-party developers will evolve their existing software apps to be compatible or that they will participate in the creation of new apps utilizing the new architecture;
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•
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we cannot provide any assurance that these apps meet the same quality and security standards that we apply to our own development efforts, and, to the extent they contain bugs, defects or security vulnerabilities, they may create disruptions in our customers’ use of our offerings or negatively affect our brand;
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•
|
we do not currently provide support for software apps developed by third-party software developers, and users may be left without support and potentially disappointed by their experience of using our offerings if the third-party software developers do not provide support for these apps;
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•
|
these third-party software developers may not possess the appropriate intellectual property rights to develop and share their apps or otherwise may not have assessed legal and compliance risks related to distributing their apps; and
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•
|
some of these developers may use the insight they gain using our offerings and from documentation publicly available on our website to develop competing products.
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•
|
an acquisition may negatively affect our financial results because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition;
|
•
|
potential goodwill impairment charges related to acquisitions;
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•
|
costs and potential difficulties associated with the requirement to test and assimilate the internal control processes of the acquired business;
|
•
|
we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us or if we are unable to retain key personnel;
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•
|
we may not realize the expected benefits of the acquisition;
|
•
|
an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management;
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•
|
an acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from either company;
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•
|
the potential impact on relationships with existing customers, vendors and distributors as business partners as a result of acquiring another company or business that competes with or otherwise is incompatible with those existing relationships;
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•
|
the potential that our due diligence of the acquired company or business does not identify significant problems or liabilities, or that we underestimate the costs and effects of identified liabilities;
|
•
|
exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition, including but not limited to claims from former employees, customers or other third parties, which may differ from or be more significant than the risks our business faces;
|
•
|
we may encounter difficulties in, or may be unable to, successfully sell any acquired products;
|
•
|
an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions;
|
•
|
an acquisition may require us to comply with additional laws and regulations or result in liabilities resulting from the acquired company’s pre-acquisition failure to comply with applicable laws;
|
•
|
our use of cash to pay for an acquisition would limit other potential uses for our cash;
|
•
|
if we incur debt to fund such acquisition, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants; and
|
•
|
to the extent that we issue a significant amount of equity securities in connection with future acquisitions, existing stockholders may be diluted and earnings per share may decrease.
|
•
|
actual or anticipated fluctuations in our financial results;
|
•
|
the financial projections we provide to the public, any changes in these projections or our failure to meet or exceed these projections;
|
•
|
our business model shift from sales of perpetual licenses in favor of sales of term licenses and subscriptions for our cloud services, as well as increased installment invoicing, including the associated change in the timing of our revenue recognition and our collection of cash and the impact on our operating results;
|
•
|
failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;
|
•
|
ratings changes by any securities analysts who follow our company;
|
•
|
announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments;
|
•
|
changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;
|
•
|
price and volume fluctuations in certain categories of companies or the overall stock market, including as a result of trends in the global economy;
|
•
|
any major change in our board of directors or management;
|
•
|
lawsuits threatened or filed against us;
|
•
|
cybersecurity attacks or incidents; and
|
•
|
other events or factors, including those resulting from war, incidents of terrorism or responses to these events.
|
•
|
authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights and preferences determined by our board of directors;
|
•
|
require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;
|
•
|
specify that special meetings of our stockholders can be called only by our board of directors, the Chairman of our board of directors, or our Chief Executive Officer;
|
•
|
establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;
|
•
|
establish that our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving three-year staggered terms;
|
•
|
prohibit cumulative voting in the election of directors;
|
•
|
provide that our directors may be removed only for cause;
|
•
|
provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and
|
•
|
require the approval of our board of directors or the holders of a supermajority of our outstanding shares of capital stock to amend our bylaws and certain provisions of our certificate of incorporation.
|
Item 6. Exhibits
|
Exhibit
Number
|
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Description
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|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Schema Linkbase Document
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Calculation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Definition Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Labels Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Presentation Linkbase Document
|
|
|
|
#
|
|
Indicates management contract or compensatory plan.
|
SIGNATURES
|
Date: June 6, 2019
|
|
|
|
|
|
|
|
|
|
SPLUNK INC.
|
|
|
|
|
|
|
|
|
By:
|
/s/ Jason Child
|
|
|
Jason Child
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
(Principal Financial and Accounting Officer)
|
|
|
|
1.
|
Reduction of Severance Benefits. Notwithstanding anything set forth herein to the contrary, if any payment or benefit that you would receive from the Company or any other party whether in connection with the provisions herein or otherwise (the “Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment will be equal to the Best Results Amount. The “Best Results Amount” will be either (x) the full amount of such Payment or (y) such lesser amount as would result in no portion of the Payment being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local employment taxes, income taxes and the Excise Tax, results in your receipt, on an after-tax basis, of the greater amount notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting parachute payments is necessary so that the Payment equals the Best Results Amount, reduction will occur in the following order: reduction of cash payments; cancellation of accelerated vesting of stock awards; and reduction of employee benefits. In the event that acceleration of vesting of stock award compensation is to be reduced, such acceleration of vesting will be cancelled in the reverse order of the date of grant of your equity awards.
|
2.
|
Determination of Excise Tax Liability. The Company will select a professional services firm to make all of the determinations required to be made under these paragraphs relating to parachute payments. The Company will request that firm provide detailed supporting calculations both to the Company and you prior to the date on which the event that triggers the Payment occurs if administratively feasible, or subsequent to such date if events occur that result in parachute payments to you at that time. For purposes of making the calculations required under these paragraphs relating to parachute payments, the firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith determinations concerning the application of the Code. The Company and you will furnish to the firm such information and documents as the firm may reasonably request in order to make a determination under these paragraphs relating to parachute payments. The Company will bear all costs the firm may reasonably incur in connection with any calculations contemplated by these paragraphs relating to parachute payments. Any such determination by the firm will be binding upon the Company and you, and the Company will have no liability to you for the determinations of the firm.
|
1.
|
Reduction of Severance Benefits. Notwithstanding anything set forth herein to the contrary, if any payment or benefit that you would receive from the Company or any other party whether in connection with the provisions herein or otherwise (the “Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment will be equal to the Best Results Amount. The “Best Results Amount” will be either (x) the full amount of such Payment or (y) such lesser amount as would result in no portion of the Payment being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local employment taxes, income taxes and the Excise Tax, results in your receipt, on an after-tax basis, of the greater amount notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting parachute payments is necessary so that the Payment equals the Best Results Amount, reduction will occur in the following order: reduction of cash payments; cancellation of accelerated vesting of stock awards; and reduction of employee benefits. In the event that acceleration of vesting of stock award compensation is to be reduced, such acceleration of vesting will be cancelled in the reverse order of the date of grant of your equity awards.
|
2.
|
Determination of Excise Tax Liability. The Company will select a professional services firm to make all of the determinations required to be made under these paragraphs relating to parachute payments. The Company will request that firm provide detailed supporting calculations both to the Company and you prior to the date on which the event that triggers the Payment occurs if administratively feasible, or subsequent to such date if events occur that result in parachute payments to you at that time. For purposes of making the calculations required under these paragraphs relating to parachute payments, the firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith determinations concerning the application of the Code. The Company and you will furnish to the firm such information and documents as the firm may reasonably request in order to make a determination under these paragraphs relating to parachute payments. The Company will bear all costs the firm may reasonably incur in connection with any calculations contemplated by these paragraphs relating to parachute payments. Any such determination by the firm will be binding upon the Company and you, and the Company will have no liability to you for the determinations of the firm.
|
Date: June 6, 2019
|
|
|
/s/ Douglas S. Merritt
|
|
Douglas S. Merritt
|
|
|
|
President and Chief Executive Officer
|
|
|
|
(Principal Executive Officer)
|
Date: June 6, 2019
|
|
|
/s/ Jason Child
|
|
Jason Child
|
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
|
(Principal Financial and Accounting Officer)
|