Splunk: Deal-Closing Rate Rebounded In Fourth Quarter

Company sees continued demand for its big data platform for digital security tasks, says SolarWinds attack highlights the need for “timely detection capabilities.”

A slowdown in deal closings big data software developer Splunk experienced in its fiscal third quarter, which the company attributed to ongoing uncertainty from the COVID-19 pandemic, did not continue into the fourth quarter, company executives said this week in announcing Splunk’s fiscal 2021 fourth-quarter and year-end results.

Splunk CEO Doug Merritt (pictured), during an earnings call with financial analysts, also noted that the fallout from the SolarWinds cybersecurity attack points to the value of the Splunk Enterprise and Splunk Cloud platforms and Splunk Enterprise Security solution for detecting and responding to cybersecurity hacks.

“Digital security has become a broad governance comparative. Splunk is working side-by-side with our customers to help them drive the change, resiliency and optimization around both of these key and critical trends,” Merritt said on the earnings call Wednesday.

[Related: Splunk To Acquire Network Monitoring Tech Startup Flowmill]

For its fiscal 2021 fourth quarter (ended Jan. 31) Splunk reported revenue of $745.1 million, down nearly 6 percent from $791.2 million in the fourth quarter of fiscal 2020. For all of fiscal 2021 Splunk reported revenue of $2.23 billion, down 5.5 percent from $2.36 billion in fiscal 2020.

“Despite the continued uncertainty and volatility of the macro environment, we had a strong finish to the year,” Merritt said. “In Q4, we saw procurement patterns that were closer to what we experienced in Q1 and Q2. And we were also able to close transactions with several of the accounts that deals slipped in Q3.”

That was echoed later in the call by senior vice president and CFO Jason Child.

“On our last call, I described the slowdown in the close rates for several of our largest orders in the final weeks of Q3, which we attributed to persistent uncertainty stemming from COVID and other macro factors,” Child said. “We said all indicators pointed to strong demand overall, but some customers were taking a pause to re-evaluate the timing of high-value spending commitments. We were confident in the eventual closing of many delayed transactions, but specific timing was uncertain.”

“Today, I am pleased to report that not only did we close transactions with several of the accounts that had deals slipped from Q3, but we did not see a repeat of slower close rates in Q4 to the degree that we saw in Q3,” the CFO said.

The ongoing fallout from the widespread SolarWinds cyberattack was also front-and-center during the earnings call.

“We are seeing cybersecurity attacks at unprecedented levels and scale. The magnitude of the SolarWinds hack has hammered home the unsettling, but ever-present reality of the digital era that all organizations are likely to get hacked at some point,” CEO Merritt said.

Splunk’s system collects and indexes machine data and is used for a number of tasks including IT operations performance monitoring (including the recently launched Splunk Observability Suite), DevOps and IT security – the latter by collecting data used for security operations including posture assessment, monitoring, alert and incident handling, breach analysis and response, and event correlation.

Splunk’s platform and the company’s Splunk Enterprise Security application are often used in conjunction with other security tools. Identity software developer Okta, for example, is a long-time Splunk customer, using Splunk Cloud as part of its customer monitoring services.

Merritt said that at the onset of the SolarWinds hack, Splunk “took immediate action to both enable customers to investigate whether they had been impacted by the attack and to confirm that Splunk itself had not been impacted.”

“Our customers count on us to deliver timely detection capabilities. We did not disappoint. Our security strategy team published materials to guide our customers on how to use our products to find evidence of the Sunburst Backdoor,” Merritt said. “Our professional services and customer success teams deployed remote on-demand services to help customers implement this guidance. From there, our product and security teams released timely Splunk research and dynamic security content, using the update capability in Splunk Enterprise Security to help our customers understand their own risk.”

During the fourth quarter Splunk continued its transition to cloud-based products and a subscription model with annual recurring revenue (ARR). Total ARR was $2.36 billion, up 41 percent year over year, while cloud revenue was $171 million, up 72 percent year over year. The company said that in the quarter it had 510 customers with ARR greater than $1 million.

For all of fiscal 2021 Splunk reported cloud revenue of $554 million, up 77 percent year over year.

The company reported a net loss of $139.5 million (86 cents per share) for the fiscal 2021 fourth quarter compared to the $22.7 million (15 cents per share) loss reported one year before. The company reported an operating loss of $86.6 million for the quarter compared to a $7.8 operating loss one year before.

The company reported a net loss of just under $908.0 million ($5.68 per share) for all of fiscal 2021 compared to the $336.7 million ($2.22 per share) loss reported one year before. The company reported an operating loss of $780.2 million for the fiscal year compared to the $287.1 million operating loss one year before.