Apparently during analyst day (1/12), Splunk managment announced slightly lower guidance for next year than analysts were expecting. I’m sure they’re going to beat their guidance, but you know what happened next. The announcement drove the share price back down to the low 50’s…so I’ve been adding to SPLK. My position has gone from something I just dipped back into in December (just over 3% at year end) to now a top 5 position (surpassing HUBS, which I trimmed a little when I realized I didn’t understand the business very well).
Because this is now a top 5 position, I’m committed to understanding Splunk better. So I went to check out this infamous Analyst Day presentation. Well, the thing is 4 hours long. However, check this out: The 188 slides are linked to the video in a unique way. When you skip to the next slide, the video follows suit. I thought this was so cool I just had to share.
Click “Listen to Webcast.” http://investors.splunk.com/events.cfm
The financial portion of the presentation is about 3 hours in. If analysts didn’t like the trends for Splunk, then I just don’t think they were listening.
Splunk’s TAM is 55B.
Over the next three years, they expect to go from 12,700 customers to 20,000 customers.
Billings this year will be about 1.1B. 3 years from now it will be more than double: 2.3 billion.
Perpetual 25% / Subscription 75% by 3 years from now, and about a third of the subscription will be cloud. It takes a while to figure out what’s going on. Bert’s article helped, but I had trouble even following it. Basically they used to sell a license as a one-time revenue event. They had maintenance each year after that, but it was only a small amount compared to the upfront cost. They still offer software on this “perpetual” basis, but now they have subscription products too, which are just the opposite. The upfront costs are minimal, but the customer pays for the subscription annually. This is of course recurring revenue. Now I’m not sure why 2/3 of the subscription revenue will be non-cloud, or what that even means, but…baby steps. (Seriously, if anybody knows, please share.)
Three years from now operating margin will be 12-14% (it’s 6% now). After that, they expect cloud to hit an inflection point, where margins will really start to increase in a “non-linear” way.
So far from being concerned about growth because of analyst day guidance, I’m more excited than ever about Splunk.