Splunk Announces Fiscal Fourth Quarter and Full Year 2023 Financial Results
Revenues Grew 39% in Q4, Quarterly Revenues Exceed $1B for the First Time
Full Year Cloud Revenue Up 54%
Quarterly GAAP Net Income of $269M
SAN FRANCISCO – March 1, 2023 – Splunk Inc. (NASDAQ: SPLK), the cybersecurity and observability leader, today announced results for its fiscal fourth quarter and full year ended January 31, 2023.
Fourth Quarter 2023 Financial Highlights
•Total revenues were $1.251 billion, an increase of 39% year-over-year.
•GAAP operating margin was 21.3%; Non-GAAP operating margin was 37.9%
•GAAP net income was $269 million; GAAP EPS was $1.44.
•Operating cash flow was $276 million; Free cash flow was $269 million.
•790 customers with total ARR greater than $1 million, an increase of 115 year-over-year.
Full Year 2023 Financial Highlights
•Total revenues were $3.654 billion, up 37% year-over-year.
•Total ARR was $3.674 billion, up 18% year-over-year.
•Cloud revenue was $1.457 billion, up 54% year-over-year.
•GAAP operating margin was (6.4)%; Non-GAAP operating margin was 17.6%.
•Operating cash flow was $450 million; Free cash flow was $427 million.
“Our team delivered a solid finish to an important transitional year for Splunk, positioning us well for our next chapter,” said Gary Steele, President and CEO of Splunk. “More than ever, Splunk plays a critical role in helping our customers ensure their digital systems are resilient, secure and able to adapt to constant change. As we begin our new fiscal year, we remain committed to delivering durable growth and substantially increasing free cash flow.”
“Total ARR grew by 18% to $3.674 billion and annual free cash flow nearly quadrupled as the team continued its focus on driving results and improving operating efficiency,” said Brian Roberts, CFO of Splunk. “In a time of economic uncertainty, we are pleased with our strategic, competitive and financial position to deliver significant value to our customers and substantially increase free cash flow margins in FY24 through expected growth and continued operating efficiencies.”
Q4 2023 Business Highlights:
•Splunk Names New Chief Financial Officer: Splunk appointed Brian Roberts as the company’s Chief Financial Officer (CFO).
•Splunk Connects with Hundreds of Public Sector Customers and Partners: Splunk welcomed hundreds of government, public institutional and higher education customers and partners to Washington D.C. for its annual public sector event, GovSummit.
•Splunk Recognized as a Security Analytics Leader: Industry analyst firm, Forrester Research, recognized Splunk as a leader in The Forrester Wave™: Security Analytics Platforms, Q4 2022. The company received the highest possible scores in the product vision, planned enhancements, market approach and partner ecosystem criteria. Splunk was also named a leader in the 2022 IDC MarketScape: Worldwide SIEM 2022 Vendor Assessment.*
•Splunk Security Innovation: Splunk Enterprise Security 7.1 is now available and features three new capabilities to help security teams detect suspicious behavior in real time, quickly discover the scope of an incident to respond accurately, and improve security workflow efficiencies using embedded frameworks.
•Splunk Releases 2022 Global Impact Report: Splunk’s second annual Global Impact Report details the company’s progress across four areas: social impact, ethical and inclusive growth, data responsibility and environmental sustainability.
•Best Place to Work: Splunk was recognized as one of Great Place to Work’s 2022 Best Workplaces for Parents in the U.S. for a fourth consecutive year.
Financial Outlook
The company is providing the following guidance for its fiscal first quarter 2024 (ending April 30, 2023):
•Total ARR is expected to be approximately $3.7 billion.
•Total revenues are expected to be between $710 million and $725 million.
•Non-GAAP operating margin is expected to be between negative 3% and negative 5%.
•Free cash flow is expected to be approximately $475 million.
The company is providing the following guidance for its fiscal year 2024 (ending January 31, 2024):
•Total ARR is expected to be between $4.125 billion and $4.175 billion.
•Total revenues are expected to be between $3.85 billion and $3.9 billion.
•Non-GAAP operating margin is expected to be between 16.5% and 17.5%.
•Free cash flow is expected to be between $775 million and $795 million.
A reconciliation of non-GAAP guidance measures to corresponding GAAP guidance measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, expenses that may be incurred in the future. For example, stock-based compensation-related charges, including related employer payroll tax-related items, are impacted by the timing of employee stock transactions, the future fair market value of our common stock, and our future hiring and retention needs, all of which are difficult to predict and subject to constant change. We have provided a reconciliation of GAAP to non-GAAP financial measures in the financial statement tables for our historical non-GAAP financial results included in this release.
Conference Call and Webcast
Splunk’s executive management team will host a conference call beginning at 1:30 p.m. PT (4:30 p.m. ET) today to discuss financial results and business highlights. Interested parties may access the call by dialing (800) 715-9871 in the U.S. or (646) 307-1963 from international locations and referencing conference ID 5884905. A live audio webcast and replay of the conference call will also be available on Splunk’s Investor Relations website at https://investors.splunk.com/events-presentations. An audio webcast replay of the call will be available for the next 12 months.
Safe Harbor Statement
This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding Splunk’s long-term prospects, including Splunk’s guidance for total ARR, total revenues, non-GAAP operating margin and free cash flow targets for the company’s fiscal first quarter 2024 and fiscal year 2024; our global presence and trends in customer demand and engagement; statements regarding our operating efficiency, growth and profitability; statements regarding our products, projects, technology and ongoing product development; statements regarding our market opportunity; the market for data-related products and the importance of data and our ability to leverage these trends; expectations for our industry, business and products, such as our business model, customer demand and trust, our partner relationships, customer success and feedback, expanding use of Splunk by customers, and expected benefits and scale of our products. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: the macroeconomic environment, including inflationary pressures, economic uncertainty and impacts on information technology spending; risks associated with Splunk’s growth, particularly outside of the United States; Splunk’s inability to realize value from its significant investments in the company’s business, including product and service innovations and through acquisitions; Splunk’s shift from sales of licenses to sales of cloud services which impacts the timing of revenue and margins; Splunk’s transition to a multi-product software and services business; Splunk’s inability to successfully integrate acquired businesses and technologies; Splunk’s inability to service its debt obligations or other adverse effects related to the company’s convertible notes; COVID-19 and related public health measures on our business and the business of our customers, as well as the impact of new variants on the overall economic environment, including customer buying capacity, urgency and patterns; and general market, political, economic, business and competitive market conditions.
Additional information on potential factors that could affect Splunk’s financial results is included in the company’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2022, which is on file with the U.S. Securities and Exchange Commission (“SEC”) and Splunk’s other filings with the SEC, including its Annual Report on Form 10-K that will be filed within 60 days of Splunk’s fiscal year end. Splunk does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.
Splunk Inc. (NASDAQ: SPLK) helps build a safer and more resilient digital world. Organizations trust Splunk to prevent security, infrastructure and application issues from becoming major incidents, absorb shocks from digital disruptions, and accelerate digital transformation.
Weighted-average shares used in computing basic net income (loss) per share
164,262
159,217
162,376
161,628
Weighted-average shares used in computing diluted net income (loss) per share
187,002
159,217
162,376
161,628
Splunk Inc. | www.splunk.com
Splunk Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
January 31, 2023
January 31, 2022
Assets
Current assets
Cash and cash equivalents
$
690,587
$
1,428,691
Investments, current
1,316,347
286,337
Accounts receivable, net
1,600,591
1,306,666
Prepaid expenses and other current assets
174,388
152,871
Deferred commissions, current
116,758
102,322
Total current assets
3,898,671
3,276,887
Investments, non-current
41,700
46,431
Accounts receivable, non-current
286,299
242,689
Operating lease right-of-use assets
186,981
229,198
Property and equipment, net
108,540
124,900
Intangible assets, net
119,588
164,769
Goodwill
1,416,920
1,401,628
Deferred commissions, non-current
242,731
200,876
Other assets
42,493
103,497
Total assets
$
6,343,923
$
5,790,875
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable
$
15,299
$
59,206
Accrued compensation
357,550
396,952
Accrued expenses and other liabilities
229,480
257,979
Deferred revenue, current
1,657,685
1,384,605
Debt, current
775,656
—
Total current liabilities
3,035,670
2,098,742
Debt, non-current
3,099,289
3,137,731
Operating lease liabilities
202,268
225,556
Deferred revenue, non-current
91,102
86,584
Other liabilities, non-current
26,107
19,491
Total non-current liabilities
3,418,766
3,469,362
Total liabilities
6,454,436
5,568,104
Stockholders’ equity
Common stock
171
167
Accumulated other comprehensive loss
(6,363)
(1,199)
Additional paid-in capital
4,682,414
5,032,351
Treasury stock, at cost
(1,000,000)
(1,000,000)
Accumulated deficit
(3,786,735)
(3,808,548)
Total stockholders’ equity
(110,513)
222,771
Total liabilities and stockholders’ equity
$
6,343,923
$
5,790,875
Splunk Inc. | www.splunk.com
Splunk Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended January 31,
Fiscal Year Ended January 31,
2023
2022
2023
2022
Cash flows from operating activities
Net income (loss)
$
268,792
$
(140,823)
$
(277,862)
$
(1,339,097)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization
26,024
24,520
99,470
99,145
Amortization of deferred commissions
29,796
34,745
111,205
144,850
Amortization of investment premiums (accretion of discounts), net
(2,590)
653
(4,652)
1,741
Amortization of debt discount and issuance costs
2,401
41,889
10,279
140,847
Losses on facility exits
—
—
10,000
47,124
Non-cash operating lease costs
3,403
9,446
324
9,191
Stock-based compensation
187,393
203,861
789,138
794,818
Deferred income taxes
(1,261)
1,089
(2,695)
(579)
Other
782
752
879
785
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net
(745,160)
(513,226)
(337,177)
(87,491)
Prepaid expenses and other assets
(54,633)
(25,155)
42,075
(8,215)
Deferred commissions
(65,130)
(105,233)
(167,496)
(242,080)
Accounts payable
(3,134)
23,589
(43,907)
33,115
Accrued compensation
109,392
99,219
(39,402)
114,966
Accrued expenses and other liabilities
30,887
19,795
(15,337)
90,079
Deferred revenue
489,026
457,568
274,788
328,849
Net cash provided by operating activities
275,988
132,689
449,630
128,048
Cash flows from investing activities
Purchases of property and equipment
(4,391)
(841)
(13,620)
(10,671)
Capitalized software development costs
(2,976)
(3,518)
(8,782)
(9,361)
Purchases of marketable securities
(547,654)
(29,992)
(1,536,558)
(388,741)
Maturities of marketable securities
163,086
53,670
515,950
178,124
Purchases of strategic investments
(375)
(8,300)
(6,734)
(23,750)
Acquisitions, net of cash acquired
(21,950)
—
(21,950)
(80,333)
Other investment activities
—
33
1,534
980
Net cash provided by (used in) investing activities
(414,260)
11,052
(1,070,160)
(333,752)
Cash flows from financing activities
Proceeds from the exercise of stock options
59
564
1,457
2,430
Proceeds from employee stock purchase plan
29,722
31,692
78,318
79,938
Proceeds from the issuance of convertible senior notes, net of issuance costs
—
(290)
—
981,920
Repurchases of common stock
—
—
—
(1,000,000)
Taxes paid related to net share settlement of equity awards
(33,851)
(51,397)
(197,349)
(200,957)
Net cash used in financing activities
(4,070)
(19,431)
(117,574)
(136,669)
Net increase (decrease) in cash and cash equivalents
(142,342)
124,310
(738,104)
(342,373)
Cash and cash equivalents at beginning of period
832,929
1,304,381
1,428,691
1,771,064
Cash and cash equivalents at end of period
$
690,587
$
1,428,691
$
690,587
$
1,428,691
Splunk Inc. | www.splunk.com
Splunk Inc.
Operating Metrics
Total Annual Recurring Revenue (“Total ARR”) represents the annualized revenue run-rate of active cloud services, term license and maintenance contracts at the end of a reporting period. Cloud Annual Recurring Revenue (“Cloud ARR”) represents the annualized revenue run-rate of active cloud services contracts at the end of a reporting period. Each contract is annualized by dividing the contract value by the number of days in the contract term and then multiplying by 365. We calculate cloud dollar-based net retention rate (“Cloud DBNRR”) by dividing the Cloud ARR at the end of a period (“Cloud Current Period ARR”) by the Cloud ARR of the same group of customers at the beginning of that 12-month period. Cloud Current Period ARR includes existing customer renewals and expansion, is net of existing customer contraction and churn, and excludes new customers. For the trailing 12-month Cloud DBNRR, we take the dollar-weighted average of the Cloud DBNRR over the trailing 12 months.
Non-GAAP Financial Measures and Reconciliations
To supplement Splunk’s condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States (“GAAP”), Splunk provides investors with the following non-GAAP financial measures: cloud services cost of revenues, cloud services gross margin, cost of revenues, gross margin, research and development expense, sales and marketing expense, general and administrative expense, operating expense, operating income (loss), operating margin, income tax provision (benefit), net income (loss), net income (loss) per share and free cash flow (collectively the “non-GAAP financial measures”). These non-GAAP financial measures exclude all or a combination of the following (as reflected in the following reconciliation tables): expenses related to stock-based compensation and related employer payroll tax, amortization of intangible assets, acquisition-related adjustments, restructuring and facility exit charges, capitalized software development costs, non-cash interest expense related to convertible senior notes and a net loss on strategic investments. The non-GAAP financial measures are also adjusted for Splunk's current and deferred tax rate on non-GAAP income (loss). Splunk uses a long-term projected non-GAAP tax rate to provide consistency across interim reporting periods. We base our rate on non-GAAP financial projections. In determining our tax rate, we exclude the impact of nonrecurring items, and we make assumptions including those about tax legislation and our tax positions. We applied a 20% non-GAAP tax rate to the three and twelve months ended January 31, 2023 and 2022. In addition, non-GAAP financial measures include free cash flow, which represents operating cash flow less purchases of property and equipment and capitalized software development costs. Splunk considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated or used by the business.
Splunk excludes stock-based compensation expense because it is non-cash in nature and excluding this expense provides meaningful supplemental information regarding Splunk’s operational performance and allows investors the ability to make more meaningful comparisons between Splunk’s operating results and those of other companies. Splunk excludes employer payroll tax expense related to employee stock plans in order for investors to see the full effect that excluding that stock-based compensation expense had on Splunk’s operating results. These expenses are tied to the exercise or vesting of underlying equity awards and the price of Splunk’s common stock at the time of vesting or exercise, which may vary from period to period independent of the operating performance of Splunk’s business. Splunk also excludes amortization of intangible assets, acquisition-related adjustments, restructuring and facility exit charges, capitalized software development costs, non-cash interest expense related to convertible senior notes and a net loss on strategic investments from the applicable non-GAAP financial measures because these adjustments are considered by management to be outside of Splunk’s core operating results.
There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by Splunk’s competitors and exclude expenses that may have a material impact upon Splunk’s reported financial results. Further, stock-based compensation expense has been and will continue to be, for the foreseeable future, a significant recurring expense in Splunk’s business and an important part of the compensation provided to Splunk’s employees. The presentation of the non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Splunk uses these non-GAAP financial measures for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. Splunk believes that these non-GAAP financial measures provide useful information about Splunk’s operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. In addition, these non-GAAP financial measures facilitate comparisons to competitors’ operating results. The non-GAAP financial measures are meant to supplement and be viewed in conjunction with GAAP financial measures.
The following tables reconcile Splunk’s GAAP results to Splunk’s non-GAAP results included in this press release.
Splunk Inc. | www.splunk.com
Splunk Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)
(Unaudited)
Reconciliation of Cash Provided By Operating Activities to Free Cash Flow
Three Months Ended January 31,
Fiscal Year Ended January 31,
2023
2022
2023
2022
Net cash provided by operating activities
$
275,988
$
132,689
$
449,630
$
128,048
Less purchases of property and equipment
(4,391)
(841)
(13,620)
(10,671)
Less capitalized software development costs
(2,976)
(3,518)
(8,782)
(9,361)
Free cash flow (non-GAAP)
$
268,621
$
128,330
$
427,228
$
108,016
Net cash provided by (used in) investing activities
$
(414,260)
$
11,052
$
(1,070,160)
$
(333,752)
Net cash used in financing activities
$
(4,070)
$
(19,431)
$
(117,574)
$
(136,669)
Reconciliation of GAAP to Non-GAAP Financial Measures
Three Months Ended January 31, 2023
GAAP
Stock-based compensation and related employer payroll tax
Amortization of intangible assets
Restructuring and facility exit charges
Capitalized software development costs
Non-cash interest expense related to convertible senior notes
Income tax adjustment (2)
Non-GAAP
Cloud services cost of revenues
$
128,360
$
(6,226)
$
(8,209)
$
—
$
(3,788)
$
—
$
—
$
110,137
Cloud services gross margin
69.0
%
1.5
%
2.0
%
—
%
0.9
%
—
%
—
%
73.4
%
Cost of revenues
205,283
(21,775)
(9,438)
—
(3,788)
—
—
170,282
Gross margin
83.6
%
1.7
%
0.8
%
—
%
0.3
%
—
%
—
%
86.4
%
Research and development
243,027
(88,741)
—
—
2,976
—
—
157,262
Sales and marketing
427,589
(61,690)
(4,908)
(3,968)
—
—
—
357,023
General and administrative
109,135
(16,850)
—
—
—
—
—
92,285
Operating expense
779,751
(167,281)
(4,908)
(3,968)
2,976
606,570
Operating income
266,071
189,056
14,346
3,968
812
—
—
474,253
Operating margin
21.3
%
15.1
%
1.1
%
0.3
%
0.1
%
—
%
—
%
37.9
%
Income tax provision (benefit)
(3,241)
—
—
—
—
—
98,468
95,227
Net income
$
268,792
$
189,056
$
14,346
$
3,968
$
812
$
2,401
$
(98,468)
$
380,907
Basic net income per share (1)
$
1.64
$
1.15
$
0.10
$
0.02
$
—
$
0.01
$
(0.60)
$
2.32
Diluted net income per share (1)
$
1.44
$
2.04
_________________________
(1) GAAP basic net income per share and Non-GAAP basic net income per share is calculated based on 164,262 weighted-average shares of common stock. GAAP diluted net income per share and Non-GAAP diluted net income per share is calculated based on 187,002 diluted weighted-average shares of common stock, which includes 22,740 potentially dilutive shares related to convertible notes and employee stock awards. GAAP to non-GAAP diluted net income per share is not reconciled due to the difference in the number of weighted-average shares used to calculate GAAP and non-GAAP diluted net income per share.
(2) Represents the income tax adjustment using our estimated non-GAAP tax rate of 20%.
Reconciliation of GAAP to Non-GAAP Financial Measures
Three Months Ended January 31, 2022
GAAP
Stock-based compensation and related employer payroll tax
Amortization of intangible assets
Restructuring and facility exit charges
Capitalized software development costs
Non-cash interest expense related to convertible senior notes
Income tax adjustment (2)
Non-GAAP
Cloud services cost of revenues
$
111,963
$
(4,739)
$
(7,578)
$
—
$
(2,747)
$
—
$
—
$
96,899
Cloud services gross margin
61.3
%
1.6
%
2.7
%
—
%
0.9
%
—
%
—
%
66.5
%
Cost of revenues
190,366
(19,500)
(8,806)
—
(2,747)
—
—
159,313
Gross margin
78.9
%
2.1
%
1.0
%
—
%
0.3
%
—
%
—
%
82.3
%
Research and development
257,522
(84,817)
—
—
3,518
—
—
176,223
Sales and marketing
409,431
(65,884)
(5,242)
—
—
—
—
338,305
General and administrative
122,486
(36,159)
—
(3,268)
—
—
—
83,059
Operating expense
789,439
(186,860)
(5,242)
(3,268)
3,518
—
—
597,587
Operating income (loss)
(78,686)
206,360
14,048
3,268
(771)
—
—
144,219
Operating margin
(8.7)
%
22.8
%
1.6
%
0.4
%
(0.1)
%
—
%
—
%
16.0
%
Income tax provision
9,401
—
—
—
—
—
17,273
26,674
Net income (loss)
$
(140,823)
$
206,360
$
14,048
$
3,268
$
(771)
$
41,889
$
(17,273)
$
106,698
Basic net income (loss) per share (1)
$
(0.88)
$
1.29
$
0.09
$
0.02
$
—
$
0.26
$
(0.11)
$
0.67
Diluted net income (loss) per share (1)
$
(0.88)
$
0.66
_________________________
(1) GAAP basic and diluted net loss per share and non-GAAP basic net loss per share calculated based on 159,217 weighted-average shares of common stock. Non-GAAP net income per share calculated based on 160,765 diluted weighted-average shares of common stock, which includes 1,548 potentially dilutive shares related to convertible notes and employee stock awards. GAAP to non-GAAP diluted net income (loss) per share is not reconciled due to the difference in the number of weighted-average shares used to calculate GAAP and non-GAAP diluted net income (loss) per share.
(2) Represents the income tax adjustment using our estimated non-GAAP tax rate of 20%.
Reconciliation of GAAP to Non-GAAP Financial Measures
Fiscal Year Ended January 31, 2023
GAAP
Stock-based compensation and related employer payroll tax
Amortization of intangible assets
Acquisition-related adjustments
Restructuring and facility exit charges
Capitalized software development costs
Non-cash interest expense related to convertible senior notes
Loss on strategic investments, net
Income tax adjustment (2)
Non-GAAP
Cloud services cost of revenues
$
490,299
$
(23,082)
$
(30,943)
$
—
$
—
$
(12,777)
$
—
$
—
$
—
$
423,497
Cloud services gross margin
66.4
%
1.6
%
2.0
%
—
%
—
%
0.9
%
—
%
—
%
—
%
70.9
%
Cost of revenues
815,995
(87,837)
(35,859)
—
—
(12,777)
—
—
—
679,522
Gross margin
77.7
%
2.4
%
1.0
%
—
%
—
%
0.3
%
—
%
—
%
—
%
81.4
%
Research and development
997,170
(345,679)
—
—
—
8,782
—
—
—
660,273
Sales and marketing
1,621,518
(252,952)
(20,522)
—
(3,968)
—
—
—
—
1,344,076
General and administrative
454,531
(118,066)
—
(692)
(10,000)
—
—
—
—
325,773
Operating expense
3,073,219
(716,697)
(20,522)
(692)
(13,968)
8,782
—
—
—
2,330,122
Operating income (loss)
(235,506)
804,534
56,381
692
13,968
3,995
—
—
—
644,064
Operating margin
(6.4)
%
22.0
%
1.5
%
—
%
0.4
%
0.1
%
—
%
—
%
—
%
17.6
%
Income tax provision
12,411
—
—
—
—
—
—
—
112,488
124,899
Net income (loss)
$
(277,862)
$
804,534
$
56,381
$
692
$
13,968
$
3,995
$
10,279
$
97
$
(112,488)
$
499,596
Basic net income (loss) per share (1)
$
(1.71)
$
4.95
$
0.36
$
—
$
0.09
$
0.02
$
0.06
$
—
$
(0.69)
$
3.08
Diluted net income (loss) per share (1)
$
(1.71)
$
2.69
_________________________
(1) GAAP basic and diluted net loss per share and non-GAAP basic net loss per share calculated based on 162,376 weighted-average shares of common stock. Non-GAAP net income per share calculated based on 185,791 diluted weighted-average shares of common stock, which includes 23,415 potentially dilutive shares related to convertible notes and employee stock awards. GAAP to non-GAAP diluted net income (loss) per share is not reconciled due to the difference in the number of weighted-average shares used to calculate GAAP and non-GAAP diluted net income (loss) per share.
(2) Represents the income tax adjustment using our estimated non-GAAP tax rate of 20%.
Reconciliation of GAAP to Non-GAAP Financial Measures
Fiscal Year Ended January 31, 2022
GAAP
Stock-based compensation and related employer payroll tax
Amortization of intangible assets
Acquisition-related adjustments
Restructuring and facility exit charges
Capitalized software development costs
Non-cash interest expense related to convertible senior notes
Income tax adjustment (2)
Non-GAAP
Cloud services cost of revenues
$
398,274
$
(17,554)
$
(29,197)
$
—
$
—
$
(6,432)
$
—
$
—
$
345,091
Cloud services gross margin
57.8
%
1.9
%
3.0
%
—
%
—
%
0.7
%
—
%
—
%
63.4
%
Cost of revenues
733,969
(81,835)
(37,438)
—
—
(6,432)
—
—
608,264
Gross margin
72.5
%
3.1
%
1.4
%
—
%
—
%
0.2
%
—
%
—
%
77.2
%
Research and development
1,029,574
(333,178)
(26)
—
—
8,649
—
—
705,019
Sales and marketing
1,534,600
(252,180)
(20,368)
—
(613)
—
—
—
1,261,439
General and administrative
522,350
(143,762)
—
(957)
(58,496)
—
—
—
319,135
Operating expense
3,086,524
(729,120)
(20,394)
(957)
(59,109)
8,649
—
—
2,285,593
Operating loss
(1,146,829)
810,955
57,832
957
59,109
(2,217)
—
—
(220,193)
Operating margin
(42.9)
%
30.4
%
2.2
%
—
%
2.2
%
(0.1)
%
—
%
—
%
(8.2)
%
Income tax provision (benefit)
18,314
—
—
—
—
—
—
(68,975)
(50,661)
Net loss
$
(1,339,097)
$
810,955
$
57,832
$
957
$
59,109
$
(2,217)
$
140,847
(4)
$
68,975
$
(202,639)
Basic and diluted net loss per share (1)
$
(8.29)
$
5.01
$
0.36
$
0.01
$
0.37
$
(0.01)
$
0.87
$
0.43
$
(1.25)
_________________________
(1) Calculated based on 161,628 weighted-average shares of common stock.
(2) Represents the income tax adjustment using our estimated non-GAAP tax rate of 20%.
