Splunk (SPLK) Sees Another High Level Executive Depart, But Reaffirm Of Guidance Brings Some Relief
2:11 pm Tuesday, September 27th, 2022
Splunk (SPLK), a data analytics and cybersecurity company, is experiencing another shake up at the C-suite level as CFO Jason Child will depart the company to accept another position at a “leading pre-IPO semiconductor company.” Shortly after SPLK issued its press release, it was revealed that Child accepted the CFO role at Arm Ltd., which is now planning to go public after NVIDIA’s (NVDA) $40 bln bid to acquire the company fell apart. The exit comes less than one year after SPLK’s former CEO, Doug Merritt, unexpectedly stepped down last November while the company was struggling to find its footing amid a major business model transition.
Specifically, SPLK has been migrating its on-premise products to a cloud-based platform, and Child has played a meaningful part in that conversion. His departure could create a distraction as the company looks to get back on track after cutting its FY23 total ARR and cloud ARR guidance last quarter. During that earnings conference call, Gary Steele, who was appointed CEO last March, explained that Q2 total ARR and cloud ARR missed internal expectations due to a slowing number of cloud migrations and expansions as customers tightened their spending.
SPLK reaffirmed its Q3 revenue guidance of $835-$855 mln, and all of its guidance for FY23. This includes revenue of $3.35-$3.40 bln, total ARR of approximately $3.65 bln, cloud ARR of approximately $1.8 bln, non-GAAP operating margin of roughly 8%, and free cash flow of at least $400 mln. Typically, a reaffirm of guidance wouldn’t constitute a significant positive catalyst, but in this case, it’s viewed as a relief and its easing investors’ anxieties.
Seeing a high-level executive leave a company for another opportunity is never a comforting sign. In this case, though, it doesn’t appear that Child is leaving due to tough times at SPLK. Rather, he has the opportunity to help take one of the largest semiconductor companies in the world public, which would be difficult to pass up. By reaffirming its guidance, SPLK is signaling to the market that Child isn’t jumping ship as the business deteriorates.