Splunk’s New Billing Policy to Hurt Cash Flows Through 2022
The analytics firm has adopted a more generous invoicing policy that will be a drag on operations for the next year.
June 21, 2021
Splunk (SPLK), an analytics and security firm, is transitioning primarily to a cloud services delivery model. The transition is happening more rapidly than Splunk originally expected. Longer term, the company’s revenue will be more predictable once the transition is complete. However, as a greater percentage of sales are recognized ratably, Splunk’s near term prospects have been lumpy and plagued by lower than expected operating margins.
In its latest 10-Q, Splunk disclosed another change that will negatively impact operating results in the year ahead:
“We have also shifted from generally invoicing our multi-year contracts upfront to invoicing on an annual basis. Accordingly, we have seen the timing of our cash collections extend over a longer period of time with the transition to a subscription model than it has historically, and we expect this to negatively impact operating cash flows through at least fiscal 2022.”
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