It was my honor to become Splunk’s CEO in April 2022. I’m grateful to my predecessors Godfrey Sullivan and
Doug Merritt, our company founders and our Board Chair, Graham Smith, for their thoughtful, driven leadership
in bringing Splunk’s products and vision to our customers around the world.
With more than 35 years in tech, I’m excited to build upon Splunk’s incredibly strong legacy of innovation,
growth and hard-won industry leadership. And I’m deeply committed to delivering even more customer
success to our ever-expanding market.
Building on our strengths
MAY 2022
Dear Splunk Stockholders,
Splunk delivered a record year. We grew total ARR to over $3 billion, up 32% year-over-year with our cloud
revenue growing 70% to $944 million. Total revenues were $2.67 billion, up 20% year-over-year. I’m also
pleased to report that our cloud-first business model transformation is nearing completion. I’m incredibly
proud of Splunkers for achieving such strong results for our customers and business.
As Splunk looks to the future to continue delivering value for our customers and stockholders, we’ll hold true
to our deep customer centrism and laser focus on product innovation. The value we provide for our customers
and partners has never been more evident, nor has it ever been more necessary, and we’ll continue to add
growth and product differentiation to a foundation built on two decades of innovation and leadership.
After founding and leading a cybersecurity business for nearly 20 years, I see an amazing opportunity to further
strengthen Splunk’s position within security. In a turbulent and complex geopolitical landscape, with the war in
Ukraine as the most recent example, we are on high alert to support our customers and their security needs.
Our own global research found that nearly two-thirds of organizations are facing more attacks than ever, and
49% of organizations suffered a data breach in the past two years (up from 39% a year ago).
In 2021, for the eighth consecutive year, Splunk was a leader in the Gartner Security Information and Event
Management Magic Quadrant, highlighting the power and durability of our solutions. And, we’re continuing to
innovate and invest in security analytics and orchestration solutions necessary for modern security operations,
including integrated threat intelligence, innovative Risk-Based Alerting technology, and visual playbook editor.
Our security experts from our threat research and SURGe teams provide the necessary situational awareness
and security content needed to address fast-moving and high-profile threats for our customers and the
broader cybersecurity community.
We’ve also seen how quickly observability solutions have become essential in a hybrid, multi-cloud
technology landscape. As with security, Splunk’s leadership in the observability market has been increasingly
recognized, including being named a Leader and one of only two Fast Movers in the GigaOm Radar for
Application Performance Monitoring Report for 2021. We continue to invest aggressively in observability
solutions to serve as a key driver of our customers’ business resilience.
Our entire team is working hard to bring Splunk’s innovation and customer focus to the broader market.
Splunk’s Partner Network taps more than 2,400 partners using our platform to develop solutions and
services that create even more value for customers. In addition, our recently announced Splunk Partnerverse
Program received a 5-star rating in the 2022 CRN Partner Program Guide, important validation of its strength
and value.
More than 20,000 customers and partners joined our annual user conference in 2021 to learn how they
can accelerate their own innovation, strengthen their security posture and bolster resilience. Delivering
a virtual event with this level of engagement is a testament to the dedication and ingenuity of our entire
team, as well as the passion of our customers. In mid-June 2022, we’ll gather again (this time in-person
and online) for .conf22, where we’ll deepen our connection with Splunk practitioners and showcase our
continued innovation.
We’re also committed to harnessing the power of data for good. Our Global Impact program is working to
bridge the data divide: the disparity between the expanding use of data to create commercial value and the
comparatively weak use of data to solve social and environmental challenges. Our customers and partners
exist in all sectors across the world, and through collaboration, we can mobilize our collective talent as well as
financial and technical solutions to tackle this critical problem and enact positive outcomes.
In addition, we’re taking action to combat climate change, including our goal to achieve net zero greenhouse
gas emissions by 2050 and our commitment to establish shorter-term science-based targets. We’re proud to
advance our climate journey with a fact-based, data-driven approach and build on our previous support for
the Paris Agreement.
This is Splunk’s moment
We’ve seen that one of the strongest forces for positive transformation in business is data-driven innovation.
Organizations everywhere are undergoing rapid digitalization and moving to the cloud faster than ever, which
brings both value and complexity. Today, we’re closer than ever to our customers and what they need not only
to navigate disruption and competition, but also to solve mission critical problems and seize the opportunities
brought on by the quickly evolving technology landscape. Splunk’s leading-edge security and observability
products, and our differentiated data platform, put us squarely at the heart of our customers’ innovation.
I fully intend on being Splunk’s number-one customer advocate, bringing customer feedback to every
conversation and decision. The best products come from connecting customer needs to market trends in
order to build both a smart product and a compelling customer experience. This is the art and science of
what we do in tech, and I’m dedicated to adding my perspective to the greatness built by those Splunkers
who came before me.
As we move forward, one thing that will not change is the ownership culture we have built within Splunk. We
strive to keep our team’s incentives aligned with the interests of our stockholders, and we use our robust
investor outreach program to help keep us shoulder to shoulder with your views on key issues. As you will
see in the proxy statement, our Board has integrated the feedback we gathered in direct conversations with
investors to transform our executive compensation program this year and to inform the design of our new
equity incentive plan, which we are presenting for vote at this year’s annual meeting of stockholders. I have
been pleased to see how the open dialogue that we maintain with our stockholders informs Board decisions
on key strategic and operating decisions, and has helped to shape an organization where Splunkers are
motivated to achieve outstanding business performance.
While I have been on the job for just a few weeks, I can say with confidence that this is Splunk’s moment.
Nearly 20 years of vision, grit and passion for our customers have brought us here–and those enduring
qualities are what will carry us into the next decade.
Thank you for your confidence in Splunk’s mission, our products, our team and our future.
Gary Steele
President & CEO
Splunk Inc.
How to Cast Your Vote
www.proxyvote.com
Vote by Internet
1-800-690-6903
Vote by Telephone
Mail your signed proxy card
Vote by Mail
Note for Street Name Holders:
If you hold your shares through
a broker, bank or other
nominee, you must instruct
your nominee how to vote the
shares held in your account. The
nominee will give you a voting
instruction form.
Your vote is important. Please
vote your shares as soon
as possible.
See “Other Matters—Questions
and Answers About the Proxy
Materials and Our 2022 Annual
Meeting” for details on voting
requirements and additional
information about the Annual
Meeting, including how to vote
at the Annual Meeting.
270 Brannan Street
San Francisco, California 94107
Notice of Annual
Meeting of Stockholders
To Be Held at 3:30 p.m. Pacific Time on June 16, 2022
To The Stockholders of Splunk Inc.:
The 2022 Annual Meeting of Stockholders (the “Annual Meeting”) of Splunk Inc., a
Delaware corporation (“Splunk,” “we,” or the “Company”), will be held virtually via
live audio webcast on June 16, 2022, at 3:30 p.m. Pacific Time, for the following
purposes, as more fully described in the accompanying proxy statement:
1. To elect three Class I directors to serve until the 2025 annual meeting of
stockholders or until their successors are duly elected and qualified;
2. To ratify the appointment of PricewaterhouseCoopers LLP as our independent
registered public accounting firm for our fiscal year ending January 31, 2023;
3. To conduct an advisory vote to approve the compensation of our named
executive officers;
4. To approve the Splunk Inc. 2022 Equity Incentive Plan and the reservation of
shares thereunder; and
5. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
The Board of Directors of Splunk (the “Board”) fixed the close of business on
April 20, 2022 as the record date for the Annual Meeting. Only holders of our
common stock as of the record date are entitled to notice of and to vote at the
Annual Meeting. Further information regarding voting rights and the matters to be
voted upon is presented in the accompanying proxy statement.
On or about May 2, 2022, we mailed to our stockholders a Notice of Internet
Availability of Proxy Materials (the “Notice”). The Notice provides instructions on
how to vote online, by telephone, or by mail and includes instructions on how to
receive a paper or e-mail copy of proxy materials if you choose. Instructions on how
to access our proxy statement and our fiscal 2022 Annual Report may be found in
the Notice or on our website at investors.splunk.com.
The Annual Meeting this year will be a virtual-only meeting. We have designed the
virtual Annual Meeting to provide stockholders with the same opportunities to
participate as they would have had at an in-person meeting. We aim to provide a
consistent experience to all stockholders regardless of their geographic location.
Stockholders will be able to attend and participate in the Annual Meeting, vote their
shares electronically, submit questions, and examine a stockholder list during the live
audio webcast of the Annual Meeting by visiting www.virtualshareholdermeeting.com/
SPLK2022 and entering their control number. Stockholders may submit questions
for the meeting in advance at www.proxyvote.com.
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the Annual Meeting
online, we urge you to submit your vote now via the Internet, telephone, or mail.
We appreciate your continued support of Splunk.
Very truly yours,
Scott Morgan
Senior Vice President, Chief Legal Officer, Global Affairs and Secretary
San Francisco, California
May 2, 2022
Table of Contents
Proxy Statement Summary
1
Corporate Governance at Splunk
10
Proposal 1: Election of Directors
10
Non-Employee Director Compensation
Stockholder Engagement
ESG Oversight and Highlights
Other Governance Policies and Practices
31
35
36
38
Board Composition
Board’s Role and Responsibilities
Board Effectiveness
Board Meetings and Committees
10
22
25
27
Audit Committee Matters
39
Proposal 2: Ratification of Appointment of
Independent Registered Public Accounting Firm
39
Fees Paid to the Independent Registered Public
Accounting Firm
Audit Committee Policy on Pre-Approval of Audit and
Permissible Non-Audit Services of Independent
Registered Public Accounting Firm
41
41
Report of the Audit Committee
40
Our Executive Officers
42
Executive Compensation
43
Proposal 3: Advisory Vote to Approve Named
Executive Officer Compensation
43
Outstanding Equity Awards at Fiscal 2022 Year-End
Option Exercises and Stock Vested in Fiscal 2022
Pension Benefits and Nonqualified Deferred
Compensation
Executive Employment Arrangements
Equity Acceleration Death Benefit
Potential Payments Upon Termination or Upon
Termination in Connection With a Change in Control
CEO Pay Ratio
Equity Compensation Plan Information
75
76
76
76
78
79
80
81
Compensation Discussion and Analysis
Executive Summary
Discussion of Our Fiscal 2022 Executive
Compensation Program
Other Compensation Policies and Information
Talent & Compensation Committee Report
Compensation Tables
Summary Compensation Table
Grants of Plan-Based Awards for Fiscal 2022
44
44
52
66
70
71
71
73
Splunk Inc. 2022 Equity Incentive Plan
83
Proposal 4: Approval of Splunk Inc. 2022 Equity
Incentive Plan
83
Summary of the 2022 Plan
Summary of U.S. Federal Income Tax Consequences
New Plan Benefits
87
93
95
Approval of the 2022 Equity Incentive Plan
Why Should Stockholders Vote to Approve the 2022 Plan?
83
83
Stock Ownership Information
96
Security Ownership of Certain Beneficial Owners
and Management
96
Delinquent Section 16(a) Reports
97
Other Matters
98
Questions and Answers About the Proxy Materials and
Our 2022 Annual Meeting
Stockholder Proposals
98
102
Fiscal 2022 Annual Report and SEC Filings
103
Appendix A
Reconciliation of GAAP and Non-GAAP Information
A-1
Appendix B
Splunk Inc. 2022 Equity Incentive Plan
B-1
This proxy statement includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
All statements other than statements of historical or current facts, including statements regarding our business plans and objectives,
our strategies and systems for implementing our goals, our commitments to programs and policies, our expectations and priorities for
ESG initiatives, and executive compensation plans, made in this document are forward-looking. We use words such as “aim,” “anticipate,”
“believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “target,” “will,” “would”
and similar expressions to identify forward-looking statements, although not all forward-looking statements contain these identifying
words. Forward-looking statements reflect management’s current expectations, estimates and assumptions based on information currently
available to us as of the date of this proxy statement. Actual results could differ materially for a variety of reasons. Risks and uncertainties
that could cause our actual results to differ significantly from management’s expectations include, but are not limited to, those described
in our Annual Report on Form 10-K for the fiscal year ended January 31, 2022. We undertake no obligation, and do not intend to update the
forward-looking statements.
References to our website in this proxy statement are not intended to function as a hyperlink and the information contained on our website is
not intended to be part of this proxy statement.
1
Splunk 2022 Proxy Statement
PROXY
Proxy Statement Summary
Voting Matters, Vote Recommendations and Rationale
PROPOSAL
1
Election of Class I Directors
Vote Recommendation “FOR” EACH NOMINEE. (page 10)
The Board and the Governance & Sustainability Committee believe that each of the nominees
possesses the right skills, qualifications and experience to effectively oversee the Company’s
long-term business strategy.
PROPOSAL
2
Ratification of Appointment of Independent
Registered Public Accounting Firm
Vote Recommendation “FOR” RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM. (page 39)
The Board and the Audit Committee believe that the retention of PricewaterhouseCoopers LLP for the
fiscal year ending January 31, 2023 is in the best interests of the Company and its stockholders. As a
matter of good corporate governance, stockholders are being asked to ratify the Audit Committee’s
selection of the independent registered public accounting firm.
PROPOSAL
3
Advisory Vote to Approve Named
Executive Officer Compensation
Vote Recommendation “FOR” APPROVAL OF OUR NAMED EXECUTIVE OFFICER COMPENSATION.
(page 43)
The Board and the Talent & Compensation Committee believe our executive compensation program
demonstrates the continuing evolution of our “pay for performance” philosophy, and reflects feedback
received from stockholder engagement. We currently hold our Say-on-Pay advisory, non-binding vote annually.
PROPOSAL
4
Approval of Splunk Inc. 2022 Equity
Incentive Plan
Vote Recommendation “FOR” APPROVAL OF OUR 2022 EQUITY INCENTIVE PLAN. (page 83)
The Board and the Talent & Compensation Committee believe that approval of our 2022 Equity
Incentive Plan and the reservation of shares thereunder is in the best interests of the Company and
its stockholders. Our ability to grant equity awards is crucial to recruiting and retaining the best
personnel. If stockholders do not approve our 2022 Equity Incentive Plan at the Annual Meeting, our
ability to recruit, retain and incentivize the highly skilled talent critical to successfully compete and
grow our business could be seriously and negatively impacted.
Your vote is important
This summary highlights information contained within this proxy statement. You should read the entire proxy statement
carefully and consider all information before voting. Page references are supplied to help you find further information in
this proxy statement.
2
Fiscal 2022 Business Highlights
In fiscal 2022, we prioritized growth with a focus on disciplined execution of our business objectives as we navigated our
cloud-first business model transformation. Accordingly, in fiscal 2022, we and our investors focused on total annual recurring
revenue (“ARR”) and operating cash flow metrics. Our focus on customer success and innovative products is critical to
software and cloud services adoption and led to continued ARR growth. Our focus on capturing our large and growing market
opportunity requires that we continue to invest in our business, so in fiscal 2022, our executive compensation balanced growth
and operational discipline in support of our long-term execution objectives. Our fiscal 2022 business highlights include the
following ARR, revenue and operating cash flow results and other key business metrics:
Strong Cloud Momentum
Cloud ARR of $1.34 billion
Cloud Revenue of $944 million
317 customers with
Cloud ARR > $1 million
Up 65%
Up 70%
Up 70%
year-over-year(1)
year-over-year
year-over-year
Fiscal Year 2022 Performance
Total Revenues
$2.67 Billion
Up 20%
year-over-year
Cash Flow
Operating Cash Flow of
$128 million
Free Cash Flow(2) of
$117 million
Customers with ARR >
$1 million
675 customers
Up 32%
year-over-year
ARR
($ in millions) • FYE January 31
FY22
FY21
FY20
FY19
FY18
$2,365
$1,680
$1,091
3,500
0
500
2,000
2,500
1,000
1,500
3,000
$3,117
32%
41%
54%
50%
$727
ARR up 32% year-over-year(1)
Proxy Statement Summary
3
Splunk 2022 Proxy Statement
PROXY
(1)
ARR represents the annualized revenue run-rate of active cloud services, term license, and maintenance contracts at the end of a reporting period, Cloud ARR
represents the annualized revenue run-rate of active cloud services contracts at the end of a reporting period, each as reported in our Annual Report on Form
10-K for the year ended January 31, 2022. Each contract is annualized by dividing the total contract value by the number of days in the contract term and then
multiplying by 365. ARR and Cloud ARR should be viewed independently of revenue, and do not represent our revenue under GAAP on an annualized basis, as
each is an operating metric that can be impacted by contract start and end dates and renewal rates. ARR is not intended to be a replacement for forecasts of
revenue.
(2)
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide investors with certain non-
GAAP financial measures, including non-GAAP free cash flow. For a full reconciliation between GAAP and net cash used in operating activities and free cash
flow, please see Appendix A.
In June 2021, we entered into an investment agreement with Silver Lake Alpine, L.P., Silver Lake Alpine (Offshore Master), L.P.
and Silver Lake Partners VI, L.P. (collectively, “Silver Lake”) related to the issuance and sale of $1 billion of our convertible senior
notes. Proceeds from the sale of the notes were used to repurchase 6.9 million shares of our common stock during fiscal 2022.
For more information on the Silver Lake transaction, please see “Corporate Governance at Splunk—Board Composition—Board
Refreshment and Succession Planning—Agreement with Silver Lake.”
ESG Highlights
In November 2021, we announced our intent to achieve net zero greenhouse gas emissions by
2050 and a commitment to set a suite of shorter-term five, ten, and fifteen year science-based
targets by the end of fiscal year 2023. All targets will be submitted to the Science Based Target
initiative (SBTi) and will be consistent with a 1.5°C ambition level. In December 2021, we issued our
2021 Global Impact Report (“Global Impact Report”), which details the Company’s approach and
engagement with the societal and environmental issues that matter most to our stakeholders and
our business. The report launches our four-pillared global impact strategy that focuses on social
impact, ethical and inclusive growth, data responsibility and environmental sustainability.
For more information on our ESG program, please see “Corporate Governance at Splunk—ESG
Oversight and Highlights.”
Proxy Statement Summary
4
Corporate Governance
We believe that good corporate governance promotes the long-term interests of our stockholders, strengthens our Board and
management accountability and leads to better business performance. For these reasons, we are committed to maintaining
strong corporate governance practices.
The “Corporate Governance at Splunk” section beginning on page 10 describes our governance practices, which include the
following highlights:
• 100% Independent Committee Members
• Independent Chair and Lead Independent Director in
accordance with our Corporate Governance Guidelines
• Majority Voting for Directors with Resignation Policy
• Annual Board and Committee Evaluation
• Board Continuing Education Program
• Proxy Access Bylaws
• Director Change in Circumstances with Resignation Policy
• Qualified Diverse Candidate Pool Policy
• Board Risk Oversight
• Periodic Review of Committee Charters and
Governance Policies
• Regular Meetings of Independent Directors Without
Management Present
• Formal CEO Evaluation Process
• Clawback Policy
• Annual Say-on-Pay Vote
• Stockholder Engagement Program
• Stock Ownership Guidelines for Directors and
Officers
• Anti-Hedging and Anti-Pledging Policy
• Code of Conduct for Directors, Officers and
Employees
• Succession Planning Process
• Global Impact Report
• Diversity, Equity and Inclusion Annual Report
Stockholder Engagement
We believe that effective corporate governance includes regular, constructive conversations with our stockholders. We are
committed to maintaining an active dialogue to understand the priorities and concerns of our stockholders and believe that
ongoing engagement builds mutual trust and understanding with our stockholders. Stockholder engagement and feedback are
critical components of our corporate governance practices and inform our decisions and programs.
Below is a summary of our engagement with stockholders following our 2021 annual meeting of stockholders. These
discussions have helped ensure that our Board’s decisions are informed by stockholder objectives.
62%
We Reached out to
Institutional Stockholders
Representing
of shares outstanding
43%
We Engaged with Institutional
Stockholders Representing
of shares outstanding
27%
Lead Independent Director
Participated in Calls with
Institutional Stockholders
Representing
of shares outstanding
See “Corporate Governance at Splunk—Stockholder Engagement” on page 35 of this proxy statement for more information on
our stockholder engagement program.
For key feedback from our stockholders related to our executive compensation program and our 2021 Say-On-Pay Vote, and
our responses to this feedback, please see “Executive Compensation—Compensation Discussion and Analysis—Executive
Summary—Stockholder Engagement and Our 2021 Say-On-Pay Vote” on page 49 of this proxy statement.
Proxy Statement Summary
5
Splunk 2022 Proxy Statement
PROXY
Over the past several years, in response to stockholder feedback, and as part of our ongoing evaluation of best practices, the
Board has incorporated enhancements to our executive compensation program and corporate governance practices, such as
those depicted in the timeline below.
2022
MARCH
• Established Cybersecurity & Data Responsibility Committee
• Initiated a transition to a PSU program with a three-year relative total stockholder return performance metric
• Implemented distinct performance metrics in each of our executive bonus plan and our PSU program
2021
DECEMBER
• Released Global Impact Report
APRIL
• Enhanced proxy disclosure regarding Board oversight of COVID-19 response
• Added underrepresented community diversity of Board to proxy
2020
NOVEMBER
• Released first ESG update
MARCH
• Replaced revenue metric with annual recurring revenue in both our executive bonus plan and our PSU program to align
our incentives with key drivers of stockholder value and reflect our transition to a renewable business model
• Replaced non-GAAP operating margin metric with operating cash flow in our PSU program to reflect focus on disciplined
execution of our business objectives during our transition to a renewable business model
2019
APRIL
• Enhanced proxy disclosures regarding Board succession planning, risk oversight and corporate sustainability
2018
SEPTEMBER
• Updated stock ownership guidelines
APRIL
• Enhanced proxy disclosures regarding director qualifications and skills, the role of diversity in our director nominations
process, Board refreshment and corporate sustainability
MARCH
• Added stock price modifier to PSU program
2017
DECEMBER
• Adopted director change in circumstances with resignation policy
• Adopted qualified diverse candidate pool policy
APRIL
• Added collective director qualifications table to proxy
MARCH
• Replaced operating cash flow metric with non-GAAP operating margin in our PSU program to reflect increased strategic
focus on a profitability measure
2016
APRIL
• Added proxy disclosure regarding Board and Committee self-evaluations and succession planning
MARCH
• Implemented proxy access Bylaws
• Increased proportion of PSUs in long-term equity compensation program for all executive officers
2015
APRIL
• Significantly enhanced readability and presentation of proxy
MARCH
• Introduced performance-based equity awards (“PSUs”) with revenue and operating cash flow metrics
FEBRUARY
• Adopted clawback policy
2014
SEPTEMBER
• Launched formal stockholder engagement program
• Adopted majority voting for directors with resignation policy
• Adopted stock ownership guidelines
Proxy Statement Summary
6
Director Nominees and Other Directors
Ensuring the Board is composed of directors who bring diverse viewpoints and perspectives, exhibit a variety of skills, experience,
and backgrounds, and effectively represent the long-term interests of stockholders is a top priority of our Board and Governance &
Sustainability Committee. The Board believes periodic assessment of directors is integral to an effective governance structure and
aims to strike a balance between ensuring that we retain directors with deep knowledge of the Company while adding directors who
bring a fresh perspective. We have added five new directors since 2020, enhancing the Board’s breadth and depth of experience and
diversity, while taking into account the Company’s evolving business model, the macro technology business environment and the
changing governance landscape. See below for summary information about our Board and each director nominee and continuing
director as of May 1, 2022 (Mr. Viswanath will depart the Board effective immediately following the Annual Meeting). For purposes of
the information below, a member of an underrepresented community is defined as an individual who self-identifies as Black, African
American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self-identifies as gay,
lesbian, bisexual or transgender. See pages 13, 15 to 20 for more information.
Continuing Board Overview
In March 2022, we changed the name of the Compensation Committee to the Talent & Compensation Committee and the name of
the Nominating and Corporate Governance Committee to the Governance & Sustainability Committee. See “Corporate Governance
at Splunk—Board Meetings and Committees” for further discussion on why we changed the names of these committees.
3
4
10 out of 11
5 Years
58.2
5
Directors Self-Identify as Women
Directors are
Independent
Average Tenure
Average Age
New Directors Joined the
Board in the Last Two Years
Directors Self-Identify as an
Underrepresented Community Member
Committees
Class
Age
Director
Since
Current Term
Expires
Expiration of Term for
Which Nominated
2022 Director
Nominees
Mark Carges*
Former CTO, eBay
I
60
2014
2022
2025
Kenneth Hao*
Chairman and Managing Partner,
Silver Lake
I
53
2021
2022
2025
Elisa Steele*
Independent Board Member
I
55
2017
2022
2025
Continuing Directors
Patricia Morrison*
Former EVP, Customer Support
Services, and CIO, Cardinal Health
II
62
2013
2023
—
Stephen Newberry*
Former Chairman, Lam Research
II
68
2013
2023
—
General Dennis Via*
EVP, Booz Allen Hamilton and
Retired Four-Star U.S. Army General
II
64
2020
2023
—
Luis Felipe Visoso*
CFO, Unity Software
II
53
2022
2023
—
Sara Baack*
Former Chief Product Officer, Equinix
III
50
2017
2024
—
Sean Boyle*
COO and CFO, Wildlife Studios Limited
III
54
2020
2024
—
Graham Smith*
Chair, Splunk
III
62
2011
2024
—
Gary Steele
President and CEO, Splunk
III
59
2022
2024
—
* Independent
director
Audit Committee
Talent & Compensation
Committee
Governance & Sustainability
Committee
Cybersecurity & Data
Responsibility Committee
Chair
Member
Audit Committee Financial Expert
Proxy Statement Summary
7
Splunk 2022 Proxy Statement
PROXY
Executive Compensation Highlights
Our executive compensation program is designed to attract, motivate and retain the key executives who drive our success. Pay
that reflects performance and aligns with the interests of long-term stockholders is key to our executive compensation program
design and decisions. The Talent & Compensation Committee structures our executive compensation program to include
significant performance attributes that are aligned with our business strategy and long-term stockholder value creation.
The fiscal 2022 executive compensation program provided short-term annual cash bonuses designed to drive ARR, and long-
term performance-based equity awards designed to drive ARR, operating cash flow and future stock price performance. The
chart below illustrates the short-term and long-term timeframe over which the regular components of our named executive
officers’ fiscal 2022 compensation are earned and paid, and designed to retain and incentivize them. The fiscal 2022 named
executive officer compensation program (including certain exceptions to the chart below) is described in further detail
below under “Executive Compensation—Compensation Discussion and Analysis—Discussion of Our Fiscal 2022 Executive
Compensation Program—Components of Our Fiscal 2022 Compensation Program.”
January 31, 2022
January 31, 2023
January 31, 2024
March 2024
BASE SALARY
Paid throughout fiscal 2022
CASH BONUS
Fiscal 2022 annual
cash bonus (50% of target
annual cash bonus opportunity
paid in September 2021, and
full fiscal 2022 achievement
determined and paid in
April 2022)
LONG-TERM EQUITY COMPENSATION (RSUs)
Fiscal 2022 awards granted in 2021
(1/3 vested in March 2022, remaining 2/3 vest quarterly thereafter over next two years)
LONG-TERM EQUITY COMPENSATION (PSUs)
Fiscal 2022 awards granted in 2021
(1/3 of earned corporate PSUs vested in March 2022, remaining 2/3 of earned corporate PSUs vest quarterly
thereafter over next two years)
(stock price PSUs eligible to be earned
and to vest beginning in June 2023
on a quarterly basis through the end of
the three-year vesting period of the
corporate PSUs in March 2024)
Proxy Statement Summary
8
Performance-based and long-term compensation are predominant elements of our executive compensation program. The
chart below illustrates the evolution of our long-term equity compensation design through fiscal 2022.
Long-term equity compensation evolution*
Fiscal 2013
to 2015
Fiscal 2016
Fiscal 2017**
Fiscal 2018
Fiscal 2019
and 2020
Fiscal 2021
and 2022***
RSUs = 100%
RSUs = 50%
RSUs = 40%
RSUs = 40%
RSUs = 40%
RSUs = 40%
PSUs = 60%
Payout range: 0-200%
Performance metrics:
revenue and operating
cash flow percentage
relative to revenue
growth rate
PSUs = 60%
Payout range: 0-200%
Performance metrics:
revenue and
non-GAAP operating
margin
PSUs = 60%
Corporate PSUs
payout range:
0-200%
Corporate
performance metrics:
revenue and non-
GAAP operating
margin
Stock Price PSUs
payout range: 0-50%
earned corporate
PSUs
PSUs = 60%
Corporate PSUs
payout range:
0-200%
Corporate
performance metrics:
annual recurring
revenue and
operating cash flow
Stock Price PSUs
payout range: 0-50%
earned corporate
PSUs
PSUs = 50%
Payout range: 0-200%
Performance metrics:
revenue and operating
cash flow percentage
relative to revenue
growth rate
*
Equity weightings are at the target performance level; the actual mix of equity will vary with PSU results.
**
In fiscal 2017 only, long-term equity compensation for our CEO consisted of 25% RSUs and 75% PSUs.
*** In fiscal 2022 only, long-term equity compensation for our former President and Chief Growth Officer consisted of 68% RSUs and 32% PSUs, and our interim
CEO did not receive any long-term equity compensation in connection with his employment as our interim CEO.
As described in more detail below under “Executive Compensation—Compensation Discussion and Analysis—Executive
Summary—Stockholder Engagement and Our 2021 Say-On-Pay Vote,” in response to the “Say-on-Pay” vote at our 2021 annual
meeting of stockholders, we undertook an extensive stockholder outreach campaign.
In the course of meetings with our stockholders, we discussed, among other things, adjustments to our performance metrics,
overlapping performance metrics, length of performance periods, use of relative total stockholder return as a performance
metric, and rigor of performance metrics. In response to feedback from our stockholders, the successful progression of our
business model transformation, and our business becoming more mature and financial results becoming more predictable,
in fiscal 2023 we initiated a transition to a long-term performance-based compensation program with a three-year relative
total stockholder return performance metric, and we implemented distinct performance metrics in each of our annual
executive bonus plan and our long-term performance-based compensation program. Our stockholder outreach campaign and
related changes to our executive compensation program are described in further detail under “Executive Compensation—
Compensation Discussion and Analysis—Executive Summary—Stockholder Engagement and Our 2021 Say-On-Pay Vote”
and “—Recent Fiscal 2023 Compensation Decisions.” In addition, as described in Proposal 4, we are submitting a new and
redesigned equity incentive plan for stockholder approval. We believe this new equity incentive plan demonstrates best
practices and will keep us accountable to our stockholders as we transition to a new equity compensation program for
the Company.
Proxy Statement Summary
9
Splunk 2022 Proxy Statement
PROXY
Our compensation actions during fiscal 2022 and early fiscal 2023 also included the implementation of compensation
arrangements to support a CEO transition and the appointment of two new executive officers. As described in further detail
below under “Executive Compensation—Compensation Discussion and Analysis—Executive Summary—CEO Transition and
Named Executive Officers for Fiscal 2022,” on November 13, 2021, our Board terminated Douglas Merritt as our President
and CEO, and Mr. Merritt continued his employment with us as a strategic advisor to our interim CEO through March 31, 2022.
Immediately following the termination of Mr. Merritt’s employment as our President and CEO, Graham Smith, the Chair of our
Board, became our interim CEO, and we immediately commenced a search process to identify our next President and CEO.
Following an extensive candidate search and interview process, our Board appointed Gary Steele as the Company’s President
and CEO effective as of April 11, 2022. Mr. Smith ceased services as our interim CEO on such date and remains the Chair
of our Board. Our compensation actions related to these transitions are described in further detail below under “Executive
Compensation—Compensation Discussion and Analysis—Executive Summary—CEO Transition and Named Executive Officers
for Fiscal 2022.”
Our executive compensation policies and practices are designed to reinforce our pay for performance philosophy and align with
sound governance principles. Listed below are highlights of our fiscal 2022 executive compensation policies and practices:
WHAT WE DO
• Ongoing engagement with our institutional
stockholders regarding our compensation
policies and practices
• Performance-based cash and equity incentive
compensation
• Caps on performance-based cash and equity
incentive compensation
• Annual review and approval of our executive
compensation strategy
• Significant portion of executive compensation at
risk based on corporate performance
• Clawback policy on cash and equity incentive
compensation
• Stock ownership guidelines for executive
officers and non-employee directors
• Multi-year equity award vesting periods for
equity awards
• Independent compensation consultant engaged
by the Talent & Compensation Committee
• 100% independent directors on the Talent &
Compensation Committee
• Limited perquisites
WHAT WE DON’T DO
• No “single trigger” change in control payments
and benefits
• No post-termination retirement or pension-
type non-cash benefits or perquisites for
our executive officers that are not generally
available to our employees
• No tax gross-ups for change in control related
payments
• No short sales, hedging, or pledging of stock
ownership positions and transactions involving
derivatives of our common stock
• No strict benchmarking of compensation to
a specific percentile of our compensation
peer group
Proxy Statement Summary
10
Corporate Governance at Splunk
PROPOSAL
1
Election of Directors
The Board recommends a vote “FOR” each of the nominees named below.
Our business affairs are managed under the direction of our Board, which is currently composed of 12 members. Mr. Viswanath
was not nominated for re-election and will depart the Board effective immediately following the Annual Meeting. Promptly
following his departure, the size of the Board will be decreased from 12 to 11. Ten of our 11 director nominees and continuing
directors are independent directors within the rules of The Nasdaq Stock Market. Our Board is divided into three classes of
directors. At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the
same class whose term is then expiring. Each director’s term continues until the expiration of the term for which he or she is
elected and until the election and qualification of his or her successor, or his or her earlier death, resignation, or removal.
Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible,
each class will consist of one-third of the total number of directors.
In an uncontested election, directors are elected by a majority vote. This means that in order for a nominee to be elected in an
uncontested election, the number of votes cast “For” such nominee’s election must exceed the number of votes cast “Against”
that nominee’s election. Broker non-votes and abstentions will have no effect on the outcome of such election. In addition to
the majority vote standard for director elections, we have a director resignation policy described in “Other Matters—Questions
and Answers About the Proxy Materials and Our 2022 Annual Meeting” on page 98.
In light of the individual qualifications and experience of each of our director nominees, and the contributions that our
nominees have made to our Board, our Board has recommended that each of our director nominees be elected by our
stockholders. In connection with the Investment Agreement (as defined herein) entered into with affiliates of Silver Lake,
Mr. Hao has been designated by Silver Lake as their nominee to the Board. For more information, see “Agreement with Silver
Lake” on page 14. Biographies of all our directors are set forth below under “Nominees for Director” and “Continuing Directors.”
Board Composition
Considerations in Evaluating Director Nominees
Our Board follows an annual director nomination process that promotes the thoughtful and in-depth review of overall Board
composition and director nominees throughout the year. At the beginning of the process, the Governance & Sustainability
Committee reviews current Board composition and any specific characteristics desired for future director candidates. In its
review of incumbent director candidates, the Governance & Sustainability Committee evaluates any changes in circumstances
that may impact their candidacy and considers information from the Board evaluation process. Upon a recommendation from
the Governance & Sustainability Committee, the Board considers and approves the nomination of director candidates for
election at the annual meeting of the stockholders. See “Board Refreshment and Succession Planning” below for a discussion
of the characteristics identified in the most recent director search.
In evaluating director candidates and considering incumbent directors for nomination to the Board, the Governance &
Sustainability Committee expects certain minimum qualifications and takes into consideration key factors, experiences,
qualifications and skills that are relevant to the Board’s work and the Company’s strategy and strengthen the current Board’s
mix of skills.
PROXY
11
Splunk 2022 Proxy Statement
The Governance & Sustainability Committee requires the following minimum qualifications to be satisfied by any nominee for a
position on the Board:
Highest personal and
professional ethics & integrity
Complementary skills to
those of existing Board
Understanding of
fiduciary duties
Sound
business
judgment
Ability to assist management
and significantly contribute to
our success
Commitment of
time and energy
Proven achievement in
nominee’s field
Key factors the Governance & Sustainability Committee considers when selecting directors and refreshing the Board
(in addition to the current size and composition of the Board and the needs of the Board and its committees) include:
Age and Tenure – While the Board does not have term limits, the Board seeks to establish appropriate levels of director
turnover. New perspectives and new ideas are critical to an engaged forward-looking and strategic Board, as are the
benefits of the valuable experience and familiarity that longer-serving directors offer.
Diversity – Our Corporate Governance Guidelines reflect our commitment to Board diversity, by explicitly stating the
Board’s commitment to include qualified diverse candidates (with diversity including gender, race and ethnicity) in the
pool from which nominees are considered. We believe that the judgment and perspective offered by a diverse board
of directors improves the quality of decision making and enhances the Company’s business performance. We also
believe such diversity can help the Board respond more effectively to the varying needs of our customers, stockholders,
workforce and other stakeholders.
Experience – The Governance & Sustainability Committee strives for a Board that spans a range of expertise and
perspective in areas relevant to the Company’s business, strategic vision, governance and operating and innovation
environment.
Full-time employment/Directorships – The Governance & Sustainability Committee takes into consideration employment
status and whether the director holds a current operating role or is retired, as well as the number of other public company
boards on which the director serves to evaluate whether the nominee can commit the time and energy necessary to
diligently carry out his or her fiduciary responsibilities and meaningfully contribute to the Company.
Independence – Having an independent Board is a core element of our governance philosophy. Our Corporate
Governance Guidelines provide that a majority of our directors will be independent as defined under the rules of The
Nasdaq Stock Market.
The Governance & Sustainability Committee also considers and evaluates other factors it deems to be in our and our
stockholders’ best interests. The Governance & Sustainability Committee does not pre-assign weighting or priority to any of
these factors.
The Governance & Sustainability Committee reviews with the Board on an annual or more frequent basis the director skills
and experience qualifications that it believes are desirable to be represented on the Board. The Board and the Governance
& Sustainability Committee believe that the collective experiences and qualifications of the directors allow the Board to
best fulfill its responsibilities to the long-term interests of our stockholders. Subject to the requirements set forth below
in “Agreement with Silver Lake” on page 14, the Governance & Sustainability Committee has full discretion in considering
potential candidates and making its nominations to the Board.
Corporate Governance at Splunk
12
Below is a summary of the primary experience, qualifications and skills that our director nominees and continuing directors
bring to the Board:
Capability
Description
Number of directors with the
capability
Technology
and security
infrastructure
Deep insight in technology infrastructure, business
prioritization, customer drivers and cybersecurity
risk
Scaling a
SaaS business
Experience growing successful SaaS companies,
reaching scale and maturity
Investment
Experience creating long-term value through
investment, acquisitions and growth strategies
CEO experience
Expertise shaping strategy, performance,
prioritization and scale leadership
Modern cloud
technologist
Deep knowledge in technology architecture,
including SaaS, cloud-based platforms, integrated
solutions and customers’ data journey
Sales
Experience building global sales capability for cloud
services and enterprise software
Marketing
Marketing and brand-building capability in rapidly
changing industries, including new markets and
opportunities for innovation and disruption
Key customer
segment insight
Depth of insight into current and potential target
markets and geographies
Finance
Financial expert with expertise in financial strategy,
accounting and reporting
People and
compensation
Expertise in aligning company culture, performance,
reward and talent with strategy, as well as remote
and flexible work strategies
Governance, risk
and compliance
Experience in public company corporate
governance, privacy, compliance, policy, activism
and creating long term sustainable value
Strong capability
Moderate capability
Corporate Governance at Splunk
PROXY
13
Splunk 2022 Proxy Statement
Director Diversity
We are committed to continuously evolving and enhancing our disclosures about Board diversity in response to feedback from
stockholders and other stakeholders. The information below about our director nominees and continuing directors is being
presented in compliance with Nasdaq’s new disclosure format requirements, based on each director's self-identification.
Board Diversity Matrix ( as of May 1, 2022)
Board Size:
Total Number of Directors
11
Sex / Gender:
Male
Female
Non-Binary
Gender
Undisclosed
Number of directors based on gender identity
8
3
-
Number of directors who identify in any of the categories below:
African American or Black
1
-
-
-
Asian
1
-
-
-
Hispanic or Latinx
1
-
-
-
White
5
3
-
-
LGBTQ+
1
Did not disclose demographic background
-
Board Refreshment and Succession Planning
The Governance & Sustainability Committee, together with our Board, practices a long-term approach to Board refreshment.
With the assistance of an independent search firm, the Governance & Sustainability Committee focuses on identifying,
considering and evaluating potential Board candidates with the goal of evolving the composition of our Board in line with
the strategic needs of the Company. As the Company innovates, implements new technologies and enters new markets, its
business model may require directors with new or different skill sets. Our succession planning process takes the Company’s
evolution into account to ensure the Board remains a strategic asset capable of addressing the risks, trends and opportunities
that the Company will face in the future.
The following describes the Company’s selection process for new directors:
Source Candidate
Pool from
• Independent
Search Firm
• Stockholders
• Independent
Directors
• Our Management
Team
In-Depth Review
and Oversight
by the Governance &
Sustainability Committee
• Consider skills mix and
needs
• Consider diversity
screen qualifications
• Review independence
and potential conflicts
Meeting with
Candidate
• Chair
• CEO
• CFO
• CLO
• Chair of each
committee
• Opportunity for
all other directors
to meet
Recommend
Selected
Candidate for
Appointment
to our Board
Review and
Appointment
by full Board
Select Director
5 new directors
since 2020
Corporate Governance at Splunk
14
This past year, as part of the Board succession planning and refreshment process, and in line with its multi-year view of
potential director departures and leadership changes, the Governance & Sustainability Committee, together with the Board,
discussed the Board’s future composition needs. This discussion included the desired skills and attributes of successors for
long-tenured directors, as well as successors for the Chair of our Board (the "Chair") and committee chairs. It also took into
account the current and long-term needs of our business and the skills composition of our Board and our committees. Through
this process we identified finance and accounting expertise in the technology industry and insight into international financial
markets as important priorities for overall Board composition. The Governance & Sustainability Committee worked with a third-
party search firm to identify candidates with these skills and attributes. As a result of a robust and deliberate search process, in
April 2022 we appointed Luis Visoso, Chief Financial Officer of Unity Software to our Board.
Other recent changes to our Board and committee composition include: the appointment of Mr. Hao in connection with our
investment agreement with Silver Lake (as discussed further below); the appointment of Mr. Steele in connection with his
appointment as our President and CEO; the appointment of Ms. Baack as chair of the Governance & Sustainability Committee,
replacing Ms. Morrison; the appointments of Ms. Steele and Mr. Visoso to the Governance & Sustainability Committee,
replacing Messrs. Via and Viswanath; the appointment of Mr. Visoso to the Audit Committee, replacing Mr. Carges; and the
appointment of Mr. Smith to the Talent & Compensation Committee, replacing Mr. Carges. In addition, the Board established a
Cybersecurity & Data Responsibility Committee in March 2022, and appointed General Via (ret) as chair, and Mr. Carges and
Ms. Morrison as members.
Agreement with Silver Lake
On June 22, 2021, in connection with the issuance to Silver Lake Alpine, L.P., Silver Lake Alpine (Offshore Master), L.P. and
Silver Lake Partners VI, L.P. (collectively, “Silver Lake”) of $1,000,000,000 in aggregate principal amount of the Company’s
0.75% Convertible Senior Notes due 2026 (the “Notes”), the Company entered into an investment agreement (the “Investment
Agreement”) with Silver Lake. The Investment Agreement provides that so long as Silver Lake beneficially owns at least 50%
of the principal amount of the Notes purchased by Silver Lake at the closing (including, for this purpose, the amount of the
Notes converted into shares of the Company’s common stock so long as Silver Lake holds such shares of common stock),
Silver Lake will have the right to designate a director nominee for election to the Board, which is Mr. Hao, and the Company will
agree to use its reasonable efforts to cause the election of such person. In addition, Silver Lake has agreed to vote any shares
of common stock beneficially owned by it, which for these purposes includes only common stock issued upon conversion or
repurchase of the Notes, in support of Company-nominated directors and otherwise in accordance with the recommendations
of the Board. However, as of the date of this proxy statement, Silver Lake has not converted any of the Notes into shares, and
therefore has no shares related to the Notes subject to this agreement to vote.
Pursuant to the Investment Agreement, Silver Lake has also agreed to certain standstill provisions and transfer restrictions
with respect to the Notes, in each case, subject to the terms of the Investment Agreement.
For further information regarding the Investment Agreement, including a description of certain obligations and restrictions
binding on the parties, as well as a copy of such Investment Agreement, please refer to the Company’s Current Report on
Form 8-K filed with the Securities and Exchange Commission on June 22, 2021, and see Note 7 "Convertible Senior Notes" of
our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2022.
Corporate Governance at Splunk
PROXY
15
Splunk 2022 Proxy Statement
Nominees for Director
Mark Carges
Mr. Carges possesses specific attributes that qualify
him to serve as a director, including his knowledge and
experience in the software industry and professional
experience serving in leadership positions at various
technology companies.
Mark Carges has served as a member of our Board
since 2014. Mr. Carges previously served as the Chief
Technology Officer of eBay Inc., an e-commerce
company, from September 2009 to September 2014.
From September 2009 to November 2013, he also
served as eBay’s Senior Vice President, Global Products,
Marketplaces. From September 2008 to September 2009,
he served as eBay’s Senior Vice President, Technology.
From November 2005 to May 2008, Mr. Carges served as
Executive Vice President, Products and General Manager
of the Business Interaction Division of BEA Systems, Inc.,
a software company (acquired by Oracle Corporation).
Mr. Carges has served as a member of the board of
directors of Veeva Systems Inc., a provider of industry
cloud solutions for the global life sciences industry,
since 2017. Mr. Carges holds a B.A. from the University of
California, Berkeley and an M.S. from New York University.
Mr. Carges brings the following primary
experiences, qualifications and skills to
the Board:
Technology
and security
infrastructure
Scaling a SaaS
business
Modern cloud
technologist
Key customer
segment insight
People and
compensation
Governance,
risk and
compliance
Independent
Former CTO of eBay
Age 60
Director Since 2014
Splunk Committee(s):
Cybersecurity &
Data Responsibility
Committee
Kenneth Hao
Mr. Hao possesses specific attributes that qualify him
to serve as a director, including his knowledge and
experience in technology and finance and professional
experience as a member of the board of directors of
other public software companies.
Ken Hao has served as a member of our Board since 2021.
Since December 2019, Mr. Hao has served as Chairman
and Managing Partner of Silver Lake, a global technology
investment firm. Prior to this role, Mr. Hao served in
various roles at Silver Lake, which he joined in 2000,
including Managing Partner and Managing Director from
2012 to 2019. Prior to joining Silver Lake, Mr. Hao served
as Managing Director at Hambrecht & Quist (now part of
J.P. Morgan), from 1990 to 1999. Mr. Hao has served as a
member of the board of directors of NortonLifeLock Inc.,
a global leader in consumer cyber safety, since 2016, and
SolarWinds Corporation, an IT infrastructure management
software company, since 2016. Mr. Hao previously served
on the board of directors of Broadcom Inc., a global
technology leader in semiconductor and infrastructure
software solutions, from 2016 to 2018, and SMART Global
Holdings, Inc., a provider of specialty memory, storage and
hybrid solutions, from 2011 to 2021. Mr. Hao holds an A.B.
from Harvard College.
Mr. Hao brings the following primary
experiences, qualifications and skills to
the Board:
Technology
and security
infrastructure
Scaling a SaaS
business
Investment
CEO
experience
Modern cloud
technologist
Sales
Marketing
Key customer
segment insight
Finance
People and
compensation
Governance,
risk and
compliance
Independent
Chairman and Managing
Partner of Silver Lake
Age 53
Director Since 2021
Splunk Committee(s):
None
Corporate Governance at Splunk
16
Elisa Steele
Ms. Steele possesses specific attributes that qualify her to
serve as a director, including her knowledge and experience
in the software industry and professional experience as a
former executive of various technology companies.
Elisa Steele has served as a member of our Board since 2017.
Ms. Steele previously served as Chief Executive Officer of
Namely, Inc., a financial and human capital management
software company, from 2018 to 2019. Prior to joining Namely,
Ms. Steele served as Chief Executive Officer and President
of Jive Software, Inc., a collaboration software company
(acquired by Aurea Software, Inc.), from 2015 to 2017, and was
a member of the executive leadership team since 2014. Prior
to joining Jive Software, Ms. Steele served as Chief Marketing
Officer and Corporate Vice President, Consumer Apps &
Services at Microsoft Corporation, a worldwide provider of
software, services and solutions, and Chief Marketing Officer
of Skype, an Internet communications company, from 2012 to
2014. Ms. Steele also has held executive leadership positions at
Yahoo! Inc. and NetApp, Inc. Ms. Steele has served as a member
of the board of directors of JFrog Ltd., an enterprise software
company, since 2020, Bumble Inc., an online dating and social
networking platform, since 2020, Procore Technologies, Inc., a
provider of cloud-based construction management software,
since 2020, and Amplitude, a product analytics software
provider, since 2021. Ms. Steele previously served on the board
of directors of Cornerstone OnDemand, Inc., a learning and
human capital management software company, from 2018
to 2021. Ms. Steele holds a B.S. from the University of New
Hampshire and an M.B.A. from San Francisco State University.
Ms. Steele brings the following primary
experiences, qualifications and skills to
the Board:
Scaling a SaaS
business
CEO
experience
Modern cloud
technologist
Sales
Marketing
Key customer
segment insight
People and
compensation
Governance,
risk and
compliance
Independent
Independent Board
Member
Age 55
Director Since 2017
Splunk Committee(s):
Governance &
Sustainability
Committee; Talent &
Compensation
Committee
Continuing Directors
Patricia
Morrison
Ms. Morrison possesses specific attributes that qualify
her to serve as a director, including her information
technology expertise and professional experience as an
executive and as a member of the board of directors of
other public companies.
Patricia Morrison has served as a member of our Board since
2013. Ms. Morrison was Executive Vice President, Customer
Support Services and Chief Information Officer at Cardinal
Health, Inc., a provider of healthcare services, from 2009 to
2018. Prior to joining Cardinal Health, Ms. Morrison was Chief
Executive Officer of Mainstay Partners, a technology advisory
firm, from 2008 to 2009, and Executive Vice President
and Chief Information Officer at Motorola, Inc., a designer,
manufacturer, marketer and seller of mobility products,
from 2005 to 2008. Her previous experience also includes
Chief Information Officer of Office Depot, Inc. and senior-
level information technology positions at PepsiCo, Inc., The
Quaker Oats Company, General Electric Company and The
Procter & Gamble Company. Ms. Morrison has served as a
member of the board of directors of Baxter International Inc.,
a global medical products company, since 2019. Ms. Morrison
previously served as a member of the board of directors
of Aramark, a global provider of food, facilities and uniform
services, from 2017 to 2019, and Virtusa Corporation, a global
provider of digital strategy, digital engineering, and IT services
and solutions, from 2020 to 2021. Ms. Morrison holds a B.A.
and B.S. from Miami University in Oxford, Ohio.
Ms. Morrison brings the following primary
experiences, qualifications and skills to
the Board:
Technology
and security
infrastructure
Modern cloud
technologist
Key customer
segment insight
People and
compensation
Governance,
risk and
compliance
Independent
Former EVP, Customer
Support Services, and
CIO of Cardinal Health
Age 62
Director Since 2013
Splunk Committee(s):
Audit Committee;
Cybersecurity &
Data Responsibility
Committee
Corporate Governance at Splunk
PROXY
17
Splunk 2022 Proxy Statement
Stephen
Newberry
Mr. Newberry possesses specific attributes that qualify
him to serve as a director, including the perspective and
experience he brings as a former executive of global
technology companies.
Stephen Newberry has served as a member of our
Board since 2013 and Lead Independent Director from
November 2021 to April 2022. Mr. Newberry served as a
director of Lam Research Corporation, a supplier of wafer
fabrication equipment and services, from 2005 to 2019,
and served as the Chairman of the board of Lam Research
from 2012 to 2019. He served as Lam Research’s Chief
Executive Officer from 2005 to 2011, President from 1998
to 2010, and Chief Operating Officer from 1997 to 2005.
Prior to joining Lam Research, Mr. Newberry held various
executive positions at Applied Materials, Inc., a provider of
manufacturing solutions for the semiconductor, flat panel
display and solar industries. Mr. Newberry holds a B.S.
from the United States Naval Academy and is a graduate
of the Program for Management Development at Harvard
Business School.
Mr. Newberry brings the following primary
experiences, qualifications and skills to
the Board:
Scaling a SaaS
business
CEO
experience
Sales
Marketing
Key customer
segment insight
People and
compensation
Governance,
risk and
compliance
Independent
Former Chairman of
Lam Research
Age 68
Director Since 2013
Splunk Committee(s):
Talent & Compensation
Committee
General
Dennis Via
General Via (ret) possesses specific attributes
that qualify him to serve as a director, including his
information technology expertise and extensive
government and leadership experience.
General Dennis L. Via, US Army, Retired, has served on
our Board since 2020. General Via (ret) has served as an
Executive Vice President for Corporate Engagement and
a member of the Global Defense Sector leadership team
since 2021, an Executive Vice President in the Global
Defense Group’s Joint Combatant Command from 2018
to 2021 and a fellow for Defense Futures since 2017 at
Booz Allen Hamilton Inc., a management and information
technology consulting firm, and prior to this role, he
served as Senior Executive Advisor from 2017 to 2018.
Prior to joining Booz Allen, he served in the United States
Army from 1980 to 2016, holding multiple command and
senior leadership positions, including as the Commander
of the U.S. Army Materiel Command from 2012 to 2016
and retiring as a four-star General. He holds a B.S. from
Virginia State University and a Master of Education from
Boston University.
General Via (ret) brings the following
primary experiences, qualifications and
skills to the Board:
Technology
and security
infrastructure
CEO
experience
Modern cloud
technologist
Key customer
segment insight
People and
compensation
Governance,
risk and
compliance
Independent
Executive Vice
President, Booz
Allen Hamilton and
Retired Four-Star
U.S. Army General
Age 64
Director Since 2020
Splunk Committee(s):
Cybersecurity &
Data Responsibility
Committee
Corporate Governance at Splunk
18
Sara Baack
Ms. Baack possesses specific attributes that qualify
her to serve as a director, including her knowledge and
experience in the information technology services
industry and professional experience serving in
leadership positions at other public companies.
Sara Baack has served as a member of our Board since
2017. Ms. Baack served as Chief Product Officer of
Equinix, Inc., a global interconnection and data center
company, from 2019 to 2021. Previously, she was
Equinix’s Chief Marketing Officer from 2012 to 2019.
Prior to joining Equinix, she served in various executive
positions at Level 3 Communications Inc., a provider of
integrated communications services, most recently as
Senior Vice President, Voice Services from 2007 to 2012
and in other leadership positions in the company from
2000 to 2007. Prior to Level 3, she worked in financial
services investing private equity for PaineWebber
Capital (since acquired by UBS Group AG). Ms. Baack has
served as a member of the board of directors of Crucible
Acquisitions Corporation, a special purchase acquisition
company, since 2021. Ms. Baack holds a B.A. from Rice
University and an M.B.A. from Harvard Business School.
Ms. Baack brings the following primary
experiences, qualifications and skills to
the Board:
Technology
and security
infrastructure
Scaling a SaaS
business
Investment
Modern cloud
technologist
Sales
Marketing
Key customer
segment insight
Finance
People and
compensation
Governance,
risk and
compliance
Independent
Former Chief Product
Officer of Equinix
Age 50
Director Since 2017
Splunk Committee(s):
Governance &
Sustainability
Committee
Sean Boyle
Mr. Boyle possesses specific attributes that qualify him
to serve as a director, including his financial expertise
and professional experience serving in leadership
positions at other public companies.
Sean Boyle has served as a member of our Board since
2020. Since December 2020, Mr. Boyle has served as
Chief Operating Officer and Chief Financial Officer of
Wildlife Studios Limited, a mobile gaming company.
Previously, he served in various roles at Amazon and
Amazon Web Services, Inc., a cloud computing and
infrastructure company, from 2006 to 2020, including
most recently as Vice President in 2020, Vice President
and Chief Financial Officer from 2015 to 2020 and
before that in various finance leadership roles. Mr. Boyle
holds a B.Com. (Hons) and an M.B.A. from the University
of Windsor.
Mr. Boyle brings the following primary
experiences, qualifications and skills to
the Board:
Technology
and security
infrastructure
Scaling a SaaS
business
Investment
Modern cloud
technologist
Key customer
segment insight
Finance
People and
compensation
Independent
Chief Operating Officer
and Chief Financial
Officer of Wildlife
Studios Limited
Age 54
Director Since 2020
Splunk Committee(s):
Audit Committee
Corporate Governance at Splunk
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Splunk 2022 Proxy Statement
Graham Smith
Mr. Smith possesses specific attributes that qualify
him to serve as a director, including his financial
expertise and professional experience as an executive
and as a member of the board of directors of other
public software companies.
Graham Smith has served as a member of our Board since
2011 and Chair since 2019. From November 2021 to
April 2022, Mr. Smith served as our interim CEO. Mr. Smith
served in various leadership positions at salesforce.com,
inc., a provider of enterprise cloud computing software,
from 2007 to 2015, including as Chief Financial Officer
and most recently as Executive Vice President. Prior to
joining Salesforce, Mr. Smith served as Chief Financial
Officer at Advent Software Inc., a portfolio accounting
software company, from 2003 to 2007. Mr. Smith has
served as a member of the board of directors of BlackLine,
Inc., a provider of cloud-based solutions for finance and
accounting since 2015, and Procore Technologies, Inc.,
a provider of cloud-based construction management
software, since 2020. Mr. Smith previously served on the
board of directors of Citrix Systems, Inc., an enterprise
software company, from 2015 to 2018, MINDBODY, Inc., a
cloud-based wellness services marketplace (acquired by
Vista Equity Partners), from 2015 to 2019, Xero Limited,
an online accounting software company, from 2015 to
2020, Slack Technologies, Inc., a provider of cloud-based
professional collaboration tools, from 2018 to 2021, and
Elliott Opportunity II Corp., a special purchase acquisition
company, from June to December 2021. Mr. Smith holds
a B.Sc. from Bristol University in England and qualified as a
chartered accountant in England and Wales.
Mr. Smith brings the following primary
experiences, qualifications and skills to
the Board:
Scaling a SaaS
business
Investment
CEO
experience
Modern cloud
technologist
Key customer
segment insight
Finance
People and
compensation
Governance,
risk and
compliance
Independent
Chair of Splunk
Age 62
Director Since 2011
Splunk Committee(s):
Talent &
Compensation
Committee
Luis Visoso
Mr. Visoso possesses specific attributes that qualify him
to serve as a director, including his financial expertise
and professional experience serving in leadership
positions at other public companies.
Luis Visoso has served as a member of our Board since
2022. Since April 2021, he has served as Senior Vice
President and Chief Financial Officer of Unity Software
Inc., a real-time 3D (RT3D) software platform company.
Prior to joining Unity, Mr. Visoso served as Executive Vice
President, Chief Financial Officer of Palo Alto Networks,
Inc., a cybersecurity company, from 2020 to 2021. Prior
to joining Palo Alto Networks, he served in various roles at
Amazon.com, Inc., an e-commerce and cloud-computing
company, from 2018 to 2020, including as Chief Financial
Officer of Amazon Web Services, Inc. in 2020, and Chief
Financial Officer of Amazon’s Worldwide Consumer
organization, from 2018 to 2020. From 2016 to 2018, he
served as Senior Vice President, Business, Technology and
Operations Finance at Cisco Systems, Inc., a networking
technology company. Prior to joining Cisco, Mr. Visoso
held various roles at The Procter & Gamble Company,
a consumer products company, from 1993 to 2016,
including most recently as Vice President, F&A Global
Business Units. Mr. Visoso previously served as a member
of the board of directors of Unity from 2020 to 2021. He
holds a bachelor’s degree from Tecnológico de Monterrey.
Mr. Visoso brings the following primary
experiences, qualifications and skills to
the Board:
Technology
and security
infrastructure
Scaling a SaaS
business
Investment
Modern cloud
technologist
Key customer
segment insight
Finance
People and
compensation
Governance,
risk and
compliance
Independent
Chief Financial Officer,
Unity Software
Age 53
Director Since 2022
Splunk Committee(s):
Audit Committee;
Governance &
Sustainability
Committee
Corporate Governance at Splunk
20
Gary Steele
Mr. Steele possesses specific attributes that qualify
him to serve as a director, including his knowledge
and experience in the software industry and extensive
professional experience as a CEO and as a member of
the board of directors of other public companies.
Gary Steele has served as our President, CEO and as a
member of our Board since 2022. Prior to joining Splunk,
he served as CEO and a director of Proofpoint, Inc., a
provider of security-as-a-service solutions, from 2002
to 2022, and served as the Chairman of the board of
Proofpoint from 2018 to 2021. From 1997 to 2002,
Mr. Steele served as Chief Executive Officer of Portera
Systems Inc., a software company. Before Portera,
Mr. Steele served as the vice president and general
manager of the Middleware and Data Warehousing
Product Group at Sybase, Inc., an enterprise and
mobile software company. Mr. Steele also served in
business development, marketing, and engineering
roles at Sun Microsystems, Inc. and Hewlett-Packard
Company, computer, computer software and information
technology companies. Mr. Steele has served as a
member of the board of directors of Upwork Inc., a
talent freelancing platform, since 2018. Mr. Steele
previously served as a member of the board of directors
of Vonage Holdings Corp., a cloud communications
provider, from 2016 to 2021. Mr. Steele holds a B.S. from
Washington State University.
Mr. Steele brings the following primary
experiences, qualifications and skills to
the Board:
Technology
and security
infrastructure
Scaling a SaaS
business
Investment
CEO
experience
Modern cloud
technologist
Sales
Marketing
Key customer
segment insight
Finance
People and
compensation
Governance,
risk and
compliance
President and CEO of
Splunk
Age 59
Director Since 2022
Splunk Committee(s):
None
Director Independence
Our common stock is listed on The Nasdaq Global Select Market. Under the rules of The Nasdaq Stock Market, independent
directors must comprise a majority of a listed company’s board of directors, and subject to specified limited exceptions, all
members of its audit, compensation, and nominating and corporate governance committees must be independent. Under
those rules, a director is independent only if a company’s board of directors makes an affirmative determination that the
director has no material relationship with the company that would impair his or her independence.
Our Board has undertaken a review of the independence of each director. In making this determination, our Board considered
the relationships that each non-employee director has with us and all other facts and circumstances that our Board deemed
relevant in determining their independence, including the beneficial ownership of our capital stock of each non-employee
director, as well as relationships that our directors may have with our customers and vendors. Based on this review, our Board
has determined that Ms. Baack, Mr. Boyle, Mr. Carges, Mr. Hao, Ms. Morrison, Mr. Newberry, Mr. Smith, Ms. Steele, General Via
(ret), Mr. Visoso and Mr. Viswanath are “independent directors” as that term is defined under the rules of The Nasdaq Stock
Market for purposes of serving on our Board and committees of our Board. During his service as interim CEO, Mr. Smith was
deemed to be not independent.
Stockholder Recommendations
The Governance & Sustainability Committee will consider candidates for director recommended by stockholders holding
at least one percent of our fully diluted capitalization continuously for at least 12 months. The Governance & Sustainability
Committee will evaluate such recommendations in accordance with its charter, our Bylaws, our policies and procedures
for director candidates, as well as the nominee criteria described above. This process is designed to ensure that the Board
includes members with diverse backgrounds, skills and experience, including appropriate financial and other expertise
Corporate Governance at Splunk
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Splunk 2022 Proxy Statement
relevant to our business. Stockholders meeting the applicable requirements that wish to recommend a candidate for
nomination should contact our Corporate Secretary in writing. Such recommendations must include the candidate’s name,
home and business contact information, detailed biographical data, relevant qualifications, a statement of support by the
recommending stockholder, evidence of the recommending stockholder’s ownership of our stock and a signed letter from
the candidate confirming willingness to serve on our Board. The Governance & Sustainability Committee has discretion to
decide which individuals to recommend for nomination as directors. We did not receive any stockholder recommendations in
fiscal 2022.
Stockholder Nominations
Our Bylaws permit stockholders to nominate director candidates through proxy access for inclusion in our proxy statement.
PROXY ACCESS PROCESS
1
2
3
a single stockholder, or group
of up to 20 stockholders (or 25
stockholders, if our annual revenues
are greater than $4 billion for the
most recently completed fiscal year)
owning 3% outstanding stock for
at least 3 years consecutively
the individual or group may submit
up to 20%
(if there are 10 or more directors in
office) or
up to 25%
(if there are nine or fewer directors in
office) of the directors then in office,
but in no case less than
one nominee
stockholders and nominees who
satisfy the requirements specified
by our Bylaws are included in the
proxy statement
To be timely for our 2023 annual meeting of stockholders, our Corporate Secretary must receive a stockholder’s notice of a
proxy access nomination at our principal executive offices:
• not earlier than December 3, 2022; and
• not later than the close of business on January 2, 2023.
Advance Notice Procedures
Our Bylaws also permit stockholders to nominate directors for election at an annual meeting of stockholders. To nominate a
director, the stockholder must provide the information required by our Bylaws. In addition, the stockholder must give timely
notice to our Corporate Secretary in accordance with our Bylaws, which, in general, require that the notice be received by
our Corporate Secretary within the time period described under “Other Matters—Stockholder Proposals” for stockholder
proposals that are not intended to be included in our proxy statement.
Corporate Governance at Splunk
22
Board’s Role and Responsibilities
Stockholders elect the Board to oversee our management team and to serve stockholders’ long-term interests. In exercising
their fiduciary duties, the Board represents and acts in the interests of our stockholders and is committed to strong corporate
governance. The Board is deeply involved in the Company’s strategic planning process, risk oversight, human capital
management, succession planning and selecting and evaluating the performance of our CEO.
Long-Term Strategic Planning
Our Board recognizes the importance of assuring that our overall business strategy is designed to create long-term,
sustainable value for our stockholders. As a result, our Board maintains an active oversight role in helping our management
team formulate, plan and implement the Company’s strategy. The Board and our management team routinely discuss the
execution of our long-term strategic plans, the status of key initiatives and the key opportunities and risks facing the Company.
At least annually, the Board participates in an in-depth review of the Company’s overall strategy with our management team.
The Board and our management team discuss the industry and competitive landscapes, and short- and long-term plans and
priorities. In addition to our business strategy, the Board reviews the Company’s financial plan for the upcoming year, which is
aligned to the Company’s long-term strategic plans and priorities.
Risk Oversight
Our Board recognizes the importance of effective risk oversight in running a successful business and in fulfilling its fiduciary
responsibilities to the Company and its stockholders. Our Board is responsible for assuring that an appropriate culture of risk
management exists within the Company and for setting the right “tone at the top,” overseeing our risk management programs
and practices. This oversight responsibility includes areas such as strategic risks (including risks related to product, go-to-
market and sales strategies), competitive risks, financial risks, brand and reputation risks, legal, compliance, governance and
geo-political risks, operational risks, ESG risks and cybersecurity and technology risks.
Our Board exercises its risk oversight responsibility both directly and through its four standing committees, each of which
is delegated specific risks and keeps our Board informed of its oversight responsibilities through regular reports by the
committee chairs. Our management team is responsible for the day-to-day management of risks we face and members of our
management team engage with the Board and its four standing committees regularly regarding such risks. Throughout the
year, our Board and each committee spend a portion of their time reviewing and discussing specific risk topics.
In March 2022, the Board formed a new Cybersecurity & Data Responsibility Committee to oversee and make
recommendations to the Board, as necessary, on matters concerning the Company’s cybersecurity and data responsibility
objectives, strategies, capabilities, initiatives, and risk assessment and mitigation protocols.
Corporate Governance at Splunk
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Splunk 2022 Proxy Statement
The following are the key oversight responsibilities of our Board and its committees:
BOARD OF DIRECTORS
Oversees Major Risks
• Strategic and competitive
• Operational
• ESG
• Financial
• Data protection and cybersecurity
• Brand and reputational
• Succession planning
• Legal, compliance
and geo-political
• Culture
AUDIT COMMITTEE
TALENT & COMPENSATION
COMMITTEE
GOVERNANCE &
SUSTAINABILITY
COMMITTEE
CYBERSECURITY &
DATA RESPONSIBILITY
COMMITTEE
Primary Risk Oversight
• Risk management
framework
• Financial statements,
financial reporting
and internal controls
• Legal and
compliance
• Data protection and
cybersecurity (as
described below)
Primary Risk Oversight
• Employee compensation
policies and practices
• Non-executive director
compensation policies
and practices
• Human capital
management
• CEO and management
succession planning
Primary Risk Oversight
• Governance framework
• Board effectiveness
• Board succession
planning
• Conflicts of interest
and compliance
• ESG activities,
programs and public
disclosure
Primary Risk Oversight
• Cybersecurity
• Data responsibility
• Breach incident
response and
management
• Business continuity
and disaster recovery
for cyber events
MANAGEMENT
The primary responsibility for the identification, assessment and management of the various risks that the Company
faces resides with our management team. The Company has established a formal risk assessment framework through
its enterprise risk management ("ERM") program to facilitate risk assessment across the enterprise. The ERM program
monitors the state of risks and changes to the Company’s internal and external business environment and risk profile, and
reports on key enterprise risks and risk management activities to the Board and Audit Committee on a periodic basis.
Board Oversight of Response to COVID-19
Our Board has been actively engaged with our management team in monitoring the market developments and other
effects of the ongoing COVID-19 pandemic, and our management team is in regular communication with the Board
about the assessment and management of the significant risks to the Company, our employees, our customers and
other stakeholders. These risks include the impact of the COVID-19 pandemic on our business and the overall economic
environment, compliance with measures by private industry and governments to protect the public health, operational
challenges and increased risk of cybersecurity related breaches. In addition, the Board has overseen our management
team’s initiatives to ensure the health and safety of our employees and to provide support to our customers, partners
and the communities in which we operate. To ensure effective and timely information sharing, in fiscal 2021 and
throughout fiscal 2022, the Board and our management team held standing interim meetings to discuss the Company’s
COVID-19 response.
Corporate Governance at Splunk
24
Human Capital Management Oversight
The Board has general oversight of the Company’s corporate culture and human capital management, both directly and
through its standing committees. The Governance & Sustainability Committee is responsible for director appointments and
ensuring consideration of a diverse pool of director candidates. The Talent & Compensation Committee periodically reviews
and discusses with our management team the Company’s human capital management activities including, among other
things, matters related to talent management and development, talent acquisition, employee engagement and diversity, equity
and inclusion. The Audit Committee oversees compliance with the Code of Business Conduct and Ethics (the “Code”). Our
management team is responsible for ensuring that our policies and processes reflect and reinforce our desired corporate
culture. We publish a Diversity, Equity and Inclusion Report annually in which we use our own data to identify and assess what
we have achieved and understand what we need to do to increase our diversity in the workplace.
Approach
Actions and Highlights
Ensuring
Employee
Health and
Safety
Throughout the COVID-19
pandemic, leadership
has closely monitored
the developments, and
prioritized employee health,
safety and wellbeing.
• We offer employees 30 days of pay for pandemic/epidemic
and natural disaster-related absences plus four wellbeing paid
rest days. In March 2022, we expanded this offering to include
significant public emergencies.
• We reimburse certain expenses related to remote working.
• We offer counseling, coaching and digital wellness.
Information about our general approach to human capital management is available in the “Human Capital” section of our Annual
Report on Form 10-K for the fiscal year ended January 31, 2022. Our human capital management disclosures in our Annual Report
on Form 10-K for the fiscal year ended January 31, 2022 are referenced for general information only and are not incorporated by
reference in this proxy statement.
Other Core Business Functions Oversight
As part of our program to keep the Board informed in a timely and relevant manner, those employees representing certain core
business functions also regularly engage with the Board and its committees. For example:
• Our Chief Information Security Officer (“CISO”) provided periodic updates to the Audit Committee and the Board on
cybersecurity and other risks relevant to our information technology environment in fiscal 2022. The Audit Committee
receives periodic updates about maturity and readiness assessments performed internally and reviewed by our CISO.
Following the establishment of the Cybersecurity & Data Responsibility Committee in March 2022, our CISO will provide
periodic updates to the Cybersecurity & Data Responsibility Committee with respect to cybersecurity risks.
• Reporting to the Audit Committee, our internal audit function provides objective audit, investigative, and advisory services
aimed at providing assurance to our management team and the Board that the Company is anticipating, identifying,
assessing and appropriately prioritizing and mitigating risks.
• Representatives from our Legal & Global Affairs team update our Board regularly on material legal, ethics, compliance,
governance and geo-political matters. Our Chief Ethics and Compliance Officer oversees risks related to ethics and
compliance, labor and employment and disputes and litigation, and provides regular reports to the Audit Committee
regarding these areas.
• Our Strategy and Corporate Development team, along with others, assists the Board in its governance of strategic
acquisitions and investments and assessments of the competitive landscape.
Our Board believes that its current leadership structure, described in detail under “Board Effectiveness” on page 25, supports
the risk oversight function of our Board by providing for open communication between our management team and our Board.
In addition, independent directors chair the various committees involved in assisting with risk oversight, and all directors are
involved in the risk oversight function.
Corporate Governance at Splunk
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Splunk 2022 Proxy Statement
Leadership Development and Management Succession Planning
The Board and management team recognize the importance of continuously developing our executive talent. The Talent &
Compensation Committee periodically reviews the performance of, and succession planning for, our management team,
and reports its findings and recommendations to the Board, works with the Board in evaluating potential successors to
management positions and confers with the CEO to encourage our management team’s employee development programs.
The Talent & Compensation Committee also periodically reviews a succession plan for the CEO position, using formal
criteria to evaluate potential successors, and reporting such information to the Board. In conducting its evaluation, the
Talent & Compensation Committee considers current and future organizational needs, competitive challenges, leadership/
management potential and development and emergency situations.
The Governance & Sustainability Committee regularly oversees and plans for director succession and refreshment of the
Board to ensure a mix of skills, experience, tenure and diversity, as described under “Board Composition—Board Refreshment
and Succession Planning” beginning on page 13.
CEO Evaluation Process
Our Board conducts an annual CEO evaluation process, consisting of both a performance review and, with the Talent &
Compensation Committee, a compensation analysis. The performance evaluation component is led by our Chair and the chair
of the Talent & Compensation Committee and includes an assessment of the CEO’s performance in light of set objectives and
a detailed CEO self-assessment. Separately, the Talent & Compensation Committee's independent compensation consultant
conducts a market analysis to assess alignment of CEO compensation with competitive market practices and provides its
findings to the Talent & Compensation Committee. Once the relevant performance data has been collected, our Chair and the
chair of the Talent & Compensation Committee meet with the CEO to discuss his performance and then prepare and present
their evaluation on CEO performance to the Board. The Talent & Compensation Committee then meets in executive session
to discuss the CEO performance evaluation results and CEO compensation. After reviewing the collected data regarding
performance, the Talent & Compensation Committee makes its decision regarding CEO compensation for the fiscal year. Our
CEO abstains from participating in all discussions of the Talent & Compensation Committee and Board related to the final
determination of his compensation. In fiscal 2022, we did not conduct a CEO evaluation process due to the termination of
employment of our then-CEO Douglas Merritt. We expect to conduct a CEO evaluation process in fiscal 2023.
Board Effectiveness
Leadership Structure
The Chair presides over meetings of the Board, presides over meetings of stockholders, works with our management team to
prepare agendas for meetings of the Board, serves as a liaison between our management team and the directors, and performs
additional duties as the Board determines. Our Board believes that its leadership structure appropriately and effectively
allocates authority, responsibility and oversight between our management team and the members of our Board. It gives primary
responsibility for the operational leadership and strategic direction of the Company to our CEO, while the Chair facilitates our
Board’s independent oversight of our management team, promotes communication between our management team and our
Board, engages with stockholders, when appropriate, and leads our Board’s consideration of key governance matters.
Our Corporate Governance Guidelines require an independent director to serve as Lead Independent Director if the Chair is
not an independent director.
Mr. Smith, one of the Company’s independent directors, currently serves as Chair. In November 2021, Mr. Smith was appointed
interim CEO after our then-CEO Douglas Merritt’s termination of employment. In accordance with our Corporate Governance
Guidelines, upon Mr. Smith’s appointment as interim CEO, Mr. Newberry was appointed as Lead Independent Director. Following
the appointment of Mr. Steele as the Company’s President and CEO, effective as of April 11, 2022, Mr. Smith returned to his role
as independent Chair of our Board and Mr. Newberry ceased to be our Lead Independent Director.
The Governance & Sustainability Committee periodically reviews the Board’s leadership structure and when appropriate,
recommends changes to the Board’s leadership structure, taking into consideration the needs of the Board and the Company
at such time.
Corporate Governance at Splunk
26
Executive Sessions
The independent members of our Board and all committees of the Board generally meet in executive session without
our management team present during their regularly scheduled board and committee meetings. For as long as we have
independent Board and committee chairs, the chairs will preside over these meetings.
Board Evaluations
Each year, the Governance & Sustainability Committee reviews the format and framework of the Board and committee
evaluation process and oversees the process itself.
The evaluation process has historically taken one of two forms: an internal assessment led by the independent Chair or Lead
Independent Director (when we do not have an independent Chair) or an assessment using the services of an independent
consultant. In either instance, the purpose of the evaluation is to focus on areas in which the Board or the committees believe
contributions can be made going forward to increase the effectiveness of the Board or the committees. While this formal
evaluation is conducted on an annual basis, directors share perspectives, feedback and suggestions year-round.
For fiscal 2022, as in the last several years, the Governance & Sustainability Committee used an independent consultant,
experienced in corporate governance matters, to assist with the Board and committee evaluation process. Using a
combination of online surveys and interviews by the consultant, directors provided feedback on individual directors,
committees and the Board in general. The topics covered included, among other things, Board and committee processes,
Board composition and expertise, Board refreshment and succession planning processes, and other matters designed to elicit
information to be used in improving Board and committee operation, performance and capability. In addition, certain members
of our management team completed an online survey regarding Board performance, were interviewed by the consultant and
gave specific feedback on Board engagement with our management team.
The consultant synthesized the results and comments received during the interviews and presented its findings to the Board,
which then reviewed and discussed further.
Over the past few years, the evaluation process has led to a broader scope of topics covered in Board meetings as well as
improvements in Board process.
IMPROVEMENTS
• These improvements include changes relating to the preparation and distribution of Board materials,
adjustments to the timing and location of Board and committee meetings, refining virtual Board and committee
meeting formats, a directors’ education day, an annual in-depth review of the Company’s overall strategy with
our management team and a more fluid discussion of anticipated future director skills.
• The Board and management team also developed a shared understanding on Board dynamics and progress
made and agreed on areas of focus for improved performance.
• The process has also informed Board and committee composition and leadership roles, including evolution
of our director skills and experience qualifications criteria to meet the current and anticipated needs of the
business and improved structure and transparency around Board refreshment and succession planning.
RESULTS
Results of the process, including review of contributions and performance of each director, are used by the
Governance & Sustainability Committee when considering whether to nominate the director for re-election
to the Board.
Corporate Governance at Splunk
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Splunk 2022 Proxy Statement
Director Onboarding and Continuing Education
As part of our onboarding process, all new directors participate in an orientation program which familiarizes them with the
Company’s business, operations, strategies and corporate governance practices, and assists them in developing Company and
industry knowledge to optimize their service on the Board. Our onboarding process also includes meetings with members of
our management team to accelerate their ability to engage fully and effectively in deliberations of our Board.
The Company encourages directors to participate in continuing education programs focused on the Company’s business and
industry, committee roles and responsibilities and legal and ethical responsibilities of directors. The Company reimburses
directors for their expenses associated with continuing education. We provide membership in the National Association of
Corporate Directors to all Board members. We also encourage our directors to attend Splunk events such as our annual users’
conference and take virtual Splunk education classes. Continuing director education is also provided during Board meetings
and other Board discussions as part of the formal meetings and may include internally developed materials and presentations
as well as programs presented by third parties.
Board Meetings and Committees
During our fiscal year ended January 31, 2022, the Board held 16 meetings, and no director attended fewer than 75% of the
total number of meetings of the Board during the period for which he or she has been a director and the committees of which
such director was a member during the periods that he or she served.
Although we do not have a formal policy regarding attendance by members of our Board at annual meetings of stockholders,
we encourage directors to attend. All then-serving directors attended our 2021 annual meeting of stockholders, with the
exception of Ms. Baack. Our Board has an Audit Committee, a Talent & Compensation Committee, and a Governance &
Sustainability Committee, each of which has the composition and responsibilities described below. Members serve on these
committees until their resignation or until otherwise determined by our Board.
In March 2022, we formed the Cybersecurity & Data Responsibility Committee. We expect the first meeting of the Cybersecurity
& Data Responsibility Committee to occur in June 2022. In March 2022, we changed the name of the Compensation Committee
to the Talent & Compensation Committee and the name of the Nominating and Corporate Governance Committee to the
Governance & Sustainability Committee, in each instance to reflect a broadening of responsibilities of these committees.
Corporate Governance at Splunk
28
Sean Boyle
Chair
Our Audit Committee
operates under a
written charter that
was adopted by our
Board and satisfies the
applicable standards of
the SEC and The Nasdaq
Stock Market. A copy
of the Audit Committee
Charter is available on
our investor website
at http://investors.
splunk.com/corporate-
governance.
Number of Meetings: 10
AUDIT COMMITTEE
The current members of our Audit Committee are Messrs. Boyle and Visoso and Ms. Morrison. Our
Board has determined that each of the members of our Audit Committee satisfies the requirements
for independence and financial literacy under the rules and regulations of The Nasdaq Stock Market
and the Securities and Exchange Commission (“SEC”) applicable to Audit Committee members.
Mr. Carges, who served on the Audit Committee until April 2022, was independent during his
service. Our Board also determined that Messrs. Boyle and Visoso are audit committee financial
experts as contemplated by the rules of the SEC implementing Section 407 of the Sarbanes Oxley
Act of 2002.
Our Audit Committee oversees our accounting and financial reporting processes and the audit of
our financial statements and assists our Board in monitoring our financial systems and our legal and
regulatory compliance. Our Audit Committee is responsible for, among other things:
• appointing, compensating and overseeing the work of our independent auditors, including resolving
disagreements between our management team and the independent registered public accounting
firm regarding financial reporting and any other required communications described in applicable
accounting standards, including critical audit matters;
• approving engagements of the independent registered public accounting firm to render any audit or
permissible non-audit services;
• reviewing the qualifications and independence of the independent registered public accounting firm;
• reviewing our financial statements and related disclosures and reviewing our critical accounting
policies and practices;
• reviewing the adequacy and effectiveness of our internal control over financial reporting;
• establishing procedures for the receipt, retention and treatment of accounting, internal accounting
controls or auditing matters, the prompt internal reporting of violations of the Code that could have
a significant impact on our financial statements, and procedures for the confidential, anonymous
submission by employees of concerns regarding questionable accounting or auditing matters;
• preparing the audit committee report required by SEC rules to be included in our annual proxy
statement;
• reviewing and discussing with our management team and the independent registered public
accounting firm the results of our annual audit, our quarterly financial statements and our publicly
filed reports;
• reviewing and maintaining the related person transaction policy to ensure compliance with
applicable law and that any proposed related person transactions are disclosed as required;
• overseeing the implementation and performance of the internal audit function;
• overseeing compliance with the Code and reviewing material legal and ethical matters;
• overseeing the adequacy and effectiveness of our enterprise risk management framework;
• overseeing disclosure of ESG metrics and key performance indicators, as well as the development
and implementation of disclosure controls and procedures with regard to reporting such metrics and
indicators; and
• reviewing our information technology risks, controls and procedures.
Corporate Governance at Splunk
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Splunk 2022 Proxy Statement
Stephen Newberry
Chair
Our Talent &
Compensation
Committee operates
under a written charter
that was adopted by our
Board and satisfies the
applicable standards
of the SEC and The
Nasdaq Stock Market.
A copy of the Talent
& Compensation
Committee Charter is
available on our investor
website at http://
investors.splunk.com/
corporate-governance.
Number of Meetings: 12
TALENT & COMPENSATION COMMITTEE
The current members of our Talent & Compensation Committee are Messrs. Newberry
and Smith and Ms. Steele. Our Board has determined that each of the members of our
Talent & Compensation Committee is independent within the meaning of the applicable
independence requirements of The Nasdaq Stock Market. Mr. Carges, who served on the
Talent & Compensation Committee until April 2022, was independent during his service. Our
Board has also determined that the charter and responsibilities of our Talent & Compensation
Committee complies with, any applicable requirements of The Nasdaq Stock Market and SEC
rules and regulations.
Our Talent & Compensation Committee oversees our compensation policies, plans and
programs. Our Talent & Compensation Committee is responsible for, among other things:
• reviewing our policies, strategies and progress related to human capital management
activities, including the disclosure of such activities in public filings and reports;
• reviewing periodically the succession planning for our CEO and other executive officers;
• annually reviewing and approving the primary components of compensation for our CEO
and other executive officers;
• reviewing and approving compensation and corporate goals and objectives relevant to the
compensation for our CEO and other executive officers;
• evaluating the performance of our CEO and other executive officers in light of established
goals and objectives;
• periodically evaluating the competitiveness of the compensation of our CEO and other
executive officers and our overall compensation plans;
• providing oversight of our overall compensation plans and of our 401(k) plan;
• reviewing and discussing with our management team the risks arising from our
compensation policies and practices for all employees to determine if there is a reasonable
likelihood of a material adverse effect on us;
• evaluating and making recommendations regarding director compensation;
• adopting, amending and administering any clawback policies; and
• administering our equity compensation plans for our employees and directors.
Our Talent & Compensation Committee has delegated certain day-to-day administrative and
ministerial functions to our officers under our equity compensation plans and our 401(k) plan.
Compensation Committee Interlocks and Insider Participation. None of Mr. Carges,
Mr. Newberry or Ms. Steele, who serves or has served during the past fiscal year as a member
of our Talent & Compensation Committee, is an officer or employee of our Company. None
of our executive officers currently serves, or in the past fiscal year has served, as a member
of the board of directors or compensation committee of any entity that has one or more
executive officers serving on our Board or Talent & Compensation Committee.
Corporate Governance at Splunk
30
Sara Baack
Chair
Our Governance &
Sustainability Committee
operates under a written
charter that was adopted
by our Board and satisfies
the applicable standards
of the SEC and The
Nasdaq Stock Market. A
copy of the Governance &
Sustainability Committee
Charter is available on our
investor website at http://
investors.splunk.com/
corporate-governance.
Number of Meetings: 4
GOVERNANCE & SUSTAINABILITY COMMITTEE
The current members of our Governance & Sustainability Committee are Mses. Baack and
Steele and Mr. Visoso. Our Board has determined that each of the members of our Governance
& Sustainability Committee is independent within applicable rules of The Nasdaq Stock Market.
Messrs. Viswanath and Via and Ms. Morrison, who served on the Governance & Sustainability
Committee until April 2022, were independent during their service.
Our Governance & Sustainability Committee oversees and assists our Board in reviewing and
recommending corporate governance policies and nominees for election to our Board and its
committees. Our Governance & Sustainability Committee is responsible for, among other things:
• recommending desired qualifications for Board and committee membership and conducting
searches for potential members of our Board;
• evaluating and making recommendations regarding the organization and governance of our
Board and its committees and changes to our Certificate of Incorporation, Bylaws, the Code and
stockholder communications;
• assessing the performance of board members and making recommendations regarding
committee and chair assignments and composition and the size of our Board and its committees;
• evaluating and making recommendations regarding the creation of additional committees or
the change in mandate or dissolution of committees;
• reviewing and making recommendations with regard to our Corporate Governance Guidelines
and compliance with laws and regulations;
• reviewing and approving conflicts of interest of our directors and corporate officers, other than
related person transactions reviewed by the Audit Committee;
• providing oversight of our stockholder engagement program; and
• overseeing and reviewing our ESG activities, programs and public disclosure, including in light of
any stockholder feedback.
General Dennis Via
Chair
Our Cybersecurity & Data
Responsibility Committee
operates under a written
charter that was adopted
by our Board. A copy of
the Cybersecurity & Data
Responsibility Committee
Charter is available on our
investor website at http://
investors.splunk.com/
corporate-governance.
Number of Meetings:
None
CYBERSECURITY & DATA RESPONSIBILITY COMMITTEE
The current members of our Cybersecurity & Data Responsibility Committee are Messrs.
Carges and Via and Ms. Morrison. We expect the first meeting of the Cybersecurity & Data
Responsibility Committee to occur in June 2022.
Our Cybersecurity & Data Responsibility Committee oversees and makes recommendations
to our Board, as necessary, on matters concerning our cybersecurity and data responsibility
objectives, strategies, capabilities, initiatives, and risk assessment and mitigation protocols. Our
Cybersecurity & Data Responsibility Committee is responsible for, among other things:
• overseeing, and reviewing with our management team, the overall assessment of our
cybersecurity threats, risks, and control programs;
• overseeing, and reviewing with our management team, our data responsibility strategy
and program;
• reviewing our programs to help prevent, detect, and respond to cyber attacks, data breaches,
and unplanned outages, and any related material incidents;
• reviewing our business continuity planning and disaster recovery protocols for cyber events;
• periodically reviewing or discussing with our management team the adequacy and
effectiveness of our processes and controls for making required or voluntary disclosures, in
each case relating to cybersecurity and data responsibility matters; and
• annually reviewing the appropriateness and adequacy of our cybersecurity insurance coverage.
Corporate Governance at Splunk
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Splunk 2022 Proxy Statement
Non-Employee Director Compensation
Our non-employee director compensation program is designed to attract, retain and reward qualified non-employee directors and
align the financial interests of the non-employee directors with those of our stockholders. Pursuant to this program, each member
of our Board who is not our employee received the cash and equity compensation for fiscal 2022 Board service described below.
We also reimburse our non-employee directors for expenses incurred in connection with attending Board and committee meetings,
assisting with other Company business, such as meeting with potential officer and director candidates, as well as continuing director
education.
Our Talent & Compensation Committee has the primary responsibility for reviewing the compensation paid to our non-employee
directors and making recommendations for adjustments, as appropriate, to the full Board. The Talent & Compensation Committee
undertakes an annual review of the type and form of compensation paid to our non-employee directors, which includes a market
assessment and analysis by its independent compensation consultant, Compensia, a national compensation consulting firm
(“Compensia”). As part of its analysis, Compensia reviews non-employee director compensation trends and data from companies
comprising the same compensation peer group used by the Talent & Compensation Committee in connection with its review of
executive compensation. Following a market assessment and analysis in fiscal 2022 by Compensia, no changes were made in fiscal
2022 to our non-employee director compensation program. The Board believes that the fiscal 2022 compensation program for our
non-employee directors attracted, retained and rewarded qualified non-employee directors, consistent with market practices and
the demands placed on our Board.
Among the Highlights of Our Program:
• Periodic market assessments and analyses by the Talent & Compensation Committee’s independent compensation
consultant; most recently completed assessment in fiscal 2022 indicated average non-employee director total
compensation (excluding our Chair) approximates the peer 53rd percentile.
• Equity makes up a meaningful portion of the non-employee directors’ overall compensation mix to align interests with
stockholders.
• Reasonable cash retainers for leadership roles and committee membership to recognize additional time commitment.
• Stock ownership guidelines of the lesser of five times the annual Board membership cash retainer and 4,000 shares
support alignment with stockholders’ interests.
• No short sales, hedging, or pledging of stock ownership positions and transactions involving derivatives of our common
stock.
• No additional fees are paid for Board meeting attendance.
Fiscal 2022 Cash Compensation
In fiscal 2022, our non-employee directors were entitled to receive the following cash compensation for their services:
• $50,000 per year for service as a Board member;
• $25,000 per year for service as chair of the Audit Committee;
• $20,000 per year for service as chair of the Talent & Compensation Committee;
• $10,000 per year for service as a member of the Audit Committee or the Talent & Compensation Committee;
• $12,500 per year for service as chair of the Governance & Sustainability Committee;
• $5,000 per year for service as a member of the Governance & Sustainability Committee;
• $30,000 per year for service as Lead Independent Director; and
• $50,000 per year for service as non-executive Chair.
All cash payments to our non-employee directors are paid quarterly in arrears.
Corporate Governance at Splunk
32
Fiscal 2022 Equity Compensation
Initial Award. In fiscal 2022, each non-employee director who first joined our Board was automatically granted an initial
restricted stock unit, or RSU, award having an award value of $350,000 on the date on which such person became a non-
employee director, whether through election by our stockholders or appointment by our Board to fill a vacancy. An employee
director who ceases to be an employee but remains a director will not receive this initial RSU award. An initial RSU award will
vest as to one-third of the shares subject to the award on each of the first three anniversaries of the grant date, subject to
continued service as a member of our Board through each such vesting date.
Annual Award. In fiscal 2022, each then-serving non-employee director was automatically granted an RSU award having an
award value of $270,000 on the date of the annual meeting of stockholders. Grants of annual RSU awards will vest as to one-
fourth of the shares subject to the award on the immediately following September 10, December 10, March 10 and June 10 (or
our next annual meeting of stockholders if earlier), subject to continued service as a member of our Board through each such
vesting date.
Discretionary Award. In fiscal 2022, on the date of a non-employee director’s initial appointment to the Board that occurred
other than on the date of the annual meeting of stockholders at which non-employee directors are elected, or at any other
time and for any other reason as the Board determines appropriate, the Board could have granted a non-employee director
a discretionary supplemental award. In connection with Mr. Hao's appointment to the Board effective July 9, 2021 and
consistent with our past practice, he received a discretionary supplemental RSU award, intended to make him whole for an
annual award, with an award value prorated based on the months of service between his initial appointment and the Annual
Meeting. This RSU award will vest on the day prior to the Annual Meeting, subject to his continued service through such date.
Change in Control. Under the terms of our 2012 Equity Incentive Plan, as amended (the “2012 Plan”), if the Company
experiences a change in control and our non-employee director equity awards are not assumed or substituted for, those
awards will accelerate and become fully vested. If those awards are assumed or substituted for and the director’s service as a
director is subsequently involuntarily terminated or the director resigns at the request of the acquiring company, those awards
will accelerate and become fully vested.
Death. Under the terms of our 2012 Plan, if a non-employee director dies, 100% of such non-employee director’s outstanding
equity awards will immediately vest (or 50% in the event he or she has been in service with us for less than a year.)
Expiration of 2012 Plan. In early fiscal 2023, the 2012 Plan expired by its terms, ten years after it was adopted by the
Board in connection with the Company’s 2012 initial public offering. In connection with the expiration of the 2012 Plan, the
Board has suspended grants of equity compensation to new and continuing non-employee directors under our non-employee
director compensation program, and expects to grant equity awards to non-employee directors if the proposal to approve
our 2022 Equity Incentive Plan is approved by our stockholders. See "Splunk Inc. 2022 Equity Incentive Plan—Approval of the
2022 Equity Incentive Plan—New Plan Benefits" on page 95 for more information.
Corporate Governance at Splunk
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Splunk 2022 Proxy Statement
Fiscal 2022 Director Compensation
The following table sets forth information regarding total compensation paid in fiscal 2022, in accordance with our non-
employee director compensation program, to each person who served as a non-employee director during fiscal 2022.
Mr. Merritt did not receive compensation for his service as a director in fiscal 2022. Mr. Merritt’s compensation for his services
as an employee is discussed under “Executive Compensation—Compensation Discussion and Analysis” and “Executive
Compensation—Compensation Tables,” below.
Director Name
Fees Earned or
Paid in Cash
($)
Stock
Awards
($)(1)(2)
Total
($)
Sara Baack
55,000
269,398
324,398
Sean Boyle
69,607
269,398
339,005
Mark Carges
60,000
269,398
329,398
John Connors(3)
35,393
—
35,393
Kenneth Hao(4)
15,625
653,106 (5)
668,731
Patricia Morrison
72,500
269,398
341,898
Stephen Newberry
70,000
269,398
339,398
Graham Smith(6)
110,000
269,398
379,398
Elisa Steele
60,000
269,398
329,398
General Dennis Via
51,708
269,398
321,106
Sri Viswanath
55,000
269,398
324,398
(1) The amounts reported in this column reflect the aggregate grant date fair value of the RSUs granted to our non-employee directors during fiscal 2022 as computed
in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC Topic 718”). These amounts do not necessarily
correspond to the actual value recognized by the non-employee directors. The assumptions used in the valuation of these awards are consistent with the valuation
methodologies specified in the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2022.
(2) Other than Mr. Hao and Mr. Connors, each non-employee director was granted an annual award of 2,133 RSUs on June 17, 2021, with a grant date fair value of
$269,398. Twenty-five percent of the RSUs vest on each of September 10, 2021, December 10, 2021, March 10, 2022 and June 10, 2022 (or the next annual
meeting of stockholders if earlier), subject to the director’s continued service through such date.
(3) Mr. Connors resigned from our Board effective May 1, 2021. Upon his resignation date, Mr. Connors forfeited any unvested RSUs.
(4) Mr. Hao was appointed to our Board effective July 9, 2021, and his cash Board fees were prorated based on the number of days he served as a director in
fiscal 2022.
(5) Mr. Hao was granted an initial award of 2,765 RSUs on July 9, 2021, with a grant date fair value of $382,593 computed in accordance with ASC Topic 718. One-third
of these RSUs will vest on each anniversary of the date of grant, subject to his continued service as a director through each such vesting date. Mr. Hao was granted an
additional prorated supplemental discretionary annual award of 1,955 RSUs on July 9, 2021 with a grant date fair value of $270,513 computed in accordance with
ASC Topic 718. The RSUs subject to this award will vest on the day prior to the Annual Meeting, subject to his continued service through such date.
(6) Mr. Smith was appointed interim CEO effective November 13, 2021. In connection with this appointment, the Company entered into an offer letter with Mr. Smith.
Pursuant to the offer letter, Mr. Smith’s outstanding equity awards received in connection with his service as a non-employee director continued to vest on their
terms (based on his service as a member of the Board). During the term of his employment as interim CEO, Mr. Smith did not receive any other compensation for
his service as a member of the Board. The cash compensation shown in this table reflects cash compensation paid to Mr. Smith for his services as a non-employee
director prior to becoming interim CEO. Mr. Smith’s compensation for his service as interim CEO during fiscal 2022 is discussed under “Executive Compensation—
Compensation Discussion and Analysis—Executive Summary—CEO Transition and Named Executive Officers for Fiscal 2022—Interim CEO Arrangement” and
“Executive Compensation—Compensation Tables—Summary Compensation Table” below.
Corporate Governance at Splunk
34
As of January 31, 2022, each individual who served as a non-employee director during fiscal 2022 held the following aggregate
number of shares subject to outstanding RSUs:
Director Name
Aggregate Number
of Stock Awards
Outstanding as of
January 31, 2022
Sara Baack
1,067
Sean Boyle
2,250
Mark Carges
1,067
John Connors
—
Kenneth Hao
4,720
Patricia Morrison
1,067
Stephen Newberry
1,067
Graham Smith
1,067
Elisa Steele
1,067
General Dennis Via
2,233
Sri Viswanath
1,948
Stock Ownership Guidelines
Our Board believes that our non-employee directors and executive officers should hold a meaningful financial stake in the
Company in order to further align their interests with those of our stockholders. To promote this belief, our Board has adopted
stock ownership guidelines requiring our non-employee directors to achieve certain stock ownership levels within five years
of the later of September 13, 2018 or such non-employee director’s appointment or election date, as applicable. The current
stock ownership guidelines are set forth below:
• Each non-employee director must own the lesser of (i) shares of Company common stock with a value of five times the
annual cash retainer for Board service and (ii) 4,000 shares. Unvested equity awards and unexercised stock options do not
count toward meeting the stock ownership guidelines.
As of the end of fiscal 2022, all of our directors met, exceeded, or are on track to meet, these guidelines based on their current
rate of stock accumulations in the time frames set out in the guidelines.
See “Executive Compensation—Compensation Discussion and Analysis—Other Compensation Policies and Information—
Stock Ownership Guidelines” for information about the guidelines applicable to our executive officers.
Corporate Governance at Splunk
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Splunk 2022 Proxy Statement
Stockholder Engagement
We believe that effective corporate governance includes regular, constructive conversations with our stockholders on a
broad range of governance and business topics, including business strategy and execution, Board refreshment, executive
compensation practices, risk oversight, ESG, culture and human capital management. Stockholders provide valuable insights
into emerging issues and feedback on our related programs. We believe that ongoing engagement builds mutual trust and
understanding with our stockholders and is essential to our long-term success.
62%
We Reached out to
Institutional Stockholders
Representing
of shares outstanding
43%
We Engaged with Institutional
Stockholders Representing
of shares outstanding
27%
Lead Independent Director
Participated in Calls with
Institutional Stockholders
Representing
of shares outstanding
In general, our stockholders have a long-term outlook and understand that we are currently in a dynamic, high-growth phase
and that we face a talent war. We received feedback on our compensation and corporate governance practices and feedback
was provided to the relevant committees and the full Board. See “Executive Compensation—Compensation Discussion and
Analysis—Executive Summary—Stockholder Engagement and Our 2021 Say-On-Pay Vote” for stockholder feedback on our
executive compensation program.
Annual Stockholder Engagement Cycle
SUMMER
We review the results of the annual
meeting, together with governance
trends and best practices, and regulatory
developments. We start preparing our
agenda for engagement in the fall.
FALL
We speak with our major stockholders
and others who request meetings
about significant governance and
executive compensation changes, ESG
updates, and other developments at the
Company. We solicit feedback on topics
that are important to them.
SPRING
We publish our proxy statement and
annual report to our stockholders. We
reach out to our major stockholders and
speak with those who wish to engage
on important topics to be addressed
at our annual meeting. Stockholders
vote on election of directors, executive
compensation, ratification of our
auditors, and such other matters as may
arise at our annual meeting.
WINTER
We communicate to the Board and its
committees any feedback received
and consider those perspectives in
upcoming governance and executive
compensation discussions. We consider
disclosure enhancements.
Corporate Governance at Splunk
36
Stockholder Communications with the Board
We have a practice of regularly engaging with stockholders to seek their feedback. Stockholders may also communicate with
the Board or with an individual member of the Board by writing to the Board or to the particular member of the Board and
mailing the correspondence to: c/o Corporate Secretary, Splunk Inc., 270 Brannan Street, San Francisco, California 94107.
All such stockholder communications will be reviewed initially by our Corporate Secretary or the Legal Department and, if
appropriate, will be forwarded to the appropriate member or members of the Board, or if none is specified, to the Chair of the
Board. This process assists the Board in reviewing and responding to stockholder communications in an appropriate manner.
The Corporate Secretary reports regularly to the Governance & Sustainability Committee on all correspondence received that,
in their opinion, involves functions of the Board or its committees or that they otherwise determine merits Board attention.
ESG Oversight and Highlights
The Board believes operating sustainably benefits our many different stakeholders and drives long-term value creation.
We believe that data can deliver clarity, accelerate positive change, strengthen and lift up communities, and create a more
just world. We work to conduct our business in ways that are principled, transparent and accountable to our stakeholders.
We focus our efforts where we can have the most positive impact on our business stakeholders and communities and are
committed to effectively govern and manage the environmental and social risks and opportunities that arise from our core
business strategy.
The Company’s three high-level ESG objectives — advancing our Global Impact Strategy; integrating ESG across the business;
and innovating through our Climate Resilience and Innovation Strategy — comprise our current ESG focus areas.
Oversight of ESG
We believe strong governance and oversight of the ESG issues that matter most to our business and to our stakeholders
contribute both to the long-term success of our business and to the positive impacts the Company can make in society.
• Our Board works closely with our management team to oversee ESG at the Company, both directly and through its four
standing committees dedicated to areas of the program associated with their respective areas of responsibility.
• Our Governance & Sustainability Committee provides oversight of the Company’s ESG activities, programs and public
disclosure, and factors in any feedback received from stockholders.
• Our Audit Committee provides oversight of the Company’s enterprise risk management framework, disclosure of ESG
metrics and key performance indicators, as well as the development and implementation of disclosure controls and
procedures with regard to reporting such metrics and indicators.
• Our Talent & Compensation Committee provides oversight of a range of human capital management activities, including
matters relating to talent acquisition, talent management and development, and employee engagement, as well as employee
diversity, equity and inclusion.
• Our Cybersecurity & Data Responsibility Committee provides oversight on matters concerning the Company’s cybersecurity
and data responsibility objectives, strategies, capabilities, initiatives and risk assessment and mitigation protocols.
Our ESG Pillars and Highlights
In fiscal 2022, we formally launched our Global Impact Strategy, led by our Chief Social Impact Officer, which lays out a
range of impact initiatives that reflect our values as a company and the issues that matter most to our internal and external
stakeholders across four strategy pillars: Social Impact, Ethical and Inclusive Growth, Data Responsibility and Environmental
Sustainability. The mission of our Global Impact Strategy is to bridge the data divide to find actionable solutions for humanity’s
greatest challenges, along with a set of guiding principles to add unique value, drive collaboration, innovate for impact and
embrace our stakeholders, and together provide focus and direction for implementing the strategy.
We also released our first Global Impact Report in fiscal 2022 detailing our ESG and Global Impact Strategy, mission and
guiding principles, along with progress on our four strategy pillars. The report was developed with the following leading
voluntary disclosure standards as reference: The Task Force on Climate-Related Financial Disclosures (TCFD) guidelines, the
Sustainability Accounting Standards Board (SASB) framework, and the GRI (formerly Global Reporting Initiative) Standards.
Corporate Governance at Splunk
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Splunk 2022 Proxy Statement
Social
Impact
Ethical
and
Inclusive
Growth
Data
Privacy
and
Security
Environmental
Sustainability
• Charitable giving
• Employee engagement
• Innovation technology
• Pledge product donations
• Social Impact Fund
• Workforce development
• Diversity, equity and
inclusion
• Supplier diversity
• Talent and careers
• AI ethics
• Data ethics
• Data privacy
• Data security
• Climate resilience and
innovation
• Operational eco-efficiency
• Sustainable sourcing and
procurement
Our Social Impact pillar
encompasses programs,
commitments and
initiatives that help us
engage communities,
employees, businesses,
nonprofits and academia,
and empower traditionally
underrepresented members
of society, providing pathways
to thrive in the data age.
• Splunk and Splunkers
gave more than $1.79
million to support
approximately 1,300
nonprofit organizations in
fiscal 2021.
• We also directed 54% of
our corporate giving to
COVID-19 relief and other
disaster response efforts
in fiscal 2021.
• Our $50 million Social
Impact Fund continues
to provide financial
investment and strategic
support to for-profit
social impact, beneficial
purpose firms that seek
to harness the power
of business and data to
drive positive changes.
As Splunk grows, with
it grows our vision to
deliver actionable insights,
accelerate positive change,
strengthen and lift up
communities, and create a
more just world. Workforce
diversity is an indispensable
component of this vision,
and our diversity, equity and
inclusion (DEI) initiatives
are central to fulfilling it.
• We published our second
annual Diversity, Equity
and Inclusion Annual
Report.
• We advanced initiatives
to remove unconscious
bias in our language,
product documentation
and code repositories.
• We began work with
leading supplier diversity
organizations to engage
more diverse suppliers.
• We continued work to
transform and expand
our talent pipeline to
diversify our talent
attraction channels.
Privacy and Security
by Design is top of
mind throughout our
development process,
and Splunk complies with
industry and international
security standards.
• Our Chief Information
Security Officer (CISO)
leads Splunk’s Global
Security team.
• The Splunk Assurance
Advisory, Risk and
Compliance (SpAARC)
group oversees enterprise
risk management,
assurance and internal
controls to safeguard,
evaluate and mitigate
data risk.
• The Data Protection team
operates Splunk’s global
privacy program and
supports the security and
compliance programs
managed by SpAARC and
the CISO.
Our position as the data
platform leader for security and
observability gives us the ability
to be “all in” on sustainability
and leverage our technology,
expertise and talent to help
build a safe, sustainable world
that inspires and nourishes
generations to come.
• We incorporated TCFD-
aligned disclosures of our
physical and transitional
climate risks in our Annual
Report on Form 10-K for the
fiscal year ended January 31,
2022; aligned our first Global
Impact Report with TCFD
guidelines; and became
an official signatory to
the Business Ambition for
1.5° campaign.
• We announced our
commitment to achieve a
net zero by 2050 Science
Based Target consistent with
a 1.5°C ambition level and to
register a suite of shorter-
term targets with the Science
Based Targets initiative by
the end of fiscal 2023.
• We began plans to develop
our Sustainable Sourcing
and Procurement program.
For more information about our ESG initiatives and voluntary disclosures, as well as our Global Impact Strategy, our Climate
Resilience and Innovation Strategy, and our aim to bridge the data divide, please see our 2021 Global Impact Report (https://
www.splunk.com/pdfs/2021-global-impact-report.pdf), our ESG Position Statement (https://www.splunk.com/en_us/legal/
esg-position-statement.html), and our 2020 Diversity, Equity and Inclusion Annual Report (https://www.splunk.com/en_us/
careers/diversity/diversity-annual-report.html).
The contents of these materials are referenced for general information only and are not incorporated by reference in this proxy
statement.
Corporate Governance at Splunk
38
Other Governance Policies and Practices
Related Person and Other Transactions
Policies and Procedures for Related Person Transactions
The Audit Committee of our Board has the primary responsibility for reviewing and approving or ratifying transactions with related
persons. We have adopted a formal written policy providing that related persons, which includes our executive officers, directors,
nominees for election as directors, beneficial owners of more than 5% of any class of our common stock, and any member of the
immediate family of any of the foregoing persons, are not permitted to enter into a related person transaction with us, other than
certain standing pre-approved transactions under the policy, without the prior consent of our Audit Committee.
In approving or rejecting any such proposal, our Audit Committee considers the relevant facts and circumstances available and
deemed relevant to our Audit Committee, including, but not limited to, whether the transaction is on terms no less favorable than
terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the related person's
interest in the transaction and their involvement in the transaction, if any.
In the event we become aware of a related person transaction that was not previously approved or ratified under the policy, our
Audit Committee will evaluate all options available, including whether to ratify, amend, terminate, rescind or take other action
as appropriate.
From time to time, we engage in ordinary course commercial transactions with other entities whose officers or directors are
also directors of the Company, whose directors are officers of the Company, or whose officers or directors are immediate family
members of an officer or director of the Company. Such transactions are conducted on an arm’s-length basis and our related
persons do not have a material interest in such transactions. The Audit Committee has adopted standing pre-approvals under the
policy for these and certain other transactions that do not create or involve a direct or indirect material interest.
In June 2021, we entered into an Investment Agreement with Silver Lake. Mr. Hao, a member of our Board since July 2021, is
affiliated with Silver Lake. See "Board Composition—Board Refreshment and Succession Planning—Agreement with Silver Lake"
for more information.
Except as set forth above, since the beginning of our last fiscal year, there were no related person transactions, and there are not
currently any proposed related person transactions, that would require disclosure under the SEC rules.
Employment Arrangements and Indemnification Agreements
We have entered into employment arrangements with certain current executive officers. See “Executive Compensation—
Compensation Tables—Executive Employment Arrangements.”
We have also entered into indemnification agreements with certain directors and officers. The indemnification agreements and
our Certificate of Incorporation and Bylaws require us to indemnify our directors and officers to the fullest extent permitted by
Delaware law.
Anti-Hedging and Anti-Pledging Policy; Stock Trading Practices
We maintain an Insider Trading Policy that, among other things, prohibits our non-employee directors, executive officers and
employees from trading during quarterly and closed trading windows. The Insider Trading Policy also prohibits our non-employee
directors, executive officers, employees, certain partners with access to confidential information and third parties identified
from time to time by our Insider Trading Compliance Officer from engaging in short sales, hedging, swaps, exchange funds and
similar transactions designed to decrease the risks associated with holding the Company’s securities, as well as pledging the
Company’s securities as collateral for loans, transactions involving derivative securities relating to our common stock, and holding
Company securities in a margin account. None of the Company’s subsidiaries have publicly traded equity securities. Our Insider
Trading Policy requires all non-employee directors, executive officers subject to Section 16 of the Securities Exchange Act of
1934 as amended ("Section 16 Officers") and employees identified by the Insider Trading Compliance Officer to obtain written
pre-clearance from the Insider Trading Compliance Officer or his or her designee prior to buying, selling, or engaging in any other
transaction in the Company’s securities.
Further, we have adopted Rule 10b5-1 Trading Plan Guidelines that permit our non-employee directors, Section 16 Officers and
certain employees to adopt Rule 10b5-1 trading plans (“10b5-1 plans”). Under our 10b5-1 Trading Plan Guidelines, 10b5-1 plans
may only be adopted or modified during an open trading window under our Insider Trading Policy and only when such individual
does not otherwise possess material nonpublic information about the Company. The first trade under a 10b5-1 plan may not
occur until the completion of the next quarterly closed trading window following the adoption or modification of the 10b5-1 plan,
as applicable.
Corporate Governance at Splunk
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Splunk 2022 Proxy Statement
Audit Committee Matters
PROPOSAL
2
Ratification of Appointment of Independent
Registered Public Accounting Firm
The Board recommends a vote “FOR” the Ratification of the Appointment of PricewaterhouseCoopers
LLP as our Independent Registered Public Accounting Firm for the fiscal year ending January 31, 2023.
The Audit Committee of the Board has appointed PricewaterhouseCoopers LLP (“PwC”), independent registered public
accountants, to audit our financial statements for the fiscal year ending January 31, 2023. During our fiscal year ended
January 31, 2022, PwC served as our independent registered public accounting firm.
Notwithstanding its selection and even if our stockholders ratify the selection, our Audit Committee, in its discretion, may
appoint another independent registered public accounting firm at any time during the year if the Audit Committee believes
that such a change would be in the best interests of Splunk and its stockholders. At the Annual Meeting, the stockholders
are being asked to ratify the appointment of PwC as our independent registered public accounting firm for the fiscal year
ending January 31, 2023. Our Audit Committee is submitting the selection of PwC to our stockholders because we value our
stockholders’ views on our independent registered public accounting firm and as a matter of good corporate governance.
Representatives of PwC will be present at the Annual Meeting, and they will have an opportunity to make statements and will
be available to respond to appropriate questions from stockholders.
The ratification of the appointment of PwC must receive the affirmative vote of at least a majority of the shares present in
person (virtually) or by proxy at the meeting and entitled to vote thereon to be approved. Abstentions are considered votes
present in person (virtually) or by proxy and thus will have the same effect as votes “Against” the proposal. Broker non-votes
will have no effect on the outcome of this proposal. If the stockholders do not ratify the appointment of PwC, the Board or
Audit Committee will reconsider the appointment.
40
Report of the Audit Committee
The Audit Committee is a committee of the Board comprised solely of independent directors, as required by the listing
standards of The Nasdaq Stock Market and rules of the SEC. The Audit Committee operates under a written charter
approved by the Board, which is available on our investor website at http://investors.splunk.com/corporate-governance.
The composition of the Audit Committee, the attributes of its members and the responsibilities of the Audit Committee,
as reflected in its charter, are intended to comply with applicable requirements for corporate audit committees. The Audit
Committee reviews and assesses the adequacy of its charter and the Audit Committee’s performance on an annual basis.
As of the date this report was approved, the Audit Committee consisted of three members: Sean Boyle, Mark Carges and
Patricia Morrison. Mr. Boyle is an “audit committee financial expert” as defined under SEC rules and regulations. With
respect to the Company’s financial reporting process, the management of the Company is responsible for (1) establishing
and maintaining internal controls and (2) preparing the Company’s consolidated financial statements. PwC is responsible
for auditing these financial statements. It is the responsibility of the Audit Committee to oversee these activities. It is not
the responsibility of the Audit Committee to prepare or certify the Company’s financial statements or guarantee the audits
or reports of PwC. These are the fundamental responsibilities of management and PwC. In the performance of its oversight
function, the Audit Committee has:
• reviewed and discussed the audited financial statements with management and PwC;
• discussed with PwC the applicable requirements of the Public Company Accounting Oversight Board; and
• received the written disclosures and the letter from PwC required by applicable requirements of the Public Company
Accounting Oversight Board regarding PwC’s communications with the Audit Committee concerning independence, and has
discussed with PwC its independence
Based on the Audit Committee’s review and discussions with management and PwC, the Audit Committee recommended
to the Board that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended
January 31, 2022 for filing with the SEC.
Respectfully submitted by the members of the Audit Committee of the Board:
Sean Boyle (Chair)
Mark Carges
Patricia Morrison
Audit Committee Matters
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41
Splunk 2022 Proxy Statement
Fees Paid to the Independent Registered Public
Accounting Firm
The following table presents fees for professional audit services and other services rendered to us by PwC for the fiscal
years ended January 31, 2021 and 2022. All fees were pre-approved by the Audit Committee in accordance with the policy
described below.
2021
($)
2022
($)
Audit Fees(1)
4,626,990
5,083,435
Audit-Related Fees
—
—
Tax Fees(2)
968,767
645,435
All Other Fees(3)
152,870
3,870
Total:
5,748,626
5,732,740
(1) Audit fees consist of fees for professional services provided in connection with the integrated audit of our annual financial statements, management’s report on
internal controls, the review of our quarterly consolidated financial statements, and audit services that are normally provided by independent registered public
accounting firms in connection with statutory and regulatory filings or engagements for those fiscal years, such as statutory audits.
(2) Tax fees consist of fees billed for tax compliance, consultation and planning services.
(3) All other fees consist of fees billed for access to online accounting and tax research software and ERP system implementation.
Audit Committee Policy on Pre-Approval of Audit
and Permissible Non-Audit Services of Independent
Registered Public Accounting Firm
Consistent with requirements of the SEC and the Public Company Accounting Oversight Board, regarding auditor
independence, our Audit Committee is responsible for the appointment, compensation and oversight of the work of our
independent registered public accounting firm. In recognition of this responsibility, our Audit Committee has established
a policy for the pre-approval of all audit and permissible non-audit services provided by the independent registered public
accounting firm. These services may include audit services, audit-related services, tax services and other services.
Before engagement of the independent registered public accounting firm for the next year’s audit, the independent registered
public accounting firm submits a description of services expected to be rendered during that year to the Audit Committee for
approval.
The Audit Committee pre-approves particular services or categories of services on a case-by-case basis. The fees are
budgeted, and the Audit Committee requires the independent registered public accounting firm and our management
team to report actual fees versus budgeted fees periodically throughout the year by category of service. During the year,
circumstances may arise when it may become necessary to engage the independent registered public accounting firm for
additional services not contemplated in the original pre-approval. In those instances, the services must be pre-approved by the
Audit Committee before the independent registered public accounting firm is engaged.
Audit Committee Matters
42
Our Executive Officers
The following table identifies certain information about our executive officers as of May 1, 2022. Executive officers are
appointed by the Board to hold office until their successors are elected and qualified.
Name
Age
Position(s)
Gary Steele
59
President and Chief Executive Officer
Shawn Bice
52
President of Products & Technology
Jason Child
53
Senior Vice President and Chief Financial Officer
Scott Morgan
51
Senior Vice President, Chief Legal Officer, Global Affairs and Secretary
Gary Steele has served as our President, Chief Executive Officer and member of our Board since April 2022.
Prior to joining us, Mr. Steele served as the Chief Executive Officer and as a director of Proofpoint, Inc., a
provider of security-as-a-service solutions, from 2002 to 2022, and served as the Chairman of the board of
Proofpoint from 2018 to 2021. From 1997 to 2002, Mr. Steele served as Chief Executive Officer of Portera
Systems Inc., a software company. Before Portera, Mr. Steele served as the vice president and general
manager of the Middleware and Data Warehousing Product Group at Sybase, Inc., an enterprise and mobile
software company. Mr. Steele also served in business development, marketing, and engineering roles at Sun
Microsystems, Inc. and Hewlett-Packard Company, computer, computer software and information technology
companies. Mr. Steele has served as a member of the board of directors of Upwork Inc., a talent freelancing
platform, since 2018. Mr. Steele previously served as a member of the board of directors of Vonage Holdings
Corp., a cloud communications provider, from 2016 to 2021. Mr. Steele holds a B.S. from Washington State
University.
Shawn Bice has served as our President of Products & Technology since 2021. Prior to joining us, Mr. Bice
served as Vice President, Databases at Amazon Web Services, a cloud computing infrastructure company,
from 2016 to 2021. Prior to this role, Mr. Bice spent 17 years in various leadership roles at Microsoft, a
technology company, including most recently as General Manager. Mr. Bice has served as a member of the
board of directors of Washington Federal Bank, National Association, a national bank, since 2021. Mr. Bice
holds a B.S. from Eastern Michigan University.
Jason Child has served as our Senior Vice President and Chief Financial Officer since 2019. Prior to joining
us, Mr. Child served as Chief Financial Officer at Opendoor Labs Inc., an online real estate marketplace, from
2017 to 2019. From 2015 to 2016, Mr. Child was Chief Financial Officer at AliphCom, Inc. (d/b/a Jawbone), a
consumer technology and wearable products company. Mr. Child served as Chief Financial Officer at Groupon,
Inc., an e-commerce company, from 2010 to 2015. Previously, he spent over 11 years leading various global
finance teams at Amazon.com, Inc., an e-commerce and cloud computing company. Mr. Child began his
career at Arthur Andersen LLP. Mr. Child has served as a member of the board of directors of Coupang, Inc., an
e-commerce company, since April 2022. He holds a B.A. from the University of Washington.
Scott Morgan has served as our Senior Vice President, Chief Legal Officer since 2019 and our Secretary since
2018. Mr. Morgan has also led our Global Affairs organizations since 2020. Prior to this role, Mr. Morgan served
as our General Counsel from 2017 to 2019, as our Vice President, Associate General Counsel from 2014 to
2017 and as our Associate General Counsel from 2012 to 2014. He also served as our Assistant Secretary
from 2012 to 2018. Prior to joining us, Mr. Morgan served as legal counsel at Autodesk, Inc., a design software
and services company and Tellabs, Inc., a provider of access networks solutions. Mr. Morgan began his career
as an associate at Morrison & Foerster LLP and at Thoits, Love, Hershberger & McClean LLP. Mr. Morgan holds
a B.A. from the University of California, Berkeley and a J.D. from the University of California, Hastings College of
the Law.
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43
Splunk 2022 Proxy Statement
Executive Compensation
PROPOSAL
3
Advisory Vote to Approve Named
Executive Officer Compensation
The Board recommends a vote “FOR” the Approval, on an Advisory Basis, of our Named Executive
Officer Compensation.
As required by SEC rules, we are asking our stockholders to approve, on an advisory, non-binding basis, the compensation
of our named executive officers (“NEOs”) as disclosed in the “Compensation Discussion and Analysis” section beginning on
page 44, the compensation tables and the related narratives appearing in this proxy statement. This proposal, commonly
known as a “Say-on-Pay” proposal, gives our stockholders the opportunity to express their views on our NEOs’ compensation
as a whole. This vote is not intended to address any specific item of compensation or any specific NEO, but rather the overall
compensation of all of our NEOs and the philosophy, policies and practices described in this proxy statement. We currently
hold our Say-on-Pay vote every year.
In response to the Say-on-Pay vote at our 2021 annual meeting of stockholders, in late fiscal 2022 and early fiscal 2023 we
conducted an extensive outreach campaign to speak directly with a number of our stockholders. In response to the feedback
we received from our stockholders through this campaign, we made a number of changes to our annual and long-term
incentive compensation programs. Our outreach campaign, as well as the related changes to our annual and long-term
incentive compensation programs, are described in more detail below under “Compensation Discussion and Analysis—
Executive Summary—Stockholder Engagement and Our 2021 Say-On-Pay Vote.”
The Say-on-Pay vote must receive the affirmative vote of at least a majority of the shares present in person (virtually) or
by proxy at the meeting and entitled to vote thereon to be approved. Abstentions are considered votes present in person
(virtually) or by proxy and thus have the same effect as votes “Against” the proposal. Broker non-votes, if any, will have no
effect on the outcome of this proposal. The Say-on-Pay vote is advisory, and therefore is not binding on us, our Talent &
Compensation Committee or our Board. The Say-on-Pay vote will, however, provide information to us regarding investor
sentiment about our executive compensation philosophy, policies and practices, which the Talent & Compensation Committee
will consider when determining executive compensation for the remainder of the current fiscal year and beyond. Our Board
and our Talent & Compensation Committee value the opinions of our stockholders. To the extent there is any significant vote
against the NEO compensation as disclosed in this proxy statement, we will endeavor to engage with stockholders to better
understand the concerns that influenced the vote and consider our stockholders’ concerns. The Talent & Compensation
Committee will evaluate whether any actions are necessary to address those concerns.
We believe that our executive compensation program is effective in achieving the Company’s objectives of:
• Recruiting, incentivizing and retaining highly qualified executive officers who possess the skills and leadership necessary to
grow our business;
• Directly linking incentive compensation for our executive officers with achieving or exceeding our strategic and financial
performance goals;
• Providing meaningful long-term incentives to align the interests of our executive officers with those of our stockholders;
• Reflecting our long-term strategy, which includes a financial strategy of disciplined investing for our future growth;
• Promoting a healthy approach to risk and sensitivity to underperformance as well as outperformance; and
• Providing compensation packages that are competitive, reasonable and fair relative to peers, the overall market
and performance.
Accordingly, we ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the stockholders approve, on an advisory basis, the compensation paid to the named executive officers, as
disclosed in the proxy statement for the 2022 Annual Meeting of Stockholders pursuant to the compensation disclosure rules
of the SEC, including the compensation discussion and analysis, compensation tables and narrative discussion, and other
related disclosure.”
44
Compensation Discussion and Analysis
Executive Summary
Our executive compensation program is designed to attract, motivate and retain the key executives who drive our success. Pay
that reflects performance and aligns with the interests of long-term stockholders is key to our compensation program design
and decisions. We structure our executive compensation program to include significant performance metrics that are aligned
with our business strategy and long-term stockholder value creation.
Our executive compensation program consists of the following primary components–base salary, a short-term cash bonus
opportunity, and long-term incentive compensation in the form of time-based restricted stock unit (“RSU”) and performance-
based performance unit (“PSU”) equity awards. A significant portion of our executive compensation is performance-based and
in the form of long-term compensation. The fiscal 2022 executive compensation program provided short-term cash bonuses
designed to drive total annual recurring revenue (“ARR”) and long-term performance-based equity awards designed to drive
ARR, operating cash flow and stock price performance. We believe that both ARR growth and operating cash flow performance
are critical to long-term stockholder value creation and that incorporating stock price growth as part of our long-term equity
award design further aligns our executives’ and stockholders’ interests.
In response to the “Say-on-Pay” vote at our 2021 annual meeting of stockholders, in late fiscal 2022 and early fiscal
2023 we conducted an extensive outreach campaign to speak directly with a number of our stockholders. We contacted
institutional stockholders representing approximately 62% of our shares and met with institutional stockholders
representing 43% of our shares. In response to the feedback we received from our stockholders through this campaign,
we implemented changes to our annual and long-term incentive compensation programs. Our outreach campaign, as well
as the related changes to our annual and long-term incentive compensation programs, are described in more detail below
under “Stockholder Engagement and Our 2021 Say-On-Pay Vote” and “Recent Fiscal 2023 Compensation Decisions.”
Our compensation actions during fiscal 2022 and early fiscal 2023 also included implementing compensation
arrangements to support a CEO transition and the appointment of two new executive officers, as described in more
detail below under “CEO Transition and Named Executive Officers for Fiscal 2022.”
CEO Transition and Named Executive Officers for Fiscal 2022
Termination of Douglas Merritt as President and CEO
On November 13, 2021, our Board terminated Douglas Merritt as our President and CEO, and Mr. Merritt agreed to continue
his employment with us as a strategic advisor to our interim CEO. If Mr. Merritt had not agreed to continue his employment
as a strategic advisor to our interim CEO, our Board’s termination of his employment as our President and CEO would have
constituted a termination of his employment by us without “cause” under Section 7(b) of our employment letter with him,
and given rise to the corresponding severance payments and benefits under the employment letter immediately upon such
termination in November 2021. However, in order to facilitate a smooth transition and continued business operations during
a critical transformation period without interruption, our Board negotiated to retain Mr. Merritt as a strategic advisor to our
interim CEO.
To encourage Mr. Merritt to remain employed by us as a strategic advisor to our interim CEO following our Board’s termination
of him as our President and CEO, we maintained his then-existing level of compensation, including continued vesting of
outstanding equity awards. During his employment as a strategic advisor to our interim CEO, Mr. Merritt served a crucial
role and helped facilitate a smooth leadership transition to our interim CEO. He served as a valuable resource to our interim
CEO, helping to retain senior executives, preserving the commitment and engagement of our employees, partners and
customers during a critical transformation period for the Company, and helping to lead our go-to-market efforts during the
Company’s historically most important fourth quarter, which allowed our interim CEO to focus on other operational matters
and the important task of recruiting a new President and CEO. Without Mr. Merritt’s employment as a strategic advisor to our
interim CEO through this critical transformation period, our ability to drive our ongoing business transformation and our sales
performance may have been jeopardized.
Executive Compensation
PROXY
45
Splunk 2022 Proxy Statement
In connection with the appointment of our new President and CEO, described below, Mr. Merritt’s employment with the
Company terminated on March 31, 2022, and he received the severance payments and benefits under our employment
letter with him corresponding to a termination of his employment by us without “cause.” These payments and benefits
would have been provided to him upon our termination of him as our President and CEO if he had not agreed to continue
employment with us as a strategic advisor to our interim CEO. Mr. Merritt’s severance payments and benefits are described
in further detail below under “Discussion of Our Fiscal 2022 Executive Compensation Program—Components of Our Fiscal
2022 Compensation Program—Severance and Change in Control-Related Benefits.”
Interim CEO Arrangement
Immediately following the termination of Mr. Merritt as our President and CEO, Graham Smith, the Chair of our Board, became
our interim CEO, and we immediately commenced a search process to identify our next President and CEO. In connection with
his appointment as interim CEO, we entered into an employment letter with Mr. Smith. Given the temporary and transitional
nature of Mr. Smith’s role as interim CEO, and his existing meaningful financial stake in the Company at the time of his transition
to interim CEO (including through unvested equity awards received in connection with his services as a member of our
Board), the Talent & Compensation Committee, with the assistance of its independent compensation consultant Compensia,
a national compensation consulting firm (“Compensia”), structured Mr. Smith’s compensation to be simple and to be less
than the median CEO total direct compensation for the CEOs in our compensation peer group. Mr. Smith’s employment letter
provided for a base salary for the term he served as interim CEO at a rate of $1,000,000 per month, as well as eligibility to
participate in our standard employee benefit programs applicable to full-time U.S. employees. In connection with his services
as interim CEO, Mr. Smith was not eligible for an annual cash bonus opportunity or equity awards. We determined this was
appropriate not only given the temporary and transitional nature of Mr. Smith’s role as interim CEO and his existing meaningful
financial stake in the Company, but also given that at the time he commenced his role as interim CEO, more than three-quarters
of the one-year performance periods within our fiscal 2022 annual and long-term performance-based incentive programs had
elapsed. During his term as interim CEO, Mr. Smith’s equity awards previously granted to him in connection with his services
as a member of our Board continued to vest, and he did not receive any other compensation for his services as a member of
our Board.
Appointment of New CEO
Following an extensive candidate search and interview process, our Board appointed Gary Steele as
our President and CEO effective as of April 11, 2022. Mr. Smith ceased services as our interim CEO on
such date and remained the Chair of our Board. Our Board appointed Mr. Steele as our President and
CEO in light of his tenure as a highly regarded technology executive with over 30 years of experience,
as well as his proven track record of successfully scaling SaaS operations and growing multi-billion-
dollar global enterprises. Prior to joining us, Mr. Steele served as the Chief Executive Officer and as
a director of Proofpoint, Inc., a provider of security-as-a-service solutions, since 2002, and served
as the Chairman of the board of Proofpoint from 2018 to 2021. Over the past two decades, he led
Proofpoint’s growth from an early-stage start-up to a leading, publicly traded security-as-a-service
provider to some of the world’s best-known organizations. As a public company, Proofpoint had a long
history of strong growth combined with compelling free cash flow.
CEO New Hire Compensation Package
We entered into an employment letter with Mr. Steele, which provides for the following compensation:
• Annual base salary of $900,000 and annual target bonus of 125% of annual base salary (prorated for fiscal 2023);
• A cash signing bonus of $8,000,000, subject to full reimbursement if Mr. Steele voluntarily resigns from the Company without
“good reason” (as defined in his employment letter) or the Company terminates his employment for “cause” (as defined in his
employment letter) within 12 months of his employment start date. The bonus is subject to reimbursement to the Company
on a prorated basis if such a termination occurs 12 months after Mr. Steele’s employment start date and before 36 months
after his employment start date;
• RSUs with a value of approximately $12,000,000, subject to time-based vesting over four years from Mr. Steele’s
employment start date;
• PSUs with a target value of $18,000,000, subject to performance-based vesting on terms and conditions for the fiscal year
2023 PSU program, described in further detail below under “Recent Fiscal 2023 Compensation Decisions”;
Executive Compensation
46
• In the event that Mr. Steele’s employment is terminated without cause or if he resigns employment for good reason within
six months before or 18 months after a change in control (a “change of control period”), then, in addition to any accrued
compensation, he will be eligible to receive: (i) a cash payment equal to 24 months of his annual base salary plus 24 months
of his annual target bonus in effect in the year of termination, plus a prorated portion of his annual target bonus for the fiscal
year of termination based on the number of months employed during such year, less any amounts already paid for such year;
(ii) continued health coverage for 18 months or, if doing so would cause imposition of an excise tax or otherwise violate
applicable laws, a lump sum cash payment of $36,000; and (iii) accelerated vesting of all unvested equity awards with only
time-based vesting conditions;
• In the event that Mr. Steele’s employment is terminated without cause not during a change of control period, then, in
addition to any accrued compensation, he will be eligible to receive, (i) a cash payment equal to 18 months of his then-
current base salary, plus a prorated portion of his annual target bonus for the year of termination, less any amounts already
paid for such year, (ii) continued health coverage for 12 months, or a lump sum cash payment of $24,000 if paying for COBRA
premiums would result in an excise tax to the Company or violate other applicable laws, and (iii) accelerated vesting of
equity awards with only time-based vesting conditions scheduled to vest in the 12 months following such termination; and
• The foregoing severance payments and benefits will be subject to Mr. Steele’s execution of an effective release of claims in
favor of the Company.
The Talent & Compensation Committee determined Mr. Steele’s compensation with the assistance of Compensia, as follows:
• Process. The Talent & Compensation Committee considered and analyzed CEO compensation within our compensation
peer group, as well as recent new-hire CEO compensation among 14 broader technology companies.
• Target cash compensation. Based on this analysis, the Talent & Compensation Committee set Mr. Steele’s target total cash
compensation (excluding the cash signing bonus) to approximate the median target total cash compensation within both
peer groups.
• Initial equity awards. The Talent & Compensation Committee determined that the target value of initial equity awards for
external CEO appointments ranges from approximately two to three times the value of the relevant CEO’s annual equity
awards. Based on such determination, the Talent & Compensation Committee set the target value of the initial equity awards
for Mr. Steele to approximately two times the median target value of CEO annual equity awards within our compensation
peer group. These initial equity awards were intended to encourage Mr. Steele to accept our offer of employment and
create an immediate, performance-based tie to changes in stockholder value, fostering a commonality of interest between
Mr. Steele and our stockholders.
• Forfeited compensation. In determining Mr. Steele’s initial equity awards and his cash signing bonus, the Talent &
Compensation Committee took into account the significantly higher long-term performance-based compensation
opportunity he forfeited when he separated from his prior employer, which opportunity was more than twice the target
value of Mr. Steele’s initial equity awards (target value of $30,000,000) and his cash signing bonus ($8,000,000).
• Severance eligibility. Mr. Steele’s eligibility for severance payments and benefits reflects the Company’s existing severance
payments and benefits structure for non-interim CEOs. In determining Mr. Steele’s compensation package generally, the
Talent & Compensation Committee also took into account the highly competitive business environment and extremely
competitive talent market in which we operate.
With respect to Mr. Steele’s future compensation, the Talent & Compensation Committee expects to take into account
competitive market analyses prepared by its independent compensation consultant, as well the other factors described in
“Discussion of Our Fiscal 2022 Executive Compensation Program—Compensation Process—Role of Talent & Compensation
Committee” below.
Performance-based and long-term compensation are predominant elements of our regular CEO and NEO compensation
program. For Mr. Merritt, approximately 63% of his annualized target fiscal 2022 compensation was performance-
based compensation (based on target annual cash bonus opportunity and grant date accounting fair value of PSUs), and
approximately 90% was long-term compensation (based on grant date accounting fair value of PSUs and RSUs, vesting over
three years). The Talent & Compensation Committee expects that Mr. Steele’s compensation beginning with fiscal 2024 will
have a similar mix of performance-based and long-term compensation that aligns with the Company’s pay-for-performance
compensation philosophy for its executives.
Executive Compensation
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Splunk 2022 Proxy Statement
Our Fiscal Year 2022 Named Executive Officers
Our NEOs for fiscal 2022, determined as of January 31, 2022, in accordance with SEC rules and regulations, are:
• Graham Smith, our then interim CEO and Chair of our Board;
• Jason Child, our Senior Vice President and Chief Financial Officer;
• Teresa Carlson, our then President and Chief Growth Officer;
• Shawn Bice, our President of Products & Technology;
• Scott Morgan, our Senior Vice President, Chief Legal Officer, Global Affairs and Secretary;
• Douglas Merritt, our then former President and CEO and then strategic advisor to the interim CEO; and
• Timothy Tully, our then former Senior Vice President, Chief Technology Officer.
Strategic Context and Fiscal 2022 Business Highlights
We provide innovative solutions that use data from digital systems to help organizations identify opportunities for optimization
and innovation and to keep those systems secure and performing effectively. This class of data is growing significantly as
a direct result of the prevalence and importance of digital systems used by today’s organizations. Decades of investment
in digital transformation have integrated the hardware and software that comprise digital systems into every aspect of
how modern organizations operate. The data generated by these systems contains a comprehensive, real-time record of
operations, interactions, and transactions that our offerings convert into insights and actions that improve technology
and business outcomes. Our solutions for cybersecurity (“Security”) and Observability empower users in technology roles,
including Development Operations (“DevOps”), IT Operations (“ITOps”), and cyber security, to monitor and secure digital
systems more quickly and efficiently. Business users leverage our offerings to gain visibility into their digital processes to
deliver better experiences, improve decisions and drive better results.
Our offerings provide visibility to our customers’ diverse technology infrastructure including systems deployed on the edge, on
premises, and in private and public cloud environments, running software ranging from monolithic apps to cloud native ones.
We also believe our offerings empower operational transformation, helping customers move from reactive, non-scalable and
ineffective approaches to proactive, automated, and AI-assisted processes that drive better outcomes even as the scale and
complexity of their technology continue to grow.
The COVID-19 pandemic significantly increased the importance of being a digital, data-driven organization and we believe
the importance of data-driven innovation will only continue to increase over time. The events of 2020 and 2021 accelerated
the adoption of new ways to work and exerted an enormous amount of pressure on organizations of all kinds to deliver better
experiences and outcomes, and to enable entirely new offerings and business models. We believe this global shift in the business
environment and the related challenges are here to stay and that Splunk enables organizations to rise to these challenges
by leveraging technology to achieve greater efficiency, agility, security, and drive a sustained competitive advantage. When
organizations use Splunk to improve their security postures and build resilience, they are able to innovate more effectively.
In fiscal 2022, we reached a significant milestone as we surpassed $3 billion in total ARR, with cloud revenue growing 70%. Our
cloud services customers have accelerated their time to value and achieved lower total cost of ownership. Most importantly,
the rate at which new features and capabilities are delivered to and used by customers is accelerated when using cloud
services offerings. Given our customers’ success adopting our cloud services offerings, we will continue to invest heavily in
differentiated cloud services offerings delivered through a cloud-optimized go-to-market and support model. We will continue
to invest in our license offerings to enable both standalone consumption and hybrid Splunk deployments that span customer
on-premises and cloud environments. We expect our cloud services offerings will continue to be an important source of
growth for the Company, our customers and our partners.
We intend to continue investing for long-term growth. We have invested and intend to continue to invest in product development to
deliver additional features and performance enhancements, deployment models and solutions that can address new end markets.
We expect to continue to expand our sales and marketing organizations to market and sell our offerings both in the United States
and internationally.
In fiscal 2022, we prioritized growth with a focus on disciplined execution of our business objectives as we navigated
our cloud-first business model transformation. Accordingly, in fiscal 2022, we and our investors focused on total annual
recurring revenue (“ARR”) and operating cash flow metrics. Our focus on customer success and innovative products
is critical to software and cloud services adoption and led to continued ARR growth. Our focus on capturing our large
and growing market opportunity requires that we continue to invest in our business, so in fiscal 2022, our executive
compensation balanced growth and operational discipline in support of our long-term execution objectives.
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48
In March 2021, the Talent & Compensation Committee established goals for ARR and operating cash flow performance
for fiscal 2022 that it considered very aggressive, yet achievable with focused effort and execution by our NEOs, and that
reflected a rigorous increase in growth relative to our prior fiscal year ARR and operating cash flow achievement. We believe
that our effort and performance were strong in fiscal 2022, as demonstrated by our business highlights below.
Strong Cloud Momentum
Up 65%
Up 70%
Up 70%
Cloud ARR of $1.34 billion
Cloud Revenue of $944 million
317 customers with Cloud
ARR > $1 million
year-over-year(1)
year-over-year
year-over-year
Fiscal Year 2022 Performance
Total Revenues
$2.67 Billion
Up 20%
year-over-year
Cash Flow
Operating Cash Flow of
$128 million
Free Cash Flow(2) of
$117 million
Customers with ARR >
$1 million
675 customers
Up 32%
year-over-year
ARR
($ in millions) • FYE January 31
FY22
FY21
FY20
FY19
FY18
$2,365
$1,680
$1,091
3,500
0
500
2,000
2,500
1,000
1,500
3,000
$3,117
32%
41%
54%
50%
$727
ARR up 32% year-over-year(1)
(1) ARR represents the annualized revenue run-rate of active cloud services, term license, and maintenance contracts at the end of a reporting period, Cloud ARR
represents the annualized revenue run-rate of active cloud services contracts at the end of a reporting period, each as reported in our Annual Report on Form
10-K for the year ended January 31, 2022. Each contract is annualized by dividing the total contract value by the number of days in the contract term and then
multiplying by 365. ARR and Cloud ARR should be viewed independently of revenue, and do not represent our revenue under GAAP on an annualized basis, as
each is an operating metric that can be impacted by contract start and end dates and renewal rates. ARR is not intended to be a replacement for forecasts
of revenue.
(2) To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide investors with certain non-
GAAP financial measures, including non-GAAP free cash flow. For a full reconciliation between GAAP and net cash used in operating activities and free cash
flow, please see Appendix A.
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Splunk 2022 Proxy Statement
We believe our executive compensation program structure incentivized our NEOs to drive our strong growth, financial
performance and execution for fiscal 2022. In addition, we believe our NEOs’ compensation for fiscal 2022 appropriately
reflected and rewarded their collective contributions to our performance. We have an executive management team of seasoned
and accomplished leaders focused on executing on our market opportunity and leading us through our next phase of growth.
Stockholder Engagement and Our 2021 Say-On-Pay Vote
At our 2021 annual meeting of stockholders, we held a Say-on-Pay vote on the compensation of our NEOs for fiscal 2021,
which received the support of approximately 35% of the votes cast. This was significantly lower than the Say-on-Pay vote
support of approximately 88%, 94% and 87%, respectively, of the votes cast at our annual meetings of stockholders in 2020,
2019 and 2018, respectively, for the compensation of our NEOs. The Talent & Compensation Committee and our full Board
took the Say-on-Pay vote outcome very seriously. While we have a history of strong engagement with our stockholders,
in order to better understand this vote result and solicit stockholder feedback, we undertook an extensive stockholder
outreach campaign following our 2021 annual meeting of stockholders. We contacted institutional stockholders representing
approximately 62% of our shares to, among other things, discuss our executive compensation program, policies, and practices,
solicit feedback and ensure that we had insight into the issues that were most important to our stockholders so that we could
better understand their perspectives. We met with institutional stockholders representing 43% of our shares. Mr. Newberry,
our then Lead Independent Director and current chair of the Talent & Compensation Committee, led 40% of the meetings.
These discussions included our Senior Vice President, Chief Legal Officer, Global Affairs and Secretary, our Vice President,
Investor Relations, and members of our Legal, Global Affairs team focused on corporate governance, executive compensation
and ESG matters.
We value our stockholders’ opinions and feedback and are committed to maintaining an active dialogue to understand the
priorities and concerns of our stockholders. We believe that ongoing engagement builds mutual trust and alignment with our
stockholders and is essential to our long-term success.
We Reached out to
Institutional Stockholders
Representing:
We Engaged with
Institutional Stockholders
Representing:
Institutional Stockholders We
Engaged with That Voted Against
2021 Say-On-Pay Proposal:
62%
of Shares
Outstanding
43%
of Shares
Outstanding
29%
of Shares
Outstanding
In the course of 20 meetings with our institutional stockholders, we received valuable feedback on our executive
compensation program, policies and practices, as summarized in the chart below. We discussed with these stockholders the
reasons for their opposition to, or support of, our Say-on-Pay resolution for fiscal 2021 NEO compensation. These stockholders
generally viewed the evolution of our executive compensation program as consistent with what we previously communicated
in our outreach over the past several years and consistent with our strategy and pay for performance philosophy. Key feedback
we received from our stockholders relating to our executive compensation program and our responses, including related
changes to our annual and long-term incentive compensation programs, is described in the chart below. See “Corporate
Governance at Splunk—Stockholder Engagement” on page 35 of this proxy statement for more information on our stockholder
engagement program.
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50
Area of Focus
What We Heard from Stockholders
How We Responded
Adjustments to
ARR Performance
Metrics
• Stockholders sought to understand
our fiscal 2021 mid-year adjustments
to ARR performance metrics in our
fiscal 2021 annual executive bonus
plan and fiscal 2021 PSU program,
and in many cases preferred capping
the related payout at the original
target level
• The Talent & Compensation Committee did
not lower or otherwise adjust our fiscal 2022
performance metrics
• The Talent & Compensation Committee commits
that lowering performance metrics for in-flight
incentives (or providing special incentives to true-
up in-flight incentives) are actions that it would take
only in extraordinary circumstances that could not
have been foreseen
• Further, in the event of any such extraordinary
circumstance and any related direct or indirect
change to in-flight incentives, the Talent &
Compensation Committee commits that it would
cap any related payout at its original target level
Overlapping
Performance
Metrics
• Stockholders indicated a preference
for differentiated performance
metrics in our annual executive
bonus plan and our PSU program
• As described in more detail immediately below
under “Recent Fiscal 2023 Compensation
Decisions,” beginning with fiscal 2023, we
eliminated overlapping performance metrics in our
annual executive bonus plan and our PSU program
Longer
Performance
Periods in PSU
Program
• Stockholders indicated a preference
for a performance period longer than
one year in our PSU program
• As described in more detail immediately below under
“Recent Fiscal 2023 Compensation Decisions,”
in fiscal 2023, we initiated a transition to a PSU
program with a three-year relative total stockholder
return performance metric, with interim earning
opportunities not to exceed one-third of target
Use of Relative
Total Stockholder
Return in PSU
Program
• Some stockholders indicated
a preference for basing our
PSU program on a relative total
stockholder performance metric
• As described in more detail immediately below
under “Recent Fiscal 2023 Compensation
Decisions,” in fiscal 2023, we initiated a transition
to a PSU program with a three-year relative total
stockholder return performance metric, with
interim earning opportunities not to exceed one-
third of target
Rigor of
Performance
Metric in PSU
Program
• If relative total stockholder return
performance is to be used as a PSU
metric, some stockholders indicated
a preference for using a benchmark
relevant to the Company’s industry
and not a broad public company
index like the S&P 500 index
• If relative total stockholder return
performance is to be used as a
PSU metric, some stockholders
indicated a preference for setting
target performance at a level above
median performance, and capping
any payout at the target level if the
Company’s absolute relative total
stockholder return is negative
• As described in more detail immediately below
under “Recent Fiscal 2023 Compensation
Decisions”:
• Our fiscal 2023 PSU program is based on a
Company total stockholder return performance
metric compared to the SPDR S&P Software &
Services ETF (XSW), an ETF which tracks the
S&P Software & Services index (this is an index
that is focused on the Company’s industry and
that has meaningfully outperformed the Dow
Jones, S&P 500 and Russell 2000 indices on a
five-year basis over the last five years)
• Target earning under the fiscal year 2023
PSU program is aligned with 55th percentile
performance against the SPDR S&P Software
& Services ETF (XSW), and payouts under the
program are capped at the target level if the
Company’s absolute relative total stockholder
return is negative
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Splunk 2022 Proxy Statement
Recent Fiscal 2023 Compensation Decisions
In March 2022, the Talent & Compensation Committee conducted its annual executive compensation review and made
fiscal 2023 compensation decisions for our continuing NEOs as set forth below. In making these decisions, the Talent &
Compensation Committee considered, among other factors, feedback from our stockholders, including in response to our
2021 Say-on-Pay vote as described above, pay levels of our NEOs relative to peers and the overall competitive market, the
performance of each continuing NEO, and the continued talent war for experienced leadership in our industry.
• Due to the successful progression of our business transformation, our business has matured and our financial results have
become more predictable, enabling us to respond to stockholder feedback and initiate, in fiscal 2023, a transition to a PSU
program with a three-year relative total stockholder return performance metric.
₀ The fiscal 2023 PSUs include interim payout opportunities after the end of the first and second year of the three-year
performance period as follows:
• These two interim payout opportunities are each capped at one-third of the target level payout for the PSUs, based on
relative total stockholder return performance and continued service through the end of the relevant year.
• For each interim payout opportunity, any upside above one-third of the target level payout cannot be earned until the
conclusion of the three-year performance period (and would be based on relative total stockholder return performance
through the conclusion of the three-year performance period).
• This interim payout structure was implemented in order to avoid a payout gap at the end of year one and year two of
the three-year performance period as we transition to a new PSU program (under our current PSU structure, payouts
for earned amounts begin after the conclusion of a one-year performance period).
₀ We expect that beginning with fiscal 2025, PSU grants will require continued service through the full three-year
performance period for any PSUs to vest, so that the two interim payout opportunities described above would be
converted into opportunities to “bank” shares based on the Company’s interim performance (at no more than one-third
a target level of payout) and, if earned, any payout would require continued service until the end of the full three-year
performance period.
₀ The minimum (threshold), target and maximum relative total stockholder return metrics for the fiscal 2023 program
are the 25th, 55th and 75th percentile, respectively, compared to the SPDR S&P Software & Services ETF (XSW). The
Talent & Compensation Committee selected the SPDR S&P Software & Services ETF (XSW) given (x) its representation
of our technology industry peers and (y) that it is challenging relative to other potential benchmark indices, having
outperformed the Dow Jones, S&P 500 and Russell 2000 on a five-year basis over the last five years.
₀ Payouts under the fiscal 2023 PSUs are capped at the target level if the Company’s absolute relative total stockholder
return is negative.
₀ In the event of a change in control of the Company, the fiscal 2023 PSUs will be treated as follows: (x) relative total stockholder
return will be measured, and the PSUs will correspondingly performance-vest, as of the date of such change in control; (y) a
portion of the performance-vested PSUs will time-vest on the date of such change in control on a prorated basis (based on
months of service through such date); and (z) the portion of the performance-vested PSUs that do not time-vest pursuant to the
preceding clause (y) will remain subject to time-vesting conditions following such change in control.
• In response to the stockholder feedback described above, in fiscal 2023, we eliminated overlapping metrics in our annual
executive bonus plan and our PSU program.
₀ To motivate and incentivize our executives to drive top-line growth in our business while enhancing their focus on specific
financial goals considered important to the Company’s long-term growth, our fiscal 2023 annual executive bonus plan is
based on ARR and operating cash flow.
• After considering a competitive analysis of market data of our compensation peer group provided by Compensia, the
recommendations of our interim CEO, other than with respect to his own base salary, and other factors described in
“Discussion of Our Fiscal 2022 Executive Compensation Program—Compensation Process—Role of Talent & Compensation
Committee” below:
₀ We increased the base salaries of Messrs. Child, Bice and Morgan by approximately 4% to 11% of their fiscal 2022
base salaries.
₀ We maintained the target annual cash bonus opportunities for Messrs. Child, Bice and Morgan.
₀ We maintained the mix of fiscal 2023 annual equity awards for all recipients at 60% PSUs and 40% RSUs. This mix is
consistent with that of fiscal 2022 annual equity awards.
Executive Compensation
52
Our Executive Compensation Policies and Practices
Our executive compensation policies and practices are designed to reinforce our pay for performance philosophy and align with
sound governance principles. The following chart highlights our fiscal 2022 executive compensation policies and practices:
WHAT WE DO
• Ongoing engagement with our institutional
stockholders regarding our compensation
policies and practices
• Performance-based cash and equity incentive
compensation
• Caps on performance-based cash and equity
incentive compensation
• Annual review and approval of our executive
compensation strategy
• Significant portion of executive compensation
at risk based on corporate performance
• Clawback policy on cash and equity incentive
compensation
• Stock ownership guidelines for executive
officers and non-employee directors
• Multi-year equity award vesting periods for
equity awards
• Independent compensation consultant engaged
by the Talent & Compensation Committee
• 100% independent directors on the Talent &
Compensation Committee
• Limited perquisites
WHAT WE DON’T DO
• No “single trigger” change in control
payments and benefits
• No post-termination retirement or
pension-type non-cash benefits or
perquisites for our executive officers
that are not generally available to our
employees
• No tax gross-ups for change in control
related excise tax payments
• No short sales, hedging, or pledging
of stock ownership positions and
transactions involving derivatives of our
common stock
• No strict benchmarking of compensation
to a specific percentile of our
compensation peer group
Discussion of Our Fiscal 2022 Executive Compensation Program
We align our executive compensation program with our business strategy, consider feedback from our stockholders, and focus
on outcomes that we believe to be key to our success—growth, execution, innovation and disruption. This section provides an
overview of the philosophy, objectives and components of our executive compensation program for fiscal 2022. In addition, we
explain how and why the Talent & Compensation Committee arrived at the specific compensation policies and decisions for
our NEOs during fiscal 2022.
Philosophy and Objectives
Our “Pay for Performance” Philosophy. We operate in a highly competitive business environment within a rapidly evolving and
extremely competitive talent market. To successfully compete and grow our business in this dynamic environment, we need
to recruit, incentivize and retain talented and seasoned technology leaders. Our success is critically dependent on the skills,
acumen and motivation of our executives and employees to rapidly execute at the highest level. To that end, our executive
compensation program is shaped by our “pay for performance” philosophy.
Our Current Objectives. The current objectives of our executive compensation program are to:
• Recruit, incentivize and retain highly qualified executive officers who possess the skills and leadership necessary to grow
our business;
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Splunk 2022 Proxy Statement
• Directly link the incentive compensation for our executive officers with achieving or exceeding our strategic and financial
performance goals;
• Provide meaningful long-term incentives to align the interests of our executive officers with those of our stockholders;
• Reflect our long-term strategy, which includes a financial strategy of disciplined investing for our future growth;
• Promote a healthy approach to risk and sensitivity to underperformance as well as outperformance; and
• Provide compensation packages that are competitive, reasonable and fair relative to peers, the overall market and
performance.
Intense Competition For Talent. We actively compete with other companies in seeking to attract and retain a skilled executive
management team. This is particularly prevalent in our industry, where there are a number of rapidly expanding technology
companies intensely competing for highly qualified candidates in the cloud, security and observability markets. In addition,
the success and prominence of our business in the emerging big data market is increasingly attracting the attention of
competitors and other companies. This has caused us to increase our focus on retaining employees, particularly our
executives, as we are seen as a company with experienced executive talent that has successfully and rapidly scaled our
technology business.
We have responded to this intense competition for talent by implementing compensation policies and practices designed to
motivate our executive officers to pursue our corporate objectives while also incentivizing them to create long-term value
for our stockholders. Our executive compensation program combines short-term and long-term components, including base
salary, annual cash bonuses and long-term equity awards. While challenging to achieve, we believe the Talent & Compensation
Committee has developed an appropriate mix of incentives that attracts, motivates and retains each executive officer.
We regularly review and discuss our executive compensation program with our stockholders. If appropriate, we adjust our
executive compensation program to match the maturity, size, scale and growth of our business. Because our ability to compete
and succeed in this dynamic environment is directly correlated to our ability to recruit, incentivize and retain talented and
seasoned technology executives, we expect to continue to adjust our approach to executive compensation to respond to our
needs and to market conditions as they evolve.
Compensation Process
Role of Talent & Compensation Committee
Pursuant to its charter, the Talent & Compensation Committee is responsible for annually reviewing and approving
compensation arrangements for our executive officers, including our CEO, for reviewing and approving corporate goals and
objectives relevant to these compensation arrangements, evaluating executive performance, and considering factors related
to the performance of the Company, including accomplishment of the Company’s long-term strategic and financial goals.
In evaluating and determining executive officer compensation, the Talent & Compensation Committee also considers the
results of the most recent Say-on-Pay vote and feedback from our stockholders. For additional information about the Talent &
Compensation Committee, see “Corporate Governance at Splunk—Board Meetings and Committees—Talent & Compensation
Committee” in this proxy statement.
In making executive compensation decisions, the Talent & Compensation Committee seeks the assistance of its independent
compensation consultant, Compensia, as well as our CEO and our management team (except with respect to their own
compensation). The Talent & Compensation Committee reviews the cash and equity compensation of our executive officers to
properly incentivize and reward them for their performance.
The Talent & Compensation Committee makes compensation decisions after consideration of several factors, including:
• Feedback from our stockholders;
• The performance and experience of each executive officer;
• The scope and strategic impact of the executive officer’s
responsibilities;
• Our past business performance and future expectations;
• Our long-term goals and strategies;
• The performance of our executive team as a whole;
• The difficulty and cost of replacing high-performing leaders
with in-demand skills;
• The past compensation levels of each individual;
• The relative compensation among our executive officers;
• An analysis of the competitiveness of our compensation
relative to our compensation peer group;
• Recommendations of our CEO; and
• Consultation with its independent compensation consultant
and management.
Executive Compensation
54
Role of Management
The Talent & Compensation Committee consults with members of our management team, including our CEO and our human
resources, finance and legal professionals (except with respect to their own compensation), when making compensation
decisions. Typically, our CEO and other members of our management team provide the Talent & Compensation Committee
with information on corporate and individual performance and their perspective and recommendations on compensation
matters. Our CEO makes recommendations to the Talent & Compensation Committee regarding compensation
matters, including the compensation of our other executive officers. The Talent & Compensation Committee uses these
recommendations as one of several factors in making compensation decisions, and those decisions do not necessarily follow
the CEO’s recommendations.
Role of Compensation Consultant
The Talent & Compensation Committee has the authority to retain the services and obtain the advice of external advisors,
including compensation consultants, legal counsel or other advisors, to assist in the evaluation of executive officer
compensation. For fiscal 2022, the Talent & Compensation Committee engaged Compensia to review our executive
compensation program, policies and practices, to conduct an executive compensation market analysis and to review our long-
term incentive compensation program to help ensure alignment with competitive market practices. Compensia reviewed and
advised on all principal aspects of our executive compensation program for fiscal 2022, including:
• Assisting in updating a peer group of publicly traded companies to be used to help assess our executive compensation;
• Assisting in assuring a competitive compensation framework and consistent executive compensation assessment practices
relevant to a comparable public company at our stage of development;
• Meeting regularly with the Talent & Compensation Committee to review all elements of executive compensation, including
the competitiveness of such compensation elements against those of the companies in our compensation peer group and,
where appropriate, broader compensation surveys;
• The design of our annual cash and long-term PSU program; and
• Assisting in the risk assessment of our compensation programs.
Representatives from Compensia attend the meetings of the Talent & Compensation Committee and communicate with
members of the Talent & Compensation Committee and our management team outside the formal Talent & Compensation
Committee meetings from time to time.
During fiscal 2022, Compensia also performed services for us at the direction of the Talent & Compensation Committee
relating to equity utilization and general Talent & Compensation Committee support. Compensia also provided a competitive
market analysis and advised the Talent & Compensation Committee in connection with compensation decisions related to
the employment of Messrs. Bice and Smith and Ms. Carlson in order to promote alignment between their new roles and the
competitive market for executives in similarly situated roles.
Based on the consideration of the factors specified in the rules of the SEC and the listing standards of The Nasdaq Stock
Market, the Talent & Compensation Committee does not believe that its relationship with Compensia and the work of
Compensia on behalf of the Talent & Compensation Committee has raised any conflict of interest. The Talent & Compensation
Committee reviews these factors on an annual basis. As part of the Talent & Compensation Committee’s determination of
Compensia’s independence, it received written confirmation from Compensia addressing these factors and supporting the
independence determination.
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Splunk 2022 Proxy Statement
Compensation Peer Group
The Talent & Compensation Committee reviews market data of companies that it believes are comparable to us. With
Compensia’s assistance, in December 2020, the Talent & Compensation Committee reviewed and updated our then-existing
compensation peer group for use when making its fiscal 2022 compensation decisions. The peer group consisted primarily
of publicly traded software and software services companies headquartered in the U.S. that generally had revenue between
0.33x and 3.0x of our revenue and/or had a market capitalization between 0.33x and 3.0x of our market capitalization. The
Talent & Compensation Committee referred to compensation data from this compensation peer group when making fiscal
2022 base salary, cash bonus and equity award decisions for our executive officers. The following is a list of the companies
that comprised our fiscal 2022 compensation peer group:
Akamai Technologies
ANSYS
Arista Networks
Autodesk
Citrix Systems
Electronic Arts
Fortinet
Intuit
Palo Alto Networks
ServiceNow
Square
SS&C Technologies
Twitter
Veeva Systems
Verisign
VMWare
Workday
Zillow Group
For fiscal 2022, the Talent & Compensation Committee removed Guidewire Software from, and added Electronic Arts to,
the then-existing compensation peer group based on the criteria described above. The remainder of the peer group was
unchanged.
The Talent & Compensation Committee considers compensation data from our compensation peer group as one of several
factors that informs its judgment of appropriate parameters for compensation levels. The Talent & Compensation Committee
does not strictly benchmark compensation to a specific percentile of our compensation peer group, nor does it apply a
formula or assign relative weightings to specific compensation elements. The Talent & Compensation Committee believes
that over-reliance on benchmarking can result in compensation that is unrelated to the value delivered by our executive
officers because compensation benchmarking does not take into account the specific performance of the executive officers,
the relative size, growth and performance of the Company, or any unique circumstances or strategic considerations of
the Company.
Components of Our Fiscal 2022 Compensation Program
In fiscal 2022, our executive compensation program consisted of the following primary components, all of which are described
in more detail below:
• base salary;
• annual cash bonuses;
• long-term incentive compensation in the form of equity awards; and
• severance and change in control-related payments and benefits.
In addition, where appropriate and consistent with the philosophy and objectives described above, we provided new executive
officers with sign-on bonuses, generally to compensate for imminent compensation payments that would have been forfeited
with their prior employer, as described in this “Compensation Discussion and Analysis” for Ms. Carlson and Mr. Bice for fiscal
2022. We also provide our executive officers with comprehensive employee benefit programs, including medical, dental and
vision insurance, a 401(k) plan with a matching contribution component, life and disability insurance, flexible spending and
health savings accounts, an employee stock purchase plan, a wellbeing program, post-tax hospital indemnity and critical
illness programs, a mental health program and an employee assistance program, all of which are made available to our eligible
employees generally.
We believe these elements provide a compensation package that attracts and retains qualified individuals, links individual
performance to Company performance, focuses the efforts of our NEOs and other executive officers on the achievement of
both our short-term and long-term objectives and aligns the interests of our executive officers with those of our stockholders.
In fiscal 2022 the Talent & Compensation Committee did not exercise discretion to adjust any NEO performance-based
compensation.
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56
The chart below illustrates the short-term and long-term timeframe over which the various components of the NEOs’ fiscal
2022 compensation are earned and paid and designed to retain and incentivize our NEOs, all of which are described in more
detail below. The chart below excludes one-time cash signing bonus payments made to Ms. Carlson and Mr. Bice, as described
further below. In addition, approximately 69% of Ms. Carlson’s RSUs granted in fiscal 2022 were scheduled to vest over
four years, with 25% of the RSUs scheduled to vest on March 10, 2022 and 1/16th of the RSUs scheduled to vest quarterly
thereafter over three years in approximately equal installments. The remaining portion of Ms. Carlson’s RSUs granted in fiscal
2022 were scheduled to vest over three years as shown in the chart below.
January 31, 2022
January 31, 2023
January 31, 2024
March 2024
BASE SALARY
Paid throughout fiscal 2022
CASH BONUS
Fiscal 2022 annual
cash bonus (50% of target
annual cash bonus opportunity
paid in September 2021, and
full fiscal 2022 achievement
determined and paid in
April 2022)
LONG-TERM EQUITY COMPENSATION (RSUs)
Fiscal 2022 awards granted in 2021
(1/3 vested in March 2022, remaining 2/3 vest quarterly thereafter over next two years)
LONG-TERM EQUITY COMPENSATION (PSUs)
Fiscal 2022 awards granted in 2021
(1/3 of earned corporate PSUs vested in March 2022, remaining 2/3 of earned corporate PSUs vest quarterly
thereafter over next two years)
(stock price PSUs eligible to be earned
and to vest beginning in June 2023
on a quarterly basis through the end of
the three-year vesting period of the
corporate PSUs in March 2024)
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Splunk 2022 Proxy Statement
Base Salaries
We pay base salaries to our NEOs to compensate them for their services and provide predictable annual income. The salaries
typically reflect each NEO’s experience, skills, knowledge and responsibilities, although competitive market data also plays a
role in setting salary levels. We do not apply specific formulas to determine salaries or changes in salaries. Instead, the salaries
of our NEOs are reviewed on an annual basis by the Talent & Compensation Committee based on our compensation philosophy
and objectives.
FISCAL 2022 BASE SALARIES
The Talent & Compensation Committee determined the fiscal 2022 base salary of each of our NEOs after considering a
competitive analysis of market data of our compensation peer group provided by Compensia, the recommendations of our
CEO, other than with respect to his own base salary, and other factors described in “Compensation Process—Role of Talent &
Compensation Committee” above. At the beginning of fiscal 2022, the Talent & Compensation Committee increased the base
salaries for each of our then-current NEOs to reflect each individual’s responsibilities and performance and to increase their
base salaries to more market-competitive levels.
The table below sets forth the annualized base salaries for our NEOs for fiscal 2022.
NEO
Base
Salary
Percentage Increase from
Fiscal 2021 Base Salary
Graham Smith
$12,000,000
N/A
Jason Child
$
540,000
11%
Teresa Carlson
$
600,000
N/A
Shawn Bice
$
600,000
N/A
Scott Morgan
$
475,000
10%
Douglas Merritt
$
900,000
6%
Timothy Tully
$
560,000
18%
Mr. Smith became our interim CEO on November 13, 2021 and earned $1,000,000 per month in base salary during his period
of employment with us. Ms. Carlson joined the Company on April 19, 2021, Mr. Bice joined the Company on June 1, 2021, and
Mr. Tully’s employment with the Company terminated on May 4, 2021. Please see “Other Compensation Policies and Information”
below for a more detailed description of how the Talent & Compensation Committee set the initial base salaries for Ms. Carlson
and Mr. Bice.
Given the temporary and transitional nature of Mr. Smith’s role as interim CEO, and his existing meaningful financial stake in the
Company at the time of his transition to interim CEO (including through unvested equity awards received in connection with his
services as a member of our Board), Mr. Smith’s compensation was structured to be simple and to be less than the median CEO
total direct compensation for the CEOs in our compensation peer group. Other than base salary and eligibility to participate in our
standard employee benefits programs applicable to full-time U.S. employees, Mr. Smith received no additional compensation for
his services as interim CEO in fiscal 2022.
Annual Cash Bonuses
A key objective of our compensation philosophy is to tie a significant portion of each NEO’s total direct compensation to company
performance. To help accomplish this objective, we provide annual performance-based cash bonus opportunities for our NEOs,
which are earned based on the Company’s achievement against corporate performance objectives established at the beginning
of the fiscal year. As described above, Mr. Smith did not receive an annual cash bonus opportunity in connection with his services
as interim CEO.
At the beginning of fiscal 2022, our Board approved the Company’s fiscal 2022 operating plan, which included performance
objectives that the Talent & Compensation Committee and our CEO used to design our NEOs’ target cash bonus opportunities
for fiscal 2022. For purposes of our executive bonus plan for fiscal 2022, the Talent & Compensation Committee considered
a number of factors in selecting the performance objectives applicable to our NEOs’ target annual cash bonus opportunities,
including stockholder feedback to consider performance objectives that tie to our business strategy and are appropriate for our
ongoing business transformation to a majority cloud services delivery model. The Talent & Compensation Committee determined
that revenue-related objectives were of critical importance and aligned with the key drivers of success during this phase of our
business model transformation and reflected the health of our business during the transformation.
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58
FISCAL 2022 TARGET ANNUAL CASH BONUS OPPORTUNITIES
As in prior years, the target annual cash bonus opportunities for our NEOs were expressed as a percentage of their respective
base salaries. At the beginning of fiscal 2022, the Talent & Compensation Committee, after considering a competitive analysis of
market data of our compensation peer group provided by Compensia and other factors described in “Compensation Process—
Role of Talent & Compensation Committee” above, and in consultation with Mr. Merritt (other than with respect to his own
target annual cash bonus opportunity), increased the target cash bonus opportunity percentages for Messrs. Child, Morgan
and Tully. The Talent & Compensation Committee decided to maintain the percentage for Mr. Merritt’s target annual cash bonus
opportunity but, due to the base salary increase described above, the dollar amount of the target annual cash bonus opportunity
increased for Mr. Merritt. The table below shows the target annual cash bonus opportunity for each NEO as a percentage of his or
her base salary and as a corresponding dollar amount:
NEO
Fiscal 2022
Target Bonus as a
Percentage of Salary
Fiscal 2022
Target Bonus as a
Dollar Amount
Increase from Fiscal
2021 Target Bonus
as a Percentage of Salary
Graham Smith
—
—
—
Jason Child
100%
$ 540,000
20%
Teresa Carlson
100%
$ 600,000
—
Shawn Bice
100%
$ 600,000
—
Scott Morgan
80%
$ 380,000
10%
Douglas Merritt
125%
$ 1,125,000
0%
Timothy Tully
100%
$ 560,000
20%
As described above, Mr. Smith was not eligible for an annual cash bonus. The dollar amounts shown above are on an annualized
basis, and fiscal 2022 bonuses were capped at 200% of target for our NEOs. Ms. Carlson joined the Company on April 19, 2021
and Mr. Bice joined the Company on June 1, 2021, and both received prorated annual cash bonus opportunities for fiscal 2022.
Mr. Tully’s employment with the Company terminated on May 4, 2021, at which time he forfeited his fiscal 2022 annual cash
bonus opportunity. Please see “Other Compensation Policies and Information” below for a more detailed description of how
the Talent & Compensation Committee set the initial annual cash bonus opportunities for Ms. Carlson and Mr. Bice.
FISCAL 2022 PERFORMANCE OBJECTIVES
For purposes of the executive bonus plan, in March 2021, the Talent & Compensation Committee selected ARR as the
performance metric for fiscal 2022. ARR represents the annualized revenue run-rate of active cloud services, term license
and maintenance contracts at the end of a reporting period as reported in our Annual Report on Form 10-K for fiscal 2022, but
excluding any ARR recognized during the performance period from acquisitions made during fiscal 2022.
In March 2021, the Talent & Compensation Committee, in order to motivate Mr. Merritt and our other then-current NEOs to
continue to grow and develop our business during our business model transformation, established a target level for ARR
performance for fiscal 2022 that it considered very aggressive, yet achievable with focused effort and execution by our NEOs,
and that reflected a rigorous increase in growth relative to our prior fiscal year ARR achievement. For example, our fiscal
2022 ARR target established in March 2021 reflected an increase of 28% over our fiscal 2021 ARR results, and maximum
achievement required an increase of 33% or more over our fiscal 2021 ARR results. These performance target levels were
selected and designed to drive increased ARR, which the Talent & Compensation Committee believed would increase
stockholder value consistent with our overall growth strategy.
Executive Compensation
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Splunk 2022 Proxy Statement
As noted above, the target annual cash bonus opportunities for our NEOs were based on our ARR performance. The following
chart presents the tiers of the bonus payout multiples relative to the target annual cash bonus opportunity based on ARR
achievement (with linear interpolation in between tiers).
Fiscal 2022 ARR
(in millions)(1)
YoY ARR
Growth
Bonus Payout Multiple
Relative to Target
Max
$3,145 or more
33%
200%
$3,121
32%
175%
$3,098
31%
150%
$3,074
30%
125%
Target
$3,027
28%
100%
$3,003
27%
88%
$2,980
26%
75%
Threshold
$2,956
25%
50%
Less than $2,956
Less than 25%
0%
(1) Excluding ARR recognized during the fiscal year from acquisitions made during the fiscal year.
FISCAL 2022 CASH BONUS PAYMENTS
Following the second quarter of fiscal 2022, the Talent & Compensation Committee reviewed our ARR performance against
the ARR target applicable to the target annual cash bonus opportunities of our NEOs. The Talent & Compensation Committee
determined that we were on track to achieve or exceed our fiscal 2022 ARR target. Accordingly, the Talent & Compensation
Committee approved semi-annual bonus payments of 50% of each of these NEO’s fiscal 2022 target annual cash bonus
opportunities, with Ms. Carlson’s and Mr. Bice’s bonus payment amounts prorated based on the number of days in the first
half of fiscal 2022 they were employed with us. After the conclusion of fiscal 2022, the Talent & Compensation Committee
evaluated our performance against the ARR target for the full fiscal year. The Talent & Compensation Committee determined
that we had achieved ARR of approximately $3.12 billion, which represented an approximately 32% increase from our fiscal
2021 ARR. The Talent & Compensation Committee excluded the impact of acquisitions in fiscal 2022 from the ARR metric in
accordance with the terms of the fiscal 2022 annual bonus plan. In accordance with the payout multiples established under
the executive bonus plan, the Talent & Compensation Committee approved a bonus payment to Messrs. Bice, Child, Merritt
and Morgan and Ms. Carlson in an amount that resulted in a total fiscal 2022 bonus payment for each equaling 167.72% of
the NEO’s respective fiscal 2022 target annual cash bonus opportunity. Mr. Smith was not eligible for an annual cash bonus.
Mr. Tully’s employment with the Company terminated on May 4, 2021, and he did not receive an annual cash bonus.
As described under “Executive Summary—Recent Fiscal 2023 Compensation Decisions,” above, in response to stockholder
feedback, in fiscal 2023 we eliminated overlapping metrics in our annual executive bonus plan and our PSU program. In order
to motivate and incentivize our executives to drive top-line growth in our business while enhancing their focus on specific
financial goals considered important to the Company’s long-term growth, our fiscal 2023 annual executive bonus plan uses
ARR and operating cash flow metrics.
The following table summarizes the target and actual annual cash bonus payments made to our NEOs for fiscal 2022 (prorated
for Ms. Carlson and Mr. Bice based on their fiscal 2022 employment start dates):
NEO
Fiscal 2022
Target Bonus as a
Dollar Amount
Fiscal 2022
Cash Bonus Paid
Graham Smith
—
—
Jason Child
$ 540,000
$ 905,688
Teresa Carlson
$ 473,425
$
794,028
Shawn Bice
$ 402,740
$
675,475
Scott Morgan
$ 380,000
$
637,336
Douglas Merritt
$1,125,000
$ 1,886,850
Timothy Tully
$ 560,000
$
0
Executive Compensation
60
Long-Term Equity Compensation
Our equity compensation program focuses the efforts of our NEOs and other executive officers on the achievement of long-
term objectives and aligns the interests of our executive officers with those of our stockholders through the grant of equity
awards, the value of which depends on our stock price performance and other performance metrics, to achieve strong long-
term performance.
In fiscal 2022, these equity awards consisted of time-based RSUs and performance-based PSUs. We believe that RSUs offer
predictable value delivery and promote retention of our executive officers while aligning their interests with the long-term
interests of our stockholders in a manner consistent with competitive market practices. We believe that the fiscal 2022 PSUs
described below directly link a significant portion of our executive officers’ target total direct compensation to our financial
and stock price performance based on the achievement of multiple, distinct and pre-established financial and stock price
performance metrics. Together, RSUs and PSUs are important tools to motivate and retain our highly valuable executive
officers, since the value of the awards is delivered to our executive officers over three- or four-year periods, subject to their
continued service. We may modify our equity award program from one fiscal year to the next, including performance targets,
for our executive officers, including our NEOs, to continue to maintain a strong alignment of their interests with the interests
of our stockholders. As described in more detail above under “Executive Summary—Recent Fiscal 2023 Compensation
Decisions,” due to the successful progression of our business transformation, our business has matured and our financial
results have become more predictable, enabling us to respond to stockholder feedback and initiate, in fiscal 2023, a transition
to a PSU program with a three-year relative total stockholder return performance metric with interim earning opportunities.
In fiscal 2022, the Talent & Compensation Committee, in consultation with Mr. Merritt (other than with respect to his own
equity awards) and Compensia determined the size, mix, material terms and, in the case of PSUs, performance metrics of the
equity awards granted to our executive officers, after taking into account the factors described in “Compensation Process—
Role of Talent & Compensation Committee” above.
FISCAL 2022 EQUITY AWARDS
Annual Equity Awards. In March 2021, the Talent & Compensation Committee granted RSUs and PSUs to each of our then-
current NEOs. As described above, Mr. Smith did not receive an equity award in connection with his employment as our
interim CEO and therefore does not hold any PSUs or, other than the RSUs granted to him in connection with his service as a
member of our Board, any RSUs. The Talent & Compensation Committee granted RSUs and PSUs to Ms. Carlson and Mr. Bice in
connection with the commencement of their employment with us in April 2021 and June 2021, respectively, after taking into
account the factors described in “Compensation Process—Role of Talent & Compensation Committee,” above. The following
table sets forth the number of shares of our common stock subject to the RSUs and PSUs granted to each NEO in March 2021
or, if applicable, in connection with the commencement of their employment.
NEO
Nature of
Equity Awards
Percentage of
Award as RSUs
RSUs
(number of shares)
Percentage of
Award as PSUs
Target PSUs
(number of shares)
Total
Target Value
($)
Graham Smith
—
—
—
—
—
—
Jason Child
Annual
40%
22,426
60%
33,639
8,565,464
Teresa Carlson
New Hire
68%
72,164
32%
33,765
14,773,270
Shawn Bice
New Hire
40%
33,898
60%
50,848
11,222,763
Scott Morgan
Annual
40%
14,138
60%
21,207
5,399,953
Douglas Merritt
Annual
40%
48,752
60%
73,129
18,620,603
Timothy Tully
Annual
40%
22,426
60%
33,639
8,565,464
The target number of shares of our common stock subject to the fiscal 2022 PSUs represents the number of shares eligible to
be earned and subsequently eligible to vest based on the target level performance of both the ARR metric and the operating
cash flow metric, described below, for fiscal 2022, without giving effect to the stock price modifier, described below. Please
see “Other Compensation Policies and Information” below for a more detailed description of how the Talent & Compensation
Committee determined the initial equity grants for Ms. Carlson and Mr. Bice.
Each grant to our NEOs in fiscal 2022 was made by the Talent & Compensation Committee in consultation with Compensia
and after taking into account a competitive market analysis prepared by Compensia, as well the factors described in
“Compensation Process—Role of Talent & Compensation Committee” above.
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Splunk 2022 Proxy Statement
The RSUs granted to our NEOs in fiscal 2022 vest over three years with approximately 33.33% vesting on March 10, 2022, and
approximately 66.66% vesting quarterly thereafter over the remaining two years in approximately equal installments, subject
to the NEO’s continued service with us on each vesting date. For Ms. Carlson, approximately 69% of the RSUs granted to her
in fiscal 2022 were scheduled to vest over four years, with approximately 25% scheduled to vest on March 10, 2022, and
approximately 75% scheduled to vest quarterly thereafter over the remaining three years in approximately equal installments.
The PSUs granted to our NEOs in fiscal 2022 vest over three years and may be earned based on our actual performance
as measured against corporate performance metrics (corporate PSUs) and a stock price performance modifier (stock
price PSUs). The corporate performance metrics have a one-year performance period, with approximately 33.33% of any
earned corporate PSUs vesting following the end of the performance period and after certification of financial results,
and approximately 66.66% vesting quarterly thereafter over the remaining two years in approximately equal installments,
subject to the NEO’s continued service with us on each vesting date. In order to further align the interests of our NEOs and
stockholders, a modifier to any earned corporate PSUs provides an opportunity to earn additional PSUs based on our stock
price growth rate over a multi-year performance period. Other terms and conditions are described in the “Fiscal 2022 PSU
Award Design” section below. The target number of shares of our common stock subject to the fiscal 2022 PSUs shown in the
table above represents the number of shares eligible to be earned and subsequently eligible to vest based on the target level
performance of both the ARR metric and the operating cash flow metric for fiscal 2022, without giving effect to the stock
price modifier.
Prior to fiscal 2022, the RSUs and PSUs granted to our executive officers vested over four years. The change to three-year
vesting of RSUs granted to our executive officers, including our NEOs, beginning with fiscal 2022 aligns with the vesting
schedule for the rest of our employees and allows us to better attract and retain talent in the highly competitive business
environment and extremely competitive talent market in which we operate.
Fiscal 2022 PSU Award Design. The principal terms and conditions of the fiscal 2022 PSUs, as well as the rationale for our
design approach, are set forth in the following table. As described in more detail above under “Executive Summary—Recent
Fiscal 2023 Compensation Decisions,” due to the successful progression of our business transformation, our business has
matured and our financial results have become more predictable, enabling us to respond to stockholder feedback and initiate,
in fiscal 2023, a transition to a PSU program with a three-year relative total stockholder return performance metric with interim
earning opportunities.
PSU Feature
Our Approach
Our Rationale
Corporate PSUs
Corporate
Performance
Metrics
• Two corporate metrics–60% based on ARR
achievement and 40% based on operating cash
flow achievement
• Motivate and incentivize our executives to drive
top-line growth in our business while enhancing their
focus on specific financial goals considered important
to our long-term growth
Corporate
Performance
Metric (ARR)
• ARR represents the annualized revenue
run-rate of active cloud services, term
license and maintenance contracts at the
end of a reporting period, as reported in our
Annual Report on Form 10-K for fiscal 2022,
but excluding any ARR recognized from
acquisitions made during fiscal 2022
• Use of ARR as a performance metric in both our fiscal
2022 PSUs and our executive bonus plan in fiscal
2022 underscored the importance of top-line growth.
In fiscal 2022, ARR was a key driver of stockholder
value during our ongoing business transformation
to a majority cloud services delivery model and a
key performance metric to assess the health and
trajectory of our business and the success of our
business model transformation
Corporate
Performance
Metric (OCF)
• The operating cash flow metric is determined
under GAAP, but excluding the impact from any
acquisitions made during fiscal 2022
• Use of operating cash flow as a performance metric
in the fiscal 2022 PSUs reflects focus on disciplined
execution of our business objectives during our
ongoing business transformation to a majority cloud
services delivery model
• Belief that our strategy of investing in our business
for growth is appropriate given the significant market
opportunity available to us
Executive Compensation
62
PSU Feature
Our Approach
Our Rationale
Corporate PSUs
Target Levels
for Corporate
Performance
Metrics
• Very aggressive, yet achievable with focused
effort and execution, target ARR and operating
cash flow metrics, which are described below
• Target ARR for fiscal 2022 reflected an
increase of 28% over our fiscal 2021 ARR
results, and maximum achievement required an
increase of 33% or more over our fiscal 2021
ARR results
• Align the interests of our executives with those of
our stockholders through performance targets that
correlate with key drivers of stockholder value
• Minimum (threshold) and maximum performance
levels provide accountability for underperformance
and incentive for overperformance
• Capped, maximum payouts only possible when we
have exceptional performance
Corporate
Performance
Period
• One-year performance period for corporate
performance metrics in fiscal 2022
• Earned corporate PSUs will not fully vest until
approximately three years after March 2021,
thus placing awards at-risk for a prolonged
period
• Our rapid growth and ongoing transition to a majority
cloud services delivery model has historically made
performance difficult to estimate over a longer period
• Allows for adjusted priorities in a rapidly changing
competitive business environment
• Risk of setting inappropriate target levels that may
not align with our stockholders’ interests if we were to
project more than one year in advance
Corporate PSU
Vesting
Schedule
• Approximately 33.33% of earned corporate
PSUs vested following the end of the one-
year performance period after certification of
financial results
• Remainder will vest quarterly over the next
two years in approximately equal installments,
subject to continued service through each
vesting date
• Time-based vesting schedule for earned corporate
PSUs provides additional long-term retention
incentives and encourages our NEOs to take a long-
term view of our business
Stock Price
Modifier
• Up to an additional 50% of the number of
earned corporate PSUs, or stock price PSUs,
can be earned if our stock price growth rate is
(a) equal to or greater than that of the SPDR
S&P Software & Services ETF (XSW) (or its
successor) stock price growth rate and (b)
at least 33.10%, in each case on the relevant
measurement date (as described below)
• Stock price growth rate is measured over
a three-year performance period through
March 2024, with stock price PSUs eligible
to be earned quarterly in four installments
beginning in June 2023, if the stock price
hurdles are achieved through the relevant
quarterly measurement date
• For each of the first three quarterly
measurement dates, no more than 25% of the
stock price PSUs may be earned
• Requiring our stock price to outperform an index of
other software and services companies as a threshold
in order for any additional PSUs to be earned helps
reward our relative performance, not just stock
market performance
• Below-index stockholder returns will not be rewarded
• Aligns the interests of our NEOs and stockholders, and
rewards, retains and incentivizes our NEOs for above-
market stockholder returns
• Eligibility for any stock price PSUs to be earned does
not begin until over two years after March 2021, and
for each of the first three quarterly measurement
dates, the number of stock price PSUs eligible to be
earned is capped at 25% of the number of stock price
PSUs, providing long-term incentive and alignment
Executive Compensation
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Splunk 2022 Proxy Statement
FISCAL 2022 PERFORMANCE OBJECTIVES
The following chart presents the tiers of the ARR metric payout multiples at target and relative to target (with linear
interpolation in between tiers) approved by the Talent & Compensation Committee in March 2021.
Fiscal 2022 ARR
(in millions)(1)
YoY ARR
Growth
Payout Multiple
Relative to Target
Max
$3,145 or more
33%
200%
$3,121
32%
175%
$3,098
31%
150%
$3,074
30%
125%
Target
$3,027
28%
100%
$3,003
27%
88%
$2,980
26%
75%
Threshold
$2,956
25%
50%
Less than $2,956
Less than 25%
0%
(1) Excluding ARR recognized during the fiscal year from acquisitions made during the fiscal year.
The following chart presents the tiers of the operating cash flow metric payout multiples at target and relative to target (with
linear interpolation in between tiers) approved by the Talent & Compensation Committee in March 2021.
Fiscal 2022
Operating Cash Flow
(in millions)(1)
Payout Multiple
Relative to Target
Max
$150
200%
$120
150%
$100
125%
Target
$80
100%
$60
75%
Threshold
$40
50%
Less than $40
0%
(1) Excluding the impact of acquisitions made during the fiscal year.
A summary of the stock price modifier approved by the Talent & Compensation Committee in March 2021 is shown below.
Company Stock
Price Growth Rate
Stock Price Modifier
Relative to Earned
Corporate PSUs (with
linear interpolation
in between tiers)
Company stock price growth rate must be at least equal to or greater than SPDR S&P
Software & Services ETF (XSW) stock price growth rate and achieve the following
Company stock price growth rate through the relevant measurement date
52.09%
(or $254.17)
50%
33.10% or below
(or $222.44 or below)
0%
Earned Corporate PSU Awards. In fiscal 2022, we achieved ARR of approximately $3.12 billion, which represented an
approximately 32% increase from our fiscal 2021 ARR, and operating cash flow of approximately $128.0 million. The Talent &
Compensation Committee excluded the impact of acquisitions in fiscal 2022 from both the ARR metric and the operating cash
flow metric in accordance with the terms of the fiscal 2022 PSUs.
Executive Compensation
64
Based on our actual performance, the Talent & Compensation Committee determined that 167.97% of each NEO’s target PSU
award was earned as corporate PSUs. The following chart summarizes the target and actual number of corporate PSUs earned
by each NEO:
NEO
Target PSUs
(number of shares)
Number of Earned Corporate
PSUs (number of shares)
Graham Smith
—
—
Jason Child
33,639
56,503
Teresa Carlson
33,765
56,715
Shawn Bice
50,848
85,409
Scott Morgan
21,207
35,621
Douglas Merritt
73,129
122,834
Timothy Tully
33,639
0
In connection with Mr. Tully’s termination of employment with the Company on May 4, 2021, his unearned fiscal 2022
corporate PSUs and fiscal 2022 stock price PSUs were forfeited in accordance with the terms of his PSU award agreement.
The following chart presents the number of stock price PSUs that will be eligible to be earned and vest beginning in June 2023
through March 2024, as described above:
NEO
Number of Stock Price PSUs
Eligible to be Earned
Graham Smith
—
Jason Child
28,251
Teresa Carlson
28,357
Shawn Bice
42,704
Scott Morgan
17,810
Douglas Merritt
61,417
Timothy Tully
—
In connection with their respective terminations of employment with the Company on March 31, 2022, Mr. Merritt’s and
Ms. Carlson’s fiscal 2022 stock price PSUs were forfeited in accordance with the terms of their PSU award agreements.
PAYOUT OF FISCAL 2019 AND FISCAL 2020 STOCK PRICE PSUs
Stock Price PSUs. As previously disclosed, the fiscal 2019 and fiscal 2020 PSU programs included an overall modifier to any
earned corporate PSUs that provided for an opportunity to earn additional stock price PSUs beginning in June 2020 and
June 2021, respectively, depending on the Company’s stock price growth rate as compared to the SPDR S&P Software &
Services ETF (XSW) since March 2018 and March 2019, respectively. Based on the Company’s stock price growth rate, no
stock price PSUs were earned under the fiscal 2019 and fiscal 2020 PSU programs during fiscal 2022.
As described in more detail above under “Executive Summary—Recent Fiscal 2023 Compensation Decisions,” due to the
successful progression of our business transformation, our business has matured and our financial results have become more
predictable, enabling us to respond to stockholder feedback and initiate, in fiscal 2023, a transition to a PSU program with a
three-year relative total stockholder return performance metric with interim earning opportunities. The minimum (threshold),
target and maximum relative total stockholder return metrics for the fiscal 2023 PSUs are the 25th, 55th and 75th percentile,
respectively, compared to the SPDR S&P Software & Services ETF (XSW). Payouts under fiscal 2023 PSUs are capped at the
target level if the Company’s absolute relative total stockholder return is negative.
Severance and Change in Control-Related Benefits
Our NEOs other than Mr. Smith are provided certain protections in their employment letters and equity award agreements
in the event of their termination of employment under specified circumstances, including in connection with a change in
control of the Company. We believe that these protections serve our retention objectives by permitting our NEOs to maintain
continued focus and dedication to their responsibilities in order to maximize stockholder value, including in the event of a
transaction that could result in a change in control of the Company. The chart below describes the material terms of these
benefits for our NEOs, including Mr. Merritt in his role as a strategic advisor to our interim CEO.
Executive Compensation
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Splunk 2022 Proxy Statement
Triggering Event(s)
Benefits
Employment is terminated
without cause or the NEO
resigns for good reason,
within either six months
before or 18 months after
a Company change in
control
• A lump sum payment equal to 12 months of the NEO’s then-current base salary (24 months, in
the case of Mr. Merritt), plus 100% of the NEO’s annual target bonus for the year of termination
(24 months of annual target bonus plus a pro-rated portion of annual target bonus for the year
of termination, in the case of Mr. Merritt), less any amounts already paid for such year;
• Payment by us for up to 12 months of COBRA premiums to continue health insurance coverage
for the NEO and eligible dependents (18 months, in the case of Mr. Merritt), or a lump sum
payment of $24,000 ($36,000, in the case of Mr. Merritt) if paying for COBRA premiums would
result in an excise tax to us;
• Outstanding PSU awards for which the one-year corporate performance period has
not completed will be deemed performance-vested at target levels for such corporate
performance period as further described below, and all equity awards subject only to time-
vesting conditions will become 100% time-vested;
• Six-month post-termination exercise period for the NEO’s outstanding stock options.
In each case subject to the NEO timely signing a release of claims in favor of the Company that
becomes effective.
Employment is terminated
without cause, other
than in connection with
a Company change in
control as described
above
• A lump sum payment equal to six months of the NEO’s then-current base salary (18 months, in
the case of Mr. Merritt), plus a pro-rated portion of the NEO’s annual target bonus for the year of
termination, less any amounts already paid for such year;
• Payment by us for up to six months of COBRA premiums to continue health insurance coverage
for the NEO and eligible dependents (12 months, in the case of Mr. Merritt), or a lump sum
payment of $12,000 ($24,000, in the case of Mr. Merritt) if paying for COBRA premiums would
result in an excise tax to us;
• Outstanding PSU awards for which the one-year corporate performance period has
not completed will be deemed performance-vested at target levels for such corporate
performance period, and all equity awards subject only to time-vesting conditions that would
have vested in the six-month period following termination will accelerate vesting (12 months, in
the case of Mr. Merritt); and
• Six-month post-termination exercise period for the NEO’s outstanding stock options.
In each case subject to the NEO timely signing a release of claims in favor of the Company that
becomes effective.
Effective November 30, 2021, shortly after Mr. Merritt’s employment as our President and
CEO was terminated and Mr. Smith was appointed as interim CEO, the Talent & Compensation
Committee temporarily increased the severance payments and benefits described above
for our NEOs until the 12-month anniversary of the start date of the first new (non-interim)
CEO as follows. If the relevant termination of employment occurs on or before the 12-month
anniversary of the start date of the first new (non-interim) CEO, (1) the portion of the NEO’s lump
sum severance payment equal to six months of then-current base salary increased from six to
12 months, (2) the payment by us for up to six months of the NEO’s COBRA premiums, or a lump
sum payment of $12,000 in lieu thereof as described above, increased to 12 months and $24,000,
respectively, and (3) the six months of accelerated vesting of the NEO’s outstanding equity awards
as described above increased to 12 months. The Talent & Compensation Committee believes that
such temporary enhanced severance payments and benefits serve our retention objectives by
permitting our NEOs to maintain continued focus and dedication to their responsibilities in order
to maximize stockholder value during the CEO transition. These temporary enhanced severance
arrangements do not apply to Mr. Smith or Mr. Merritt. As noted above, Gary Steele was appointed
President and CEO effective April 11, 2022. Consequently, these temporary enhanced severance
arrangements will expire effective April 11, 2023.
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In the event of a Company change in control, (1) outstanding PSU awards for which the one-year corporate performance
period has not been completed will be deemed earned at target levels for such corporate performance period, and will only
be subject to the time-based vesting conditions applicable to such corporate PSUs; (2) outstanding stock price PSUs will be
deemed earned based on stock price growth measured through the date of the change in control, and will become subject to
the same time-based vesting conditions as the corporate PSUs to which they relate; and (3) if the successor corporation does
not assume or substitute for an equity award, the award will fully vest and, with respect to awards with performance-based
vesting conditions, all performance metrics or other vesting criteria will be deemed achieved at 100% of target levels and all
other terms and conditions will be deemed met.
In addition, in the event any of the payments provided for under their employment letters, or otherwise payable to an NEO,
would constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (the “Tax Code”), and would be subject to the related excise tax under Section 4999 of the Tax Code, he or she would
be entitled to receive either full payment of the benefits or such lesser amount which would result in no portion of the benefits
being subject to the excise tax, whichever results in the greater amount of after-tax benefits to such NEO. No employment
letter with any of our NEOs provides for any excise tax reimbursement or “gross-up” payments.
Under our 2012 Plan, our employees, including our executive officers, and our non-employee directors are entitled to vesting
acceleration benefits for their outstanding and unvested equity awards in the event of their death. See “Compensation
Tables—Equity Acceleration Death Benefit” below for further information.
See page 51 for a description of the treatment of our fiscal 2023 PSUs in the event of a Company change in control.
Other Compensation Policies and Information
Employment Letter with Mr. Smith
As described above, we entered into an employment letter with Mr. Smith in connection with his appointment as our interim
CEO, effective as of November 13, 2021. Mr. Smith’s base salary for the term he served as interim CEO was at a rate of
$1,000,000 per month. Mr. Smith also was eligible to participate in our standard employee benefit programs applicable to
full-time U.S. employees. Other than this base salary and standard benefit programs, Mr. Smith was not eligible to receive
additional compensation for his services as interim CEO. Given the temporary and transitional nature of Mr. Smith’s role as
interim CEO, and his existing meaningful financial stake in the Company at the time of his transition to interim CEO (including
through unvested equity awards received in connection with his services as a member of our Board), Mr. Smith’s compensation
was structured to be simple and to be less than the median CEO total direct compensation for the CEOs in our compensation
peer group. During his term as interim CEO, Mr. Smith’s equity awards previously granted to him in connection with his services
as a member of our Board continued to vest, and he did not receive any other compensation for his services as a member of
our Board. Mr. Smith ceased serving as our interim CEO on April 11, 2022, upon the employment start date of Mr. Steele as our
President and Chief Executive Officer.
Amendment to Employment Letter with Mr. Merritt
As described above, on November 13, 2021, our Board terminated Mr. Merritt as our President and CEO, and Mr. Merritt agreed
to continue his employment with us as a strategic advisor to our interim CEO. If Mr. Merritt had not agreed to continue his
employment as a strategic advisor to our interim CEO, our Board’s termination of his employment as our President and CEO
would have constituted a termination of his employment by us without “cause” under Section 7(b) of our employment letter
with him, and given rise to the corresponding severance payments and benefits under the employment letter immediately
upon such termination in November 2021. However, in order to facilitate a smooth transition and continued business
operations during a critical transformation period without interruption, our Board negotiated to retain Mr. Merritt as a strategic
advisor to our interim CEO.
To encourage Mr. Merritt to continue employment with us as a strategic advisor to our interim CEO following our Board’s
termination of him as our President and CEO, on November 22, 2021 we entered into an amendment to Mr. Merritt’s
employment letter dated November 16, 2015, as amended by letter agreements effective as of March 20, 2019 and April 24,
2020, pursuant to which Mr. Merritt resigned from our Board and confirmed his position as a strategic advisor to our interim
CEO and we maintained his then-existing level of compensation, including continued vesting of outstanding equity awards,
during his employment as a strategic advisor to our interim CEO. During his employment as a strategic advisor to our interim
CEO, Mr. Merritt served a crucial role and he helped facilitate a smooth leadership transition to our interim CEO. He served
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as a valuable resource to our interim CEO, helping to retain senior executives, preserving the commitment and engagement
of our employees, partners and customers during a critical transformation period for the Company, and helping to lead our
go-to-market efforts during the Company’s historically most important fourth quarter, which allowed our interim CEO to focus
on other operational matters and the important task of recruiting a new President and CEO. Without Mr. Merritt’s employment
as a strategic advisor to our interim CEO through this critical transformation period, our ability to drive our ongoing business
transformation and our sales performance may have been jeopardized.
Compensation Arrangements with Ms. Carlson
Signing Bonus for Ms. Carlson. In fiscal 2022, pursuant to her employment letter, Ms. Carlson received a cash signing bonus in the
amount of $3,250,000. The bonus is approximately equal to an imminent compensation opportunity Ms. Carlson forfeited when
she separated from her prior employer. If Ms. Carlson voluntarily resigned from the Company for any reason within 12 months
following her employment start date, she would have had to reimburse the Company 100% of the bonus. If Ms. Carlson voluntarily
resigned from the Company after the 12-month anniversary of her employment start date, she would have had to reimburse the
Company up to 50% of the bonus on a prorated basis with the proration factor determined by subtracting the number of months
completed after the 12-month anniversary of her employment start date from 12 and dividing the result by 12.
New Hire Equity Awards. Ms. Carlson was also granted 72,164 RSUs and 33,765 target PSUs in connection with her hiring.
With respect to the RSUs, 49,654 RSUs were scheduled to vest over four years, with one-fourth of such RSUs vesting on
March 10, 2022 and 1/16th of the RSUs vesting quarterly thereafter in approximately equal installments, subject to continued
service with the Company on each vesting date; and 22,510 RSUs were scheduled to vest over three years, with one-third of
the RSUs vesting on March 10, 2022, and 1/12th vesting quarterly thereafter in approximately equal installments over the
remaining two years, subject to continued service to the Company. On March 24, 2022, 167.97% of such target PSUs were
earned as corporate PSUs and one-third vested based on Company performance for fiscal 2022. The remainder of such PSUs
were scheduled to vest quarterly over two years in approximately equal installments, subject to continued service with the
Company on each vesting date.
In considering Ms. Carlson’s initial compensation arrangements, including her signing bonus, the Talent & Compensation
Committee took into account the highly competitive business environment and extremely competitive talent market in which
we operate and a competitive market analysis prepared by Compensia, as well the other factors described in “Discussion of
Our Fiscal 2022 Executive Compensation Program—Compensation Process—Role of Talent & Compensation Committee”
above. To successfully compete and grow our business in this dynamic environment, we need to recruit, incentivize and
retain talented and seasoned technology leaders. Our success critically depends on the skill, acumen and motivation of
our executives and employees to rapidly execute at the highest level. The Talent & Compensation Committee also took into
account the substantial effort, focus and commitment required of Ms. Carlson to achieve the Company’s strategic business
goals and to transition into her new role as President and Chief Growth Officer of the Company, leading our efforts to align and
drive our ongoing business transformations across our go-to-market segments. The Talent & Compensation Committee was
also mindful of Ms. Carlson’s prior experience as well as the substantial future compensation opportunities she forfeited when
she separated from her prior employer. Prior to joining the Company, Ms. Carlson served as Vice President, Worldwide Public
Sector and Industries, for Amazon Web Services, Inc. (“AWS”). After she founded AWS’s Worldwide Public Sector in 2010,
Ms. Carlson’s role eventually expanded to include financial services, energy services, telecommunications, and aerospace and
services industry business units.
Ms. Carlson’s employment with us terminated on March 31, 2022; this termination constituted a termination of her
employment by us without “cause” under Section 8(b) of her employment letter with us, and gave rise to the corresponding
severance payments and benefits under her employment letter, which are described in further detail above under “Discussion
of Our Fiscal 2022 Executive Compensation Program—Components of Our Fiscal 2022 Compensation Program—Severance
and Change in Control-Related Benefits”.
Compensation Arrangements with Mr. Bice
Signing Bonus for Mr. Bice. In fiscal 2022, pursuant to his employment letter, Mr. Bice received a cash signing bonus in the
amount of $8,500,000. The bonus is approximately equal to an imminent compensation opportunity Mr. Bice forfeited when
he separated from his prior employer. If Mr. Bice voluntarily resigns from the Company for any reason within 12 months
following his employment start date, he must reimburse the Company 100% of the bonus. If Mr. Bice voluntarily resigns from
the Company after the 12-month anniversary of his employment start date, he must reimburse the Company up to 50% of
the bonus on a prorated basis with the proration factor determined by subtracting the number of months completed after the
12-month anniversary of his employment start date from 12 and dividing the result by 12.
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New Hire Equity Awards. Mr. Bice was also granted 33,898 RSUs and 50,848 target PSUs in connection with his hiring. The
RSUs vest over three years, with one-third of the RSUs vesting on March 10, 2022, and 1/12th vesting quarterly thereafter over
the remaining two years in approximately equal installments, subject to continued service with the Company on each vesting
date. On March 24, 2022, 167.97% of such target PSUs were earned as corporate PSUs and approximately one-third vested
based on Company performance for fiscal 2022. The remainder of his PSUs vest quarterly over two years in approximately
equal installments, subject to continued service with the Company on each vesting date.
In considering Mr. Bice’s initial compensation arrangements, including his signing bonus, the Talent & Compensation
Committee took into account the highly competitive business environment and extremely competitive talent market in which
we operate and a competitive market analysis prepared by Compensia, as well the other factors described in “Discussion of
Our Fiscal 2022 Executive Compensation Program—Compensation Process—Role of Talent & Compensation Committee”
above. To successfully compete and grow our business in this dynamic environment, we need to recruit, incentivize and
retain talented and seasoned technology leaders. Our success critically depends on the skill, acumen and motivation of our
executives and employees to rapidly execute at the highest level. The Talent & Compensation Committee considered the
significant value Mr. Bice would bring to the Company as a result of his deep technical and engineering leadership experience,
his many years of proven growth at scale, as well as his direct experience with transformation to the cloud. The Talent &
Compensation Committee also took into account the substantial effort, focus and commitment required of Mr. Bice to achieve
the Company’s strategic business goals and to transition into his new role as President of Products & Technology, with overall
responsibility for Product, Engineering, Design, Architecture, Chief Technology Officer, Chief Information Officer and Chief
Information Security Officer functions. The Talent & Compensation Committee was also mindful of Mr. Bice’s prior experience
as well as the substantial future compensation opportunities he forfeited when he separated from his prior employer. With
previous leadership roles at AWS and Microsoft, Mr. Bice brings nearly 25 years of expertise in managing massive data
operations and native cloud services at scale. With respect to Mr. Bice’s future compensation, the Talent & Compensation
Committee expects to take into account competitive market analyses prepared by its independent compensation consultant,
as well the other factors described in “Discussion of Our Fiscal 2022 Executive Compensation Program—Compensation
Process—Role of Talent & Compensation Committee” above.
Employee Benefits and Perquisites
Employee Benefits. We provide employee benefits to all eligible employees in the United States, including our NEOs, which the
Talent & Compensation Committee believes are reasonable and consistent with its overall compensation objective to better
enable us to attract and retain highly talented employees. These benefits include medical, dental and vision insurance, a 401(k)
plan with a matching contribution component, life and disability insurance, flexible spending and health savings accounts, an
employee stock purchase plan, a wellbeing program, post-tax hospital indemnity and critical illness programs, a mental health
program and an employee assistance program.
Perquisites and other Personal Benefits. We provide limited perquisites. In fiscal 2022, as in fiscal years prior to the COVID-19
pandemic, we paid for certain spousal expenses to attend business events and related tax gross-ups and have disclosed such
gross-up amounts and the incremental costs of such expenses in our Summary Compensation Table. During the COVID-19
pandemic, we have paid certain limited travel expenses, primarily for travel by our executive officers for events or matters at
the request of the Company, and in order to comply with potential SEC requirements, have disclosed the incremental costs of
such travel expenses in our Summary Compensation Table.
Stock Ownership Guidelines
Our Board believes that our non-employee directors and executive officers should hold a meaningful financial stake in the
Company in order to further align their interests with those of our stockholders. To promote this belief, our Board has adopted
stock ownership guidelines requiring our executive officers to achieve certain stock ownership levels within five years of the
later of September 13, 2018 or such executive officer’s hire, appointment, promotion or election date, as applicable. The
current stock ownership guidelines are set forth below:
• Our CEO must own the lesser of (i) shares of Company common stock with a value of five times his or her annual base salary
and (ii) 50,000 shares; and
• Each other executive officer who reports directly to our CEO must own the lesser of (i) shares of Company common stock
with a value of two times his or her annual base salary and (ii) 12,000 shares.
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The salary multiples above are consistent with current market practices, and the alternative share number thresholds are
intended to provide our executive officers with certainty as to whether the guidelines are met, regardless of our then-current
stock price. If an executive officer fails to meet the ownership guidelines within the applicable compliance period, he or she
will be required to hold 50% of the shares of Company common stock acquired (which will be calculated based on net shares
after taxes) through our equity incentive plans until such time as he or she meets the required ownership guidelines. Unvested
equity awards and unexercised stock options do not count toward meeting the stock ownership guidelines.
As of the end of fiscal 2022, all of our continuing NEOs have met, exceeded, or are on track to meet, these guidelines based on
their current rate of stock accumulations in the time frames set out in the guidelines.
See “Corporate Governance at Splunk—Non-Employee Director Compensation—Stock Ownership Guidelines” for information
about the stock ownership guidelines applicable to our non-employee directors.
Clawback Policy
We have a Clawback Policy pursuant to which we may seek the recovery of cash performance-based incentive compensation
paid by us as well as performance-based equity awards, including PSUs. The Clawback Policy applies to our CEO and to all
officers who report directly to our CEO. The Clawback Policy provides that if (i) we restate our financial statements as a
result of a material error; (ii) the amount of cash incentive compensation or performance-based equity compensation that
was paid or is payable based on achievement of specific financial results paid to a covered individual would have been less
if the financial statements had been correct; (iii) no more than two years have elapsed since the original filing date of the
financial statements upon which the incentive compensation was determined; and (iv) the Talent & Compensation Committee
unanimously concludes, in its sole discretion, that fraud or intentional misconduct by such individual caused the material
error and it would be in our best interests to seek from such individual recovery of the excess compensation (minus taxes
paid or payable by such individual on such excess compensation), then the Talent & Compensation Committee may, in its sole
discretion, seek from such individual repayment to the Company of an amount up to the amount of such excess compensation.
Anti-Hedging and Anti-Pledging Policy; Stock Trading Practices
We maintain an Insider Trading Policy that, among other things, prohibits our executive officers, including our NEOs, from
trading during quarterly and special closed trading windows. The Insider Trading Policy also prohibits our executive officers,
including our NEOs, from engaging in short sales, hedging, swaps, exchange funds and similar transactions designed to
decrease the risks associated with holding the Company’s securities, as well as pledging the Company’s securities as collateral
for loans, transactions involving derivative securities relating to our common stock, and holding Company securities in a margin
account. None of the Company’s subsidiaries have publicly traded equity securities. Our Insider Trading Policy requires all
executive officers subject to Section 16 of the Securities Exchange Act of 1934, as amended (“Section 16 Officers”), including
our NEOs, to obtain written pre-clearance from the Insider Trading Compliance Officer or his or her designee prior to buying,
selling, or engaging in any other transaction in the Company’s securities.
Further, we have adopted Rule 10b5-1 Trading Plan Guidelines that permit our Section 16 Officers, including our NEOs, to
adopt Rule 10b5-1 trading plans (“10b5-1 plans”). Under our 10b5-1 Trading Plan Guidelines, 10b5-1 plans may only be
adopted or modified during an open trading window under our Insider Trading Policy and only when the relevant NEO does
not otherwise possess material nonpublic information about the Company. The first trade under a 10b5-1 plan may not occur
until the completion of the next quarterly closed trading window following the adoption or modification of the 10b5-1 plan,
as applicable.
Impact of Accounting and Tax Requirements on Compensation
Deductibility of Executive Compensation
Generally, Section 162(m) of the Tax Code, or Section 162(m), disallows a tax deduction to any publicly-held corporation for
any remuneration in excess of $1 million paid in any taxable year to its chief executive officer, chief financial officer, and certain
other current and former highly compensated officers that qualify as covered employees within the meaning of Section 162(m).
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70
The Talent & Compensation Committee has not previously taken the deductibility limit imposed by Section 162(m) into
consideration in setting compensation for our current and former executive officers and does not currently have any
immediate plans to do so. The Talent & Compensation Committee may, in its judgment, authorize compensation payments that
are not fully tax deductible when it believes that such payments are appropriate to attract and retain executive talent or meet
other business objectives. The Talent & Compensation Committee intends to continue to compensate our current and former
executive officers in a manner consistent with our best interests and the best interests of our stockholders.
Taxation of “Parachute” Payments and Deferred Compensation
We do not provide our NEOs with a “gross-up” or other reimbursement payment for any tax liability that he or she might owe as
a result of the application of Sections 280G, 4999, or 409A of the Tax Code. Sections 280G and 4999 of the Tax Code provide
that executive officers, directors who hold significant equity interests in our Company, and certain other service providers
may be subject to an excise tax if they receive payments or benefits in connection with a change in control of our Company
that exceeds certain prescribed limits, and that the Company, or a successor, may forfeit a deduction on the amounts subject
to this additional tax. Section 409A of the Tax Code also imposes additional significant taxes on an executive officer, director
or other service provider to the Company in the event that he or she receives “deferred compensation” that does not meet
certain requirements of Section 409A of the Tax Code.
Accounting for Stock-Based Compensation
We follow The Financial Accounting Standards Board Accounting Standards Codification Topic 718, or ASC Topic 718, for our
stock-based awards. ASC Topic 718 requires companies to measure the compensation expense for all share-based payment
awards made to employees and directors, including stock options, restricted stock unit awards and performance unit awards
(including PSUs), based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes
and reported in the compensation tables below for equity awards to our NEOs as required by the applicable SEC rules. ASC
Topic 718 also requires companies to recognize the compensation cost of their stock-based compensation awards in their
income statements over the period that the recipient of such compensation is required to render service in exchange for the
option or other award.
For performance unit awards (including PSUs), stock-based compensation expense recognized may be adjusted over the
performance period based on interim estimates of performance against pre-set objectives.
Compensation Risk Assessment
The Talent & Compensation Committee, with the assistance of Compensia, assesses and considers potential risks when
reviewing and approving our compensation programs, policies and practices for our executive officers and our employees.
We designed our compensation programs, including our incentive compensation plans, with features to address potential
risks while rewarding employees for achieving financial and strategic objectives through prudent business judgment and
appropriate risk taking. Based upon its assessment, the Talent & Compensation Committee believes that any risks arising from
our compensation programs do not create disproportionate incentives for our employees to take risks that are reasonably
likely to have a material adverse effect on us.
Talent & Compensation Committee Report
The Talent & Compensation Committee of our Board has reviewed and discussed the Compensation Discussion and Analysis
required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Talent &
Compensation Committee recommended to our Board that this Compensation Discussion and Analysis be included in this
proxy statement.
TALENT & COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Stephen Newberry (Chair)
Graham Smith*
Elisa Steele
*
Mr. Smith joined the Talent & Compensation Committee effective April 12, 2022.
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Compensation Tables
Summary Compensation Table
The following table summarizes the compensation that we paid to or was earned by each of our NEOs for the fiscal years
ended January 31, 2022, 2021 and 2020, and their principal position with us as of the fiscal year ended January 31, 2022.
Name and Principal
Position
Fiscal
Year
Salary
($)
Bonus
($)
Stock
Awards
($)(1)
Non-Equity
Incentive Plan
Compensation
($)
All Other
Compensation
($)
Total
($)
Graham Smith
Interim Chief Executive
Officer and Director
2022
2,740,137(2)
—
269,398
—
853(3)
3,010,388
Jason Child
Senior Vice President and
Chief Financial Officer
2022
540,000
—
8,565,464
905,688
67,430(3)
10,078,582
2021
485,000
—
10,734,528
413,492
4,010(4)
11,637,030
2020
341,534(5)
500,000 (6)
16,294,280
265,372(5)
84,623(7)
17,485,809
Teresa Carlson
President and Chief Growth
Officer
2022
473,425(8)
3,250,000 (9)
14,773,270
794,028(8)
60,157(3)
19,350,880
Shawn Bice
President of Products
and Technology
2022
402,740(10)
8,500,000(11)
11,222,763
675,475(10)
61,481(3)
20,862,459
Scott Morgan
Senior Vice President,
Chief Legal Officer, Global
Affairs and Secretary
2022
475,000
—
5,399,953
637,336
61,776(3)
6,574,065
2021
430,000
—
6,851,708
320,776
3,545(4)
7,606,029
2020
375,000
5,853,518
233,100
10,599(7)
6,472,217
Douglas Merritt
Former President, CEO
and Director
2022
900,000
—
18,620,603
1,886,850
134,790(3)
21,542,243
2021
850,000
—
25,351,450
1,132,306
50,055(4)
27,383,811
2020
675,000
—
14,100,955
874,125
60,565(7)
15,710,645
Timothy Tully
Former Senior Vice President,
Chief Technology Officer
2022
142,685(12)
—
8,565,464
—
7,959(3)
8,716,108
2021
475,000
—
10,734,528
404,966
3,957(4)
11,618,451
2020
420,000
8,064,755
304,584
10,464(7)
8,799,803
(1)
The amounts reported in the Stock Awards column reflect the aggregate grant date fair value of the RSUs granted to our NEOs in fiscal 2022, 2021 and 2020
and the PSUs granted to our NEOs in fiscal 2022, 2021 and 2020, as computed in accordance with ASC Topic 718. For fiscal 2022 and 2020, the estimated
fair value of PSUs is calculated based on the probable outcome of the performance measures for the applicable performance period as of the date on which
the PSUs were granted for accounting purposes. The estimated fair value of the fiscal 2021 PSUs is calculated based on (a) the probable outcome of the
performance measures for such PSUs, which were granted in March 2020 and (b) the incremental fair value of the modification of such PSUs based on the
probable outcome of the performance measures calculated as of October 27, 2020, the date on which such PSUs were modified. We accounted for this change
as a Type III modification under ASC Topic 718 as the expectation of the achievement of certain performance conditions related to these awards changed
from improbable to probable post-modification. Post-modification stock-based compensation expense related to these awards will be recognized based on
the modification date fair value over their remaining service period, under the graded-vesting attribution method. PSUs include both corporate performance
and market-related (stock price modifier) goals. Consistent with the applicable accounting standards, the grant date fair value of the stock price modifier
component has been determined using a Monte Carlo simulation model. The assumptions used in the valuation of these awards are consistent with the
valuation methodologies specified in the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended
January 31, 2022. Notwithstanding the foregoing, for Mr. Smith, the amount reported in the Stock Awards column reflects the aggregate grant date fair value of
the RSUs granted to him in fiscal 2022 in connection with his service as a member of our Board, as computed in accordance with ASC Topic 718.
The grant date fair value of the fiscal 2022 PSUs assuming that the highest level of performance is achieved under the applicable performance measures is
presented below. The estimated grant date fair value for these PSUs presented in the table above is different from (and lower than) the maximum value set
forth below. These amounts do not necessarily correspond to the actual value recognized by our NEOs.
Name
Maximum Value of
Fiscal 2022 PSUs
($)
Graham Smith
—
Jason Child
16,399,246
Teresa Carlson
15,548,024
Shawn Bice
21,121,282
Scott Morgan
10,338,670
Douglas Merritt
35,650,692
Timothy Tully
16,399,246
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(2) Mr. Smith became Interim Chief Executive Officer of the Company on November 13, 2021. The salary presented for Mr. Smith is prorated based on the number
of days in fiscal 2022 during which he was employed with us and includes $110,000 in director fees paid to him in fiscal 2022.
(3) For Mr. Smith, this amount represents a premium payment for long-term disability benefits. For Mr. Child, this amount represents $26,421 in tax gross-ups;
$31,205 in spousal expenses associated with attendance at our annual sales achievement event and a gift presented to all attendees at the event; $8,806
in a matching contribution to Mr. Childs’ 401(k) plan account, which contribution was made to all eligible participants; a premium payment for long-term
disability benefits; travel expenses for spousal travel to accompany Mr. Child for travel he engaged in for business purposes; and a gift presented to Mr. Child
in connection with a team building event. For Ms. Carlson, this amount represents $17,736 in tax gross-ups; $27,337 in spousal expenses associated with
attendance at our annual sales achievement event and a gift presented to all attendees at the event; $10,085 in a matching contribution to Ms. Carlson’s 401(k)
plan account, which contribution was made to all eligible participants; a premium payment for long-term disability benefits; travel expenses for spousal travel
to accompany Ms. Carlson for travel she engaged in for business purposes; spousal expenses associated with attendance at a customer event that Ms. Carlson
engaged in for business purposes; gifts presented to Ms. Carlson in connection with team building events and the commencement of her employment with
the Company; and expenses for travel that Ms. Carlson engaged in that could be required to be reported as All Other Compensation under the SEC’s proxy
disclosure rules. For Mr. Bice, this amount represents $18,907 in tax gross-ups; $29,142 in spousal expenses associated with attendance at our annual sales
achievement event and a gift presented to all attendees at the event; $10,085 in a matching contribution to Mr. Bice’s 401(k) plan account, which contribution
was made to all eligible participants; a premium payment for long-term disability benefits; travel expenses for spousal travel to accompany Mr. Bice for travel
he engaged in for business purposes; and gifts presented to Mr. Bice in connection with team building events and the commencement of his employment
with the Company. For Mr. Morgan, this amount represents $23,949 in tax gross-ups; $28,171 in spousal expenses associated with attendance at our annual
sales achievement event and a gift presented to all attendees at the event; $8,804 in a matching contribution to Mr. Morgan’s 401(k) plan account, which
contribution was made to all eligible participants; and a premium payment for long-term disability benefits. For Mr. Merritt, this amount represents $16,071
in tax gross-ups; $24,770 in spousal expenses associated with attendance at our annual sales achievement event and a gift presented to all attendees at the
event; $8,815 in a matching contribution to Mr. Merritt’s 401(k) plan account, which contribution was made to all eligible participants; a premium payment
for long-term disability benefits; spousal expenses associated with attendance at a customer event that Ms. Merritt engaged in for business purposes; and
$84,281 in expenses for travel that Mr. Merritt engaged in for business purposes that could be required to be reported as All Other Compensation under the
SEC’s proxy disclosure rules. For Mr. Tully, this amount represents $7,604 in a matching contribution to Mr. Tully’s 401(k) plan account, which contribution was
made to all eligible participants; and a premium payment for long-term disability benefits.
(4)
For Mr. Child, this amount represents $847 in tax gross-ups; and $1,163 in a matching contribution and $2,000 in a discretionary contribution to Mr. Child’s
401(k) plan account, which contributions were made to all eligible participants. For Mr. Morgan, this amount represents $553 in tax gross-ups; and $992
in a matching contribution and $2,000 in a discretionary contribution to Mr. Morgan’s 401(k) plan account, which contributions were made to all eligible
participants. For Mr. Merritt, this amount represents $1,136 in tax gross-ups; spousal expenses associated with attendance at our annual sales achievement
event and a gift provided to all attendees at the event; $1,962 in a matching contribution and $2,000 in a discretionary contribution to Mr. Merritt’s 401(k) plan
account, which contributions were made to all eligible participants; a premium payment for long-term disability benefits; and $44,957 in expenses for travel
that Mr. Merritt engaged in for business purposes that could be required to be reported as All Other Compensation under the SEC’s proxy disclosure rules. For
Mr. Tully, this amount represents $638 in tax gross-ups; and $1,319 in a matching contribution and $2,000 in a discretionary contribution to Mr. Tully’s 401(k)
plan account, which contributions were made to all eligible participants.
(5)
Mr. Child joined the Company on May 6, 2019. The salary and non-equity incentive plan compensation amounts presented for Mr. Child are prorated based on
the number of days in fiscal 2020 during which he was employed with us.
(6)
Pursuant to his employment letter, Mr. Child received a cash signing bonus, subject to reimbursement if he voluntarily resigns from the Company without good
reason within 12 months of his employment start date.
(7)
For Mr. Child, this amount represents $24,830 in tax gross-ups; spousal expenses associated with attendance at our annual sales achievement event and a
gift presented to all attendees at the event; $48,807 reimbursement of relocation expenses provided as part of his employment letter; $1,769 in a matching
contribution and $2,000 in a discretionary contribution to Mr. Childs’ 401(k) plan account, which contributions were made to all eligible participants; and a
premium payment for long-term disability benefits. For Mr. Morgan, this amount represents $6,599 in tax gross-ups; and $2,000 in a matching contribution
and $2,000 in a discretionary contribution to Mr. Morgan’s 401(k) plan account, which contributions were made to all eligible participants. For Mr. Merritt,
this amount represents $5,562 in tax gross-ups; spousal expenses associated with attendance at our annual sales achievement event and a gift presented
to all attendees at the event; $42,698 in one-time home security installation, equipment and monitoring cost; $2,000 in a matching contribution and $2,000
in a discretionary contribution to Mr. Merritt’s 401(k) plan account, which contributions were made to all eligible participants; and a premium payment for
long-term disability benefits. For Mr. Tully, this amount represents $6,225 in tax gross-ups; and $2,239 in a matching contribution and $2,000 in a discretionary
contribution to Mr. Tully’s 401(k) plan account, which contributions were made to all eligible participants.
(8)
Ms. Carlson joined the Company on April 19, 2021. The salary and non-equity incentive plan compensation amounts presented for Ms. Carlson are prorated
based on the number of days in fiscal 2022 during which she was employed with us. Ms. Carlson’s employment with the Company terminated on March 31, 2022.
(9)
Pursuant to her employment letter, Ms. Carlson received a cash signing bonus. The bonus is approximately equal to an imminent compensation opportunity
Ms. Carlson forfeited when she separated from her prior employer. If Ms. Carlson voluntarily resigned from the Company for any reason within 12 months
following her employment start date, she would have had to reimburse the Company 100% of the bonus. If Ms. Carlson resigned after the 12-month anniversary
of her employment start date, she would have had to reimburse the Company up to 50% of the bonus on a prorated basis with the proration factor determined
by subtracting the number of months completed after the 12-month anniversary of her employment start date from 12 and dividing the result by 12.
(10) Mr. Bice joined the Company on June 1, 2021. The salary and non-equity incentive plan compensation amounts presented for Mr. Bice are prorated based on
the number of days in fiscal 2022 during which he was employed with us.
(11) Pursuant to his employment letter, Mr. Bice received a cash signing bonus. The bonus is approximately equal to an imminent compensation opportunity
Mr. Bice forfeited when he separated from his prior employer. If Mr. Bice voluntarily resigns from the Company for any reason within 12 months following his
employment start date, he must reimburse the Company 100% of the bonus. If Mr. Bice voluntarily resigns after the 12-month anniversary of his employment
start date, he must reimburse the Company up to 50% of the bonus on a prorated basis with the proration factor determined by subtracting the number of
months completed after the 12-month anniversary of his employment start date from 12 and dividing the result by 12.
(12) Tim Tully resigned as Senior Vice President, Chief Technology Officer, effective May 4, 2021. The salary amount presented for Mr. Tully is prorated based on the
number of days in fiscal 2022 during which he was employed with us.
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Splunk 2022 Proxy Statement
Grants of Plan-Based Awards for Fiscal 2022
The following table presents, for each of our NEOs, information concerning grants of plan-based awards made during fiscal
2022. This information supplements the information about these awards set forth in the Summary Compensation Table.
Estimated Future Payouts Under
Non-Equity Incentive Plan
Awards(1)
Estimated Future Payouts
Under Equity Incentive Plan
Awards(2)
All Other
Stock
Awards:
Number of
Shares or
Units
(#)(3)
Grant Date
Fair Value
of Stock
Awards
($)(4)
Name
Grant Date
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
Graham Smith
—
—
—
—
—
—
RSUs
06/17/2021
—
—
—
—
—
—
2,133
269,398
Jason Child
—
270,000
540,000
1,080,000
—
—
—
—
—
RSUs
03/11/2021
—
—
—
—
—
—
22,426
3,099,049
PSUs
03/11/2021
—
—
—
16,820
33,639
100,917
—
5,466,415
Teresa Carlson
—
236,712
473,425
946,849
—
—
—
—
—
RSUs
04/19/2021
—
—
—
—
—
—
49,654
6,599,017
RSUs
04/19/2021
—
—
—
—
—
—
22,510
2,991,579
PSUs
04/19/2021
—
—
—
16,883
33,765
101,295
—
5,182,675
Shawn Bice
—
201,370
402,740
805,479
—
—
—
—
—
RSUs
06/16/2021
—
—
—
—
—
—
33,898
4,182,335
PSUs
06/16/2021
—
—
—
25,424
50,848
152,544
—
7,040,428
Scott Morgan
—
190,000
380,000
760,000
—
—
—
—
—
RSUs
03/11/2021
—
—
—
—
—
—
14,138
1,953,730
PSUs
03/11/2021
—
—
—
10,604
21,207
63,621
—
3,446,223
Douglas Merritt
—
562,500
1,125,000
2,250,000
—
—
—
—
—
RSUs
03/11/2021
—
—
—
—
—
—
48,752
6,737,039
PSUs
03/11/2021
—
—
—
36,565
73,129
219,387
—
11,883,564
Timothy Tully
—
280,000
560,000
1,120,000
—
—
—
—
—
RSUs
03/11/2021
—
—
—
—
—
—
22,426
3,099,049
PSUs
03/11/2021
—
—
—
16,820
33,639
100,917
—
5,466,415
(1)
Amounts in the “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” columns relate to cash incentive compensation opportunities under our
executive bonus plan. Payments under this plan are subject to a threshold limitation based on achieving at least 97.65% of the target corporate performance
objective. Target payment amounts assume achievement of 100% of the target corporate performance objective. Payments to Mr. Child, Ms. Carlson, Mr. Bice,
Mr. Morgan, Mr. Merritt and Mr. Tully under these plans are subject to a maximum payment of 200%, based on achievement of 103.9% or more of the target
corporate performance objective. The actual amounts paid to our NEOs are set forth in the “Summary Compensation Table” above, and the calculation of the
actual amounts paid is discussed more fully in “Compensation Discussion and Analysis—Discussion of Our Fiscal 2022 Executive Compensation Program—
Components of Our Fiscal 2022 Compensation Program—Annual Cash Bonuses” above. The amounts presented for Ms. Carlson and Mr. Bice are prorated
based on the number of days in fiscal 2022 during which they were employed with us.
(2)
Amounts in the “Estimated Future Payouts Under Equity Incentive Plan Awards” columns relate to payout opportunities of the fiscal 2022 PSUs, which were
granted under Our 2012 Plan. The amounts shown in the Threshold column reflect the corporate PSUs if the minimum ARR metric and operating cash flow
metrics are met and are 50% of the amounts shown under the Target column. The amounts shown in the Target column reflect the corporate PSUs if the target
ARR metric and operating cash flow metrics are met. The amounts shown in the Maximum column reflect the corporate PSUs if the maximum ARR metric and
operating cash flow metrics are met and are 200% of the amounts shown under the Target column, plus the maximum number of stock price PSUs eligible to
be earned, which is 50% of the maximum number of corporate PSUs. The PSUs vest over three years, subject to continued service to us. On March 24, 2022,
167.97% of each NEO’s target fiscal 2022 PSUs were earned based upon our fiscal 2022 financial results, and one-third of these earned corporate PSUs vested
on March 24, 2022 and 1/12th vest quarterly thereafter, beginning on June 10, 2022, over the remaining two years, subject to continued service to us. The
PSUs are discussed more fully in “Compensation Discussion and Analysis—Discussion of Our Fiscal 2022 Executive Compensation Program—Components of
Our Fiscal 2022 Compensation Program—Long-Term Equity Compensation” above.
(3)
Mr. Smith’s RSU grant represents an RSU grant received under our 2012 Plan in connection with his service as a member of our Board. Twenty-five percent
of such grant vests on each of September 10, 2021, December 10, 2021, March 10, 2022 and June 10, 2022 (or the next annual meeting of stockholders
following the grant date if earlier), subject to his continued service through each such date. For Mr. Child, Mr. Bice, Mr. Morgan, Mr. Merritt and Mr. Tully, the RSUs
were granted under our 2012 Plan and vest over three years, with one-third of the RSUs vesting on March 10, 2022 and 1/12th vesting quarterly thereafter
over the remaining two years, subject to continued service to us. For Ms. Carlson, the RSUs were granted under our 2012 Plan and approved by the Talent
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74
& Compensation Committee on April 14, 2021, and were scheduled to vest as follows: 49,654 RSUs over four years, with one-fourth of the RSUs vesting on
March 10, 2022 and 1/16th vesting quarterly thereafter over the remaining three years; and 22,510 RSUs over three years, with one-third of the RSUs vesting
on March 10, 2022 and 1/12th vesting quarterly thereafter over the remaining two years, both subject to continued service to us.
(4)
The amounts reported in this column reflect the aggregate grant date fair value of the RSUs and PSUs granted to our NEOs in fiscal 2022 as computed in
accordance with ASC Topic 718. For accounting purposes, the estimated fair value of PSUs was calculated based on the probable outcome of the performance
measures for the fiscal 2022 performance period as of the grant date. The fiscal 2022 PSUs include both corporate performance and market-related
(stock price modifier) goals. Consistent with the applicable accounting standards, the grant date fair value of the stock price modifier component has been
determined using a Monte Carlo simulation model. These amounts do not necessarily correspond to the actual value recognized by NEOs. The assumptions
used in the valuation of these awards are consistent with the valuation methodologies specified in the notes to our consolidated financial statements included
in our Annual Report on Form 10-K for the fiscal year ended January 31, 2022.
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Splunk 2022 Proxy Statement
Outstanding Equity Awards at Fiscal 2022 Year-End
The following table sets forth information concerning outstanding equity awards held by our NEOs as of January 31, 2022.
Stock Awards
Name
Vesting
Commencement
Date
Number
of Shares
or Units of
Stock That
Have Not
Vested (#)
Market Value
of Shares
or Units of
Stock That
Have Not
Vested ($)(1)
Equity Incentive Plan
Awards: Number of
Unearned Shares,
Units or Other Rights
That Have Not Vested
(#)
Equity Incentive Plan
Awards: Market or Payout
Value of Unearned Shares,
Units or Other Rights
That Have Not Vested
($)(1)
Graham Smith
—
1,067(2)
132,223
—
—
Jason Child
6/10/2019
15,577(2)
1,930,302
—
—
3/10/2019
29,216(3)
3,620,447
—
—
3/10/2020
13,651(2)
1,691,632
—
—
3/10/2020
27,566(4)
3,415,979
—
—
3/10/2021
22,426(5)
2,779,030
—
—
3/10/2021
—
—
56,503(6)
7,001,852
Teresa Carlson
3/10/2021
49,654(2)
6,153,124
—
—
3/10/2021
22,510(5)
2,789,439
—
—
3/10/2021
—
—
56,715(6)
7,028,123
Shawn Bice
3/10/2021
33,898(5)
4,200,640
—
—
3/10/2021
—
—
85,409(6)
10,583,883
Scott Morgan
9/10/2018
1,875(2)
232,350
—
—
3/10/2019
4,774(2)
591,594
—
—
3/10/2019
10,744(3)
1,331,396
—
—
3/10/2020
8,714(2)
1,079,839
—
—
3/10/2020
17,596(4)
2,180,496
—
—
3/10/2021
14,138(5)
1,751,981
—
—
3/10/2021
—
—
35,621(6)
4,414,154
Douglas Merritt
3/10/2018
2,336(2)
289,477
—
—
3/10/2018
7,006(7)
868,184
—
—
3/10/2019
11,500(2)
1,425,080
—
—
3/10/2019
25,882(3)
3,207,297
—
—
3/10/2020
32,239(2)
3,995,057
—
—
3/10/2020
65,093(4)
8,066,325
—
—
3/10/2021
48,752(5)
6,041,348
—
—
3/10/2021
—
—
122,834(6)
15,221,589
Timothy Tully(8)
—
—
—
—
—
(1)
Market Value is calculated based on the closing price of our common stock on The NASDAQ Global Select Market on January 31, 2022 (the last trading day of
our fiscal year), which was $123.92.
(2)
Mr. Smith’s RSU grant represents an RSU grant received in connection with his service as a member of our Board. Twenty-five percent of such grant vests on
each of September 10, 2021, December 10, 2021, March 10, 2022 and June 10, 2022 (or the next annual meeting of stockholders following the grant date if
earlier), subject to his continued service through each such date. For the other NEOs, the RSUs vest over four years, with one-fourth of the RSUs vesting one
year following the vesting commencement date and 1/16th vesting quarterly thereafter over the remaining three years, subject to continued service to us.
(3)
On March 26, 2020, 150.05% of each NEO’s target fiscal 2020 PSUs were deemed earned based upon our fiscal 2020 financial results, and one-fourth of these
earned corporate PSUs vested on March 26, 2020 and 1/16th vest quarterly thereafter, beginning on June 10, 2020, over the remaining three years, subject to
continued service to us. The number of corporate PSUs earned were 93,488, 34,382 and 82,827 shares for Mr. Child, Mr. Morgan and Mr. Merritt, respectively.
The number of stock price PSUs that will be eligible to be earned and vest beginning in June 2021 through March 2023 are 46,744 and 17,191 for Mr. Child
and Mr. Morgan, respectively. No stock price PSUs were earned in fiscal 2022. In connection with Mr. Merritt’s termination of employment with the Company on
March 31, 2022, all outstanding stock price PSUs held by him were forfeited to the Company.
(4)
On March 31, 2021, 134.60% of each NEO’s target fiscal 2021 PSUs were deemed earned based upon our fiscal 2021 financial results, and one-fourth of these
earned corporate PSUs vested on March 31, 2021 and 1/16th vest quarterly thereafter, beginning on June 10, 2021, over the remaining three years, subject to
continued service to us. The number of corporate PSUs earned were 48,997, 31,274 and 115,715 shares for Mr. Child, Mr. Morgan and Mr. Merritt, respectively.
The number of stock price PSUs that will be eligible to be earned and vest beginning in June 2022 through March 2024 are 24,498 and 15,637 for Mr. Child and
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76
Mr. Morgan, respectively. In connection with Mr. Merritt’s termination of employment with the Company on March 31, 2022, all outstanding stock price PSUs
held by him were forfeited to the Company.
(5)
The RSUs vest over three years, with one-third of the RSUs vesting one year following the vesting commencement date and 1/12th vesting quarterly thereafter
over the remaining two years, subject to continued service to us.
(6)
On March 24, 2022, 167.97% of each NEO’s target fiscal 2022 PSUs were deemed earned based upon our fiscal 2022 financial results, and one-third of these
earned corporate PSUs vested on March 24, 2022 and 1/12th vest quarterly thereafter, beginning on June 10, 2022, over the remaining two years, subject to
continued service to us. The number of corporate PSUs earned were 56,503, 56,715, 85,409, 35,621, and 122,834 shares for Mr. Child, Ms. Carlson, Mr. Bice,
Mr. Morgan and Mr. Merritt, respectively. The number of stock price PSUs that will be eligible to be earned and vest beginning in June 2023 through March 2024
are 28,251, 42,704, 17,810 for Mr. Child, Mr. Bice, and Mr. Morgan, respectively. In connection with Ms. Carlson’s termination of employment with the Company
on March 31, 2022, all outstanding stock price PSUs held by her were forfeited to the Company. In connection with Mr. Merritt’s termination of employment
with the Company on March 31, 2022, all outstanding stock price PSUs held by him were forfeited to the Company.
(7)
On March 27, 2019, 200% of Mr. Merritt’s target fiscal 2019 PSUs were deemed earned based upon our fiscal 2019 financial results, and one-fourth of these
earned corporate PSUs vested on March 27, 2019 and 1/16th vest quarterly thereafter, beginning on June 10, 2019, over the remaining three years, subject
to continued service to us. The number of corporate PSUs earned was 112,088 for Mr. Merritt. The number of stock price PSUs eligible to be earned and vest
beginning in June 2020 through March 2022 was 56,044. An additional 24.67% to 50% of Mr. Merritt’s earned corporate PSUs were earned as stock price PSUs
on June 10, 2020, September 10, 2020 and December 10, 2020. No stock price PSUs were earned in fiscal 2022.
(8)
In connection with Mr. Tully’s termination of employment with the Company on May 4, 2021, all outstanding equity awards were forfeited to the Company.
Option Exercises and Stock Vested in Fiscal 2022
The following table sets forth the number of shares acquired and the value realized upon the exercise of stock options and the
vesting of RSUs/PSUs during fiscal 2022 by each of our NEOs.
Option Awards
Stock Awards
Name
Number of Shares
Acquired on Exercise (#)
Value Realized on
Exercise ($)
Number of Shares
Acquired on Vesting (#)
Value Realized on
Vesting ($)(1)
Graham Smith
—
—
1,935
251,632
Jason Child
—
—
65,804
8,616,352
Teresa Carlson
—
—
—
—
Shawn Bice
—
—
—
—
Scott Morgan
—
—
39,870
5,219,792
Douglas Merritt
—
—
154,734
20,309,943
Timothy Tully
—
—
31,767
4,273,148
(1)
The value realized on vesting is calculated by multiplying the number of shares of stock by the market value of the underlying shares on each vesting date. The
value reported in this column for Mr. Smith relates to stock awards received in connection with his service as a member of our Board.
Pension Benefits and Nonqualified Deferred Compensation
We do not provide a pension plan for our employees, and none of our NEOs participated in a nonqualified deferred
compensation plan during fiscal 2022.
Executive Employment Arrangements
The terms and conditions of employment for each of our NEOs are set forth in written employment letters, as amended from
time to time (“employment letters”). Each of the employment letters with our NEOs sets forth the terms and conditions of such
executive’s employment with us and, other than with respect to Mr. Graham, provides for severance and change in control
payments and benefits, as described above under “Compensation Discussion and Analysis—Discussion of Our Fiscal 2022
Executive Compensation Program—Components of Our Fiscal 2022 Compensation Program—Severance and Change in
Control-Related Benefits”.
Graham Smith
We entered into an initial employment letter dated November 13, 2021 with Mr. Smith, our interim CEO. Mr. Smith’s base salary
for fiscal 2023 was $1,000,000 per month. Given the temporary and transitional nature of Mr. Smith’s role as interim CEO, and
his existing meaningful financial stake in the Company at the time of his transition to interim CEO (including through unvested
equity awards received in connection with his services as a member of our Board), Mr. Smith’s compensation was structured to
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77
Splunk 2022 Proxy Statement
be simple and to be less than the median CEO total direct compensation for the CEOs in our compensation peer group. Other
than base salary and eligibility to participate in our standard employee benefit programs applicable to full-time U.S. employees
in the U.S., Mr. Smith received no additional compensation for his services as interim CEO in fiscal 2022 or fiscal 2023.
Consequently, Mr. Smith was not eligible for an annual cash bonus opportunity or equity awards for his services as interim
CEO. During his term as interim CEO, Mr. Smith’s equity awards previously granted to him in connection with his services as
a member of our Board continued to vest, and he did not receive any other compensation for his services as a member of
our Board.
Jason Child
We entered into an initial employment letter dated April 16, 2019 with Mr. Child, our Senior Vice President and Chief Financial
Officer. Mr. Child’s severance benefits were amended effective as of November 30, 2021 – see “Compensation Discussion and
Analysis—Discussion of Our Fiscal 2022 Executive Compensation Program—Components of Our Fiscal 2022 Compensation
Program—Severance and Change in Control-Related Benefits” above for the severance benefits for which Mr. Child is eligible
under his employment letter, as amended. Mr. Child received a cash signing bonus in the amount of $500,000, subject to
reimbursement if he voluntarily resigns from the Company without good reason within 12 months of his employment start
date. Mr. Child’s current base salary for fiscal 2023 is $575,000 and his annual target cash bonus is 100% of his base salary.
Teresa Carlson
We entered into an initial employment letter dated March 2, 2021 with Ms. Carlson, our former President and Chief
Growth Officer. Ms. Carlson’s severance benefits were amended effective as of November 30, 2021 – see “Compensation
Discussion and Analysis—Discussion of Our Fiscal 2022 Executive Compensation Program—Components of Our Fiscal 2022
Compensation Program—Severance and Change in Control-Related Benefits” above for the severance benefits for which
Ms. Carlson was eligible under her employment letter, as amended. Ms. Carlson received a cash signing bonus in the amount
of $3,250,000. The bonus is approximately equal to an imminent compensation opportunity Ms. Carlson forfeited when she
separated from her prior employer. If Ms. Carlson voluntarily resigned from the Company for any reason within 12 months
following her employment start date, she would have had to reimburse the Company 100% of the bonus. If Ms. Carlson
voluntarily resigned after the 12-month anniversary of her employment start date, she would have had to reimburse the
Company up to 50% of the bonus on a prorated basis with the proration factor determined by subtracting the number of
months completed after the 12-month anniversary of her employment start date from 12 and dividing the result by 12. In
connection with the commencement of her employment in fiscal 2022, Ms. Carlson was granted 72,164 RSUs and 33,765
target PSUs. With respect to her RSUs, 49,654 RSUs were scheduled to vest over four years, with one-fourth of such RSUs
vesting on March 10, 2022 and 1/16th of the RSUs vesting quarterly thereafter in approximately equal installments, subject
to continued service to us; and 22,510 RSUs were scheduled to vest over three years, with one-third of the RSUs vesting on
March 10, 2022, and 1/12th vesting quarterly thereafter in approximately equal installments over the remaining two years,
subject to continued service to us. Ms. Carlson’s employment with the Company terminated on March 31, 2022.
Shawn Bice
We entered into an initial employment letter dated April 29, 2021 with Mr. Bice, our President, Products and Technology.
Mr. Bice’s severance benefits were amended effective as of November 30, 2021 – see “Compensation Discussion and
Analysis—Discussion of Our Fiscal 2022 Executive Compensation Program—Components of Our Fiscal 2022 Compensation
Program—Severance and Change in Control-Related Benefits” above for the severance benefits for which Mr. Bice is eligible,
as amended. Mr. Bice received a cash signing bonus in the amount of $8,500,000. The bonus is approximately equal to an
imminent compensation opportunity Mr. Bice forfeited when he separated from his prior employer. If Mr. Bice voluntarily
resigns from the Company for any reason within 12 months following his employment start date, he must reimburse the
Company 100% of the bonus. If Mr. Bice voluntarily resigns after the 12-month anniversary of his employment start date, he
must reimburse the Company up to 50% of the bonus on a prorated basis with the proration factor determined by subtracting
the number of months completed after the 12-month anniversary of his employment start date from 12 and dividing the result
by 12. In connection with the commencement of his employment with us in fiscal 2022, Mr. Bice was granted 33,898 RSUs
and 50,848 target PSUs in connection with his hiring. The RSUs vest over three years, with one-third of the RSUs vesting on
March 10, 2022, and 1/12th vesting quarterly thereafter over the remaining two years in approximately equal installments,
subject to continued service to us. Mr. Bice’s current base salary for fiscal 2023 is $625,000 and his annual target cash bonus
is 100% of his base salary.
Executive Compensation
78
Scott Morgan
We entered into an initial employment letter dated January 24, 2012, as amended on March 28, 2012, with Mr. Morgan, our
Senior Vice President, Chief Legal Officer, Global Affairs and Secretary, that was superseded by a revised employment letter
dated October 30, 2018. Mr. Morgan’s severance benefits were amended effective as of March 20, 2019 and November 30,
2021 – see “Compensation Discussion and Analysis—Discussion of Our Fiscal 2022 Executive Compensation Program—
Components of Our Fiscal 2022 Compensation Program—Severance and Change in Control-Related Benefits” above for the
severance benefits for which Mr. Morgan is eligible, as amended. Mr. Morgan’s current base salary for fiscal 2023 is $525,000
and his annual target cash bonus is 80% of his base salary.
Douglas Merritt
We entered into an initial employment letter dated April 7, 2014 with Mr. Merritt, our former Senior Vice President, Field
Operations that was superseded by a revised employment letter dated November 16, 2015 in connection with his appointment
as our President and CEO. Mr. Merritt’s severance benefits were amended by letter agreements effective as of March 20, 2019
and April 24, 2020 – see “Compensation Discussion and Analysis—Discussion of Our Fiscal 2022 Executive Compensation
Program—Components of Our Fiscal 2022 Compensation Program—Severance and Change in Control-Related Benefits”
above for the severance benefits for which Mr. Merritt was eligible. As described above under “Compensation Discussion
and Analysis—Executive Summary—CEO Transition and Named Executive Officers for Fiscal 2022,” on November 13, 2021,
Mr. Merritt’s employment as President and CEO terminated. As part of his transition, on November 22, 2021, the Company
entered into an amendment to Mr. Merritt’s employment letter, pursuant to which Mr. Merritt resigned from our Board and
confirmed his position as a strategic advisor to the interim CEO. The amendment also provided that the Company will not
terminate Mr. Merritt’s employment other than for “cause” (as defined in his employment letter) prior to February 1, 2022.
The amendment included no other changes to Mr. Merritt’s compensation or employment terms. Mr. Merritt’s base salary for
fiscal 2023 was $900,000 and his annual target cash bonus was 125% of his base salary. Mr. Merritt’s employment with the
Company terminated on March 31, 2022.
Timothy Tully
We entered into an employment letter dated July 22, 2017 with Mr. Tully, our former Senior Vice President, Chief Technology
Officer. Mr. Tully’s employment with the Company terminated on May 4, 2021. He did not receive any severance payment or
benefits in connection with such termination.
Equity Acceleration Death Benefit
Under our 2012 Plan, each of our employees and non-employee directors is eligible to receive the following vesting
acceleration upon such person’s termination of service due to death:
• 100% of the shares underlying plan awards held by that person (including any plan awards previously earned based on the
achievement of designated performance goals) will vest and, with respect to stock options and stock appreciation rights,
become immediately exercisable, and
• where the achievement of designated performance goals has been determined, all performance goals or other applicable
vesting criteria required to be met for any plan awards held by that person to be earned will be deemed achieved based on
such determination and all other terms and conditions will be deemed satisfied and that person will immediately become
vested in 100% of the earned plan awards, and
• where the achievement of designated performance goals has not yet been determined, all performance goals or other
vesting criteria required to be met for such awards to be earned will be deemed achieved at target levels, provided that
• if that person’s death occurs following the end of the performance period for any performance goal but prior to the
determination of the achievement of such performance goal, then the achievement of such performance goal will be
determined based on actual performance.
In the event the person has not continuously served as an employee or non-employee director for at least 12 months prior to
his or her death, all references to 100% in this paragraph mean 50%.
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Splunk 2022 Proxy Statement
Potential Payments Upon Termination or Upon Termination in
Connection With a Change in Control
Our executive officers other than Mr. Smith, including our NEOs other than Mr. Smith, are eligible for certain payments
and benefits in the event of their termination of employment under specified circumstances, including in connection with
a change in control of the Company, contingent on the execution of a release by the NEO in favor of the Company (other
than a termination of employment due to death). These payments and benefits are described in further detail above under
“Compensation Discussion and Analysis—Discussion of Our Fiscal 2022 Executive Compensation Program—Components
of Our Fiscal 2022 Compensation Program—Severance and Change in Control-Related Benefits” and “Equity Acceleration
Death Benefit.” The following table and the narrative that follows provide information concerning the estimated payments and
benefits that could be provided in the termination circumstances described below, assuming that the relevant termination
took place on January 31, 2022.
NEO
Death ($)
Termination
Without
Cause ($)
Termination Without Cause or
Resignation for Good Reason in
Connection with a Change in Control
($)(1)
Graham Smith(2)
Severance payment
—
—
—
Continued health coverage
—
—
—
Accelerated vesting(3)
132,223
—
—
Total:
132,223
—
—
Jason Child
Severance payment(4)
—
1,080,000
1,080,000
Continued health coverage
—
31,824
31,824
Accelerated vesting(3)
20,439,241
12,157,915
20,439,241
Total:
20,439,241
13,269,739
21,551,065
Teresa Carlson(5)
Severance payment(4)
—
1,200,000
1,200,000
Continued health coverage
—
21,742
21,742
Accelerated vesting(3)
7,985,343
8,418,257
15,970,686
Total:
7,985,343
9,639,999
17,192,428
Shawn Bice
Severance payment(4)
—
1,200,000
1,200,000
Continued health coverage
—
32,587
32,587
Accelerated vesting(3)
7,392,262
8,623,469
14,784,523
Total:
7,392,262
9,856,056
16,017,110
Scott Morgan
Severance payment(4)
—
855,000
855,000
Continued health coverage
—
32,587
32,587
Accelerated vesting(3)
11,581,811
6,816,096
11,581,811
Total:
11,581,811
7,703,683
12,469,398
Douglas Merritt(6)
Severance payment(4)
—
2,475,000
5,175,000
Continued health coverage
—
32,587
48,880
Accelerated vesting(3)
39,114,357
22,627,172
39,114,357
Total:
39,114,357
25,134,759
44,338,237
Tim Tully(7)
Severance payment
—
—
—
Continued health coverage
—
—
—
Accelerated vesting
—
—
—
Total:
—
—
—
Executive Compensation
80
(1)
A qualifying termination of employment is considered “in connection with a change in control” if such termination occurs within the period commencing six
months before and ending 18 months after a “change in control” of the Company.
(2)
Mr. Smith was not eligible for any severance payment or benefits upon termination of his employment as our interim CEO.
(3)
For purposes of valuing accelerated vesting, the values indicated in the table are calculated as follows. With respect to RSUs, the values are calculated as (i)
the closing price of a share of our common stock on January 31, 2022, which was $123.92, multiplied by (ii) the number of RSUs outstanding on such date that
accelerate vesting. With respect PSUs, the values are calculated as (i) the closing price of a share of our common stock on January 31, 2022, which was $123.92,
multiplied by (ii) the number of PSUs previously earned (based on the applicable one-year corporate performance metrics, including 167.97% of each NEO’s
target fiscal 2022 PSUs) outstanding on such date that accelerate vesting as to time-based vesting conditions. In the event of a Company change in control,
outstanding stock price PSUs will be deemed earned based on stock price growth measured through the date of the change in control, and will become subject
to the same time-based vesting conditions as the corporate PSUs to which they relate. Assuming a Company change in control on January 31, 2022, no stock
price PSUs would have been deemed earned and all stock price PSUs would have been forfeited. Mr. Smith is entitled to accelerated vesting of outstanding RSUs
received in connection with his services as a member of our Board upon his death, as described under “Corporate Governance at Splunk—Non-Employee Director
Compensation” of this proxy statement, and the amount reflected in this table for Mr. Smith reflects such accelerated vesting. Please see “Corporate Governance
at Splunk—Non-Employee Director Compensation” of this proxy statement for further information regarding potential accelerated vesting of Mr. Smith’s RSUs
received in connection with his services as a member of our Board under certain circumstances unrelated to his role as our interim CEO.
(4)
Other than Messrs. Smith and Tully, each NEO’s base salary and target bonus amount in effect as of January 31, 2022 was used in calculating severance
payment amounts.
(5)
Ms. Carlson’s employment with us terminated on March 31, 2022; this termination constituted a termination of her employment by us without “cause” under
Section 8(b) of her employment letter with us, and gave rise to the corresponding severance payments and benefits under the employment letter. These
severance payments and benefits are described in further detail under “Compensation Discussion and Analysis—Discussion of Our Fiscal 2022 Executive
Compensation Program—Components of Our Fiscal 2022 Compensation Program—Severance and Change in Control-Related Benefits.”
(6)
Mr. Merritt’s employment with us terminated on March 31, 2022, and he received the severance payments and benefits under Section 7(b) of our employment
letter with him corresponding to a termination of his employment by us without “cause,” which payments and benefits would have been provided to him
upon our termination of him as our President and CEO if he had not agreed to continue employment with us as a strategic advisor to our interim CEO. These
severance payments and benefits are described in further detail under “Compensation Discussion and Analysis—Discussion of Our Fiscal 2022 Executive
Compensation Program—Components of Our Fiscal 2022 Compensation Program—Severance and Change in Control-Related Benefits.”
(7)
Mr. Tully informed us of his decision to resign as our Senior Vice President, Chief Technology Officer, effective as of May 4, 2021. He did not receive any
severance payment or benefits in connection with such termination.
For purposes of the severance benefits disclosed above that our NEOs are eligible to receive, “cause” generally means:
(i) the NEO’s conviction of or plea of nolo contendere to a felony or a crime involving moral turpitude which our Board believes
has had or will have a detrimental effect on the Company’s reputation or business; (ii) the NEO engaging in an act of gross
negligence or willful misconduct in the performance of the NEO’s employment obligations and duties; (iii) the NEO committing
an act of fraud against, material misconduct or willful misappropriation of property belonging to the Company; (iv) the NEO
engaging in any other misconduct that has had or will have an adverse effect on the Company’s reputation or business; or
(v) the breach of the NEO’s Employee Invention Assignment and Confidentiality Agreement or other unauthorized misuse of
the Company’s or a third party’s trade secrets or proprietary information. For purposes of the severance benefits disclosed
above that our NEOs are eligible to receive, “good reason” generally means any of the following taken without the NEO’s
written consent, provided that the Company is given an opportunity to cure the event giving rise to good reason and the NEO
terminates employment within 30 days following the expiration of the Company’s cure period: (i) a material change, adverse
to the NEO, in the NEO’s position, title(s), office(s) or duties; (ii) an assignment of any significant duties to the NEO that are
inconsistent with the NEO’s positions or offices; (iii) a decrease in the NEO’s then-current annual base salary by more than
10% (other than in connection with a general decrease in the salary of all executives); or (iv) the NEO’s relocation to a facility
or a location more than 30 miles from the NEO’s residence. For purposes of the severance benefits disclosed above that our
NEOs are eligible to receive, “change in control” generally means (i) a sale, conveyance, exchange or transfer (excluding any
venture-backed or similar investments in the Company) in which any person or entity (excluding certain persons and entities)
becomes the beneficial owner, directly or indirectly, of securities of the Company representing 50% percent of the total voting
power of all its then-outstanding voting securities; (ii) a merger or consolidation of the Company in which its voting securities
immediately prior to the merger or consolidation do not represent, or are not converted into securities that represent, a
majority of the voting power of all voting securities of the surviving entity immediately after the merger or consolidation; or (iii)
a sale of substantially all of the assets of the Company or a liquidation or dissolution of the Company.
CEO Pay Ratio
Under SEC rules, we are required to provide information regarding the relationship between the annual total compensation
of our CEO and the annual total compensation of our median employee (excluding our CEO) for our last completed fiscal year,
which ended January 31, 2022:
• The median of the annual total compensation of all of our employees (other than Mr. Smith), including our consolidated
subsidiaries, was approximately $260,390. This annual total compensation is calculated in accordance with Item 402(c)(2)(x)
of Regulation S-K, and reflects, among other things, salary and bonus earned and aggregate “grant date fair value” of RSU
awards granted during the 12-month period ended January 31, 2022.
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Splunk 2022 Proxy Statement
• Mr. Smith’s annual total compensation, as reported in the Summary Compensation Table included in this proxy statement,
was $3,010,388. As noted therein, in accordance with applicable SEC rules, such annual total compensation includes
director fees paid to Mr. Smith in fiscal 2022 and the aggregate grant date fair value of RSUs granted to Mr. Smith in
fiscal 2022, in both cases for his service as a member of our Board. Since Mr. Smith was appointed interim CEO effective
November 13, 2021, and in accordance with applicable SEC rules, we annualized his salary for his service as our CEO, and
added it to the other components of his pay disclosed in the Summary Compensation Table (the director fees paid to him
in fiscal 2022 and the aggregate grant date fair value of the RSUs granted to him in fiscal 2022, in both cases for his service
as a member of our Board, and the premium payment for long-term disability benefits disclosed as All Other Compensation
in the Summary Compensation Table), to arrive at a value of $12,380,251. We used this value for the ratio of annual total
compensation for our CEO to the annual total compensation for our median employee.
• Based on the above, for fiscal 2022, the ratio of Mr. Smith’s annual total compensation to the median of the annual total
compensation of all employees was approximately 48 to 1.
• We determined the median of the annual total compensation of our employees as of January 31, 2022 at which time we
(including our consolidated subsidiaries) had approximately 7,505 full-time and part-time employees, including interns, of
which approximately 5,323 were U.S. employees, and approximately 2,182 (or approximately 29.1% of our total employee
population as of January 31, 2022, excluding acquired employees) were located outside of the United States. In accordance
with the SEC’s permitted methodology for determining the “median employee,” we excluded from our calculations 29
employees (or approximately 0.4% of our total employee population as of January 31, 2022) who were hired in connection
with the acquisition of TruSTAR Technology, Inc. in fiscal 2022.
• We then compared the sum of (i) the annual base salary of each of these employees for fiscal 2022, plus (ii) the total annual
cash incentive bonus or commission, as applicable, earned by each of these employees for fiscal 2022 as reflected in our
payroll records, plus (iii) the aggregate grant date fair value of equity awards (as determined in accordance with footnote 1
of the 2022 Summary Compensation Table) granted to these employees in fiscal 2022, to determine the median employee.
Compensation paid in foreign currency was converted to U.S. dollars using a spot exchange rate on March 1, 2022. In
determining the median total compensation of all employees, we did not make any cost-of-living adjustments to the
compensation paid to any employee outside of the U.S.
Once we identified our median employee, we estimated the median employee’s annual total compensation in accordance with
the requirements of Item 402(c)(2)(x) of Regulation S-K, yielding the median annual total compensation disclosed above.
The pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K under the
Securities Act of 1933, as amended, and based upon our reasonable judgment and assumptions. The SEC rules do not specify
a single methodology for identification of the median employee or calculation of the pay ratio, and other companies may use
assumptions and methodologies that are different from those used by us in calculating their pay ratio. Accordingly, the pay
ratio disclosed by other companies may not be comparable to our pay ratio as disclosed above.
Equity Compensation Plan Information
The following table provides information as of January 31, 2022 with respect to the shares of our common stock that may be
issued under our existing equity compensation plans.
Plan Category
(a)
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights
(b)
Weighted
Average
Exercise Price
of Outstanding
Options,
Warrants and
Rights
($)(1)
(c)
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation
Plans (Excluding
Securities Reflected in
Column (a))
Equity compensation plans approved by stockholders(2)
11,899,803
12.35
42,350,489
Equity compensation plans not approved by stockholders(3)
—
—
4,600,000
Total
11,899,803
12.35
46,950,489
(1)
Does not include shares issuable upon vesting of outstanding RSU and PSU awards, which have no exercise price and are included in column (a).
(2)
Includes the following plans: 2012 Equity Incentive Plan (“2012 Plan”), 2003 Equity Incentive Plan (“2003 Plan”) and 2012 Employee Stock Purchase
Plan (“2012 ESPP”). Our 2012 Plan provides that on the first day of each fiscal year, the number of shares authorized for issuance under the 2012 Plan is
automatically increased by a number equal to the least of (i) ten million (10,000,000) shares of common stock, (ii) five percent (5%) of the aggregate number
Executive Compensation
82
of shares of common stock outstanding on the last day of the immediately preceding fiscal year, or (iii) such number of shares of common stock that may be
determined by our Board. Our 2012 ESPP provides that on the first day of each fiscal year, the number of shares authorized for issuance under the 2012 ESPP
is automatically increased by a number equal to the least of (i) four million (4,000,000) shares of common stock, (ii) two percent (2%) of the aggregate number
of outstanding shares of common stock on the last day of the immediately preceding fiscal year, or (iii) an amount determined by our Board or any committee
designated by our Board to administer the 2012 ESPP. Our 2012 Plan expired in March 2022 with respect to future awards. Our 2003 Plan expired with respect
to future awards in 2012 and no awards were outstanding under our 2003 Plan as of April 15, 2022.
(3)
Includes the 2022 Inducement Plan, which was approved by our Board on January 31, 2022, in accordance with Listing Rule 5635(c)(4) of the corporate
governance rules of The Nasdaq Stock Market and became effective on April 1, 2022. The 2022 Inducement Plan provides for the grant of nonstatutory
stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance units and performance shares to eligible employees in
accordance with Listing Rule 5635(c)(4) of the corporate governance rules of The Nasdaq Stock Market. The 2022 Inducement Plan will continue in effect
for a term of one year from its effective date, unless terminated earlier by the Company in accordance with its terms. Does not include outstanding 96,034
RSUs and 144,052 PSUs (assuming target level achievement) granted to our President and Chief Executive Officer on April 11, 2022, which were granted
outside of the 2022 Inducement Plan in accordance with Listing Rule 5635(c)(4) of the corporate governance rules of The Nasdaq Stock Market and are
described under “Compensation Discussion and Analysis—Executive Summary—CEO Transition and Named Executive Officers for Fiscal 2022—CEO New Hire
Compensation Package.”
Executive Compensation
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Splunk 2022 Proxy Statement
Splunk Inc. 2022 Equity
Incentive Plan
PROPOSAL
4
Approval of Splunk Inc. 2022 Equity
Incentive Plan
The Board recommends a vote “FOR” the approval of our 2022 Equity Incentive Plan.
Approval of the 2022 Equity Incentive Plan
We are asking our stockholders to approve a new equity incentive plan, the Splunk Inc. 2022 Equity Incentive Plan (the “2022
Plan”). Based on the Talent & Compensation Committee’s recommendation, our Board adopted the 2022 Plan on March 10,
2022, subject to approval from our stockholders at our Annual Meeting.
The 2022 Plan is intended to replace our 2012 Equity Incentive Plan, as amended (the “2012 Plan”), which expired by its terms
in March 2022, ten years after it was adopted by our Board in 2012 in connection with our initial public offering.
In connection with the expiration of the 2012 Plan and based on the Talent & Compensation Committee’s recommendation,
our Board has adopted the 2022 Inducement Plan (the “Inducement Plan”) in accordance with Listing Rule 5635(c)(4) of the
corporate governance rules of The Nasdaq Stock Market. Our Board adopted the Inducement Plan to permit the Company to
grant “new-hire” equity awards to eligible new employees of the Company during the transition period between the expiration
of the 2012 Plan and stockholder approval of the 2022 Plan. If our stockholders approve the 2022 Plan, we will cease granting
equity awards under the Inducement Plan and will reduce the 2022 Plan share reserve by the number of shares that we grant
under the Inducement Plan between April 15, 2022 and June 16, 2022 (the date of the Annual Meeting), and the 2022 Plan will
continue in effect until 2032 (unless earlier terminated by the 2022 Plan’s administrator, as defined below).
The approval of our 2022 Equity Incentive Plan must receive the affirmative vote of at least a majority of the votes cast to be
approved. Abstentions are not considered votes cast and thus will have no effect on the outcome of this proposal. Broker non-
votes, if any, will have no effect on the outcome of this proposal.
Why Should Stockholders Vote to Approve the 2022 Plan?
The 2022 Plan is Critical to Our Growth and Will Allow Us to Recruit,
Incentivize and Retain the Best Talent
We are currently unable to grant equity awards to individuals other than, as described above, equity awards to eligible “new
hire” employees under the Inducement Plan. Consequently, we are currently unable to grant equity awards to our continuing
employees, as well as to new and continuing members of our Board.
We operate in an extremely competitive business environment and talent market. In fiscal 2022, there has been a dramatic
increase in workers leaving their positions throughout our industry that is being referred to as the “Great Resignation,” and the
market to build, retain and replace talent has become even more highly competitive. Our Board believes that our ability to grant
equity awards is critical to successfully compete and grow our business in this environment, because equity awards allow us to
recruit, incentivize and retain the best available employees and other service providers.
84
In addition, our Board believes that equity awards align the interests of our employees with those of our stockholders.
Equity awards provide our employees an ownership stake in the Company, motivating them to achieve outstanding business
performance, and provide an effective means of rewarding our employees for their contributions to our success.
If stockholders do not approve the 2022 Plan at our Annual Meeting, our ability to recruit, retain and incentivize the highly skilled
talent (including continuing employees and non-employee members of our Board) critical to successfully compete and grow our
business could be seriously and negatively impacted. In addition, we would have to consider other compensation alternatives,
which may not as effectively align the interests of our employees with those of our stockholders, and would be a distraction from
our management team’s focus on execution of our business strategy. For example, we would have to consider increasing cash
compensation, which could adversely affect our business, results of operations, financial condition and cash flows.
To Keep Us Accountable to Our Stockholders, We are Asking for
Approximately One Year’s Worth of Shares Under the 2022 Plan as We
Transition to a New Equity Compensation Program
If our stockholders approve the 2022 Plan, (a) 10,460,784 shares of the Company’s common stock (“shares”) will initially be
reserved for issuance under the 2022 Plan, which equates to approximately 6.5% of our common shares outstanding as of
April 15, 2022, plus (b) any shares subject to awards granted under the 2012 Plan or the Inducement Plan that, on or after the
date stockholders initially approve the 2022 Plan, expire or otherwise terminate without having been exercised or issued in full.
Please see below for information regarding outstanding equity awards and overhang as of April 15, 2022.
Our Board seeks approval for a share reserve of 10,460,784 shares, initially equating to approximately 6.5% of our
common shares outstanding as of April 15, 2022. Our Board believes that a share request of this amount is critical for the
following reasons:
• As noted above, we operate in an extremely competitive talent market. This competition for talent has intensified in the
current period of the “Great Resignation.” Our Board believes that our ability to grant equity awards is critical to successfully
compete and grow our business in this environment, because equity awards allow us to recruit, incentivize and retain the
best available employees.
• In fiscal 2022, we reached a significant milestone as we surpassed $3 billion in total ARR, with cloud revenue growing 70%.
We expect our cloud services offerings will continue to be an important source of growth for Splunk, our customers and our
partners. This transition has required us to, and will continue to require us to, recruit, incentivize and retain employees in the
hyper-competitive cloud, security and observability technology talent markets.
• Our Board anticipates that equity awards will continue to be a key tool to recruit and retain the employees that our
Board believes are critical to the ongoing operation, success and growth of the Company, and our Board believes these
equity awards will help these individuals maintain continued focus and dedication to their responsibilities to maximize
stockholder value.
• As noted above, our 2012 Plan recently expired by its terms in March 2022, ten years after it was adopted by our Board in 2012
in connection with our initial public offering. Over the last ten years, we have used equity awards strategically and on a broad
basis to successfully compete and to grow our business. Equity compensation has been a key compensation component for
our existing employees, and we leveraged equity incentives to differentiate our compensation program from peers. As our
business has grown and matured, and in connection with the expiration of the 2012 Plan, we have initiated a transition to a new
equity compensation program that provides for awards in amounts closer to the levels of our peers, while still providing us an
edge to recruit and retain top talent. For example, effective in fiscal 2023, we ceased providing equity awards in connection
with promotions and, effective with the second quarter of fiscal 2023, we decreased the number of “new hire” employees
who receive equity awards from approximately 100% of “new hires” to approximately 90% of “new hires”. In order to minimize
disruption to our employees, and to ensure an effective and smooth transition, we expect the transition to progress in stages
over several years. As this transition progresses, we anticipate asking our stockholders to approve a more normalized quantum
of shares closer to the levels of our peers. We anticipate that fewer than 10% of the shares reserved under the 2022 Plan
would be used for equity award grants to senior vice presidents and above, including our NEOs.
For the foregoing reasons, we anticipate that the size of the share request described above will be sufficient to meet our
expected needs for approximately one year. We expect to ask our stockholders for approval of a new equity plan in fiscal
2024 with a lower quantum of shares that will reflect the transition, described above, to a new equity compensation program
that is closer to levels of our peers and that is also intended to provide us an edge to recruit and retain top talent. Our Board
made the determination to ask our stockholders for no more than an approximately one-year share request so that we remain
accountable to our stockholders on this transition to a new equity compensation program for the Company.
Splunk Inc. 2022 Equity Incentive Plan
PROXY
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Splunk 2022 Proxy Statement
In addition to the dynamics described above, the Talent & Compensation Committee and our Board considered the following
factors when determining the number of shares to ask our stockholders to approve for issuance under the 2022 Plan:
• Number of Shares Remaining under the Existing Equity Plan. As of April 15, 2022, no shares remained available for
issuance under the 2012 Plan and 4,458,988 shares remained available for issuance under the Inducement Plan. Any shares
remaining available for future awards under the Inducement Plan will expire immediately upon stockholder approval of the
2022 Plan. As described above, we are currently unable to grant equity awards to our continuing employees, as well as to
new and continuing members of our Board. Under the Inducement Plan, we may only grant equity awards to eligible “new
hire” employees.
• Overhang. As of April 15, 2022, 15,908,824 shares remained subject to outstanding equity awards, collectively representing
approximately 9.9% of our outstanding common shares as of such date (15,527,726 shares were subject to equity awards
under our 2012 Plan, 141,012 shares were subject to equity awards under our Inducement Plan, and 240,086 shares were
subject to inducement equity awards granted to our President and CEO outside of the foregoing plans). For this purpose,
unearned performance stock units (“PSUs”) were counted assuming target level performance, earned PSUs were counted
using actual performance achieved, and any unearned stock price PSUs were counted based on the number of shares
eligible to be earned. Of the 15,908,824 shares that remained subject to outstanding equity awards as of April 15, 2022,
143,595 shares were covered by stock options, with a weighted average remaining term of 5.86 years and average weighted
exercise price of $11.91. All other outstanding equity awards were “full-value” awards (restricted stock units, PSUs and
restricted stock awards). No other equity awards were outstanding as of April 15, 2022. We commit to reduce the 2022 Plan
share reserve by the number of shares that we grant under the Inducement Plan between April 15, 2022 and June 16, 2022
(the date of the Annual Meeting), unless this proposal to adopt the 2022 Plan is not approved by our stockholders at the
Annual Meeting.
• Historical Grant Practices. The Talent & Compensation Committee and our Board considered the number of shares
covered by equity awards we granted in our last three fiscal years. In fiscal 2020, fiscal 2021, and fiscal 2022 we granted
equity awards covering approximately 6.9 million, 4.9 million and 7.8 million shares, respectively, for approximately 19.5
million shares over that three-year period (assuming, in each case, “target” level performance for performance-based equity
awards and excluding equity awards assumed in acquisitions).
• Forecasted Grants. To determine how long the share request under the 2022 Plan described above will enable us to make
grants of equity awards, our Board reviewed a forecast that considered the dynamics and factors described above under
“To Keep Us Accountable to Our Stockholders, We are Asking for Approximately One Year’s Worth of Shares Under the 2022
Plan as We Transition to a New Equity Compensation Program.” In addition, the forecast reviewed by our Board considered
forecasted future equity awards, with the future equity awards determined based on assumptions about our stock price
and the competitive dollar value to be delivered to the equity award recipient. Because we generally determine the size of
equity awards to be granted based on the dollar value of the relevant award, if the stock price used to determine the number
of shares subject to an equity award differs significantly from the stock price assumed in the forecast (which was $115 to
$140), our actual share usage will deviate significantly from our forecasted share usage. For example, if our stock price used
to determine the number of shares subject to future equity awards is lower than the stock price assumed in the forecast, we
would need a larger number of shares than anticipated to deliver the same intended dollar value to the recipients of those
equity awards. Conversely, if our stock price used to determine the number of shares subject to future equity awards is
higher than the stock price assumed in the forecast, we would need a fewer number of shares than anticipated to deliver the
same intended dollar value to the recipients of those equity awards.
In addition to considering the dynamics and factors described above to determine the number of shares subject to the 2022
Plan, the Talent & Compensation Committee and our Board considered analyses prepared by the Talent & Compensation
Committee’s independent compensation consultant, Compensia, a national compensation consulting firm, which included an
analysis of the metrics shown in the table below. This table includes “gross burn rate” and “net burn rate” metrics. Gross burn
rate can be used by some to assess a company’s use of equity compensation. Gross burn rate is defined as (i) the number of
shares underlying equity awards granted in a given fiscal year (excluding any equity awards assumed in acquisitions) divided
by (ii) the number of shares of weighted average common stock outstanding (“CSO”). Potential actual dilution to stockholders
is often measured by analyzing the net burn rate. We define net burn rate as (i) the number of shares underlying equity awards
granted in a given fiscal year (excluding any equity awards assumed in acquisitions) minus shares subject to outstanding equity
awards forfeited during the year minus shares withheld by us to cover tax withholdings, divided by (ii) CSO. This measure
indicates the rate at which we actually create potential future stockholder dilution.
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The following table shows our gross and net burn rate over the past three fiscal years and the average across those three years
(excluding any equity awards assumed in acquisitions).
FY 2020
FY 2021
FY 2022
Average
Options granted
0
0
0
0
Time-based restricted stock units and restricted stock granted
6,512,200
4,598,363
7,321,730
6,144,098
Performance-based restricted stock units and restricted stock granted
(at the “target” level)
350,548
318,514
430,056
366,373
Total awards granted(1)
6,862,748
4,916,877
7,751,786
6,510,470
Weighted Average Common Shares Outstanding
151,948,507
159,744,275
161,628,332
157,773,705
Gross Burn Rate
4.5%
3.1%
4.8%
4.1%
Forfeitures
1,726,746
1,830,369
3,063,530
2,206,882
Shares withheld to cover taxes
1,374,238
968,432
1,563,608
1,302,093
Net Burn Rate
2.5%
1.3%
1.9%
1.9%
(1) Includes grants of (1) options, (2) time-based restricted stock units and restricted stock, and (3) performance-based restricted stock units and restricted stock
(at the “target” level). Excludes any equity awards assumed in acquisitions.
We Have Taken Measures and are Committed to Manage Dilution
We recognize the dilutive impact of our equity compensation program on our stockholders and continuously strive to balance
this concern with the competition for talent in the extremely competitive business environment and talent market in which
we operate. Our Talent & Compensation Committee and Board thoughtfully manage long-term stockholder dilution, equity
incentive plan burn rate, stock-based compensation expense and stock-based compensation while maintaining our ability to
attract, reward and retain key talent in a hypercompetitive market.
In June 2021, in order to decrease dilution to our stockholders, our Board authorized and approved a stock repurchase
program of up to $1.0 billion of our shares and, as of October 31, 2021, we repurchased approximately 6.9 million shares with a
total price of $1.0 billion.
Where permitted under applicable law, our Board actively manages dilution by satisfying its tax withholding obligations
related to equity awards by withholding shares from shares otherwise issuable to the equity award recipients. In fiscal 2022,
we withheld approximately 1.56 million such shares to satisfy our tax withholding obligations related to equity awards, and
our Board expects to continue this practice to minimize the dilutive impact of our equity compensation program to our
stockholders.
As described above, we have also initiated a transition to a new equity compensation program that is closer to market
levels and that is also intended to provide us an edge to recruit and retain top talent. In order to minimize disruption to our
employees, and to ensure an effective and smooth transition, we expect the transition to progress in stages over several years.
As this transition progresses, we anticipate asking our stockholders to approve a more normalized quantum of shares closer to
market levels. Our Board is deliberately asking our stockholders for no more than a one-year share request at this time so that
we remain accountable to our stockholders on this transition.
Finally, the 2022 Plan includes provisions designed to be less dilutive to stockholders relative to the 2012 Plan, which, as
described above, was adopted by our Board in connection with our initial public offering in 2012. Unlike the 2012 Plan, the
2022 Plan does not contain an “evergreen” provision, so the number of shares available for issuance under the 2022 Plan will
not automatically increase each year. Unlike the 2012 Plan, if shares are used to pay the exercise price of a 2022 Plan equity
award, those shares will not become available for future grant under the 2022 Plan. In addition, unlike the 2012 Plan, if shares
are used to satisfy the tax withholding obligations for a 2022 Plan equity award, those shares will not become available for
future grant under the 2022 Plan.
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Splunk 2022 Proxy Statement
The 2022 Plan Includes Compensation and Governance Best Practices
The 2022 Plan includes provisions considered best practice for compensation and corporate governance purposes. These
provisions protect our stockholders’ interests:
• Administration. The 2022 Plan will be administered by the Talent & Compensation Committee, which consists entirely of
independent non-employee directors.
• No Annual “Evergreen” Provision. The 2022 Plan requires stockholder approval to increase the maximum number of shares
that can be granted under the 2022 Plan. Unlike the 2012 Plan, the 2022 Plan does not contain an annual “evergreen” to
automatically increase the number of shares available for issuance each year.
• Certain Shares Are No Longer Returned to the Share Reserve. Shares used to pay the exercise price of an award granted
under the 2022 Plan or to satisfy tax withholding obligations for an award granted under the 2022 Plan will not become
available for future grant under the 2022 Plan. Under the 2012 Plan, such shares could be used for future grants.
• Repricing is Not Allowed without Stockholder Approval. The 2022 Plan does not permit 2022 Plan awards to be repriced
or exchanged for other awards unless our stockholders approve the repricing or exchange. The 2012 Plan did not require
such stockholder approval.
• No Single-Trigger Vesting Acceleration upon a Change in Control for Employees and Consultants. In a change of control
(as defined in the 2022 Plan), awards under the 2022 Plan will be treated in the manner determined by the administrator,
and except for awards granted to our non-employee directors for their service as non-employee directors, the terms of
the 2022 Plan provide for no automatic vesting of awards upon a change in control unless the award is not assumed or
substituted.
• Reasonable Annual Limits on Non-Employee Director Compensation. The 2022 Plan sets limits as to the total
compensation that non-employee directors may receive during each fiscal year (for service as a non-employee director). The
2012 Plan included no such limit.
• Minimum Vesting Requirements. Awards granted under the 2022 Plan, other than substitute awards for equity awards of
acquired entities, generally cannot become fully vested in less than one year from grant unless the vesting of such awards
is accelerated due to a termination of the participant’s service under certain circumstances, due to the participant’s death
or disability, or in connection with a change in control. However, an aggregate of 5% of the shares reserved for issuance
under the 2022 Plan can be granted without meeting such minimum vesting requirements. The 2012 Plan imposed no such
minimum vesting limitation.
• Limited Transferability. Awards under the 2022 Plan generally may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner, other than by will or by the laws of descent and distribution, unless otherwise
approved by the administrator (on such terms as the administrator deems appropriate). Equity awards under the 2022 Plan
may not be transferred to financial institutions.
• No Tax Gross-ups. The 2022 Plan does not provide for any tax gross-ups.
• Forfeiture Events. Each award under the 2022 Plan will be subject to any clawback policy of the Company, and the
administrator may require a participant to forfeit, return, or reimburse the Company all or a portion of the award and any
amounts paid under the award to comply with such clawback policy or applicable laws.
• No Dividends on Unvested Awards. No dividends or other distributions may be paid with respect to any shares underlying
the unvested portion of an award, and no dividends or other distributions may be paid with respect to stock options or stock
appreciation rights.
• Minimum Exercise Price. Other than stock options and stock appreciation rights assumed in connection with acquisitions,
stock options and stock appreciation rights granted under the 2022 Plan must have a per share exercise price no less than
100% of the fair market value per share on the date of grant of the relevant award.
• Certain Limits Related to Stock Options. The 2022 Plan prohibits “reload” stock options, as well as the payment of the
exercise price of stock options with a promissory note. The 2012 Plan did not include such prohibitions.
Our executive officers and directors have an interest in the approval of the 2022 Plan because they are eligible to receive
equity awards under the 2022 Plan.
Summary of the 2022 Plan
The following paragraphs summarize the principal features of the 2022 Plan and its operation. However, this summary is not
a complete description of the provisions of the 2022 Plan and is qualified in its entirety by the specific language of the 2022
Plan. A copy of the 2022 Plan is provided as Appendix B to this proxy statement.
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Purpose of the 2022 Plan. The purpose of the 2022 Plan is to promote the success of the Company and the interests
of its stockholders by providing equity-based incentives to attract, retain and motivate eligible service providers, whose
contributions drive the Company’s success, and encourage stock ownership by eligible service providers, thereby aligning
their interests with those of the Company’s stockholders. Service providers eligible to participate in the 2022 Plan are
discussed below.
Award Types. The 2022 Plan permits the grant of incentive stock options, nonstatutory stock options, restricted stock,
restricted stock units, stock appreciation rights, performance units and performance shares. An “incentive stock option” is an
incentive stock option within the meaning of Section 422 of the Internal Revenue Code (the “Code”). A “nonstatutory stock
option” is a stock option that is not an incentive stock option. “Restricted stock” is stock that is subject to forfeiture to the
Company during a “period of restriction” until applicable vesting conditions are met. A “restricted stock unit” is a bookkeeping
entry representing an amount equal to the fair market value of one share. A “stock appreciation right” is an award that provides
for a payment based upon the difference between the fair market value of a share on the date of exercise and the stated
exercise price of the stock appreciation right. A “performance unit” is an award denominated in shares or cash, which may be
earned based on applicable vesting conditions. A “performance share” means an award denominated in shares, which may be
earned based on applicable vesting conditions. All such awards are described in further detail below.
Stock Subject to the 2022 Plan. Subject to certain adjustments described below, the maximum aggregate number of shares
that may be issued under the 2022 Plan is 10,460,784 shares, plus any shares subject to awards granted under the 2012 Plan,
and shares subject to awards granted under the Inducement Plan, in each case that, on or after the date stockholders initially
approve the 2022 Plan, expire or otherwise terminate without having been exercised or issued in full. In the event the Company
substitutes equity awards of acquired entities in connection with mergers, reorganizations, separations, or other transactions
to which Section 424(a) of the Code applies (each such award, a “substituted award”), the maximum aggregate number of
shares that may be issued under the 2022 Plan will be increased by the number of shares underlying the substituted awards as
of the effectiveness of the substitution. The shares issued under the 2022 Plan may be authorized, but unissued, or reacquired
Company common stock. As of April 25, 2022, the closing sale price of a share of our common stock reported on The Nasdaq
Stock Market was $129.00.
If an award granted under the 2022 Plan expires or becomes unexercisable without having been exercised in full, or, with
respect to restricted stock, restricted stock units, performance units or performance shares, is forfeited to or repurchased
by the Company due to failure to vest, then the unpurchased shares (or for awards other than options or stock appreciation
rights, the forfeited or repurchased shares), which were subject thereto will become available for future grant or sale under
the 2022 Plan (unless the 2022 Plan has terminated). With respect to the exercise of stock appreciation rights or options, the
gross shares underlying such stock appreciation rights or options will cease to be available under the 2022 Plan. Shares that
actually have been issued under the 2022 Plan under any award will not be returned to the 2022 Plan and will not become
available for future distribution under the 2022 Plan; provided, however, that if shares issued pursuant to awards of restricted
stock, restricted stock units, performance shares or performance units are repurchased by the Company or are forfeited to
the Company due to failure to vest, such shares will become available for future grant under the 2022 Plan. Shares used to pay
the exercise price or purchase price of an award or to satisfy the withholding obligations for taxes related to an award will not
become available for future grant or sale under the 2022 Plan. To the extent an award under the 2022 Plan is paid out in cash
rather than shares, such cash payment will not result in reducing the number of shares available for issuance under the 2022
Plan. Notwithstanding the foregoing and, subject to certain adjustments described below, the maximum number of shares
that may be issued upon the exercise of incentive stock options will equal 200% of the aggregate share number stated in the
paragraph above, plus, to the extent allowable under Section 422 of the Code, any shares that become available for issuance
under the 2022 Plan pursuant to this paragraph.
We commit to reduce the 2022 Plan share reserve by the number of shares that we grant under the Inducement Plan between
April 15, 2022 and June 16, 2022 (the date of the Annual Meeting), unless this proposal to adopt the 2022 Plan is not approved
by our stockholders at the Annual Meeting.
Administration of the 2022 Plan. Different committees of one or more members of our Board, or of one or more other
individuals satisfying applicable laws appointed by our Board (each a “committee”), may administer the 2022 Plan, including
with respect to different groups of eligible participants. If the 2022 Plan is administered by a committee other than the
Company’s independent Talent & Compensation Committee, the Company’s independent Talent & Compensation Committee
will maintain oversight of, and set a limit on the number of shares covered by awards that may be granted by, such committee,
such committee will not have authority to grant awards to members of such committee, and such committee will be
constituted to satisfy applicable laws.
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Splunk 2022 Proxy Statement
Powers of the Administrator. Subject to the provisions of the 2022 Plan, and in the case of a committee, the specific duties
delegated by our Board to such committee, the administrator will have the authority, in its discretion, to: determine the fair
market value (as defined in the 2022 Plan) for purposes of the 2022 Plan; select the eligible service providers to whom awards
may be granted under the 2022 Plan; determine the number of shares to be covered by each award granted under the 2022
Plan; approve forms of award agreements for use under the 2022 Plan; determine the terms and conditions, not inconsistent
with the terms of the 2022 Plan, of any award granted under the 2022 Plan (including, but not limited to, the exercise price, the
time or times when awards may vest or be exercised (which may be based on performance criteria), any vesting acceleration
or waiver of forfeiture restrictions, and any restriction or limitation regarding any award or the shares relating thereto, based in
each case on such factors as the administrator determines; prescribe, amend and rescind rules and regulations relating to the
2022 Plan, including rules and regulations relating to sub-plans established for the purpose of accommodating requirements
of local law and procedures outside the U.S., facilitating the administration of the 2022 Plan in jurisdictions outside the U.S.,
or for qualifying for favorable tax treatment under applicable non-U.S. laws; construe and interpret the terms of the 2022 Plan
and awards granted under the 2022 Plan; modify or amend each award (subject to limitations contained in the 2022 Plan);
allow participants to satisfy withholding obligations for taxes (subject to limitations contained in the 2022 Plan); authorize any
person to execute on behalf of the Company any instrument required to affect the grant of an award previously granted by the
administrator; temporarily suspend the exercisability or vesting of an award if the administrator deems such suspension to be
necessary or appropriate for administrative purposes; allow a participant to defer the receipt of the payment of cash or the
delivery of shares that otherwise would be due to the participant under an award; and make all other determinations deemed
necessary or advisable for administering the 2022 Plan.
No Repricing; Exchange Program; “Reload” awards. Without stockholder approval, the administrator may not institute a
program under which: outstanding awards are surrendered or cancelled in exchange for awards of the same type (which may
have higher or lower exercise prices and different terms), awards of a different type, and/or cash; participants would have the
opportunity to transfer any outstanding awards to a financial institution or other person or entity selected by the administrator;
and/or the exercise price of an outstanding award is reduced. No term of an award will provide for automatic “reload” grants of
additional awards upon the exercise of an option or stock appreciation right.
Outside Director Award Limitations. No director who is not an employee (an “outside director”) may be paid, issued, or
granted, in any fiscal year of the Company, equity awards (including any awards issued under the 2022 Plan) with an aggregate
value (the value of which will be based on their grant date fair value determined in accordance with U.S. generally accepted
accounting principles) and any other compensation (including without limitation any cash retainers or fees) that, in the
aggregate, exceed $750,000, increased to $1,500,000 for such outside director for the fiscal year in which he or she joins our
Board as an outside director. Any awards or other compensation paid or provided to an individual for his or her services as
an employee, or for his or her services as a consultant (other than as an outside director), will not count for purposes of the
limitation described in this paragraph. The foregoing limits may not be increased without stockholder approval.
Minimum Vesting Requirements. Except as described below, no portion of an award (other than substituted awards) will vest
earlier than the one-year anniversary of such award’s grant date. Awards may be granted to any service provider without regard
to the minimum vesting requirements described in the preceding sentence if the shares subject to such awards would not
result in more than 5% of the maximum aggregate number of shares reserved for issuance pursuant to all outstanding awards
granted under the 2022 Plan (the “5% Limit”). Substituted awards will not count against the 5% Limit. This minimum vesting
requirement described in this paragraph will not prevent accelerated vesting of any portion of an award earlier than the one-
year anniversary of such award’s grant date if such acceleration is due to a termination of the relevant participant’s service or if
such acceleration is in connection with a change in control (as defined in the 2022 Plan), in each case to the extent otherwise
permitted under the 2022 Plan.
Dividends and Other Distributions. Service providers holding an award granted under the 2022 Plan will not be entitled to
receive any dividends or other distributions paid with respect to a share underlying such award until the portion of such award
covering such share has fully vested, and all periods of restriction with respect to such share has lapsed, and such share has
been issued pursuant to such award.
Transferability of awards. Unless determined otherwise by the administrator, an award may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent and distribution, and may
be exercised, during the lifetime of the participant, only by the participant. If the administrator makes an award transferable,
such award will contain such additional terms and conditions as the administrator deems appropriate. For the avoidance of
doubt, awards may not be transferred to financial institutions.
Eligibility. Nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares
and performance units may be granted to employees, members of our Board or consultants (each, as defined in the 2022 Plan,
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a “service provider” and, collectively, “service providers”). Incentive stock options may be granted only to employees. As of
April 15, 2022, we had approximately 7,505 employees (including one employee member of our Board), approximately 31
consultants and 11 non-employee members of our Board that would be eligible to participate in the 2022 Plan. Historically, we
have rarely granted equity awards to consultants.
Stock Options. Each option will be evidenced by an award agreement that will specify the exercise price, the number of
shares subject to the option, the exercise restrictions, if any, applicable to the option, and such other terms and conditions as
the administrator determines. Each option will be designated in the award agreement as either an incentive stock option or
a nonstatutory stock option. However, notwithstanding such designation, to the extent that the aggregate fair market value
of the shares with respect to which incentive stock options are exercisable for the first time by the participant during any
calendar year (under all plans of the Company and any parent or subsidiary) exceeds $100,000, such options will be treated
as nonstatutory stock options. The fair market value of the shares will be determined as of the time the option with respect to
such shares is granted. The term of each option will be 10 years from the date of grant or such shorter term as may be provided
in the award agreement. Moreover, in the case of an incentive stock option granted to a participant who, at the time the
incentive stock option is granted, owns stock representing more than 10% of the total combined voting power of all classes
of stock of the Company or any parent or subsidiary, the term of the incentive stock option will be 5 years from the date of
grant or such shorter term as may be provided in the award agreement. The per share exercise price for the shares to be issued
pursuant to exercise of an option will be determined by the administrator, subject to the following. In the case of an incentive
stock option granted to an employee who, at the time the incentive stock option is granted, owns stock representing more than
10% of the voting power of all classes of stock of the Company or any parent or subsidiary, the per share exercise price will be
no less than 110% of the fair market value per share on the date of grant. In the case of an incentive stock option granted to
any employee other than an employee described in the preceding sentence, the per share exercise price will be no less than
100% of the fair market value per share on the date of grant. In the case of a nonstatutory stock option, the per share exercise
price will be no less than 100% of the fair market value per share on the date of grant. Notwithstanding the foregoing, options
may be granted with a per share exercise price of less than 100% of the fair market value per share on the date of grant in
the case of substitute awards granted in connection with transactions described in, and in a manner consistent with, Section
424(a) of the Code.
At the time an option is granted, the administrator will fix the period within which the option may be exercised and will
determine any conditions that must be satisfied before the option may be exercised. The administrator will determine the
acceptable form of consideration for exercising an option, including the method of payment. In the case of an incentive stock
option, the administrator will determine the acceptable form of consideration at the time of grant. Such consideration may
consist entirely of: cash; check; shares, provided that such shares have a fair market value on the date of surrender equal to the
aggregate exercise price of the shares as to which such option will be exercised and provided that accepting such shares will
not result in any adverse accounting consequences to the Company, as the administrator determines; consideration received
by the Company under a broker-assisted (or other) cashless exercise program (whether through a broker or otherwise)
implemented by the Company; by net exercise; such other consideration and method of payment for the issuance of shares to
the extent permitted by applicable laws; or any combination of the foregoing methods of payment. A promissory note may not
be used as a form of consideration for exercising an option.
If a participant ceases to be a service provider, other than as the result of death or disability (as defined in the 2022 Plan),
the participant may exercise his or her option within such period of time as is specified in the award agreement to the extent
that the option is vested on the date of cessation of the participant’s service provider status (but in no event later than the
expiration of the term of such option as set forth in the award agreement). In the absence of a specified time in the award
agreement, the option will remain exercisable for three months following cessation of the participant’s service provider status.
If a participant ceases to be a service provider as a result of disability, the participant may exercise his or her option within
such period of time as is specified in the award agreement to the extent the option is vested on the date of cessation of
the participant’s service provider status (but in no event later than the expiration of the term of such option as set forth in
the award agreement). In the absence of a specified time in the award agreement, the option will remain exercisable for 12
months following cessation of the participant’s service provider status.
If a participant dies while a service provider, the option may be exercised following the participant’s death within such
period of time as is specified in the award agreement to the extent that the option is vested on the date of death (but in no
event may the option be exercised later than the expiration of the term of such option as set forth in the award agreement),
by the participant’s designated beneficiary, provided the administrator has permitted the designation of a beneficiary and
provided such beneficiary has been designated prior to the participant’s death in a form acceptable to the administrator. If
the administrator has not permitted the designation of a beneficiary or if no such beneficiary has been designated by the
participant, then such option may be exercised by the personal representative of the participant’s estate or by the person(s)
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Splunk 2022 Proxy Statement
to whom the option is transferred pursuant to the participant’s will or in accordance with the laws of descent and distribution.
In the absence of a specified time in the award agreement, the option will remain exercisable for 12 months following the
participant’s death.
Unless otherwise provided by the administrator, if on the date of cessation of the participant’s service provider status the
participant is not vested as to his or her entire option, the shares covered by the unvested portion of the option will revert to
the 2022 Plan. If, after cessation of the participant’s service provider status, the participant does not exercise his or her option
within the time specified by the administrator (or if not specified by the administrator, the time specified in the 2022 Plan), the
option will terminate, and the shares covered by such option will revert to the 2022 Plan.
Restricted Stock. Each award of restricted stock will be evidenced by an award agreement that will specify any period
of restriction, the number of shares granted, and such other terms and conditions as the administrator determines. The
administrator may accelerate the time at which any restrictions will lapse or be removed. Except as described below or
the award agreement, shares of restricted stock may not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated until the end of any applicable period of restriction. During any applicable period of restriction, service providers
holding shares of restricted stock granted under the 2022 Plan may exercise full voting rights with respect to those shares,
unless the administrator determines otherwise. On the date set forth in the award agreement, the restricted stock for which
restrictions have not lapsed will revert to the Company and again will become available for grant under the 2022 Plan.
Restricted Stock Units. Each award of restricted stock units will be evidenced by an award agreement that will specify vesting
criteria, the number of restricted stock units granted, and such other terms and conditions as the administrator determines.
The administrator will set vesting criteria, which, depending on the extent to which the criteria are met, will determine the
number of restricted stock units that will be paid out to the participant. The administrator may set vesting criteria based
upon the achievement of Company-wide, divisional, business unit, or individual goals (including, but not limited to, continued
employment or service), applicable U.S. or non-U.S. federal or state securities laws or any other basis determined by the
administrator. Upon meeting the applicable vesting criteria, the participant will be entitled to receive a payout as determined
by the administrator. Notwithstanding the foregoing, at any time after the grant of restricted stock units, the administrator may
reduce or waive any vesting criteria that must be met to receive a payout. The administrator may settle earned restricted stock
units only in cash, shares, or a combination of both. On the date set forth in the award agreement, all unearned restricted stock
units will be forfeited to the Company.
Stock Appreciation Rights. Each stock appreciation right grant will be evidenced by an award agreement that will specify
the exercise price, the term of the stock appreciation right, the conditions of exercise, and such other terms and conditions as
the administrator determines. The administrator will have complete discretion to determine the number of stock appreciation
rights granted to any service provider.
The per share exercise price for the shares to be issued pursuant to exercise of a stock appreciation right will be determined
by the administrator and will be no less than 100% of the fair market value per share on the date of grant. Otherwise, the
administrator, subject to the provisions of the 2022 Plan, will have complete discretion to determine the terms and conditions
of stock appreciation rights granted under the 2022 Plan. Notwithstanding the foregoing, a stock appreciation right may be
granted with a per share exercise price of less than 100% of the fair market value per share on the date of grant in the case of
substitute awards granted in connection with transactions described in, and in a manner consistent with, Section 424(a) of
the Code. A stock appreciation right granted under the 2022 Plan will expire upon the date as determined by the administrator
and set forth in the award agreement. Notwithstanding the foregoing, the provisions described above relating to the maximum
term and exercise of options also will apply to stock appreciation rights. Upon exercise of a stock appreciation right, a
participant will be entitled to receive payment from the Company in an amount determined as the product of: the difference
between the fair market value of a share on the date of exercise over the exercise price; and the number of shares with respect
to which the stock appreciation right is exercised. At the discretion of the administrator, the payment upon exercise of a stock
appreciation right may be in cash, in shares of equivalent value, or in some combination of both.
Performance Units and Performance Shares. Each performance unit will have an initial value that is established by the
administrator on or before the date of grant. Each performance share will have an initial value equal to the fair market value of
a share on the date of grant. The administrator will set performance objectives or other vesting provisions (including, without
limitation, continued status as a service provider) which, depending on the extent to which they are met, will determine the
number or value of performance units/shares that will be paid out to the service providers. The time period during which
the performance objectives or other vesting provisions must be met will be called the “performance period.” Each award
of performance units/shares will be evidenced by an award agreement that will specify the performance period, and such
other terms and conditions as the administrator determines. The administrator may set performance objectives based
upon the achievement of Company-wide, divisional, business unit or individual goals (including, but not limited to, continued
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employment or service), applicable U.S. or non-U.S. federal or state securities laws, or any other basis determined by the
administrator. After the applicable performance period has ended, the holder of performance units/shares will be entitled
to receive a payout of the number of performance units/shares earned by the participant over the performance period, to
be determined as a function of the extent to which the corresponding performance objectives or other vesting provisions
have been achieved. After the grant of a performance unit/share, the administrator may reduce or waive any performance
objectives or other vesting provisions for such performance unit/share. Payment of earned performance units/shares will
be made as soon as practicable after the expiration of the applicable performance period or as otherwise determined by
the administrator and set forth in the award agreement. The administrator may pay earned performance units/shares in the
form of cash, in shares or in a combination thereof. On the date set forth in the award agreement, all unearned or unvested
performance units/shares will be forfeited to the Company, and again will be available for grant under the 2022 Plan.
Adjustments. In the event that any extraordinary dividend or other extraordinary distribution (whether in the form of
cash, shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, reclassification, repurchase, or exchange of shares or other securities of the
Company, or other change in the corporate structure of the Company affecting the shares occurs (other than any ordinary
dividends or other ordinary distributions), the administrator, in order to prevent diminution or enlargement of the benefits
or potential benefits intended to be made available under the 2022 Plan, will adjust the number and class of shares of stock
that may be delivered under the 2022 Plan and/or the number, class, and exercise price of shares of stock covered by each
outstanding award, and the numerical share limits set forth in the 2022 Plan.
Dissolution or Liquidation. In the event of a proposed dissolution or liquidation of the Company, the administrator will notify
each participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been
previously exercised or vested, an award will terminate immediately prior to the consummation of such proposed action.
Merger or Change in Control. In the event of a merger of the Company with or into another corporation or other entity or
a change in control (as defined in the 2022 Plan), each outstanding award will be treated as the administrator determines
(subject to the provisions of the following paragraph) without a participant’s consent, including, without limitation, that (i)
awards will be assumed, or substantially equivalent awards will be substituted, by the acquiring or succeeding corporation (or
an affiliate thereof) with appropriate adjustments as to the number and kind of shares and exercise prices; (ii) upon written
notice to a participant, that the participant’s awards will terminate upon or immediately prior to the consummation of such
merger or change in control; (iii) outstanding awards will vest and become exercisable, realizable, or payable, or restrictions
applicable to an award will lapse, in whole or in part, prior to or upon consummation of such merger or change in control,
and, to the extent the administrator determines, terminate upon or immediately prior to the effectiveness of such merger or
change in control; (iv) (A) an award will be terminated in exchange for an amount of cash and/or property, if any, equal to the
amount that would have been attained upon the exercise of such award or realization of the participant’s rights as of the date
of the occurrence of the transaction (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction
the administrator determines in good faith that no amount would have been attained upon the exercise of such award or
realization of the participant’s rights, then such award may be terminated by the Company without payment), or (B) such
award will be replaced with other rights or property selected by the administrator; or (v) any combination of the foregoing.
The administrator will not be obligated to treat all awards, all awards held by a participant, all awards of the same type, or all
portions of awards, similarly.
In the event that the successor corporation does not assume or substitute for the award (or portion thereof), the participant
will fully vest in and have the right to exercise the participant’s outstanding option and stock appreciation right (or portion
thereof) that is not assumed or substituted for, including shares as to which such award would not otherwise be vested or
exercisable, all restrictions on restricted stock, restricted stock units, performance shares and performance units (or portions
thereof) not assumed or substituted for will lapse, and, with respect to such awards with performance-based vesting (or
portions thereof) not assumed or substituted for, all performance goals or other vesting criteria will be deemed achieved at
100% of target levels and all other terms and conditions met, in each case, unless specifically provided otherwise under the
applicable award agreement or other written agreement between the participant and the Company or any of its subsidiaries
or parents, as applicable. In addition, if an option or stock appreciation right (or portion thereof) is not assumed or substituted
for in the event of a merger or change in control, the administrator will notify the participant in writing or electronically that
such option or stock appreciation right (or its applicable portion) will be exercisable for a period of time determined by the
administrator, and the option or stock appreciation right (or its applicable portion) will terminate upon the expiration of
such period.
With respect to awards granted to an outside director, in the event of a change in control, the participant will fully vest in and
have the right to exercise options and/or stock appreciation rights as to all of the shares underlying such award, including
those shares which would not be vested or exercisable, all restrictions on restricted stock and restricted stock units will lapse,
Splunk Inc. 2022 Equity Incentive Plan
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Splunk 2022 Proxy Statement
and, with respect to awards with performance-based vesting, all performance goals or other vesting criteria will be deemed
achieved at 100% of target levels and all other terms and conditions met, unless specifically provided otherwise under the
applicable award agreement or other written agreement between the participant and the Company or any of its subsidiaries or
parents, as applicable.
Death. Unless otherwise determined by the administrator, if an employee or outside director ceases to be an employee or
outside director, as applicable, as a result of such participant’s death, then such participant will immediately become 100%
vested in and have the right to exercise options and/or stock appreciation rights as to 100% of the shares underlying such
award, including those shares which would not otherwise be vested or exercisable; 100% of the aggregate restrictions
initially on restricted stock and restricted stock units will lapse; with respect to awards with performance-based vesting for
which the achievement of designated performance goals has been determined, participant will immediately become vested
in 100% of the earned awards; and, with respect to awards for which the achievement of designated performance goals or
other vesting criteria has not yet been determined, all performance goals or other vesting criteria required to be met for such
awards to be earned will be deemed achieved at target levels and participant will immediately become vested in 100% of the
earned awards, provided that if such termination of the participant occurs following the end of the performance period for any
performance goal but prior to the determination of the achievement of such performance goal, then the achievement of such
performance goal will be determined based on actual performance and participant will immediately become vested in 100%
of the earned awards. Notwithstanding the foregoing sentence, if the participant has not been continuously an employee or
outside director, as applicable, for at least 12 months prior to the day the participant ceases to be an employee or outside
director as a result of the participant’s death, then for each reference to “100%” in the foregoing sentence, “50%” will be
substituted.
Term of 2022 Plan. The 2022 Plan will become effective upon its approval by the Company’s stockholders. It will continue in
effect for a term of 10 years from the effective date, unless terminated earlier by the administrator. The administrator, at any
time, may amend, alter, suspend or terminate the 2022 Plan. The Company will obtain stockholder approval of any 2022 Plan
amendment to the extent necessary and desirable to comply with applicable laws.
Stockholder Approval. The 2022 Plan will be subject to approval by the stockholders of the Company within 12 months after
the date the 2022 Plan is adopted by our Board. Such stockholder approval will be obtained in the manner and to the degree
required under applicable laws.
Forfeiture Events. Awards will be subject to the Company’s clawback policy in effect as of the adoption of the 2022 Plan,
and will be subject to any other clawback policy of the Company as may be established and/or amended from time to time to
comply with applicable laws.
Summary of U.S. Federal Income Tax Consequences
The following summary is intended only as a general guide to the U.S. federal income tax consequences of participation
in the 2022 Plan. The summary is based on existing U.S. laws and regulations, and there can be no assurance that those
laws and regulations will not change. The summary is not complete and does not discuss the tax consequences upon a
participant’s death, or the income tax laws of any municipality, state or foreign country in which the participant may reside. Tax
consequences for any particular participant may vary based on individual circumstances.
Incentive Stock Options
A participant recognizes no taxable income for regular income tax purposes because of the grant or exercise of an option that
qualifies as incentive stock option under Section 422 of the Code. If a participant exercises the option and then later sells or
otherwise disposes of the shares acquired through the exercise the option after both the two-year anniversary of the date
the option was granted and the one-year anniversary of the exercise, the participant will recognize a capital gain or loss equal
to the difference between the sale price of the shares and the exercise price, and we will not be entitled to any deduction for
federal income tax purposes.
However, if the participant disposes of such shares either on or before the two-year anniversary of the date of grant or on
or before the one-year anniversary of the date of exercise (a “disqualifying disposition”), any gain up to the excess of the fair
market value of the shares on the date of exercise over the exercise price generally will be taxed as ordinary income, unless the
shares are disposed of in a transaction in which the participant would not recognize a loss (such as a gift). Any gain in excess
of that amount will be a capital gain. If a loss is recognized, there will be no ordinary income, and such loss will be a capital
loss. Any ordinary income recognized by the participant upon the disqualifying disposition of the shares generally should be
deductible by Splunk for federal income tax purposes, except to the extent such deduction is limited by applicable provisions
of the Code.
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94
For purposes of the alternative minimum tax, the difference between the option exercise price and the fair market value of
the shares on the exercise date is treated as an adjustment item in computing the participant’s alternative minimum taxable
income in the year of exercise. In addition, special alternative minimum tax rules may apply to certain subsequent disqualifying
dispositions of the shares or provide certain basis adjustments or tax credits for purposes.
Nonstatutory Stock Options
A participant generally recognizes no taxable income as the result of the grant of such an option. However, upon exercising
the option, the participant normally recognizes ordinary income equal to the amount that the fair market value of the shares
on such date exceeds the exercise price. If the participant is an employee, such ordinary income generally is subject to
withholding of income and employment taxes. Upon the sale of the shares acquired by exercising a nonstatutory stock option,
any gain or loss (based on the difference between the sale price and the fair market value on the exercise date) will be taxed as
capital gain or loss. Any ordinary income recognized by the participant upon exercising a nonstatutory stock option generally
should be deductible by Splunk for federal income tax purposes, except to the extent such deduction is limited by applicable
provisions of the Code. No tax deduction is available to Splunk with respect to the grant of a nonstatutory stock option or the
sale of the shares acquired through the exercise of the nonstatutory stock option.
Stock Appreciation Rights
In general, no taxable income is reportable when a stock appreciation right is granted to a participant. Upon exercise, the
participant generally will recognize ordinary income equal to the fair market value of any shares received. Any additional gain
or loss recognized upon any later disposition of the shares would be capital gain or loss.
Restricted Stock Awards
A participant acquiring shares of restricted stock generally will recognize ordinary income equal to the fair market value of the
shares on the vesting date, reduced by any amount paid by the participant for such shares. If the participant is an employee,
such ordinary income generally is subject to withholding of income and employment taxes. The participant may elect, under
Section 83(b) of the Code to accelerate the ordinary income tax event to the date of acquisition by filing an election with the
Internal Revenue Service no later than thirty days after the date the shares are acquired. Upon the sale of shares acquired
under a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value on
the date the ordinary income tax event occurs, will be taxed as capital gain or loss.
Restricted Stock Unit Awards
There are no immediate tax consequences of receiving an award of restricted stock units. A participant who is awarded
restricted stock units generally will recognize ordinary income equal to the fair market value of shares issued to such
participant at the end of the applicable vesting period or, if later, the settlement date elected by the administrator or a
participant. Any additional gain or loss recognized upon any later disposition of any shares received would be capital gain or
loss.
Performance Shares and Performance Unit Awards
A participant generally will recognize no income upon the grant of a performance share or a performance unit award. Upon the
settlement of such awards, participants normally will recognize ordinary income in the year of receipt in an amount equal to
the cash received and the fair market value of any cash or unrestricted shares received. If the participant is an employee, such
ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of any shares received,
any gain or loss, based on the difference between the sale price and the fair market value on the date the ordinary income tax
event occurs, will be taxed as capital gain or loss.
Section 409A
Section 409A of the Code provides certain requirements for non-qualified deferred compensation arrangements with respect
to an individual’s deferral and distribution elections and permissible distribution events. Awards granted under the 2022
Plan with a deferral feature will be subject to the requirements of Section 409A. If an award is subject to and fails to satisfy
the requirements of Section 409A of the Code, the recipient of that award may recognize ordinary income on the amounts
deferred under the award, to the extent vested, which may be before the compensation is actually or constructively received.
Also, if an award subject to Section 409A of the Code violates the provisions of Section 409A of the Code, Section 409A of the
Code imposes an additional 20% federal income tax on compensation recognized as ordinary income, and interest on such
deferred compensation.
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Splunk 2022 Proxy Statement
Tax Effect for Splunk
We generally will be entitled to a tax deduction in connection with an award under the 2022 Plan equal to the ordinary income
realized by a participant when the participant recognizes such income (for example, the exercise of a nonstatutory stock
option) except to the extent such deduction is limited by applicable provisions of the Code. Special rules limit the deductibility
of compensation paid to our chief executive officer and other “covered employees” as determined under Section 162(m) of
the Code and applicable guidance. Under Section 162(m) of the Code, the annual compensation paid to any of these specified
executives will be deductible only to the extent that it does not exceed $1,000,000.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF U.S. FEDERAL INCOME TAXATION UPON PARTICIPANTS AND
SPLUNK WITH RESPECT TO AWARDS UNDER THE 2022 PLAN. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT
DISCUSS THE IMPACT OF EMPLOYMENT OR OTHER TAX REQUIREMENTS, THE TAX CONSEQUENCES OF A PARTICIPANT’S
DEATH, OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE, OR FOREIGN COUNTRY IN WHICH THE
PARTICIPANT MAY RESIDE.
New Plan Benefits
No awards have been made under the 2022 Plan, and no awards have been granted that are contingent on the approval of
the 2022 Plan. Awards under the 2022 Plan would be made at the discretion of the Talent & Compensation Committee or
the Board. Therefore, the benefits and amounts that will be received or allocated under the 2022 Plan in the future are not
determinable at this time. Currently, our non-employee directors are entitled to receive cash compensation for their service as
directors as described above under “Corporate Governance at Splunk—Non-Employee Director Compensation.” As described
above under “Corporate Governance at Splunk—Non-Employee Director Compensation,” in connection with the expiration
of the 2012 Plan, the Board suspended grants of equity compensation to non-employee directors under our non-employee
director compensation program. If the 2022 Plan is approved by our stockholders, the Board expects to grant equity awards
to non-employee directors consistent with past practice. Specifically, the Board expects to grant annual restricted stock unit
awards to all individuals who are non-employee members of the Board following the Annual Meeting, with an equity award
value of $270,000 (measured as of the date of the Annual Meeting). The Board also expects to grant Mr. Visoso an initial
restricted stock unit award with a value of $350,000 (measured as of April 6, 2022, the date on which he was appointed to
the Board). Finally, the Board expects to grant Mr. Visoso a fully vested discretionary supplemental restricted stock unit award
with a value of $45,000 (measured as of April 6, 2022, the date on which he was appointed to the Board), for his service on the
Board between his appointment date and the Annual Meeting.
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96
Stock Ownership Information
Security Ownership of Certain Beneficial Owners
and Management
The following table sets forth certain information with respect to the beneficial ownership of our common stock at March 31,
2022 for:
• each person or group of affiliated persons known by us to be the beneficial owner of more than 5% of our common stock;
• each of our NEOs;
• each of our directors; and
• all of our executive officers and directors as a group.
The information provided in the table is based on our records, information filed with the SEC, and information provided to
us. For our 5% stockholders, to the extent we did not have more recent information, we relied upon such stockholders’ most
recent filing with the SEC pursuant to Section 13(g) of the Exchange Act as noted below. We have determined beneficial
ownership in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership
for any other purpose. Except as indicated by the footnotes below, we believe, based on information furnished to us, that
the persons and entities named in the table below have sole voting and sole investment power with respect to all shares of
common stock that they beneficially owned, subject to applicable community property laws.
Applicable percentage ownership is based on 160,833,919 shares of common stock outstanding at March 31, 2022. In
computing the number of shares of common stock beneficially owned by a person or entity and the percentage ownership of
such person or entity, we deemed to be outstanding all shares of common stock subject to shares held by the person that are
currently exercisable or exercisable (or issuable upon vesting of RSUs) within 60 days of March 31, 2022. However, we did not
deem such shares outstanding for the purpose of computing the percentage ownership of any other person.
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Splunk 2022 Proxy Statement
Unless otherwise indicated in their respective footnote, the address of each beneficial owner listed in the table below is c/o
Splunk Inc., 270 Brannan Street, San Francisco, California 94107.
Number of
Shares
Percent of
Shares
Outstanding
5% Stockholders:
The Vanguard Group, Inc.(1)
14,710,340
9.2%
Hellman & Friedman LLC(2)
11,909,197
7.4%
BlackRock, Inc.(3)
9,821,781
6.1%
NEOs and Directors:
Graham Smith
30,404
*
Jason Child
71,459
*
Teresa Carlson
63,629
*
Shawn Bice
25,288
*
Scott Morgan
45,656
*
Douglas Merritt
237,904
*
Timothy Tully
3,822
*
Sara Baack
15,446
*
Sean Boyle
3,247
*
Mark Carges
18,458
*
Kenneth Hao
—
*
Patricia Morrison
31,649
*
Stephen Newberry
41,947
*
Elisa Steele
14,696
*
General Dennis Via (ret)
2,908
*
Luis Visoso
—
*
Sri Viswanath
8,403
*
All executive officers and directors as a group (15 persons)
310,561
*
*
Represents beneficial ownership of less than one percent (1%).
(1)
As of December 31, 2021, the reporting date of The Vanguard Group, Inc.’s most recent filing with the SEC pursuant to Section 13(g) of the Exchange Act filed
on February 10, 2022, The Vanguard Group, Inc. (“Vanguard”), in its capacity as an investment advisor, has shared voting power with respect to 156,344 shares,
sole dispositive power with respect to 14,353,560 shares, and shared dispositive power with respect to 356,780 shares reported as beneficially owned. The
address for Vanguard is 100 Vanguard Blvd., Malvern, PA 19355.
(2)
As of February 22, 2022, the reporting date of Hellman & Friedman LLC’s most recent filing with the SEC pursuant to Section 13(d) of the Exchange Act filed
on March 4, 2022, as amended on April 4, 2022. The Schedule 13D was filed jointly on behalf of H&F Corporate Investors X, Ltd. (“H&F X”), Hellman & Friedman
Investors X, L.P. (“H&F Investors X”), Hellman & Friedman Capital Partners X, L.P. (“HFCP X”), H&F Shadowfax Holdings GP, LLC (“Shadowfax Holdings GP”) and
H&F Shadowfax Holdings, L.P. (“Shadowfax Holdings” and together with H&F X, H&F Investors X, HFCP X and Shadowfax Holdings GP, “Hellman”). H&F X is a
Cayman Islands limited company whose principal business is serving as the general partner of H&F Investors X as well as other partnerships. Hellman has sole
voting power with respect to 11,909,197 shares and sole dispositive power with respect to 11,909,197 shares reported as beneficially owned. The address for
Hellman & Friedman LLC is 415 Mission Street, Suite 5700, San Francisco, CA 94105.
(3)
As of December 31, 2021, the reporting date of BlackRock, Inc.’s most recent filing with the SEC pursuant to Section 13(g) of the Exchange Act filed on February 7,
2022, BlackRock, Inc. (“BlackRock”), which is a parent holding company or control person, has sole voting power with respect to 8,776,782 shares and sole
dispositive power with respect to 9,821,781 shares reported as beneficially owned. The address for BlackRock is 55 East 52nd Street, New York, NY 10055.
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that our executive officers and directors, and persons
who own more than 10% of our common stock, file reports of ownership and changes of ownership with the SEC. Such directors,
executive officers and 10% stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
SEC regulations require us to identify in this proxy statement anyone who filed a required report late during the most recent
fiscal year. Based on our review of forms we received, or written representations from reporting persons stating that they were
not required to file these forms, we believe that during fiscal 2022, all Section 16(a) filing requirements were satisfied on a timely
basis, except, due to an administrative error on the part of the Company, we were late in filing a Form 4 for Graham Smith to report
the withholding of shares of common stock to satisfy tax withholding obligations in connection with a vesting of restricted stock
units with respect to a transaction on December 10, 2021, that was reported on a Form 4 on January 31, 2022.
Stock Ownership Information
98
Other Matters
Questions and Answers About the Proxy Materials
and Our 2022 Annual Meeting
The information provided in the “question and answer” format below is for your convenience only and is merely a summary of
the information contained in this proxy statement. You should read this entire proxy statement carefully.
How do I attend and participate in the Virtual Annual Meeting?
This year’s Annual Meeting will be conducted as a virtual-only meeting of stockholders. We will host the Annual Meeting
online through a live audio webcast. You are entitled to attend the Annual Meeting if you were a holder of our common stock
as of the close of business on April 20, 2022, hold a valid proxy for the Annual Meeting or are an authorized guest of the
Company. You will be able to attend the Annual Meeting and submit your questions during the Annual Meeting by visiting
www.virtualshareholdermeeting.com/SPLK2022. You will need the control number included on your Notice or proxy card or in
the instructions from your broker in order to attend and participate in the Annual Meeting virtually.
The format of the virtual Annual Meeting has been designed to ensure that our stockholders generally have the same rights
and opportunities to participate as they would at an in-person meeting and we have endeavored to provide stockholder
access, participation and communication through online tools. The virtual format facilitates stockholder attendance and
participation by enabling stockholders to participate fully and equally from any location around the world. During the meeting,
you will have the ability to submit a question real-time via the virtual meeting website. We will answer as many questions
submitted in accordance with the meeting rules of conduct as possible in the time allotted for the meeting. Only questions that
are relevant to our business operations will be answered. A copy of the Annual Meeting rules of conduct will be available online
at the Annual Meeting.
Online check-in will begin at 3:15 p.m. Pacific Time on June 16, 2022, and you should allow ample time for the online check-
in proceedings. If you encounter any difficulties accessing the Annual Meeting during the check-in or meeting time, please
call the technical support number that will be posted on the Annual Meeting log-in page. Technical support will be available
starting at 3:15 p.m. Pacific Time on the day of the meeting. If you wish to submit questions prior to the Annual Meeting, you
may do so at www.proxyvote.com by signing in with your control number.
What matters am I voting on?
You will be voting on:
• the election of three Class I directors to hold office until the 2025 annual meeting of stockholders or until their successors
are duly elected and qualified;
• a proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm
for the fiscal year ending January 31, 2023;
• an advisory vote to approve the compensation of our named executive officers, as described in this proxy statement;
• a proposal to approve our 2022 Equity Incentive Plan and the reservation of shares thereunder; and
• any other business that may properly come before the meeting.
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Splunk 2022 Proxy Statement
How does the Board recommend I vote on these proposals?
The Board recommends a vote:
• FOR each of the nominees for election as Class I directors;
• FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting
firm for the fiscal year ending January 31, 2023;
• FOR approval, on an advisory basis, of our named executive officer compensation; and
• FOR approval of our 2022 Equity Incentive Plan and the reservation of shares thereunder.
Who is entitled to vote?
Holders of our common stock as of the close of business on April 20, 2022 (the “Record Date”), may vote at the Annual
Meeting. As of the Record Date, we had 160,936,616 shares of common stock outstanding. In deciding all matters at the
Annual Meeting, each stockholder will be entitled to one vote for each share of common stock held on the Record Date. We do
not have cumulative voting rights for the election of directors.
Registered Stockholders. If your shares are registered directly in your name with our transfer agent, you are considered the
stockholder of record with respect to those shares, and the Notice was provided to you directly by us. As the stockholder of
record, you have the right to grant your voting proxy directly to the individuals listed on the proxy card or to vote in person
(electronically) at the Annual Meeting.
Street Name Stockholders. If your shares are held in a stock brokerage account or by a bank or other nominee, you are
considered the beneficial owner of shares held in street name, or a street name stockholder, and the Notice was forwarded to
you by your broker, bank or other nominee, who is considered the stockholder of record with respect to those shares. As the
beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares. Beneficial owners
are also invited to attend the Annual Meeting in person (virtually). Beneficial owners who did not receive a 16-digit control
number from their broker or bank, who wish to attend the Annual Meeting in person (virtually) should follow the instructions
from their broker or bank, including any requirement to obtain a legal proxy. Most brokers or banks allow a beneficial owner to
obtain a legal proxy either online or by mail. If you request a printed copy of the proxy materials by mail, your broker, bank or
other nominee will provide a voting instruction card for you to use to direct your broker, bank or other nominee how to vote
your shares.
How do I vote?
If you are a registered stockholder, you may:
• instruct the proxy holder or holders on how to vote your shares by using the Internet voting site or the toll-free telephone
number listed on the Notice, 24 hours a day, seven days a week, until 11:59 p.m. Eastern Time on June 15, 2022 (have the
Notice or proxy card in hand when you call or visit the website);
• instruct the proxy holder or holders on how to vote your shares by completing and mailing your proxy card to the address
indicated on your proxy card (if you received printed proxy materials), which must be received by the time of the Annual
Meeting; or
• vote your shares in person (electronically) at the Annual Meeting.
To attend and participate in the Annual Meeting virtually, stockholders of record will need to use their control number on their
Notice or proxy card to log onto www.virtualshareholdermeeting.com/SPLK2022.
If you are a street name stockholder, you will receive instructions from your broker, bank or other nominee. The instructions
from your broker, bank or other nominee will indicate if the various methods by which you may vote, including whether Internet
or telephone voting, are available.
Other Matters
100
Can I change or revoke my vote?
Yes. Subject to any rules your broker, bank or other nominee may have, you can change your vote or revoke your proxy before
the Annual Meeting.
If you are a registered stockholder, you may change your vote by:
• entering a new vote via Internet or by telephone by 11:59 p.m. Eastern Time on June 15, 2022;
• returning a later-dated proxy card which must be received by the time of the Annual Meeting; or
• submitting a later-dated vote electronically at the Annual Meeting.
If you are a registered stockholder, you may also revoke your proxy by providing our Corporate Secretary with a written
notice of revocation prior to your shares being voted at the Annual Meeting. Such written notice of revocation should be hand
delivered to Splunk’s Corporate Secretary or mailed to and received by Splunk Inc. prior to the Annual Meeting at 270 Brannan
Street, San Francisco, California 94107, Attention: Corporate Secretary.
If you are a street name stockholder, you may change your vote by:
• submitting new voting instructions to your broker, bank or other nominee pursuant to instructions provided by such broker,
bank or other nominee; or
• submitting a later-dated vote electronically at the Annual Meeting; provided you have obtained a legal proxy from your
broker, bank or other nominee giving you the right to vote the shares.
If you are a street name stockholder, you must contact your broker, bank or other nominee that holds your shares to find out
how to revoke your proxy.
What is the effect of giving a proxy?
Proxies are solicited by and on behalf of our Board. The persons named in the proxy have been designated as proxy holders.
When proxies are properly dated, executed and returned, the shares represented by such proxies will be voted electronically
at the Annual Meeting in accordance with the instructions of the stockholder. If the proxy is properly dated, executed and
returned, but no specific instructions are given, the shares will be voted in accordance with the recommendations of our Board
as described above. If any matter not described in the proxy statement is properly presented at the Annual Meeting, the proxy
holders will use their own judgment to determine how to vote your shares. If the Annual Meeting is adjourned, the proxy holders
can vote your shares on the new meeting date as well, unless you have properly revoked your proxy, as described above.
Why did I receive a notice regarding the availability of proxy
materials on the internet instead of a full set of proxy materials?
In accordance with the rules of the SEC, we have elected to furnish our proxy materials, including this proxy statement and
our annual report to our stockholders, primarily via the Internet. On or about May 2, 2022, we mailed to our stockholders the
Notice that contains instructions on how to access our proxy materials on the Internet, how to vote at the Annual Meeting, and
how to request printed copies of the proxy materials and annual report. Stockholders may request to receive all future proxy
materials in printed form by mail or electronically by e-mail by following the instructions contained in the Notice. We encourage
stockholders to take advantage of the availability of the proxy materials on the Internet to help reduce the environmental
impact of our annual meetings and keep our Annual Meeting process efficient.
What is a quorum?
A quorum is the minimum number of shares required to be present at the scheduled time of the Annual Meeting in person
(virtually) or by proxy for the meeting to be properly held under our Bylaws and Delaware law. The presence in person (virtually)
or by proxy, of a majority of all issued and outstanding shares of common stock entitled to vote at the Annual Meeting will
constitute a quorum at the Annual Meeting. A proxy submitted by a stockholder may indicate that all or a portion of the shares
represented by the proxy are not being voted (“stockholder withholding”) with respect to a particular matter. Similarly, a
broker may not be permitted to vote stock (“broker non-vote”) held in street name on a particular matter in the absence of
instructions from the beneficial owner of the stock. See “How may my broker, bank or other nominee vote my shares if I fail
Other Matters
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Splunk 2022 Proxy Statement
to provide timely directions?” below. The shares subject to a proxy that are not being voted on a particular matter because
of either stockholder withholding or broker non-vote will count for purposes of determining the presence of a quorum.
Abstentions are also counted in the determination of a quorum.
How many votes are needed for approval of each matter?
• Proposal 1: Each director nominee will be elected by a vote of the majority of the votes cast. A majority of the votes cast
means the number of votes cast “For” such nominee’s election exceeds the number of votes cast “Against” that nominee.
You may vote “For,” “Against,” or “Abstain” with respect to each director nominee. Broker non-votes and abstentions, if any,
will have no effect on the outcome of the election.
• Proposal 2: The ratification of the appointment of PricewaterhouseCoopers LLP must receive the affirmative vote of at least
a majority of the shares present in person (virtually) or by proxy at the meeting and entitled to vote thereon to be approved.
You may vote “For,” “Against,” or “Abstain” with respect to this proposal. Abstentions are considered votes present in person
(virtually) or by proxy and thus will have the same effect as votes “Against” the proposal. Broker non-votes, if any, will have no
effect on the outcome of this proposal.
• Proposal 3: The advisory vote to approve the compensation of our named executive officers must receive the affirmative
vote of at least a majority of the shares present in person (virtually) or by proxy at the meeting and entitled to vote thereon
to be approved. You may vote “For,” “Against,” or “Abstain” with respect to this proposal. Abstentions are considered votes
present in person (virtually) or by proxy and thus will have the same effect as votes “Against” the proposal. Broker non-votes,
if any, will have no effect on the outcome of this proposal. Because this vote is advisory only, it will not be binding on us,
our Talent & Compensation Committee or our Board. However, we value our stockholders’ input and will take the vote into
consideration when evaluating executive compensation decisions.
• Proposal 4: The approval of our 2022 Equity Incentive Plan must receive the affirmative vote of at least a majority of the
votes cast to be approved. You may vote “For,” “Against,” or “Abstain” with respect to this proposal. Abstentions are not
considered votes cast and thus will have no effect on the outcome of this proposal. Broker non-votes, if any, will have no
effect on the outcome of this proposal.
What happens if a director nominee who is duly nominated does
not receive a majority vote?
The Board nominates for election or re-election as director only candidates who have tendered, in advance of such nomination,
an irrevocable, conditional resignation that will be effective only upon both (i) the failure to receive the required vote at the
next annual meeting of stockholders at which they face re-election and (ii) the Board’s acceptance of such resignation. In
an uncontested election, the Board, after taking into consideration the recommendation of the Governance & Sustainability
Committee, will determine whether or not to accept the pre-tendered resignation of any nominee for director who receives
a greater number of votes “Against” such nominee’s election than votes “For” such nominee’s election. In the event of a
contested election, the director nominees equal to the number of seats available who receive the largest number of votes cast
“For” their election will be elected as directors.
How are proxies solicited for the Annual Meeting?
The Board is soliciting proxies for use at the Annual Meeting. All expenses associated with this solicitation will be borne by us.
We will reimburse brokers, banks or other nominees for reasonable expenses that they incur in sending these proxy materials
to you, if a broker, bank or other nominee holds your shares.
How may my broker, bank or other nominee vote my shares if I fail
to provide timely directions?
Brokers, banks and other nominees holding shares in street name for their customers are generally required to vote such shares
in the manner directed by their customers. In the absence of timely directions, your broker, bank or other nominee will have
discretion to vote your shares on our sole “routine” matter—the proposal to ratify the appointment of PricewaterhouseCoopers
LLP as our independent registered public accounting firm. Your broker, bank or other nominee will not have discretion to vote on
the other matters submitted for a vote absent direction from you as they are “non-routine” matters.
Other Matters
102
Is my vote confidential?
Proxy instructions, electronic votes, and voting tabulations that identify individual stockholders are handled in a manner that
protects your voting privacy. Your vote will not be disclosed either within Splunk or to third parties, except as necessary to
meet applicable legal requirements, to allow for the tabulation of votes and certification of the vote, to facilitate a successful
proxy solicitation, or when you request or consent to disclosure.
Where can I find the voting results of the Annual Meeting?
We will disclose voting results on a Current Report on Form 8-K to be filed with the SEC within four business days after the
Annual Meeting. If final voting results are not available to us in time to include them in such Current Report on Form 8-K, we
will file a Current Report on Form 8-K to publish preliminary results and will provide the final results in an amendment to the
Current Report on Form 8-K as soon as final results become available.
I share an address with another stockholder, and we received
multiple copies of the proxy materials. How may we obtain a
single copy of the proxy materials?
Stockholders who share an address and receive multiple copies of our proxy materials can request to receive a single copy in
the future. To receive a single copy of the Notice and, if applicable, the proxy materials, stockholders may contact us as follows:
Splunk Inc.
Attention: Investor Relations
3098 Olsen Drive
San Jose, California 95128
(415) 848-8400
Stockholders who hold shares in street name may contact their brokerage firm, bank, broker-dealer or other similar
organization to request information about householding.
Stockholder Proposals
Stockholders may present proper proposals for inclusion in our proxy statement and for consideration at the next annual
meeting of stockholders by submitting their proposals in writing to our Corporate Secretary in a timely manner. For a
stockholder proposal to be considered for inclusion in our proxy statement for our 2023 annual meeting of stockholders,
our Corporate Secretary must receive the written proposal at our principal executive offices not later than January 2, 2023.
In addition, stockholder proposals must comply with the requirements of Rule 14a-8 regarding the inclusion of stockholder
proposals in company-sponsored proxy materials. Proposals should be addressed to:
Splunk Inc.
Attention: Corporate Secretary
270 Brannan Street
San Francisco, California 94107
Other Matters
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Splunk 2022 Proxy Statement
Our Bylaws also establish an advance notice procedure for stockholders who wish to present a proposal before an annual
meeting of stockholders but do not intend for the proposal to be included in our proxy statement. Our Bylaws provide that the
only business that may be conducted at an annual meeting is business that is (i) specified in our proxy materials with respect
to such meeting, (ii) otherwise properly brought before the meeting by or at the direction of our Board, or (iii) properly brought
before the meeting by a stockholder of record entitled to vote at the annual meeting who has delivered timely written notice to
our Corporate Secretary, which notice must contain the information specified in our Bylaws. To be timely for our 2023 annual
meeting of stockholders, our Corporate Secretary must receive the written notice at our principal executive offices:
• not earlier than February 16, 2023; and
• not later than the close of business on March 18, 2023.
If a stockholder who has notified us of his or her intention to present a proposal at an annual meeting does not appear to
present his or her proposal at such meeting, we are not required to present the proposal for a vote at such meeting.
Please see “Corporate Governance at Splunk—Board Composition—Stockholder Recommendations” and “—Stockholder
Nominations” on pages 20 to 21 for further information about recommendations and nominations of director candidates.
Availability of Bylaws and Stockholder List
A copy of our Bylaws may be obtained by accessing our filings on the SEC’s website at www.sec.gov or on our investor
website at http://investors.splunk.com/corporate-governance. You may also contact our Corporate Secretary at our principal
executive offices for a copy of the relevant Bylaw provisions regarding the requirements for making stockholder proposals and
nominating director candidates.
The Company’s list of stockholders as of April 20, 2022 will be available for inspection by any stockholder of record upon
request via our Investor Relations website (https://investors.splunk.com/contact-us) during the 10-day period immediately
prior to the date of the Annual Meeting. In addition, the list of stockholders will also be available to stockholders during the
Annual Meeting at www.virtualshareholdermeeting.com/SPLK2022.
Fiscal 2022 Annual Report and SEC Filings
Our financial statements for the fiscal year ended January 31, 2022 are included in our Annual Report on Form 10-K, which
was filed with the SEC and which we will make available to stockholders at the same time as this proxy statement. Our annual
report and this proxy statement are posted on our website at www.splunk.com and are available from the SEC at its website
at www.sec.gov. You may also obtain a copy of our annual report without charge by sending a written request to Investor
Relations, Splunk Inc., 3098 Olsen Drive, San Jose, California 95128.
* * *
The Board does not know of any other matters to be presented at the Annual Meeting. If any additional matters are properly
presented at the Annual Meeting, the persons named in the enclosed proxy card will have discretion to vote shares they
represent in accordance with their own judgment on such matters.
It is important that your shares be represented at the Annual Meeting, regardless of the number of shares that you hold. You
are, therefore, urged to vote by telephone or by using the Internet as instructed on the enclosed proxy card or execute and
return, at your earliest convenience, the enclosed proxy card in the envelope that has also been provided.
THE BOARD OF DIRECTORS
San Francisco, California
May 2, 2022
Other Matters
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Splunk 2022 Proxy Statement A-1
Appendix A
Reconciliation of GAAP and Non-GAAP Information
Reconciliation of Cash Provided By (Used In) Operating Activities to Free Cash Flow
Three Months Ended
January 31,
Fiscal Year Ended
January 31,
(in thousands)
2022
2021
2022
2021
Net cash provided by (used in) operating activities
$132,689
$(23,766)
$ 128,048
$(190,862)
Less purchases of property and equipment
(841)
(8,800)
(10,671)
(37,107)
Free cash flow (non-GAAP)
$ 131,848
$(32,566)
$
117,377
$ (227,969)
Net cash provided by (used in) investing activities
$ 11,052
$ 195,234
$(333,752)
$ 797,190
Net cash provided by (used in) financing activities
$(19,431)
$ (55,417)
$(136,669)
$ 382,882
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Splunk 2022 Proxy Statement B-1
Appendix B
Splunk Inc. 2022 Equity Incentive Plan
SPLUNK INC.
2022 EQUITY INCENTIVE PLAN
1. Purpose of the Plan. The purpose of this Plan is to:
• promote the success of the Company and the interests of its stockholders by providing equity-based incentives
to attract, retain and motivate eligible service providers, whose contributions drive the Company’s success, and
• encourage stock ownership by eligible service providers, thereby aligning their interests with those of the
Company’s stockholders.
The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Restricted
Stock Units, Stock Appreciation Rights, Performance Units and Performance Shares.
2. Definitions. As used herein, the following definitions will apply:
(a) “Administrator” means the Board or any of its Committees as will be administering the Plan, in accordance
with Section 4 of the Plan.
(b) “Applicable Laws” means the legal and regulatory requirements relating to the administration of equity-based
awards, including without limitation the related issuance of shares of Common Stock, including without limitation under U.S.
state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the
Common Stock is listed or quoted and the applicable laws of any non-U.S. country or jurisdiction where Awards are, or will be,
granted under the Plan.
(c) “Award” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, Performance Units or Performance Shares.
(d) “Award Agreement” means the written or electronic agreement between the Company and Participant setting
forth the terms and provisions applicable to an Award granted under the Plan. The Award Agreement is subject to the terms
and conditions of the Plan.
(e) “Board” means the Board of Directors of the Company.
(f) “Change in Control” means the occurrence of any of the following events:
(i) Change in Ownership of the Company. A change in the ownership of the Company which occurs on
the date that any one person, or more than one person acting as a group (“Person”), acquires ownership of the stock of the
Company that, together with the stock held by such Person, constitutes more than fifty percent (50%) of the total voting power
of the stock of the Company; provided, however, that for purposes of this subsection, the acquisition of additional stock by any
one Person, who is considered to own more than fifty percent (50%) of the total voting power of the stock of the Company will
not be considered a Change in Control; or
(ii) Change in Effective Control of the Company. A change in the effective control of the Company which
occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors
whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment
or election. For purposes of this subsection (ii), if any Person is considered to be in effective control of the Company, the
acquisition of additional control of the Company by the same Person will not be considered a Change in Control; or
(iii) Change in Ownership of a Substantial Portion of the Company’s Assets. A change in the ownership
of a substantial portion of the Company’s assets which occurs on the date that any Person acquires (or has acquired during
the twelve (12) month period ending on the date of the most recent acquisition by such Person) assets from the Company
that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of
the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this
B-2
subsection (iii), the following will not constitute a change in the ownership of a substantial portion of the Company’s assets:
(A) a transfer of assets to an entity that is directly or indirectly controlled by the Company’s stockholders immediately after
the transfer, or (B) a transfer of assets by the Company to: (1) a stockholder of the Company (immediately before the asset
transfer) in exchange for or with respect to the Company’s stock, (2) an entity, fifty percent (50%) or more of the total value
or voting power of which is owned, directly or indirectly, by the Company, (3) a Person that owns, directly or indirectly, fifty
percent (50%) or more of the total value or voting power of all the outstanding stock of the Company, or (4) an entity, at
least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a Person described in
this subsection (iii)(B)(3). For purposes of this subsection (iii), gross fair market value means the value of the assets of the
Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a
corporation or other entity that enters into a merger, consolidation, purchase or acquisition of stock, or similar business
transaction with the Company.
Notwithstanding the foregoing, a transaction will not be deemed a Change in Control unless the transaction
qualifies as a change in control event within the meaning of Section 409A.
Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (x) its primary
purpose is to change the jurisdiction of the Company’s incorporation, or (y) its primary purpose is to create a holding company
that will be owned in substantially the same proportions by the Persons who held the Company’s securities immediately before
such transaction.
(g) “Code” means the U.S. Internal Revenue Code of 1986, as amended. Any reference to a section of the Code or
regulation thereunder will include such section or regulation, any valid regulation or other official guidance promulgated under
such section, and any comparable provision of any future legislation or regulation amending, supplementing, or superseding
such section or regulation.
(h) “Committee” means a committee of one or more Directors or of one or more other individuals satisfying
Applicable Laws appointed by the Board, or a duly authorized committee of the Board, in accordance with Section 4 hereof.
(i) “Common Stock” means the common stock of the Company.
(j) “Company” means Splunk Inc., a Delaware corporation, or any successor thereto.
(k) “Consultant” means any natural person, including an advisor, who is resident in the United States and party
to a written consulting agreement with the Company at the time that his or her award is granted, engaged by the Company to
render bona fide services to the Company, provided the services (i) are not in connection with the offer or sale of securities in
a capital-raising transaction, and (ii) do not directly promote or maintain a market for the Company’s securities, in each case,
within the meaning of Form S-8 promulgated under the Securities Act, and provided, further, that a Consultant will include only
those persons to whom the issuance of Shares may be registered under Form S-8 promulgated under the Securities Act.
(l) “Director” means a member of the Board.
(m) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code, provided that in
the case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent
and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from
time to time.
(n) “Employee” means any natural person, including Officers and Inside Directors, employed by the Company or
any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a director’s fee by the Company will be
sufficient to constitute “employment” by the Company.
(o) “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
(p) “Exchange Program” means a program under which (i) outstanding Awards are surrendered or cancelled
in exchange for awards of the same type (which may have higher or lower exercise prices and different terms), awards of
a different type, and/or cash, (ii) Participants would have the opportunity to transfer any outstanding Awards to a financial
institution or other person or entity selected by the Administrator, and/or (iii) the exercise price of an outstanding Award
is reduced. Pursuant to the provisions of Section 4(d), the Administrator may not institute an Exchange Program without
stockholder approval.
Appendix B
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Splunk 2022 Proxy Statement B-3
(q) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a national market system, including
without limitation the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market of The Nasdaq
Stock Market or the New York Stock Exchange, its Fair Market Value will be the closing sales price for such stock (or, if no
closing sales price was reported on that date, as applicable, on the last Trading Day such closing sales price was reported)
as quoted on such exchange or system on the day of determination, as reported in such source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not
reported, the Fair Market Value of a Share will be the mean between the high bid and low asked prices for the Common Stock
on the day of determination (or, if no bids and asks were reported on that date, as applicable, on the last Trading Day such bids
and asks were reported), as reported in such source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock, the Fair Market Value will be
determined in good faith by the Administrator.
The determination of fair market value for purposes of withholding Tax-Related Items may be made in the Administrator’s
discretion subject to Applicable Laws and is not required to be consistent with the determination of Fair Market Value
described above or for other purposes.
(r) “Fiscal Year” means the fiscal year of the Company.
(s) “Incentive Stock Option” means an Option intended to qualify, and actually qualifies, as an incentive stock
option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
(t) “Inside Director” means a Director who is an Employee.
(u) “Nonstatutory Stock Option” means an Option that by its terms does not qualify or is not intended to qualify
as an Incentive Stock Option.
(v) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange
Act and the rules and regulations promulgated thereunder.
(w) “Option” means a stock option granted pursuant to the Plan.
(x) “Outside Director” means a Director who is not an Employee.
(y) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the
Code.
(z) “Participant” means the holder of an outstanding Award.
(aa) “Performance Share” means an Award denominated in Shares which may be earned in whole or in part upon
attainment of performance goals or other vesting criteria as the Administrator may determine pursuant to Section 10.
(bb) “Performance Unit” means an Award denominated in Shares or cash, which may be earned in whole or in
part upon attainment of performance goals or other vesting criteria as the Administrator may determine and which may be
settled for cash, Shares or other securities or a combination of the foregoing pursuant to Section 10.
(cc) “Period of Restriction” means the period (if any) during which the transfer of Shares of Restricted Stock
is subject to restrictions and the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the
passage of time, the achievement of specified levels of performance, or the occurrence of other events as determined by the
Administrator.
(dd) “Plan” means this Splunk Inc. 2022 Equity Incentive Plan.
(ee) “Restricted Stock” means Shares issued pursuant to a Restricted Stock award under Section 7 of the Plan,
or issued pursuant to the early exercise of an Option.
Appendix B
B-4
(ff) “Restricted Stock Unit” means a bookkeeping entry representing an amount equal to the Fair Market Value of
one Share, granted pursuant to Section 8. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the
Company.
(gg) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when
discretion is being exercised with respect to the Plan.
(hh) “Section 16(b)” means Section 16(b) of the Exchange Act.
(ii) “Section 409A” means Section 409A of the Code, and any proposed, temporary or final Treasury Regulations
and Internal Revenue Service guidance thereunder, as each may be amended from time to time.
(jj) “Securities Act” means the U.S. Securities Act of 1933, as amended.
(kk) “Service Provider” means an Employee, Director or Consultant.
(ll) “Share” means a share of the Common Stock, as adjusted in accordance with Section 14 of the Plan.
(mm) “Stock Appreciation Right” means an Award, granted alone or in connection with an Option, that pursuant
to Section 9 is designated as a Stock Appreciation Right.
(nn) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Code
Section 424(f).
(oo) “Substituted Award” has the meaning set forth in Section 3(a) of the Plan.
(pp) “Tax-Related Items” means any U.S. or non-U.S. federal, state and/or local taxes, including, without limitation,
income tax, social insurance contributions, fringe benefit tax, employment tax, stamp tax and any employer tax liability which
has been transferred to a Service Provider for which the Service Provider is liable in connection with his or her participation in
the Plan.
(qq) “Trading Day” means a day that the primary stock exchange, national market system, or other trading
platform, as applicable, upon which the Common Stock is listed is open for trading.
3. Stock Subject to the Plan.
(a) Stock Subject to the Plan. Subject to the provisions of Section 14 of the Plan, the maximum aggregate
number of Shares that may be issued under the Plan is 10,460,784 Shares, plus any Shares subject to awards granted under
the Company’s 2012 Equity Incentive Plan, as amended, and Shares subject to awards granted under the Company’s 2022
Inducement Plan, in each case that, on or after the date stockholders initially approve the Plan, expire or otherwise terminate
without having been exercised or issued in full. In the event the Company substitutes equity awards of acquired entities in
connection with mergers, reorganizations, separations, or other transactions to which Section 424(a) of the Code applies
(each such award, a “Substituted Award”), the number of Shares reserved pursuant to Section 3(a) will be increased by the
number of Shares underlying Substituted Awards as of the effectiveness of the substitution. In addition, Shares may become
available for issuance under the Plan pursuant to Section 3(b). The Shares may be authorized, but unissued, or reacquired
Common Stock.
(b) Lapsed Awards. If an Award expires or becomes unexercisable without having been exercised in full, or, with
respect to Restricted Stock, Restricted Stock Units, Performance Units or Performance Shares, is forfeited to or repurchased
by the Company due to failure to vest, then the unpurchased Shares (or for Awards other than Options or Stock Appreciation
Rights, the forfeited or repurchased Shares), which were subject thereto will become available for future grant or sale under
the Plan (unless the Plan has terminated). With respect to the exercise of Stock Appreciation Rights or Options, the gross
Shares underlying such Stock Appreciation Rights or Options will cease to be available under the Plan. Shares that actually
have been issued under the Plan under any Award will not be returned to the Plan and will not become available for future
distribution under the Plan; provided, however, that if Shares issued pursuant to Awards of Restricted Stock, Restricted Stock
Units, Performance Shares or Performance Units are repurchased by the Company or are forfeited to the Company due to
failure to vest, such Shares will become available for future grant under the Plan. Shares used to pay the exercise price or
purchase price of an Award or to satisfy the withholding obligations for Tax-Related Items related to an Award will not become
available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than Shares,
such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Notwithstanding the
foregoing and, subject to adjustment as provided in Section 14, the maximum number of Shares that may be issued upon the
Appendix B
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Splunk 2022 Proxy Statement B-5
exercise of Incentive Stock Options will equal 200% of the aggregate Share number stated in Section 3(a), plus, to the extent
allowable under Section 422 of the Code and the Treasury Regulations promulgated thereunder, any Shares that become
available for issuance under the Plan pursuant to this Section 3(b).
(c) Share Reserve. The Company, at all times during the term of this Plan, will reserve and keep available such
number of Shares as will be sufficient to satisfy the requirements of the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. Different Committees with respect to different groups of Service
Providers may administer the Plan.
(ii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the
transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3.
(iii) Other Administration. Other than as provided above, the Plan will be administered by (A) the Board or
(B) a Committee, which committee will be constituted to satisfy Applicable Laws. If the Plan is administered by a Committee
other than the Company’s independent Compensation Committee, the Company’s independent Compensation Committee
will maintain oversight of, and set a limit on the number of Shares covered by Awards that may be granted by, such Committee,
such Committee will not have authority to grant Awards to members of such Committee, and such Committee will be
constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, the specific
duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion, to:
(i) determine the Fair Market Value;
(ii) select the Service Providers to whom Awards may be granted hereunder;
(iii) determine the number of Shares to be covered by each Award granted hereunder;
(iv) approve forms of Award Agreements for use under the Plan;
(v) determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted
hereunder. The terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may vest
or be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions,
and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the
Administrator will determine;
(vi) prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations
relating to sub-plans established for the purpose of accommodating requirements of local law and procedures outside the U.S.,
facilitating the administration of the Plan in jurisdictions outside the U.S., or for qualifying for favorable tax treatment under
applicable non-U.S. laws;
(vii) construe and interpret the terms of the Plan and Awards granted under the Plan;
(viii) modify or amend each Award (subject to Section 19(c) of the Plan), including without limitation the
discretionary authority to extend the post-termination exercisability period of Awards; provided, however, that in no event will
the term of an Option or Stock Appreciation Right be extended beyond its original maximum term;
(ix) allow Participants to satisfy withholding obligations for Tax-Related Items in a manner prescribed in
Section 15 of the Plan;
(x) authorize any person to execute on behalf of the Company any instrument required to affect the grant
of an Award previously granted by the Administrator;
(xi) temporarily suspend the exercisability or vesting of an Award if the Administrator deems such
suspension to be necessary or appropriate for administrative purposes;
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B-6
(xii) allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that otherwise
would be due to the Participant under an Award; and
(xiii) make all other determinations deemed necessary or advisable for administering the Plan.
(c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations will be
final and binding on all Participants and any other holders of Awards and will be given the maximum deference permitted by
Applicable Laws.
(d) Exchange Program; “Reload” Awards. The Administrator may not institute an Exchange Program (including
“repricing” Options or Stock Appreciation Rights) without stockholder approval. No term of an Award shall provide for
automatic “reload” grants of additional Awards upon the exercise of an Option or Stock Appreciation Right.
5. Eligibility. Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units,
Performance Shares and Performance Units may be granted to Service Providers. Incentive Stock Options may be granted only
to Employees.
6. Stock Options.
(a) Grant of Options. Subject to the terms and provisions of the Plan, the Administrator, at any time and from time
to time, may grant Options to Service Providers in such amounts as the Administrator, in its sole discretion, will determine.
(b) Stock Option Agreement. Each Option will be evidenced by an Award Agreement that will specify the exercise
price, the number of Shares subject to the Option, the exercise restrictions, if any, applicable to the Option, and such other
terms and conditions as the Administrator, in its sole discretion, will determine.
(c) Limitations. Each Option will be designated in the Award Agreement as either an Incentive Stock Option
or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during
any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars
($100,000), such Options will be treated as Nonstatutory Stock Options. For purposes of this Section 6(c), Incentive Stock
Options will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be
determined as of the time the Option with respect to such Shares is granted.
(d) Term of Option. The term of each Option will be ten (10) years from the date of grant or such shorter term as
may be provided in the Award Agreement. Moreover, in the case of an Incentive Stock Option granted to a Participant who, at
the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be
five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement.
(e) Option Exercise Price and Consideration.
(i) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option
will be determined by the Administrator, subject to the following:
(1) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price will be no less than one hundred ten percent (110%) of the Fair Market Value per Share
on the date of grant.
(B) granted to any Employee other than an Employee described in paragraph (A) immediately
above, the per Share exercise price will be no less than one hundred percent (100%) of the Fair Market Value per Share on the
date of grant.
(2) In the case of a Nonstatutory Stock Option, the per Share exercise price will be no less than one
hundred percent (100%) of the Fair Market Value per Share on the date of grant.
(3) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than
one hundred percent (100%) of the Fair Market Value per Share on the date of grant in the case of Substitute Awards granted
in connection with transactions described in, and in a manner consistent with, Section 424(a) of the Code.
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(ii) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator will fix the period
within which the Option may be exercised and will determine any conditions that must be satisfied before the Option may be
exercised.
(iii) Form of Consideration. The Administrator will determine the acceptable form of consideration for
exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator will
determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of: (1) cash;
(2) check; (3) other Shares, provided that such Shares have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which such Option will be exercised and provided that accepting such Shares will not
result in any adverse accounting consequences to the Company, as the Administrator determines in its sole discretion;
(4) consideration received by the Company under a broker-assisted (or other) cashless exercise program (whether through a
broker or otherwise) implemented by the Company in connection with the Plan; (5) by net exercise; (6) such other consideration
and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or (7) any combination of the
foregoing methods of payment. A promissory note may not be used as a form of consideration for exercising an Option.
(f) Exercise of Option.
(i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder will be exercisable
according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set
forth in the Award Agreement. An Option may not be exercised for a fraction of a Share.
An Option will be deemed exercised when the Company receives: (i) notice of exercise (in accordance
with the procedures that the Administrator may specify from time to time from the person entitled to exercise the Option, and
(ii) full payment for the Shares with respect to which the Option is exercised (together with any applicable withholdings for
Tax-Related Items). Full payment may consist of any consideration and method of payment authorized by the Administrator
and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name
of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of
the Company), no right to vote or any other rights as a stockholder will exist with respect to the Shares subject to an Option,
notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the
Shares are issued, except as provided in Section 14 of the Plan.
Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes
of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
(ii) Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other
than upon the cessation of the Participant’s Service Provider status as the result of the Participant’s death or Disability, the
Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent
that the Option is vested on the date of cessation of the Participant’s Service Provider status (but in no event later than the
expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award
Agreement, the Option will remain exercisable for three (3) months following cessation of the Participant’s Service Provider
status. Unless otherwise provided by the Administrator, if on the date of cessation of the Participant’s Service Provider status
the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert
to the Plan. If, after cessation of the Participant’s Service Provider status, the Participant does not exercise his or her Option
within the time specified by the Administrator (or if not specified by the Administrator, the time specified herein), the Option
will terminate, and the Shares covered by such Option will revert to the Plan.
(iii) Disability of Participant. If a Participant ceases to be a Service Provider as a result of the Participant’s
Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to
the extent the Option is vested on the date of cessation of the Participant’s Service Provider status (but in no event later than
the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award
Agreement, the Option will remain exercisable for twelve (12) months following cessation of the Participant’s Service Provider
status. Unless otherwise provided by the Administrator, if on the date of cessation of the Participant’s Service Provider status
the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert
to the Plan. If, after cessation of the Participant’s Service Provider status, the Participant does not exercise his or her Option
within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
(iv) Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised
following the Participant’s death within such period of time as is specified in the Award Agreement to the extent that the
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B-8
Option is vested on the date of death (but in no event may the Option be exercised later than the expiration of the term of
such Option as set forth in the Award Agreement), by the Participant’s designated beneficiary, provided the Administrator has
permitted the designation of a beneficiary and provided such beneficiary has been designated prior to the Participant’s death
in a form acceptable to the Administrator. If the Administrator has not permitted the designation of a beneficiary or if no such
beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the
Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance
with the laws of descent and distribution. In the absence of a specified time in the Award Agreement, the Option will remain
exercisable for twelve (12) months following the Participant’s death. Unless otherwise provided by the Administrator, if at the
time of death, the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the
Option will immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option will
terminate, and the Shares covered by such Option will revert to the Plan.
(v) Tolling Expiration. A Participant’s Award Agreement may also provide that:
(1) if the exercise of the Option following the cessation of the Participant’s status as a Service
Provider (other than upon the Participant’s death or Disability) would result in liability under Section 16(b), then the Option will
terminate on the earlier of (A) the expiration of the term of the Option set forth in the Award Agreement, or (B) the tenth (10th)
day after the last date on which such exercise would result in liability under Section 16(b); or
(2) if the exercise of the Option following the cessation of the Participant’s status as a Service
Provider (other than upon the Participant’s death or Disability) would be prohibited at any time solely because the issuance
of Shares would violate the registration requirements under the Securities Act, then the Option will terminate on the earlier
of (A) the expiration of the term of the Option or (B) the expiration of a period of thirty (30) days after the cessation of the
Participant’s status as a Service Provider during which the exercise of the Option would not be in violation of such registration
requirements.
7. Restricted Stock.
(a) Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Administrator, at any time and
from time to time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole
discretion, will determine.
(b) Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by an Award Agreement that
will specify any Period of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator,
in its sole discretion, will determine. Unless the Administrator determines otherwise, the Company (or its designee) as escrow
agent will hold Shares of Restricted Stock until the restrictions on such Shares have lapsed.
(c) Transferability. Except as provided in this Section 7 or the Award Agreement, Shares of Restricted Stock may
not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of any applicable Period of
Restriction.
(d) Other Restrictions. The Administrator, in its sole discretion, may impose such other restrictions on Shares of
Restricted Stock as it may deem advisable or appropriate.
(e) Removal of Restrictions. Except as otherwise provided in this Section 7, Shares of Restricted Stock covered
by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day
of any applicable Period of Restriction or at such other time as the Administrator may determine. The Administrator, in its
discretion, may accelerate the time at which any restrictions will lapse or be removed.
(f) Voting Rights. During any applicable Period of Restriction, Service Providers holding Shares of Restricted
Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines
otherwise.
(g) Return of Restricted Stock to Company. On the date set forth in the Award Agreement, the Restricted Stock
for which restrictions have not lapsed will revert to the Company and again will become available for grant under the Plan.
8. Restricted Stock Units.
(a) Grant. Subject to the terms and provisions of the Plan, Restricted Stock Units may be granted at any time and
from time to time as determined by the Administrator. After the Administrator determines that it will grant Restricted Stock
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Units under the Plan, it will advise the Participant in an Award Agreement of the terms, conditions, and restrictions related to
the grant, including the number of Restricted Stock Units.
(b) Restricted Stock Unit Agreement. Each Award of Restricted Stock Units will be evidenced by an Award
Agreement that will specify vesting criteria, the number of Restricted Stock Units granted, and such other terms and
conditions as the Administrator, in its sole discretion, will determine.
(c) Vesting Criteria and Other Terms. The Administrator will set vesting criteria in its discretion, which, depending
on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the
Participant. The Administrator may set vesting criteria based upon the achievement of Company-wide, divisional, business unit,
or individual goals (including, but not limited to, continued employment or service), applicable U.S. or non-U.S. federal or state
securities laws or any other basis determined by the Administrator in its discretion.
(d) Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the Participant will be entitled to
receive a payout as determined by the Administrator. Notwithstanding the foregoing, at any time after the grant of Restricted
Stock Units, the Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be met to receive a
payout.
(e) Form and Timing of Payment. Payment of earned Restricted Stock Units will be made as soon as practicable
after the date(s) determined by the Administrator and set forth in the Award Agreement. The Administrator, in its sole
discretion, may settle earned Restricted Stock Units only in cash, Shares, or a combination of both.
(f) Cancellation. On the date set forth in the Award Agreement, all unearned Restricted Stock Units will be
forfeited to the Company.
9. Stock Appreciation Rights.
(a) Grant of Stock Appreciation Rights. Subject to the terms and conditions of the Plan, a Stock Appreciation
Right may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its
sole discretion.
(b) Stock Appreciation Right Agreement. Each Stock Appreciation Right grant will be evidenced by an Award
Agreement that will specify the exercise price, the term of the Stock Appreciation Right, the conditions of exercise, and such
other terms and conditions as the Administrator, in its sole discretion, will determine.
(c) Number of Shares. The Administrator will have complete discretion to determine the number of Stock
Appreciation Rights granted to any Service Provider.
(d) Exercise Price and Other Terms. The per share exercise price for the Shares to be issued pursuant to exercise
of a Stock Appreciation Right will be determined by the Administrator and will be no less than one hundred percent (100%)
of the Fair Market Value per Share on the date of grant. Otherwise, the Administrator, subject to the provisions of the Plan,
will have complete discretion to determine the terms and conditions of Stock Appreciation Rights granted under the Plan.
Notwithstanding the foregoing, a Stock Appreciation Right may be granted with a per Share exercise price of less than one
hundred percent (100%) of the Fair Market Value per Share on the date of grant in the case of Substitute Awards granted in
connection with transactions described in, and in a manner consistent with, Section 424(a) of the Code.
(e) Expiration of Stock Appreciation Rights. A Stock Appreciation Right granted under the Plan will expire upon
the date as determined by the Administrator, in its sole discretion, and set forth in the Award Agreement. Notwithstanding the
foregoing, the rules of Section 6(d) relating to the maximum term and Section 6(f) relating to exercise also will apply to Stock
Appreciation Rights.
(f) Payment of Stock Appreciation Right Amount. Upon exercise of a Stock Appreciation Right, a Participant will
be entitled to receive payment from the Company in an amount determined as the product of:
(i) The difference between the Fair Market Value of a Share on the date of exercise over the exercise
price; and
(ii) The number of Shares with respect to which the Stock Appreciation Right is exercised.
At the discretion of the Administrator, the payment upon exercise of a Stock Appreciation Right may be in cash, in Shares of
equivalent value, or in some combination of both.
Appendix B
B-10
10. Performance Units and Performance Shares.
(a) Grant of Performance Units/Shares. Performance Units and Performance Shares may be granted to Service
Providers at any time and from time to time, as will be determined by the Administrator, in its sole discretion. The Administrator
will have complete discretion in determining the number of Performance Units and Performance Shares granted to each
Participant.
(b) Value of Performance Units/Shares. Each Performance Unit will have an initial value that is established by the
Administrator on or before the date of grant. Each Performance Share will have an initial value equal to the Fair Market Value of
a Share on the date of grant.
(c) Performance Objectives and Other Terms. The Administrator will set performance objectives or other vesting
provisions (including, without limitation, continued status as a Service Provider) in its discretion which, depending on the
extent to which they are met, will determine the number or value of Performance Units/Shares that will be paid out to the
Service Providers. The time period during which the performance objectives or other vesting provisions must be met will be
called the “Performance Period.” Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will
specify the Performance Period, and such other terms and conditions as the Administrator, in its sole discretion, will determine.
The Administrator may set performance objectives based upon the achievement of Company-wide, divisional, business unit
or individual goals (including, but not limited to, continued employment or service), applicable U.S. or non-U.S. federal or state
securities laws, or any other basis determined by the Administrator in its discretion.
(d) Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder
of Performance Units/Shares will be entitled to receive a payout of the number of Performance Units/Shares earned by
the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding
performance objectives or other vesting provisions have been achieved. After the grant of a Performance Unit/Share, the
Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such
Performance Unit/Share.
(e) Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units/Shares
will be made as soon as practicable after the expiration of the applicable Performance Period or as otherwise determined by
the Administrator and set forth in the Award Agreement. The Administrator, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash, in Shares or in a combination thereof.
(f) Cancellation of Performance Units/Shares. On the date set forth in the Award Agreement, all unearned or
unvested Performance Units/Shares will be forfeited to the Company, and again will be available for grant under the Plan.
11. Award Limitations.
(a) Outside Director Award Limitations. No Outside Director may be paid, issued, or granted, in any Fiscal
Year, equity awards (including any Awards issued under this Plan) with an aggregate value (the value of which will be based
on their grant date fair value determined in accordance with U.S. generally accepted accounting principles) and any other
compensation (including without limitation any cash retainers or fees) that, in the aggregate, exceed $750,000, increased to
$1,500,000 for such Outside Director for the Fiscal Year in which he or she joins the Board as an Outside Director. Any Awards
or other compensation paid or provided to an individual for his or her services as an Employee, or for his or her services as a
Consultant (other than as an Outside Director), will not count for purposes of the limitation under this Section 11(a).
(b) Minimum Vesting Requirements.
(i) General. Except as specified in Section 11(b)(ii), no portion of an Award (other than Substituted
Awards) will vest earlier than the one-year anniversary of such Award’s grant date.
(ii) Exception. Awards may be granted to any Service Provider without regard to the minimum vesting
requirements set forth in Section 11(b)(i) if the Shares subject to such Awards would not result in more than 5% of the
maximum aggregate number of Shares reserved for issuance pursuant to all outstanding Awards granted under the Plan (the
“5% Limit”). For purposes of clarification, Substituted Awards shall not count against the 5% Limit. The 5% Limit applies in
the aggregate to Awards (other than Substituted Awards) that do not satisfy the minimum vesting requirements set forth in
Section 11(b)(i). Section 11(b)(i) shall not prevent accelerated vesting of any portion of an Award earlier than the one-year
anniversary of such Award’s grant date if such acceleration is due to a termination of the relevant Participant’s service or if
such acceleration is in connection with a Change in Control, in each case to the extent otherwise permitted under the Plan.
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(c) Dividends and Other Distributions. Service Providers holding an Award granted under the Plan will not be
entitled to receive any dividends or other distributions paid with respect to a Share underlying such Award until the portion of
such Award covering such Share has fully vested, and all Periods of Restriction with respect to such Share has lapsed, and such
Share has been issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) pursuant to such Award.
12. Leaves of Absence/Transfer Between Locations. Unless the Administrator provides otherwise in an Award
Agreement, and subject to Applicable Laws, a Participant will not cease to be an Employee in the case of any transfers between
locations of the Company or between the Company, its Parent, or any of its Subsidiaries. Except as otherwise specifically set
forth in the applicable Award Agreement, the treatment of an Award (including the vesting of such Award) in the event of any
leave of absence by the applicable Participant will be governed by the Company’s then-current equity award leave of absence
policy, as may be amended from time to time by the Company in its sole discretion. For purposes of Incentive Stock Options,
no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the Company or the Participant’s employer is not
so guaranteed, then six (6) months following the first (1st) day of such leave any Incentive Stock Option held by the Participant
will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option.
13. Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent and distribution,
and may be exercised, during the lifetime of the Participant, only by the Participant. If the Administrator makes an Award
transferable, such Award will contain such additional terms and conditions as the Administrator deems appropriate. For the
avoidance of doubt, Awards may not be transferred to financial institutions.
14. Adjustments; Dissolution or Liquidation; Merger or Change in Control; Death.
(a) Adjustments. In the event that any extraordinary dividend or other extraordinary distribution (whether in
the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, reclassification, repurchase, or exchange of Shares or other securities of
the Company, or other change in the corporate structure of the Company affecting the Shares occurs (other than any ordinary
dividends or other ordinary distributions), the Administrator, in order to prevent diminution or enlargement of the benefits
or potential benefits intended to be made available under the Plan, will adjust the number and class of shares of stock that
may be delivered under the Plan and/or the number, class, and exercise price of shares of stock covered by each outstanding
Award, and the numerical Share limits in Section 3 of the Plan.
(b) Dissolution or Liquidation. In the event of a proposed dissolution or liquidation of the Company, the
Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To
the extent it has not been previously exercised or vested, an Award will terminate immediately prior to the consummation of
such proposed action.
(c) Merger or Change in Control.
In the event of a merger of the Company with or into another corporation or other entity or a Change in Control,
each outstanding Award will be treated as the Administrator determines (subject to the provisions of the following paragraph)
without a Participant’s consent, including, without limitation, that (i) Awards will be assumed, or substantially equivalent
awards will be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) with appropriate adjustments as
to the number and kind of shares and exercise prices; (ii) upon written notice to a Participant, that the Participant’s Awards will
terminate upon or immediately prior to the consummation of such merger or Change in Control; (iii) outstanding Awards will
vest and become exercisable, realizable, or payable, or restrictions applicable to an Award will lapse, in whole or in part prior to
or upon consummation of such merger or Change in Control, and, to the extent the Administrator determines, terminate upon
or immediately prior to the effectiveness of such merger or Change in Control; (iv) (A) the termination of an Award in exchange
for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the exercise of such
Award or realization of the Participant’s rights as of the date of the occurrence of the transaction (and, for the avoidance
of doubt, if as of the date of the occurrence of the transaction the Administrator determines in good faith that no amount
would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be
terminated by the Company without payment), or (B) the replacement of such Award with other rights or property selected
by the Administrator in its sole discretion; or (v) any combination of the foregoing. In taking any of the actions permitted under
this Section 14(c), the Administrator will not be obligated to treat all Awards, all Awards held by a Participant, all Awards of the
same type, or all portions of Awards, similarly.
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In the event that the successor corporation does not assume or substitute for the Award (or portion thereof), the
Participant will fully vest in and have the right to exercise the Participant’s outstanding Option and Stock Appreciation Right
(or portion thereof) that is not assumed or substituted for, including Shares as to which such Award would not otherwise
be vested or exercisable, all restrictions on Restricted Stock, Restricted Stock Units, Performance Shares and Performance
Units (or portions thereof) not assumed or substituted for will lapse, and, with respect to such Awards with performance-
based vesting (or portions thereof) not assumed or substituted for, all performance goals or other vesting criteria will be
deemed achieved at one hundred percent (100%) of target levels and all other terms and conditions met, in each case, unless
specifically provided otherwise under the applicable Award Agreement or other written agreement between the Participant
and the Company or any of its Subsidiaries or Parents, as applicable. In addition, if an Option or Stock Appreciation Right (or
portion thereof) is not assumed or substituted for in the event of a merger or Change in Control, the Administrator will notify
the Participant in writing or electronically that such Option or Stock Appreciation Right (or its applicable portion) will be
exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation
Right (or its applicable portion) will terminate upon the expiration of such period.
For the purposes of this Section 14(c), an Award will be considered assumed if, immediately following the merger or
Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to
the merger or Change in Control, the consideration (whether stock, cash, or other securities or property) received in the merger
or Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger or Change in Control is not solely common stock
of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a Restricted
Stock Unit, Performance Unit or Performance Share, for each Share subject to such Award, to be solely common stock of the
successor corporation or its Parent equal in fair market value, determined immediately following such merger or Change in
Control, to the per share consideration received by holders of Common Stock in the merger or Change in Control.
Notwithstanding anything in this Section 14(c) to the contrary, and unless otherwise provided in an Award
Agreement or other written agreement between the Participant and the Company or any of its Subsidiaries or Parents, as
applicable, an Award that vests, is earned or paid-out upon the satisfaction of one or more performance goals will not be
considered assumed if the Company or its successor modifies any of such performance goals without the Participant’s
consent; provided, however, a modification to such performance goals only to reflect the successor corporation’s post-Change
in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption.
Notwithstanding anything in this Section 14(c) to the contrary, if a payment under an Award Agreement is subject
to Section 409A and if the change in control definition contained in the Award Agreement or other written agreement related
to the Award does not comply with the definition of “change in control” for purposes of a distribution under Section 409A, then
any payment of an amount that otherwise is accelerated under this Section will be delayed until the earliest time that such
payment would be permissible under Section 409A without triggering any penalties applicable under Section 409A.
(d) Outside Director Awards. With respect to Awards granted to an Outside Director, in the event of a Change in
Control, the Participant will fully vest in and have the right to exercise Options and/or Stock Appreciation Rights as to all of the
Shares underlying such Award, including those Shares which would not be vested or exercisable, all restrictions on Restricted
Stock and Restricted Stock Units will lapse, and, with respect to Awards with performance-based vesting, all performance
goals or other vesting criteria will be deemed achieved at one hundred percent (100%) of target levels and all other terms and
conditions met, unless specifically provided otherwise under the applicable Award Agreement or other written agreement
between the Participant and the Company or any of its Subsidiaries or Parents, as applicable.
(e) Death. Unless otherwise determined by the Administrator, if an Employee or Outside Director ceases to be
an Employee or Outside Director, as applicable, as a result of such Participant’s death, then such Participant will immediately
become one hundred percent (100%) vested in and have the right to exercise Options and/or Stock Appreciation Rights as
to one hundred percent (100%) of the Shares underlying such Award, including those Shares which would not otherwise be
vested or exercisable; one hundred percent (100%) of the aggregate restrictions initially on Restricted Stock and Restricted
Stock Units will lapse; with respect to Awards with performance-based vesting for which the achievement of designated
performance goals has been determined, Participant will immediately become vested in one hundred percent (100%) of the
earned Awards; and, with respect to Awards for which the achievement of designated performance goals or other vesting
criteria has not yet been determined, all performance goals or other vesting criteria required to be met for such Awards to
be earned will be deemed achieved at target levels and Participant will immediately become vested in one hundred percent
(100%) of the earned Awards, provided that if such termination of the Participant occurs following the end of the performance
period for any performance goal but prior to the determination of the achievement of such performance goal, then the
Appendix B
PROXY
Splunk 2022 Proxy Statement B-13
achievement of such performance goal will be determined based on actual performance and Participant will immediately
become vested in one hundred percent (100%) of the earned Awards. Notwithstanding the foregoing sentence, if the
Participant has not been continuously an Employee or Outside Director, as applicable, for at least 12 months prior to the day
the Participant ceases to be an Employee or Outside Director as a result of the Participant’s death, then for each reference
to “one hundred percent (100%)” in the foregoing sentence, “fifty percent (50%)” will be substituted. Any Options or Stock
Appreciation Rights that become vested and exercisable pursuant to this paragraph shall be exercisable in accordance with
Section 6(f)(iv) and the applicable Award Agreement.
15. Tax.
(a) Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise
thereof) or such earlier time as any withholding obligations for Tax-Related Items are due, the Company (or any of its
Subsidiaries, Parents or affiliates employing or retaining the services of a Participant, as applicable) will have the power and
the right to deduct or withhold, or require a Participant to remit to the Company (or any of its Subsidiaries, Parents or affiliates,
as applicable), an amount sufficient to satisfy any Tax-Related Items required to be withheld with respect to such Award (or
exercise or vesting thereof).
(b) Withholding Arrangements. The Administrator, in its sole discretion and pursuant to such procedures as it
may specify from time to time, may permit a Participant to satisfy such withholding obligation for Tax-Related Items, in whole
or in part by (without limitation) (i) paying cash, check or other cash equivalents, (ii) electing to have the Company withhold
otherwise deliverable Shares having a Fair Market Value equal to the minimum statutory amount applicable in a Participant’s
jurisdiction or such greater amount as the Administrator may determine if such amount would not have adverse accounting
consequences, as the Administrator determines in its sole discretion, (iii) delivering to the Company already-owned Shares
having a Fair Market Value equal to the statutory amount applicable in a Participant’s jurisdiction or such greater amount as
the Administrator may determine, in each case, provided the delivery of such Shares will not result in any adverse accounting
consequences, as the Administrator determines in its sole discretion, (iv) selling a sufficient number of Shares otherwise
deliverable to the Participant through such means as the Administrator may determine in its sole discretion (whether through
a broker or otherwise) to cover the amount of the withholding obligation for Tax-Related Items, (v) having the Company or
a Parent or Subsidiary withhold from wages or any other cash amount due or to become due to the Participant and payable
by the Company or any Parent or Subsidiary, or (vi) any combination of the foregoing methods of payment. The withholding
amount will be deemed to include any amount which the Administrator agrees may be withheld at the time the election is
made, not to exceed the amount determined by using the maximum statutory rates applicable in a Participant’s jurisdiction
with respect to the Award on the date that the amount of Tax-Related Items to be withheld is to be determined or such
greater amount as the Administrator may determine if such amount would not have adverse accounting consequences, as the
Administrator determines in its sole discretion.
(c) Compliance With Section 409A. Awards will be designed and operated in such a manner that they are either
exempt from the application of, or comply with, the requirements of Section 409A such that the grant, payment, settlement or
deferral will not be subject to the additional tax or interest applicable under Section 409A, except as otherwise determined in
the sole discretion of the Administrator. The Plan and each Award Agreement under the Plan is intended to be either exempt
from the application of or meet the requirements of Section 409A and will be construed and interpreted in accordance
with such intent, except as otherwise determined in the sole discretion of the Administrator. To the extent that an Award or
payment, or the settlement or deferral thereof, is subject to Section 409A the Award will be granted, paid, settled or deferred
in a manner that will meet the requirements of Section 409A, such that the grant, payment, settlement or deferral will not be
subject to the additional tax or interest applicable under Section 409A. In no event will the Company or any of its Subsidiaries
or Parents have any obligation or liability under the terms of this Plan to reimburse, indemnify, or hold harmless any Participant
or any other person in respect of Awards, for any taxes, interest or penalties imposed, or other costs incurred, as a result of
Section 409A.
16. No Effect on Employment or Service. Neither the Plan nor any Award will confer upon a Participant any right with
respect to continuing the Participant’s relationship as a Service Provider, nor interfere in any way with the Participant’s right
or the right of the Company and its Subsidiaries or Parents, as applicable, to terminate such relationship at any time, with or
without cause, to the extent permitted by Applicable Laws.
17. Date of Grant. The date of grant of an Award will be, for all purposes, the date on which the Administrator
makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the
determination will be provided to each Participant within a reasonable time after the date of such grant.
Appendix B
B-14
18. Term of Plan. Subject to Section 22 of the Plan, the Plan will become effective upon its approval by the Company’s
stockholders. It will continue in effect for a term of ten (10) years from the effective date, unless terminated earlier under
Section 19 of the Plan.
19. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Administrator, at any time, may amend, alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company will obtain stockholder approval of any Plan amendment to the extent
necessary and desirable to comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan
will materially impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the
Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan will
not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the
Plan prior to the date of such termination.
20. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares will not be issued pursuant to an Award unless the exercise or vesting of such
Award and the issuance and delivery of such Shares will comply with Applicable Laws and, in the Administrator’s discretion,
will be further subject to the approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise or vesting of an Award, the Company may require
the person exercising or vesting in such Award to represent and warrant at the time of any such exercise or vesting that the
Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
21. Inability to Obtain Authority. If the Company determines it to be impossible or impracticable to obtain authority
from any regulatory body having jurisdiction or to complete or comply with the requirements of any registration or other
qualification of the Shares under any U.S. state or federal law or non-U.S. law or under the rules and regulations of the U.S.
Securities and Exchange Commission, the stock exchange on which Shares of the same class are then listed, or any other
governmental or regulatory body, which authority, registration, qualification or rule compliance is deemed by the Company’s
counsel to be necessary or advisable for the issuance and sale of any Shares hereunder, the Company will be relieved of any
liability in respect of the failure to issue or sell such Shares as to which such requisite authority, registration, qualification or
rule compliance will not have been obtained.
22. Stockholder Approval. The Plan will be subject to approval by the stockholders of the Company within twelve
(12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to
the degree required under Applicable Laws.
23. Forfeiture Events. The Administrator may specify in an Award Agreement that the Participant’s rights, payments,
and benefits with respect to an Award will be subject to reduction, cancellation, forfeiture, recoupment, reimbursement, or
reacquisition upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance
conditions of an Award. Notwithstanding any provisions to the contrary under this Plan, an Award will be subject to the
Company’s clawback policy in effect as of the adoption of this Plan, and will be subject to any other clawback policy of the
Company as may be established and/or amended from time to time to comply with Applicable Laws (including without
limitation pursuant to the listing standards of any national securities exchange or association on which the Company’s
securities are listed or as may be required by the Dodd-Frank Wall Street Reform and Consumer Protection Act) (the
“Clawback Policy”). The Administrator may require a Participant to forfeit, return or reimburse the Company all or a portion
of the Award and any amounts paid thereunder pursuant to the terms of the Clawback Policy or as necessary or appropriate
to comply with Applicable Laws. Unless this Section 23 specifically is mentioned and waived in an Award Agreement or
other document, no recovery of compensation under a Clawback Policy or otherwise will constitute an event that triggers or
contributes to any right of a Participant to resign for “good reason” or “constructive termination” (or similar term) under any
agreement, arrangement or policy with the Company or any Parent or Subsidiary of the Company.
* * *
Appendix B
FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended: January 31, 2022
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 001-35498
Splunk Inc.
(Exact name of registrant as specified in its charter)
Delaware
86-1106510
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
270 Brannan Street
San Francisco, California 94107
(Address of principal executive offices)
(Zip Code)
(415) 848-8400
(Registrant’s telephone number, including area code)
Securities Registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.001 per
share
SPLK
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act: Yes ☒ No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act: Yes ☐ No ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
☒
Accelerated Filer
☐
Non-Accelerated Filer
☐
Smaller Reporting Company
☐
Emerging Growth Company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No ☒
The aggregate market value of shares of common stock held by non-affiliates of the registrant was $16.0 billion, based on the
number of shares held by non-affiliates and the last reported sale price of the registrant’s common stock on July 31, 2021 (the
last business day of the registrant’s most recently completed second fiscal quarter).
The number of shares outstanding of the Registrant’s Common Stock as of March 17, 2022 was 160.7 million shares.
Documents Incorporated by Reference
Portions of the registrant’s definitive Proxy Statement for the 2022 Annual Stockholders’ Meeting are incorporated by reference
into Part III of this Annual Report on Form 10-K.
Splunk Inc.
Table of Contents
Page No.
PART I
3
Item 1.
Business
4
Item 1A. Risk Factors
13
Item 1B. Unresolved Staff Comments
45
Item 2.
Properties
46
Item 3.
Legal Proceedings
46
Item 4.
Mine and Safety Disclosures
46
PART II
47
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
47
Item 6.
[Reserved]
48
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
48
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
66
Item 8.
Financial Statements and Supplementary Data
68
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
108
Item 9A. Controls and Procedures
109
Item 9B. Other Information
110
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
110
PART III
111
Item 10.
Directors, Executive Officers and Corporate Governance
111
Item 11. Executive Compensation
111
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
111
Item 13.
Certain Relationships and Related Transactions, and Director Independence
111
Item 14.
Principal Accountant Fees and Services
111
PART IV
112
Item 15.
Exhibits and Financial Statement Schedules
112
Item 16.
Form 10-K Summary
112
Signatures
117
2
FORM 10-K
PART I
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including but not limited to the sections entitled “Business,” “Risk Factors,” and
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking
statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could
cause our results to differ materially from those expressed or implied by such forward-looking statements. Statements that are
not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking
statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,”
“could,” “estimate,” “expect,” “predict,” “intend,” “may,” “might,” “plan,” “project,” “potential,” “seek,” “should,” “target,”
“will,” “would” and similar expressions or variations intended to identify forward-looking statements. These forward-looking
statements include, but are not limited to, statements concerning the following:
• our future financial and operating results; including trends in and expectations regarding revenues, annual
recurring revenue, deferred revenue, remaining performance obligations, gross margins, operating income and the
proportion of transactions that will be recognized ratably;
• the effects of the COVID-19 pandemic on our business and operations and those of our customers;
• market opportunity;
• expected benefits to customers and potential customers of our offerings and our user-driven network;
• investment strategy, business strategy and growth strategy, including our business model transition and the use of
acquisitions to expand our business;
• our sales and marketing strategy, including our international sales and channel partner strategy;
• customer product adoption and purchasing patterns, including renewal, expansion and conversion from on-
premises to cloud services
• management’s plans, beliefs and objectives for future operations;
• our ability to provide compelling, uninterrupted and secure cloud services to our customers;
• expectations about competition;
• economic and industry trends or trend analysis;
• the impact of geopolitical events, including the war in Ukraine;
• our acquisitions, including the expected impacts of such acquisitions;
• expectations about seasonality;
• revenue mix;
• expected impact of changes in accounting pronouncements and other financial and non financial reporting
standards;
• operating expenses, including changes in research and development, sales and marketing, facilities and general
and administrative expenses;
• sufficiency of cash to meet cash needs for at least the next 12 months;
• exposure to interest rate changes;
• inflation;
• anticipated income tax rates, tax estimates and tax standards;
• capital expenditures, cash flows and liquidity; and
• the impact of climate change, natural disasters and actual or threatened public health emergencies.
These statements represent the beliefs and assumptions of our management based on information currently available to
us. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results
and the timing of certain events to differ materially from future results expressed or implied by such forward-looking
statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and
those discussed in the section titled “Risk Factors” included under Part I, Item 1A. Furthermore, such forward-looking
statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any
forward-looking statements to reflect events or circumstances that occur after the date of this report.
3
Item 1. Business
Overview
Splunk provides innovative solutions that use data from digital systems to help organizations identify opportunities for
optimization and innovation and to keep those systems secure and performing effectively. This class of data is growing
significantly as a direct result of the prevalence and importance of digital systems used by today’s organizations. Decades of
investment in digital transformation have integrated the hardware and software that comprise digital systems into every aspect
of how modern organizations operate. The data generated by these systems contains a comprehensive, real-time record of
operations, interactions, and transactions that our offerings convert into insights and actions that improve technology and
business outcomes. Our solutions for cybersecurity (“Security”) and Observability empower users in technology roles,
including Development Operations (“DevOps”), IT Operations (“ITOps”), and cyber security, to monitor and secure digital
systems more quickly and efficiently. Business users leverage our offerings to gain visibility into their digital processes to
deliver better experiences, improve decisions and drive better results.
Our offerings provide visibility to our customers’ diverse technology infrastructure including systems deployed on the
edge, on premises, and in private and public cloud environments, running software ranging from monolithic apps to cloud
native ones. We also believe our offerings empower operational transformation, helping customers move from reactive, non-
scalable and ineffective approaches to proactive, automated, and AI-assisted processes that drive better outcomes even as the
scale and complexity of their technology continue to grow.
The COVID-19 pandemic significantly increased the importance of being a digital, data-driven organization and we
believe the importance of data-driven innovation will only continue to increase over time. The events of 2020 and 2021
accelerated the adoption of new ways to work and exerted an enormous amount of pressure on organizations of all kinds to
deliver better experiences and outcomes, and to enable entirely new offerings and business models. We believe this global shift
in the business environment and the related challenges are here to stay and that Splunk enables organizations to rise to these
challenges by leveraging technology to achieve greater efficiency, agility, security, and drive a sustained competitive
advantage. When organizations use Splunk to improve their security postures and build resilience, they are able to innovate
more effectively.
Splunk Product Offerings
Portfolio Overview
Our portfolio comprises three categories of offerings:
The Splunk Platform A broad set of configurable and extensible capabilities that can acquire, manage, and analyze
data and deliver insights from virtually any technology source.
Splunk Solutions Application offerings that leverage the Splunk platform to provide deep, pre-built capabilities for
Security and Observability.
Customer and Partner Solutions Content built by our field organization, partners, and customers that configures and
extends the Splunk platform and Splunk Solutions, accelerating customer time-to-value for a broad range of use cases.
We believe that the Splunk portfolio offers a unique breadth and depth of capabilities, including:
• Industry analyst-recognized market leadership in our Security and Observability solutions, which can deliver best-
in-class outcomes for customers.
• Creating greater cost efficiencies and better outcomes for customers by reducing data duplication, scaling
investments, and simplifying data reuse across multiple functions and use cases, and enabling common visibility,
greater collaboration, and tighter alignment across functions.
4
FORM 10-K
• The scalability, flexibility, and power of the Splunk platform enables a wide-range of use-cases for very large and
complex technology infrastructures, and is proven across thousands of customers capable of ingesting and
analyzing petabytes of data per day.
• The combination of real-time stream transformation and analytical processing with near-real time and batch-
oriented processing of large, complex data sets collected over long time periods. Together these capabilities
provide support for a broad range of use cases spanning end-to-end operational processes, from historical
analytics, forensic investigation, and machine learning model development to real-time monitoring, analytics, and
machine model execution.
• The increasing use of machine learning across the portfolio to drive more sophisticated and valuable insights at
ever growing scale. We apply our deep expertise in the security and observability domains to out-of-the-box
machine learning analytics in Splunk Solutions to deliver more accurate and actionable insights, proactive
monitoring, and prescriptive and automated responses. The Splunk platform provides pre-built machine learning
algorithms and model development capabilities and supports integration with external data science platforms,
expanding the use of machine learning to complex, custom use cases.
The Splunk portfolio of offerings is delivered as a mix of cloud services offerings and on-premise licensed software
offerings (“license offerings”) that customers and partners deploy in their own environments. We believe that the unique
capabilities, rapid delivery, and streamlined adoption that cloud services enable make them the best delivery model for us and
the majority of our customers. Accordingly, we will deliver a growing number of our offerings exclusively as cloud services to
take full advantage of cloud capabilities like elastic scalability while maximizing the rate at which new features are adopted and
validated. Where our solutions are delivered as license offerings, we generally follow a cloud-first model, under which the most
complete feature sets and frequent releases are provided in cloud services offerings, while subsets of cloud-validated features
are released on a more measured cadence in license offerings.
The Splunk Platform
The Splunk portfolio of offerings is anchored by the Splunk platform, an extensible real-time data platform comprising
collection, streaming, indexing, search, reporting, analysis, machine learning, alerting, monitoring and data management
capabilities. Different combinations of the Splunk platform capabilities are offered as services in Splunk Cloud, and in our
Splunk Enterprise and Data Stream Processor license offerings. Key Splunk platform capabilities include:
• Expansive data collection and instrumentation, including application programming interfaces (“APIs”), endpoints,
and agents that can acquire data from an extensive set of hardware and software sources. Additionally, Splunk is a
leading contributor to OpenTelemetry, a broadly-used open source project hosted by the Cloud Native Computing
Foundation.
• Processing and analysis of very large volumes of data, both in real-time while in motion and at rest, in our
proprietary, high-scale indexes and external data stores.
• A comprehensive, domain-specific language called the Search Processing Language (“SPL”), which provides a
broad set of commands for preparing, exploring, monitoring, analyzing, and visualizing complex, time series-
based data.
• Extensive machine learning capabilities, including out-of-the-box algorithms optimized for common data types
and use cases and interfaces that allow data scientists to develop and deploy customized algorithms and models
against our customers’ data.
• A wide range of interfaces for administrators, data engineers, analysts, and end users that includes tools providing
a point-and-click experience for data preparation and investigation, highly-configurable dashboards, and a family
of solutions purpose-built for mobile devices, smart watches, and Apple TV and Chromecast display devices.
• APIs and software development kits (“SDKs”) in major programming languages such as Java, JavaScript, C# and
Python that enable our network of customers and partners to build applications and integrations that focus the
power of the Splunk platform on specific use cases.
Splunk Solutions
5
In addition to enabling a wide range of use cases, the Splunk platform is also the foundation of the application
offerings for Security and Observability.
Splunk Security Solutions
Splunk Security solutions help cybersecurity teams streamline the security operations workflow, accelerate threat
detection and response, enhance threat visibility, and scale resources to increase analyst productivity through machine learning
and automation. Built on the Splunk platform, Splunk Security offerings include Splunk Enterprise Security, Splunk User
Behavior Analytics and Splunk Security Orchestration and Automation (“Splunk SOAR”), and are available as a mix of cloud
services and license offerings. Customers use the Splunk Security offerings to address a range of use cases including:
Investigation and Forensics Empower security teams to analyze and confirm high priority incidents to determine the
circumstances and scope of an incident while appropriately handling incident investigation and response.
Security information and event management and Security Analytics Enable security teams to gain full visibility
into their data and make analytics-driven security decisions using pre-built frameworks, workflows and dashboards.
Specific use cases include real-time security monitoring, advanced threat detection, and incident investigation for
efficient threat management.
Automation and Orchestration Provide security operations centers advanced orchestration, automation and response
capabilities by integrating teams, processes and tools. Splunk Mission Control empowers security teams to detect,
manage, investigate, hunt, contain and remediate threats from a unified security operations platform.
Splunk Observability Solutions
Splunk Observability solutions, which are built on the Splunk platform and are available as a mix of cloud services
offerings and license offerings, include Splunk IT Service Intelligence, Splunk On-Call, Splunk Infrastructure Monitoring,
Splunk Application Performance Monitoring (“APM”), and Splunk Synthetic Monitoring. These offerings can be consumed
independently or as an integrated offering that provides full-stack visibility and complete service insights. Splunk Observability
solutions provide ITOps, DevOps and developer teams visibility and control across cloud and on-premises environments. With
improved visibility, ITOps teams can predict and find outages, improve decision-making and take a service-oriented approach
to managing IT infrastructure and applications. Customers use Splunk IT solutions to address a range of use cases including:
IT Investigation and Monitoring Monitor uptime, performance and response time with a unified view of their entire
IT environment. Splunk offerings enable ITOps teams to obtain insight across their data centers and cloud services so
that they can accelerate outage investigations and reduce mean time to resolution by quickly identifying and resolving
problems.
Event Analytics and Management Proactively resolve service issues by using Splunk machine learning capabilities
to cluster, filter, and significantly reduce event noise. This results in less time sifting through false positives and the
ability to prioritize alerts in terms of impact.
Service Monitoring and Insights Understand how multiple tiers of the service stack interact with each other and
impact service degradation. Using machine learning, ITOps teams can help prevent future outages based on predictive
service health scores. ITOps teams gain visibility across silos to understand high level business service health and
performance, while also diving deep into investigations to find the root cause of an incident faster.
Incident Response and Automation Improve the experience of developers and ITOps through incident response and
automation focused on escalating outage and performance incidents to the right people and teams so they can triage
and resolve problems most quickly.
AIOps Use big data analytics, machine learning and artificial intelligence to deliver increased accuracy and speed to
ITOps. The Splunk AIOps solution analyzes massive datasets from disparate sources and employs advanced analytics
to automate common ITOps and improve data analysis.
Cloud Infrastructure Monitoring Monitors cloud infrastructure and networks by streaming performance metrics to
detect patterns, sending availability and performance alerts and analyzing performance trends. Splunk Infrastructure
6
FORM 10-K
Monitoring offers infrastructure visibility across on-premises, hybrid-cloud, multi-cloud and cloud-native
infrastructures, containers and orchestration systems such as Docker and Kubernetes and network performance using
the eBPF (Extended Berkeley Packet Filter) technology.
APM Monitors applications, especially those based on microservices, to identify performance bottlenecks and
outages caused by application issues. Splunk APM provides insights into how microservices and a wide range of
application code, including Java, are performing.
Digital Experience Monitoring Monitors services by using both real user and synthetic transactions to analyze
response time and issues that create bottlenecks in response time.
Log Investigation Helps identify the root cause of outages and issues by isolating log files that indicate a specific
problem in a specific location.
Incident Response Incident response is focused on escalating outage and performance incidents to the right people
and teams so they can triage and resolve problems quickly, while improving the experience of developers and DevOps
teams.
Customer and Partner Solutions
The Splunk platform and Splunk Solutions, including Splunk On-Call, Splunk Infrastructure Monitoring, and Splunk
SOAR, provide APIs, SDKs, and other interfaces that enable our network of third-party developers, partners, and customers to
build content that configures and extends Splunk solutions to accommodate specific use cases. This range of Customer and
Partner solutions includes pre-built data inputs, workflows, searches, reports, alerts, custom dashboards, flexible UI
components, custom data visualizations, and integration actions and methods.
Customer and Partner solutions content can be built for a customer or partner’s own internal use, or it can be made
generally available for download, in free or premium offerings, from within the Splunk platform, our Splunk Solutions, and via
Splunkbase, an online community and marketplace for developers, partners, and customers to share apps and add-ons. Over
2,000 apps and add-ons are currently available on Splunkbase, most of which are built and maintained by third parties.
We do not receive any material revenues from the sale of apps or add-ons by third-party application providers. Many
apps and add-ons posted to Splunkbase are provided at no additional cost to users. Partner apps and add-ons listed on
Splunkbase that are not free are primarily licensed directly by the third party to the end user.
Customer Success
While customers can readily consume our cloud services offerings and license offerings, our customer success team
developed scalable offerings that span the customer journey, with the explicit intent of providing the right outcome-focused
adoption services that result in customer value. These offerings include adoption and implementation services, education
services, and customer support services that are tailored to scale to our customers’ size and maturity.
Adoption and Implementation Services
Our customer success planning includes proven on-boarding and adoption best practices on our offerings for all
customers, using an outcome-focused approach. Our prescriptive adoption guidance and success planning are targeted to the
specific use cases across Security and Observability, spanning a wide variety of industries. Guided by our customer success
managers and advocacy team, customers have several ways to engage our experts: through a comprehensive catalog of On
Demand Services, expert and solution-oriented subscription services, or traditional Project-Based Implementation Services.
Education Services
We offer a robust portfolio of modularized training courses and learning paths to our customers and partners that we
continue to expand. In addition to our extensive course catalog, a comprehensive training certification program is available to
ensure an understanding of our offerings and distinguish levels of expertise. Additionally, we have expanded our Authorized
Learning Partner network to extend our reach and availability of education services throughout our network.
7
Customer Support
We offer maintenance and customer support services as part of our cloud services and license offerings. Support
entitlements provide customers the right to receive unspecified software updates, maintenance releases and patches, and access
to our technical support services during the term of the subscription.
Customers receive 24x7x365 access to subject matter experts for critical issues, direct telephone support, access to
online support, and software upgrades. Our customer support organization has global coverage capabilities, delivering support
with deep expertise in our cloud services and license offerings, complex IT environments and associated third-party
infrastructure.
Our customer support organization offers Standard and Premium service levels. Premium is an upgraded level of
support that provides customers with priority response and update times and targeted fix Service Level Objectives for all case
priorities, providing proactive support and quarterly reviews of the customer’s mission-critical deployments.
Our Growth Strategy
We are focused on providing the right capabilities through our products and services to remove the barriers between
data and action. The key elements of our growth strategy are:
Cloud-first Platform and Solutions. We have reached a key milestone in our cloud transformation, where cloud
services represent the majority of our total cloud services and license bookings. Our cloud services customers have
accelerated their time to value and achieved lower total cost of ownership. Most importantly, the rate at which new
features and capabilities are delivered to and used by customers is accelerated when using cloud services offerings.
Given our customers’ success adopting our cloud services offerings, we will continue to invest heavily in differentiated
cloud services offerings delivered through a cloud-optimized go-to-market and support model. We will continue to
invest in our license offerings to enable both standalone consumption and hybrid Splunk deployments that span
customer on-premises and cloud environments. We expect our cloud services offerings will continue to be an
important source of growth for Splunk, our customers and our partners.
Expand the Splunk value proposition with broader and deeper capabilities. We will continue to focus our product
strategy and go-to-market approaches on our Security and Observability users and we will expand the Splunk platform
and Splunk Solutions offerings that serve them. We intend to deliver new and enhanced capabilities, as well as
services that provide faster time-to-value and easier adoption and expansion. We also plan to deliver new features
tailored to meet the specific needs of users, including more comprehensive data reach, more powerful analytics, and
AI/ML and automation capabilities. While we are focused on extending our industry analyst-recognized leadership
across Security and Observability, our customers benefit from even greater value when multiple organizations are
generating insight using the Splunk platform.
Global Expansion. We continue to invest in go-to-market, operations and infrastructure to deliver our services to
customers in targeted countries across multiple geographies. Splunk has had success in global expansion as evidenced
by our increased mix of revenues outside of the U.S. and we continue to see this as a significant growth opportunity.
Research and Development
We invest substantial resources in research and development to enhance our offerings, develop new end-market
specific solutions and apps, conduct software and quality assurance testing and improve our core technology. Our technical
staff monitors and tests our software on a regular basis, and we maintain a regular release process to refine, update, and enhance
our existing offerings. As we shift our focus to cloud services offerings we will make significant investments in a cloud-
optimized delivery model while continuing to invest in our license offerings, both for standalone consumption and for
deployment in hybrid environments.
Acquisitions and Investments
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FORM 10-K
We enhance and expand our offerings both through our own research and development efforts and through
acquisitions and investments. We have made a number of acquisitions in the past and will continue to evaluate acquisition
opportunities that can accelerate the delivery of new capabilities, entry into new market segments and our technical expertise.
Intellectual Property
We rely on patent, trademark, copyright and trade secret laws, confidentiality procedures, internal policies and
contractual provisions to protect our technology and intellectual property rights. The nature and extent of legal protection of our
intellectual property rights depends on, among other things, the type of intellectual property right and the jurisdiction in which
such right arises. We believe that our intellectual property rights are valuable and important to our business. We file trademark,
patent, and copyright applications to protect our intellectual property.
Generally, we retain ownership of software we develop. All software is licensed to users and primarily provided in
object code or as a cloud service pursuant to browser-wrap, embedded or on-line license or service terms, or signed customer
agreements. These agreements generally contain restrictions on duplication, disclosure, reverse engineering, transfer and license
circumvention.
We use open source software in our offerings and business, including as incorporated into software we receive from
third party commercial software vendors or technologies obtained through acquisitions, and expect to continue to use open
source software in the future. Additionally, we, including companies that we have acquired, have intentionally made certain
proprietary software available on an open source basis, both by contributing modifications back to existing open source
projects, and by making certain internally developed tools available pursuant to open source licenses, and we plan to continue
to do so in the future.
Sales and Marketing
Our sales and marketing organizations work together closely to expand market awareness, generate sales pipeline, and
cultivate customer relationships to drive revenue growth and enablement for adoption and customer success.
Sales
We sell our offerings directly through field sales, inside sales and indirectly through different routes to market with a
community of partners. These partners include leading, global service integrators, managed services partners, and resellers. We
gather prospects through a broad range of marketing campaigns, programs and events. Our sales development teams handle
lead qualifications. Large or complex transactions generally are handled by our globally distributed direct field sales teams. Our
sales engineers help define customer use cases, pre-sales qualification and evaluation.
Our field sales teams are organized geographically across the Americas, Europe, Middle East and Africa (“EMEA”)
and Asia Pacific (“APAC”). We also have a dedicated sales team focused on government customers, which includes United
States federal, state and local government entities.
In addition to acquiring new customers, our sales teams are responsible for securing renewals of existing contracts, as
well as increased adoption of our offerings by existing customers. To accomplish this, our field sales and customer success
teams work closely with our customers to ensure adoption and overall account health, which fosters expanded usage through
higher capacity or upgrades and additional use cases.
Marketing
We focus our marketing efforts on generating opportunities for our sales force and partners, increasing awareness of
the Splunk brand, driving viral adoption, and communicating product advantages and business benefits. We market our
offerings as a targeted solution for specific use cases and as an enterprise solution for a broad range of data and use cases. We
engage with existing and potential customers to provide community-based education and awareness and to promote expanded
use of our cloud services and license offerings within these customers. We engage business press, technology press, industry
analysts and influential voices to create awareness for Splunk in our target markets. We host a number of events across our
sales regions to engage with both existing customers and new prospects, as well as deliver product training. We host our annual
user conference, “.conf” and multiple partner forums as other ways to support the Splunk community to foster collaboration and
help our customers drive further business results from our offerings.
9
Partner Network
Our prioritization of cloud services offerings presents an opportunity for Splunk partners to enhance their existing
investments and future profitability by expanding their offerings to include services, support, and integration capabilities to
accelerate customers’ digital transformations. Splunk’s ideal partner creates cloud solutions focused on customer outcomes and
delivering effective, multi-dimensional solutions across industries and theaters. Partners can untap new markets, customers, and
data streams with new product innovations. While not every innovation will deliver the same results, we believe establishing a
culture of co-innovation that drives repeatability is foundational to making Splunk broadly available. As such, Splunk shifted
the focus to partners that deliver value through selling, advising, building, and managing services to drive higher partner and
customer adoption across our offerings. The new Splunk Partnerverse program anchors our partner strategy. Splunk
Partnerverse builds on Splunk’s global brand, expands our customer base through partners, and reinforces Splunk as both
cloud-ready and partner friendly. There are three program objectives:
• Serve all Splunk partners through one program that enables and promotes a cloud-first partner network
• Differentiate partners in the market through the Splunk Partnerverse badging system powered by enablement and
training paths to demonstrate proof-points in competency
• Showcase Splunk partners’ validated expertise and their Splunk-based offerings via the Solutions Catalog so that
customers can easily find the right partners
Splunk organized its partner strategy to align with all partner types with a focus on two partner-centric routes to
market:
Cloud service providers (“CSP”) Strong partnerships with CSPs (e.g. Amazon Web Services and Google Cloud) are
the cornerstone of our cloud focus. The online storefront known as a cloud marketplace offers customers an alternate
way to conduct transactions. Today our Marketplace business is driven primarily by customer demand and we will
meet our customers where and how they want to buy. We are coordinating product development, sales efforts, and
ongoing marketing efforts with these key partners to promote Splunk Cloud running on CSP infrastructure.
Global systems integrators and managed services providers These partners support planning, implementation, and
management of end-to-end business solutions tailored to specific customers, segments, and industry verticals. We
focus on full stack market solutions that partners manage to ensure our customers have access to the best expertise,
technology, and solutions for optimal performance, security, and technology operations. We are working with this
partner set to develop and deploy Splunk platform-based solutions to their customers, extending our overall market
reach and total addressable market. We further intend to establish select core business groups to increase our joint
selling opportunities, explore new solutions, and promote Splunk’s strength in Security and Observability.
Splunk Community Engagement
We engage with the community of Splunk users, including Splunk employees, partners, and customers, through a
variety of online and in-person forums to assist with Splunk skills development. Additionally, our engagement with users
empowers the development of Customer and Partner solutions, drives cross-pollination of experiences and best practices, and
provides feedback on current and planned future offerings and capabilities.
Our primary online forums include Splunk Answers, Splunk User Groups, and Splunk Ideas. In Splunk Answers, users
share best practices about how to build searches, create data visualizations, build implementations to address specific use-cases
and configure and deploy our cloud services and license offerings. While our product, support, engineering and professional
services teams participate in Splunk Answers, the majority of questions appearing on Splunk Answers are answered by other
Splunk users, including the SplunkTrust, a peer-nominated, MVP group of Splunk users. Splunk Ideas is a forum through
which the community can submit and vote on ideas for new product offerings and capabilities, providing a highly-refined set of
inputs to our product development efforts. We also maintain active communities on leading social internet platforms, including
Facebook, Twitter, LinkedIn and Slack.
Comprehensive enablement for Customer and Partner solutions developers is provided on our Splunk Dev portal.
Splunk Dev contains resources for building apps, integrations, and other Customer and Partner solutions content that extends
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FORM 10-K
the Splunk offerings to new data, insights, and use cases. Developers can sign up for free licenses or access to support both their
on-premises and cloud-native application needs. Additional resources made available through Splunk Dev include developer
guides, API references, tutorials, downloads, tools and examples to help developers efficiently create new solutions.
We also continue to support the growth of the Splunk Community, with local Splunk User Groups around the world
and a growing collection of Splunk-sponsored events, such as .conf, and regional/local events.
Customers
As of January 31, 2022 we have customers in more than 130 countries and our offerings have been deployed by over
95 of the Fortune 100 companies. We provide offerings to customers of varying sizes, including enterprises, educational
institutions and government entities. Our current customer base spans numerous industry verticals, including education,
financial services, government, healthcare/pharmaceuticals, industrials/manufacturing, media/entertainment, retail/ecommerce,
technology, and telecommunications. Please refer to Note 9 “Revenues, Accounts Receivables, Deferred Revenue and
Remaining Performance Obligations” of our accompanying Notes to Consolidated Financial Statements included elsewhere in
this Annual Report on Form 10-K for further discussion of our customers and concentration of revenue and receivables.
Competition
Our industry is evolving rapidly and is becoming increasingly competitive with an increasing number of vendors
competing across product areas. For example, security vendors are attempting to penetrate the observability industry,
observability competitors are targeting the security space, competitors across the security and observability siloes are expanding
their footprints in log management and machine data space, and CSPs are extending their native operations and security
capabilities across competing cloud environments. Additionally, a number of more domain-focused competitors continue to
target specific use cases within the application, IT and security domains in an attempt to drive rapid penetration.
These dynamics position us in competition with a variety of large CSPs and software vendors, as well as smaller
specialized companies, open source projects and custom development efforts, which provide solutions in the specific markets
we address. Our principal competitors include:
• Cloud monitoring and APM/Observability vendors;
• Monitoring, troubleshooting, security and analytics services offered (embedded or add-ons) by major public CSPs;
• Companies targeting the data analytics industry;
• Legacy security, systems management and other IT vendors; and
• IT departments that undertake custom software development efforts to analyze and manage their operations data
across their public and private cloud landscapes.
Environmental, Social, and Governance
Three high-level environmental, social and governance (ESG) objectives—advancing our Global Impact Strategy;
integrating ESG across the business; and innovating through our climate strategy—form the tactics for maturing and extending
our ESG work. Our board of directors works closely with management to oversee ESG, with each of our three board
committees dedicated to areas of the program associated with their respective areas of responsibility.
In fiscal 2022, we formally launched our four-pillared Global Impact Strategy that focuses on these areas: Social
Impact, Ethical and Inclusive Growth, Data Responsibility and Environmental Sustainability. By leveraging our technology,
expertise and talent, we strive to add unique value, drive collaboration, embrace our stakeholders and innovate for impact—four
principles that guide our Global Impact Strategy. Through our strategy, we aim to bridge the data divide to find actionable
solutions to some of the world’s most pressing challenges and to amplify positive social and environmental impacts in service
to humanity. We also published our inaugural Global Impact Report, shared our ESG Position Statement, and released our
Bridging the Data Divide: Mobilizing data and the tech ecosystem for everyone white paper and World Economic Forum blog
article. Additionally, we announced a suite of science-based climate targets and commitments that aim to achieve net zero
greenhouse gas emissions by 2050 as verified by the Science Based Target initiative (SBTi) in a manner consistent with a 1.5°C
11
ambition level, and we shared our plan to register a second suite of shorter-term five, ten, and fifteen year targets with the SBTi
by the end of fiscal 2023.
Human Capital
Human capital management is foundational to the Ethical and Inclusive Growth pillar of our Global Impact Strategy.
At the core of Splunk, we are a people-centric company. We believe that the best way to continue to deliver customer success
and the best products and services is to focus on attracting the most qualified candidates to join our team (based on skills,
knowledge and abilities). We also spend time and energy supporting, retaining and developing our high-performing and
innovative employees. Our commitment to diversity and inclusion is central to our core values. We strive to embrace each
person’s unique individual value and the communities that matter to them. This commitment is an integral part of our Diversity,
Equity & Inclusion (“DEI”) strategy. As of January 31, 2022, we employed over 7,000 employees, of which approximately
71% were in the United States and 29% were in our international locations.
We encourage you to visit our website for more detailed information regarding our human capital programs and
initiatives. Nothing on our website shall be deemed incorporated by reference into this Annual Report on Form 10-K.
Diversity, Equity and Inclusion (DEI)
A diverse and inclusive company helps us achieve our mission of bringing data to every question, decision and action
to drive positive outcomes for our company, our communities and each other. Our company-wide inclusiveness effort, A
Million Data Points, speaks powerfully to our holistic, multi-dimensional approach to diversity, illuminating cultural heritage,
intersectionality, experiences and all the unique qualities and talents that each employee possesses. We also cultivate an
inclusive culture through several employee resource groups (ERGs). Splunk is focused on the hiring, retention and
representation rates of women and individuals from underrepresented groups. We provide DEI education and offerings to
imbed inclusion and equity in our talent processes. We plan to conduct intersectional employee surveys that look at a
combination of factors that include underrepresented groups and gender to check for variances in employee experiences.
Furthermore, to oversee the impact DEI has within Splunk, we have a dedicated DEI at Splunk Council (DISCO) composed of
leaders from each function. This team is focused on influencing our DEI strategy, with specific areas of focus around hiring,
promotion, retention and attrition, as well as connecting DEI activities to a broader business-driven, results-oriented strategy.
We also have an Inclusion Council which plays a pivotal role in embedding engagement, equity, inclusion and belonging within
everyday practices, as well as in sharing best and next practices across the enterprise.
We work to help provide access to new careers in technology with skills development and training, promoting a new
generation of diverse talent through a global network of universities, community colleges and workforce partners like YearUp
and Hire Military. Splunk is regularly recognized as an employer of choice in the technology industry and within the various
locations that we operate. In fiscal 2022, Fortune named Splunk one of the 100 Best Companies to Work For, as well as one of
the top 10 Best Workplaces in Technology, and a Best Workplace for Parents and Millennials. In addition, we were named one
of the Best Places to Work for LGBTQ Equality for the second year in a row, after earning a score of 100 on the Human Rights
Campaign (HRC) Corporate Equality Index, and named by People magazine as one of the top Companies That Care. In fiscal
2021, we were included in Fortune’s Best Workplaces for Women, Parents and Millennials.
Additional information on our diversity and inclusion strategy, diversity metrics and programs can be found in the
Diversity Annual Report posted on our website.
Compensation, Benefits and Wellbeing
Splunk provides a comprehensive and competitive compensation and benefits package to attract, retain and engage the
talented employees that make our company successful. We provide employees with competitive base salaries, incentive
compensation and equity awards in the form of RSUs as well as the opportunity to participate in our Employee Stock Purchase
Plan, which allows employees to purchase Splunk stock at a discount.
Our benefits offerings are designed to meet the unique needs of our employees. We believe we provide competitive
benefits in each local market we operate in to help our employees care for themselves and their families. Common offerings are
health benefits, retirement benefits, fertility and family planning benefits, paid time off, holidays and leave benefits.
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FORM 10-K
In response to COVID-19, we offer a number of additional benefits to help our employees. These benefits include 30
days of paid time off that employees can use for any absence related to the pandemic or a natural disaster, four additional well-
being paid rest days and reimbursement for certain expenses related to remote working. In addition, we have a global mental
health offering through a third-party provider who gives our employees and their families access to counseling, personal
coaches and a variety of digital wellness resources.
Development
We believe in leadership and learning and invest in the development of all our employees. Our vision is to further
enhance our talent practices and leadership behaviors in order to empower more autonomous decision making, leverage data
insights, reinforce open communication and feedback, and set clear rules of engagement to systemically foster increased trust
and transparency. We are strongly committed to our responsibility of providing development and growth opportunities to our
employees through greater emphasis on internal mobility and fair and equitable talent practices. Employees take advantage of
live courses, leadership programs, online training, product training, sales training, technical training, mentor programs, team
building events, seminars, conferences, lectures, university programs, peer-to-peer and manager-led training and other learning
opportunities across the company.
Corporate Information
Our principal executive offices are located at 270 Brannan Street, San Francisco, California 94107, and our telephone
number is (415) 848-8400. We were incorporated in California in October 2003 and were reincorporated in Delaware in May
2006.
Our website is located at www.splunk.com and our investor relations website is located at http://investors.splunk.com.
The information posted on our website is not incorporated into this Annual Report on Form 10-K. Our Annual Report on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to
Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on our investor
relations website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
We webcast our earnings calls and certain events we participate in or host with members of the investment community
on our investor relations website. Additionally, we provide notifications of news or announcements regarding our financial
performance, including SEC filings, investor events, press and earnings releases, as part of our investor relations website. The
contents of these websites are not intended to be incorporated by reference into this report or in any other report or document
we file.
Item 1A. Risk Factors
Risk Factor Summary
Our business is subject to numerous risks and uncertainties, including those highlighted in Part I, Item 1A titled “Risk
Factors.” These risks include, but are not limited to, the following:
Factors Related to Our Business and Results of Operations
•
our business model transition from sales of licenses to the delivery of cloud services;
•
fluctuations in our operating results from period to period;
•
our organic and inorganic growth and the effectiveness of our controls, systems and procedures as we grow;
•
our history of losses and the prospect of profitability;
•
costly and continuous infrastructure investments required by our cloud services;
•
our ability to attract and retain leadership and key personnel, particularly within our industry;
•
expansion and integration related to past and future acquisitions;
•
our ability to obtain capital on acceptable terms to support our growth;
•
our ability to use our net operating losses and tax credits to offset future taxes; and
•
liability related to past or future sales and use, value added, withholding or similar taxes.
13
Factors Related to the Economy and the Markets in which We Operate
•
the impact of the COVID-19 pandemic on our business;
•
intense competition from large and small providers and vendors in the markets in which we operate;
•
market acceptance of our new and existing offerings and product enhancements;
•
economic and political conditions and uncertainty, both domestically and internationally, including those specific to
industries in which our customers participate; and
•
governmental export and import controls related to operation in international markets.
Factors Related to Customers and Sales
•
current and future customer demand, use case expansion and satisfaction;
•
our reliance on customer purchases, renewals, upgrades and expansions of term licenses, agreements for cloud services
and maintenance and support agreements;
•
our evolving pricing models and their impacts on our customers’ purchases, renewals, upgrades and expansions;
•
the length of time, expense and unpredictability associated with our sales;
•
our international sales and operations;
•
dependency on and challenges related to sales to federal, state, local and foreign governments; and
•
customer dissatisfaction, data loss or corruption arising from incorrect or improper implementation or use of our
products.
Factors Related to IT, Privacy and Data Security
•
actual or perceived security breaches or incidents or unauthorized access to our customers’ data, our data or our cloud
services;
•
interruptions or performance problems associated with our technology and infrastructure, and reliance on SaaS
technologies from third parties;
•
actual or perceived errors, failures or bugs in our offerings, including when new offerings, versions or updates are
released; and
•
legal requirements, contractual obligations and industry standards related to security, data protection and privacy.
Factors Related to Intellectual Property and Other Proprietary Rights
•
our ability to protect our trade secrets, trademarks, copyrights, patents, know-how, confidential information,
proprietary methods and technologies and other intellectual property and proprietary rights;
•
intellectual property rights claims by third parties that may be costly to defend, require us to pay significant damages
or limit our ability to use certain technologies;
•
maintenance, protection and enhancement of our brand; and
•
our use of “open source” software and related potential burdens, restrictions and litigation.
Factors Related to Reliance on Third Parties
•
our reliance on third-party providers of cloud infrastructure services to deliver our offerings to users on our platform;
•
our ability to maintain successful relationships with our partners, such as distributors and resellers, to license, provide
professional services and support our offerings;
•
our use of our community website, expansion of our developer network and support from third-party software
developers; and
•
third-party advice and information that may not be accurate that is provided to others utilizing our community website
and our products.
Factors Related to Our Securities
•
our debt servicing obligations;
•
our current and future indebtedness may limit our operating flexibility;
•
the dilutive impact of the conversion of the Notes;
•
the conditional conversion feature of the Notes;
•
the accounting method for convertible debt securities, such as the Notes, including accounting for liability and equity
components of convertible debt instruments that may be settled entirely or partially in cash;
•
counterparty risk related to the Capped Calls; and
•
the volatility of our common stock.
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FORM 10-K
General Factors
•
the impact of climate change on our business;
•
tax liabilities related to federal, state, local and foreign taxes;
•
changes in accounting pronouncements and other financial and nonfinancial reporting standards;
•
the strain on resources and diversion of management attention caused by the requirements of being a public company
and related complexities; and
•
anti-takeover provisions in our charter, bylaws and afforded to us under Delaware law that may have the effect of
delaying or preventing a change of control or changes in our management.
Risk Factors
Our operations and financial results are subject to various risks and uncertainties including those described below.
The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are
unaware of, or that we currently believe are not material, also may become important factors that affect us. If any of the
following risks or others not specified below materialize, our business, financial condition and results of operations could be
materially adversely affected. In that case, the trading price of our common stock could decline.
Factors Related to Our Business and Results of Operations
If we fail to successfully manage our business model transition, our operating results could be negatively
impacted.
Historically we generated a majority of our revenues from sales of licenses, whereby we generally recognize the
license fee portion of the arrangement upfront, assuming all revenue recognition criteria are satisfied. However, our revenue
mix has shifted from sales of licenses to the delivery of cloud services and we expect it will continue to shift in favor of cloud
services. Our transition to a predominately cloud services delivery model has impacted, and will continue to impact, the timing
of our recognition of revenue as an increasing percentage of our sales becomes recognized ratably, and will also impact our
operating margins as cloud services become a larger percentage of our sales. Our shift to a cloud services delivery model
depends on customer choice, and our ability to predict our revenue and margins in any particular period has been, and may
continue to be, limited. 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 an annual billings model than it has historically. Whether our business model transition will prove successful and
will accomplish our business and financial objectives is subject to numerous uncertainties, including but not limited to:
customer demand, renewal and expansion rates, our ability to further develop and scale infrastructure, tax and accounting
implications, pricing, and our costs. In addition, the metrics we use to gauge the status of our business model transition, and
evaluate and describe our business, will continue to evolve over the course of this transition as significant trends emerge. If we
do not successfully execute this transition, our business and future operating results could be adversely affected.
Our operating results may fluctuate significantly and our past operating results may not be a good indication of
future performance.
Our revenues, operating margins, cash flows and other operating results could vary significantly from period to period
as a result of various factors, many of which are outside of our control. Comparing our revenues and operating results on a
period-to-period basis may not be meaningful, and our past results should not be relied upon as an indication of our future
performance. For example, we generally recognize license revenues upfront and recognize revenues associated with our cloud
services offerings ratably over the term of the agreement. At the beginning of each period, we cannot predict the ratio of orders
with revenues that will be recognized upfront and those with revenues that will be recognized ratably that we will enter into
during the quarter, due to the fact that our customers have the ability to choose between a term license and cloud subscription
agreement. Our customers may choose shorter duration term licenses ahead of migrating to cloud subscriptions and may choose
shorter duration cloud subscriptions when transitioning from on-premises to cloud services. In addition, the size of our licenses
and orders varies greatly and can result in fluctuations in our revenues and operating results. A portion of revenue recognized in
any given quarter is a result of ratably recognized agreements entered into during previous quarters, including agreements for
our cloud services offerings and maintenance and support agreements. Consequently, a decline in business from such ratably
recognized agreements in any quarter may not be reflected in our revenue results for that quarter. Any such decline, however,
will negatively affect our revenues in future quarters. Accordingly, the effect of downturns in sales and market acceptance of
our offerings may not be fully reflected in our results of operations until future periods.
15
We may not be able to accurately predict our future revenues or results of operations. For example, although our shift
to a cloud services delivery model generates recurring revenue and cash flows that are expected to be more predictable over
time, we may not be able to accurately forecast our revenue, cash flows and other financial results in the near term due to a
number of variables, including the timing of our collection of cash, increased annual invoicing, revenue mix, our customers’
rate of adoption of our cloud services model as compared to term licenses, contract durations, the extent and continued impact
of the COVID-19 pandemic on our business and overall economic environment and the timing of revenue recognition. We base
our current and future expense levels on our operating plans and sales forecasts, and our operating costs are expected to be
relatively fixed in the short-term. As a result, we may not be able to reduce our costs sufficiently to compensate for an
unexpected shortfall in revenues, and even a small shortfall in revenues could disproportionately and adversely affect our
financial results for that quarter.
In addition to other risk factors described elsewhere in this “Risk Factors” section, factors that may cause our financial
results to fluctuate from quarter to quarter include:
• the impact of our business model transition on our revenue mix, which may impact our revenue, deferred revenue,
remaining performance obligations, gross margins and operating income;
• the timing of our sales during the quarter, particularly because a large portion of our sales occur toward the end of
the quarter;
• the loss or delay of a few large transactions;
• changes in the mix of our revenues from sales of licenses to the delivery of cloud services as well as the duration;
• the mix of revenues attributable to larger transactions as opposed to smaller transactions and the impact that a few
large transactions or a change in mix may have on our overall financial results as well as the overall average
selling price of our offerings;
• the renewal and usage rates of our customers;
• changes in the competitive dynamics of our market;
• changes in customers’ budgets and in the timing of their purchasing decisions and in the length of sales cycles;
• changes in our pricing models and practices or those of our competitors;
• changes to our invoicing practices;
• customers delaying purchasing decisions in anticipation of new offerings or software enhancements by us or our
competitors or for other reasons;
• customer acceptance of and willingness to pay for new versions of our offerings or new solutions for specific
product and end markets;
• our ability to successfully introduce and monetize new offerings and licensing and service models for our new
offerings;
• network outages or actual or perceived security breaches or incidents;
• the availability and performance of our cloud services offerings, including Splunk Cloud;
• our ability to control costs, including our operating expenses;
• changes in laws and regulations that impact our business;
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• general economic and political conditions and uncertainty, both domestically and internationally, as well as
economic and political conditions and uncertainty specifically affecting industries in which our customers
participate, including the impacts of the COVID-19 pandemic and the war in Ukraine, which can adversely affect
our customers’ ability or willingness to renew, upgrade, or expand their agreements, or delay prospective
customers’ purchasing decisions, or reduce the value of new contracts;
• the amount and timing of our stock-based compensation expenses;
• changes in accounting standards, particularly those related to revenue recognition and sales commissions;
• use of estimates, judgments and assumptions under current accounting standards;
• the timing of satisfying revenue recognition criteria;
• our ability to qualify and successfully compete for government contracts; and
• the collectability of receivables from customers and resellers, which may be hindered or delayed.
Many of these factors are outside our control, and the variability and unpredictability of such factors could result in our
failing to meet or exceed our financial expectations for a given period. We believe that quarter-to-quarter comparisons of our
revenues, operating results and cash flows may not necessarily be indicative of our future performance.
If we fail to effectively manage our growth, our business and operating results could be adversely affected.
Although our business has experienced significant growth, we cannot provide any assurance that our business will
continue to grow at the same rate or at all. We have experienced and expect to continue to experience growth in our headcount
and operations, including from acquisitions, which has placed and will continue to place significant demands on our
management and our operational and financial systems and infrastructure. As of January 31, 2022, approximately 33% of our
workforce had been employed by us for less than one year. As we continue to grow, we must effectively integrate, develop and
motivate a large number of new employees, while maintaining the effectiveness of our business execution and the beneficial
aspects of our corporate culture and values, the challenges of which may be exacerbated due to remote working conditions
associated with the ongoing COVID-19 pandemic. In particular, we intend to continue to make direct and substantial
investments to expand our research and development, sales and marketing, and general and administrative organizations, as
well as our international operations.
To effectively manage growth, we must continue to improve our operational, financial and management controls, and
our reporting systems and procedures by, among other things:
• improving our key business applications, processes and IT infrastructure to support our business needs and
appropriately documenting such systems and processes;
• enhancing information and communication systems to ensure that our employees and offices around the world are
well-coordinated and can effectively communicate with each other and our growing base of customers and
partners; and
• enhancing our internal controls to ensure timely and accurate reporting of all of our operations and financial
results.
These systems enhancements and improvements will require significant capital expenditures and allocation of valuable
management and employee resources. If we fail to implement these improvements effectively, our ability to manage our
expected growth, ensure uninterrupted operation of key business systems and comply with the rules and regulations that are
applicable to public reporting companies will be impaired. Additionally, if we do not effectively manage the growth of our
business and operations, the quality of our offerings could suffer, which could negatively affect our brand, financial results and
overall business.
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We have a history of losses, and we may not be profitable in the future.
We have incurred net losses in each year since our inception. As a result, we had an accumulated deficit of $3.81
billion at January 31, 2022. Because our products and offerings, as well as the market for these products and offerings, continue
to evolve, it is difficult for us to predict our future operating results. We expect our operating expenses to increase over the next
several years as we hire additional personnel, expand and improve the effectiveness of our distribution channels, improve the
performance and scalability of our technology architecture, and continue to develop features and functionality for our offerings.
In addition, as a public company, we have incurred and will continue to incur significant legal, accounting and other operating
expenses. If our revenues do not increase to offset these increases in our operating expenses, we may not be profitable in future
periods. Our historical revenue growth has been inconsistent and should not be considered indicative of our future performance,
particularly as our business model transitions. Further, in future periods, our revenue growth could slow, or our revenues could
decline for a number of reasons, including slowing demand for our offerings, increasing competition, a decrease in the growth
of our overall market, changes in our mix of revenues, or our failure, for any reason, to continue to capitalize on growth
opportunities. Any failure by us to achieve, sustain or increase profitability on a consistent basis could cause the value of our
common stock to decline.
Our cloud services, including Splunk Cloud, require costly and continual infrastructure investments, and if our
transition to a largely cloud-based business model is not successful, our business could be adversely affected.
A cloud-based model of software deployment is one in which a software provider typically licenses an application to
customers for use as a service on demand through web browser technologies. Delivering software under a cloud-based model
results in higher costs and expenses when compared to sales of licenses for similar functionality. In recent years, companies
have begun to expect that key software, such as customer relationship management and enterprise resource planning systems,
be provided through a cloud-based model. Many of our offerings are now made available in the cloud as well as on-premises.
Customers can sign up for our cloud services offerings and avoid the need to provision, deploy and manage internal
infrastructure. In order to deliver our cloud services offerings via a cloud-based deployment, we have made and will continue to
make capital investments and incur substantial costs to implement and maintain this alternative business model. In addition, as
we look to deliver new or different cloud services, we are making significant technology investments to deliver new capabilities
and advance our software to deliver cloud-native customer experiences. We expect that over time the percentage of our revenue
attributable to our cloud services offerings will continue to increase. If our cloud services, in particular Splunk Cloud, do not
garner widespread market adoption, or there is a reduction in demand for cloud services caused by a lack of customer
acceptance, technological challenges, weakening economic or political conditions, security or privacy concerns, inability to
properly manage such services, competing technologies and products, decreases in corporate spending or otherwise, our
financial results, business model and competitive position could suffer. If these investments do not yield the expected return, or
we are unable to decrease the cost of delivering our cloud services, our gross margins, overall financial results, business model
and competitive position could suffer. Transitioning to a largely cloud-based model also impacts the way we recognize
revenues, which may affect our operating results and could have an adverse effect on our business operations and financial
results.
Even with these investments and costs, some customers may desire on-premises deployment of our offerings. Our
cloud services offerings may raise concerns among customers, including concerns regarding changes to pricing models, service
availability, scalability, ability to use customer-developed apps, information security of a cloud service and hosted data, and
access to data while offline or once a subscription has expired. Market acceptance of our cloud services offerings can be
affected by a variety of factors, including but not limited to: security, reliability, performance, terms of service, support terms,
customer preference, community engagement, customer concerns with entrusting a third-party to store and manage their data,
public concerns regarding data privacy or data protection, and the enactment of restrictive laws or regulations in the affected
jurisdictions. If we or other providers of cloud services experience security incidents or breaches, loss of customer data,
disruptions in delivery of services, network outages, disruptions in availability of the internet, unauthorized access or other
problems, the market for cloud services as a whole, including Splunk Cloud, may be negatively affected. Moreover, sales of
Splunk Cloud and other cloud services could displace sales of licenses. Alternatively, subscriptions to Splunk Cloud and other
cloud services that exceed our expectations may unexpectedly increase our costs, lower our margins, lower our profits or
increase our losses and otherwise negatively affect our projected financial results.
If we are unable to attract and retain leadership and key personnel, our business could be adversely affected.
We depend on the continued contributions of our leadership, senior management and other key personnel, the loss of
whom could adversely affect our business. All of our executive officers and key employees are at-will employees, which means
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they may terminate their employment relationship with us at any time. We do not maintain a key-person life insurance policy on
any of our officers or other employees.
In November 2021, we announced that Douglas Merritt, our CEO and a member of our board of directors, would
depart the company and Graham Smith, our Chair of the Board, would serve as interim CEO until a permanent CEO was
appointed. In March 2022, we announced the appointment of Gary Steele as our new permanent CEO, effective April 11, 2022.
We also announced the departure of Teresa Carlson, President and Chief Growth Officer. These changes in our executive
management team, and any future changes, resulting from the hiring or departure of executive officers, could disrupt our
business, and could impact our ability to preserve our culture, which could negatively affect our ability to recruit and retain
personnel. If we are not successful in managing the transition of Mr. Steele into his new role, it could be viewed negatively by
our customers, employees or investors and could have an adverse impact on our business. Further, this change also increases
our dependency on other members of our executive management team who remain with us. As noted above, because our
executive officers are at-will employees, they could terminate their employment with us at any time and any such departure
could be particularly disruptive in light of the recent leadership transition. There is intense competition for executive
management and it may take an extended period of time to find a candidate that meets our requirements. Accordingly, the loss
of one or more of our executive officers or key employees could have an adverse effect on our business.
Our future success also depends on our ability to identify, attract and retain highly skilled technical, managerial,
finance and other personnel, particularly in our sales and marketing, research and development, general and administrative, and
professional service departments. In fiscal 2022, there has been a dramatic increase in workers leaving their positions
throughout our industry that is being referred to as the “great resignation,” and the market to build, retain and replace talent has
become even more highly competitive. We face intense competition for qualified individuals from numerous software and other
technology companies. In this period of the "great resignation," we have faced and may continue to face higher employee
turnover rates. We may incur significant costs to attract and retain these qualified individuals, and we may lose new employees
to our competitors or other technology companies before we realize the benefit of our investment in recruiting and training
them. As we move into new geographies, we will need to attract and recruit skilled personnel in those areas. Further, our
current and future office environments or flexible work policies may not meet the expectations of our employees or prospective
employees. If we are unable to attract and retain suitably qualified individuals who are capable of meeting our growing
technical, operational and managerial requirements, on a timely basis or at all, our business will be adversely affected.
We continue to be substantially dependent on our sales force to effectively execute our sales strategies to obtain new
customers and to drive additional use cases and adoption among our existing customers. We believe that there is significant
competition for sales personnel with the skills and technical knowledge that we require, and further, continuing or recurring
restrictions placed on recruiting, training and retention by the ongoing COVID-19 pandemic may further exacerbate our efforts
to expand our sales force. Our ability to achieve significant revenue growth will depend, in large part, on our success in
recruiting, training and retaining sufficient numbers of sales personnel to support our growth. In addition, as we continue to
grow rapidly, a large percentage of our sales force is new to the company and our offerings. As our sales strategies evolve and
offerings expand, additional training for new hires and our existing team may be required for our sales force to successfully
execute on those strategies. We periodically adjust our sales organization and our compensation programs as part of our efforts
to optimize our sales operations to grow revenue, drive incremental growth and support our business model transition. If we
have not structured our sales organization or compensation for our sales personnel in a way that properly supports our
company’s objectives, or if we fail to make changes in a timely fashion or do not effectively manage changes, our revenue
growth could be adversely affected. Our growth creates additional challenges and risks with respect to attracting, integrating
and retaining qualified employees, particularly sales personnel. If we are unable to hire and train sufficient numbers of effective
sales personnel, or the sales personnel are not successful in obtaining new customers or increasing sales to our existing
customer base, our business will be adversely affected.
In addition, we rely upon equity compensation to help attract, motivate and retain our employees, executive officers
and directors, and to align the interests of our employees, executive officers and directors with our stockholders. Our 2012
Equity Incentive Plan, as amended, expired in March 2022. In January 2022, our board of directors approved the 2022
Inducement Plan (the “Inducement Plan”) in accordance with Listing Rule 5635(c)(4) of the corporate governance rules of The
Nasdaq Stock Market LLC, which will become effective on April 1, 2022. The 2022 Plan provides for the grant of nonstatutory
stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance units and performance
shares to eligible employees in accordance with Listing Rule 5635(c)(4) of the corporate governance rules of The Nasdaq
Stock Market LLC. No awards may be made under the Inducement Plan to current employees or current or future non-
employee service providers. Failure to obtain stockholder approval of a new equity incentive plan with a sufficient number of
shares reserved for issuance under such plan, will place us at a competitive disadvantage and would significantly hinder our
ability to grant equity awards to existing employees and existing and new directors, which could impede our ability to attract,
motivate and retain employees, key executives or directors, harm our growth and adversely affect our operating results. The
number of shares covered by equity awards that we have issued or may issue under our 2012 Equity Incentive Plan, as
amended, prior to its termination or may issue under then Inducement Plan may alter the metrics, such as burn rate and
overhang, used to measure the dilutive impact of our equity compensation on our stockholders, which could make our
stockholders less likely to approve a new equity incentive plan with the number of shares we need to attract, motivate and retain
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current and new employees and non-employee service providers. Volatility or lack of performance in our stock price may also
affect our ability to attract and retain our key employees. Many of our senior management personnel and other key employees
have become, or will soon become, vested in a substantial amount of stock, restricted stock units or stock options. Employees
may be more likely to leave us if the shares they own or the shares underlying their vested restricted stock units or options have
significantly appreciated in value relative to the original purchase prices of the shares or the exercise prices of the options, or,
conversely, if the exercise prices of the options that they hold are significantly above the market price of our common stock. If
we are unable to retain our employees, or if we need to increase our compensation expenses to retain our employees, our
business, results of operations, financial condition and cash flows would be adversely affected.
We have in the past made and may in the future make acquisitions that could prove difficult to integrate and/or
adversely affect our business operations and financial results.
From time to time, we may make acquisitions that could be material to our business, results of operations, financial
condition and cash flows. For example, in May 2021 we acquired TruSTAR, a cloud-native security company providing a data-
centric intelligence platform. Our ability as an organization to successfully acquire and integrate technologies or businesses is
unproven. Acquisitions involve many risks, including the following:
• an acquisition may negatively affect our financial results because it may require us to incur charges or assume
substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may
expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not
generate sufficient financial return to offset additional costs and expenses related to the acquisition;
• we may incur potential goodwill impairment charges related to acquisitions;
• we may incur costs and experience potential difficulties associated with the requirement to test and assimilate the
internal control processes of the acquired business;
• we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, infrastructure,
products, personnel or operations of any company that we acquire, particularly if key personnel of the acquired
company decide not to work for us or if we are unable to retain key personnel;
• we may not realize the expected benefits of the acquisition;
• an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our
management;
• an acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due
to customer uncertainty about continuity and effectiveness of service from either company;
• relationships with existing customers, vendors and distributors as business partners may be impacted as a result of
us acquiring another company or business that competes with or otherwise is incompatible with those existing
relationships;
• our due diligence of an acquired company or business may not identify significant problems or liabilities, or we
may underestimate the costs and effects of identified liabilities;
• we may be exposed to litigation or other claims in connection with, or inheritance of claims or litigation risk as a
result of, an acquisition, including but not limited to claims from former employees, customers or other third
parties, which may differ from or be more significant than the risks our business faces;
• we may encounter difficulties in, or may be unable to, successfully sell any acquired products;
• an acquisition may involve the entry into geographic or business markets in which we have little or no prior
experience or where competitors have stronger market positions;
• an acquisition may require us to comply with additional laws and regulations, or to engage in substantial
remediation efforts to cause the acquired company to comply with applicable laws or regulations, or result in
liabilities resulting from the acquired company’s failure to comply with applicable laws or regulations;
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• our use of cash to pay for an acquisition would limit other potential uses for our cash;
• if we incur debt to fund such acquisition, such debt may subject us to material restrictions on our ability to
conduct our business as well as financial maintenance covenants; and
• to the extent that we issue a significant amount of equity securities in connection with future acquisitions, existing
stockholders may be diluted and earnings per share may decrease.
The occurrence of any of these risks could have a material adverse effect on our business operations and financial
results.
We may require additional capital to support business growth, and this capital might not be available on
acceptable terms, if at all.
We intend to continue to make investments to support our business growth and may require additional funds to
respond to business challenges, including the need to develop new features or enhance our offerings, improve our operating
infrastructure or acquire complementary businesses and technologies. Accordingly, we have engaged in, and may need to
engage in the future, in equity, equity-linked or debt financings to secure additional funds. A significant disruption of global
financial markets could further reduce our ability to access capital, which could negatively affect our ability to secure these
additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our existing
stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and
privileges superior to those of holders of our common stock. For example, if we elect to settle our conversion obligation under
the Notes (as defined below) in shares of our common stock or a combination of cash and shares of our common stock, the
issuance of such common stock may dilute the ownership interests of our stockholders and sales in the public market could
adversely affect prevailing market prices. Any debt financing that we may secure in the future could involve restrictive
covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult
for us to obtain additional capital and to pursue business opportunities, including potential acquisitions, or otherwise reduce
operational flexibility. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to
obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our
business growth and to respond to business challenges could be significantly impaired, and our business may be adversely
affected.
Our ability to use our net operating losses and tax credits to offset future taxable income and tax may be subject
to certain limitations.
Our unused net operating losses (“NOLs”) and tax credits generally carry forward to offset future taxable income and
tax. We record an asset for these future tax benefits, with our U.S. federal and state tax benefits subject to a full valuation
allowance. Federal, state and foreign taxing bodies often place limitations on NOLs and tax credit carryforward benefits. As a
result, we may not be able to utilize the NOL and tax credit assets reflected on our balance sheet, even if we attain profitability.
Section 382 of the United States Internal Revenue Code of 1986, as amended (the “Code”), is one such example of a limitation.
A corporation that undergoes an “ownership change” within the meaning of Section 382 of the Code is subject to limitations on
its ability to utilize its pre-change NOLs to offset future taxable income. Future changes in our stock ownership, some of which
may be outside of our control, could result in an ownership change under Section 382 of the Code. If our existing NOLs are
subject to limitations arising from an ownership change, our ability to utilize NOLs could be limited by Section 382 of the
Code, and a certain amount of our prior-year NOLs could expire without benefit. Changes in the law may also impact our
ability to use our NOL and tax credit carryforwards. For example, the legislation commonly referred to as the Tax Cuts and
Jobs Act of 2017, as modified by the Coronavirus Aid, Relief, and Economic Security Act, limited Federal NOL deductions to
80% of taxable income for NOLs incurred in tax years beginning after December 31, 2017. As a result of this limitation, we
may face a federal income tax liability even though we have unused NOL carry forwards.
Taxing authorities may successfully assert that we should have collected or in the future should collect sales and
use, value added, withholding, or similar taxes, and we could be subject to liability with respect to past or future
sales, which could adversely affect our financial results.
We do not collect sales and use, value added, withholding, and similar taxes in all jurisdictions in which we have sales,
based on our belief that such taxes are not applicable. Certain jurisdictions in which we do not collect such taxes may
successfully assert that such taxes are applicable or that our presence in such jurisdictions is sufficient to require us to collect
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taxes and that could result in tax assessments, penalties, interest and requirements to collect such taxes in the future. Such tax
assessments, penalties, interest or future requirements to charge taxes to our customers may adversely affect our financial
results.
Factors Related to the Economy and the Markets in which We Operate
The extent to which the ongoing COVID-19 pandemic will continue to impact our business, results of operations
and cash flows will depend on future developments, which are highly uncertain and difficult to predict.
The COVID-19 pandemic has in the past affected, and may continue to affect, how we and our customers and partners
are operating our businesses, and the duration and extent to which this may continue to impact our business, results of
operations and cash flows is uncertain. Related to this uncertainty, certain customers in the past have, and may again in the
future, decrease or delay their information technology spending, purchase shorter term contracts or request payment
concessions, any of which could result in decreased revenue and cash flows for us. We may experience customer losses,
including due to bankruptcy or our customers ceasing operations, which may result in an inability to collect receivables from
these customers. A decline in revenue or the collectability of our receivables would harm our business. In addition, the ongoing
COVID-19 pandemic has in the past disrupted, and may continue to disrupt, the operations of our customers and partners for an
indefinite period of time, including as a result of changing public health recommendations, travel restrictions and limitations,
the duration, spread, and severity and potential recurrence of the virus and its variants, as well as the efficacy of vaccines and
vaccine distribution, and the timing and trajectory of the economic recovery, all of which could negatively impact our business
and results of operations, including cash flows. While the global economy is reopening in various parts of the world, some
countries and locations are reinstating lockdowns and other restrictions that make a recovery difficult to predict.
The nature and extent of the continued impact of the ongoing COVID-19 pandemic on our customers and our
customers’ response to the ongoing COVID-19 pandemic is difficult to assess or predict, and we may be unable to accurately
forecast our revenues or financial results or other performance metrics, especially given that the near and long term impact of
the pandemic remains uncertain. Our actual results could be materially above or below our forecasts, which could disappoint
analysts and investors and/or cause our stock price to decline.
In light of the uncertain and fluid situation relating to the ongoing COVID-19 pandemic, and changing public health
recommendations, we continue to take precautionary measures intended to minimize the risk of the disease to our employees,
our customers, and the communities in which we operate, which could negatively impact our business. Although we continue to
monitor the situation and will adjust our current policies as more information and public health guidance become available,
including progress made through vaccinations and changes due to additional variants, precautionary measures that have been
adopted could negatively affect our customer success efforts, employee productivity and retention, sales and marketing efforts,
delay and lengthen our sales cycles, or create operational or other challenges, including as a result of continuing or recurring
travel restrictions and limitations, any of which could harm our business and results of operations. Additionally, we have begun
to reopen certain of our offices in a phased approach and to hold in-person or hybrid meetings and events, on a voluntary basis,
taking into consideration government restrictions and employee safety. But with many of our employees continuing to work
remotely, we are at increased risk of cyber security-related breaches. We continue to take steps to monitor and enhance the
security of our systems, IT infrastructure, networks, and data; however, the unprecedented scale of remote work may require
additional personnel and resources, which nevertheless cannot be guaranteed to fully safeguard all systems, IT infrastructure
networks, and data upon which we rely. The ongoing COVID-19 pandemic may also have long-term effects on the nature of the
office environment and remote working, which has and may continue to bring changes to our real estate lease assets.
It is not possible at this time to estimate the continued impact that the COVID-19 pandemic could have on our
business, as the impact will depend on future developments, including the duration, spread and severity of the virus and its
variants, which are highly uncertain and cannot be predicted. Furthermore, due to our shift to a cloud services delivery model,
the effect of the COVID-19 pandemic may not be fully reflected in our results of operations until future periods.
In September 2021, the Biden Administration announced its Path Out of the Pandemic: COVID-19 Action Plan. As
part of that plan, the President signed an Executive Order, and related guidance was published that, together, require certain
COVID-19 precautions for federal contractors and their subcontractors, including mandatory COVID-19 vaccines for
employees (subject to medical and religious exemptions). In October 2021, we announced to our U.S. employees that we would
require all of our U.S. employees (subject to the exemptions described above) to be vaccinated by the Biden Administration’s
deadline. The Biden Administration’s vaccination requirement is currently stayed across the country as a result of preliminary
injunctions that have been entered into by a number of federal courts and our mandatory vaccine policy is similarly currently
paused. We continue to evaluate the potential impact of this Executive Order on our business. If the federal vaccine mandate
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FORM 10-K
moves forward, we may experience constraints on our workforce and the workforce of our supply chain, which could require us
to adapt our operations, and could have an adverse effect on our business.
We face intense competition in our markets, and we may be unable to compete effectively against our current
and future competitors.
Although our offerings target the new and emerging market for cloud and software services that deliver real-time
business insights from data, we compete against a variety of large cloud service providers (“CSP”) and software vendors, as
well as smaller specialized companies, open source projects and custom development efforts, which provide solutions in the
specific markets we address. Our principal competitors include:
• Cloud monitoring and APM/Observability vendors;
• Monitoring, troubleshooting, security and analytics services offered (embedded or add-ons) by major public CSPs;
• Legacy security, systems management and other IT vendors; and
• IT departments that undertake custom software development efforts to analyze and manage their operations data
across their public and private cloud landscapes.
The principal competitive factors in our markets include features, performance and support, scalability and flexibility,
ease of deployment and use, total cost of ownership and time to value. Some of our current and potential competitors have
advantages over us, such as longer operating histories, significantly greater financial, technical, marketing or other resources,
stronger brand and business user recognition, larger intellectual property portfolios, broader global distribution networks and
presence and more developed networks of partners and skilled users. Further, competitors may be able to offer products or
functionality similar to ours at a more attractive price than we can, such as by integrating or bundling their software products
with their other product offerings. In addition, our industry is evolving rapidly and is becoming increasingly competitive.
Larger and more established companies may focus on delivering real-time business insights from data and could directly
compete with us. For example, companies may commercialize open source software in a manner that competes with our
offerings or causes potential customers to believe that such products and our offerings perform the same function. If companies
move a greater proportion of their data and computational needs to the cloud, new competitors may emerge that offer services
comparable to ours or that are better suited for cloud-based data, and the demand for our offerings may decrease. Smaller
companies could also launch new products and services that we do not offer and that could gain market acceptance quickly.
In recent years, there have been significant acquisitions and consolidation by and among our competitors. We
anticipate this trend of consolidation will continue, which will present heightened competitive challenges to our business. In
particular, consolidation in our industry increases the likelihood of our competitors offering bundled or integrated products, and
we believe that it may increase the competitive pressures we face with respect to our offerings. If we are unable to differentiate
our offerings from the integrated or bundled products of our competitors, such as by offering enhanced functionality,
performance or value, we may see decreased demand for those offerings, which would adversely affect our business operations,
financial results and growth prospects. Further, it is possible that continued industry consolidation may impact customers’
perceptions of the viability of smaller or even medium-sized software firms and consequently their willingness to use software
solutions from such firms. Similarly, if customers seek to concentrate their software license purchases in the product portfolios
of a few large providers, we may be at a competitive disadvantage regardless of the performance and features of our offerings.
We believe that in order to remain competitive at the large enterprise level, we will need to develop and expand relationships
with CSPs, global system integrators and managed service provides that provide a broad range of products and services. If we
are unable to anticipate competitive challenges or compete effectively, our business operations and financial results could be
materially and adversely affected.
If our new and existing offerings and product enhancements do not achieve sufficient market acceptance, our
financial results and competitive position will suffer.
Our business substantially depends on, and we expect our business to continue to substantially depend on, sales of
licenses, maintenance and services related to Splunk Enterprise and sales of subscriptions related to Splunk Cloud and other
cloud-based offerings. As such, the market acceptance of these offerings is critical to our continued success. Demand for these
offerings is affected by a number of factors beyond our control, including continued market acceptance of these products by
referenceable accounts for existing and new use cases, the timing of development and release of new products by our
competitors, technological change, and growth or contraction in our market and the economy in general. If we are unable to
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continue to meet customer demands or to achieve more widespread market acceptance of these platform products, our business
operations, financial results and growth prospects will be materially and adversely affected.
We spend substantial amounts of time and money to research and develop or acquire new offerings and enhanced
versions of our existing offerings to incorporate additional features, improve functionality or other enhancements in order to
meet our customers’ rapidly evolving demands. In addition, we continue to invest in solutions that can be deployed on top of
our platform to target specific use cases and to cultivate our community of application developers and users. When we develop
a new or enhanced version of an existing offering, we typically incur expenses and expend resources upfront to market,
promote and sell the new offering. Therefore, when we develop or acquire new or enhanced offerings, their introduction must
achieve high levels of market acceptance in order to justify the amount of our investment in developing and bringing them to
market. If our recent product expansions and offerings do not garner widespread market adoption and implementation, our
financial results and competitive position could suffer.
Further, we may make changes to our offerings that our customers do not like, find useful or agree with. We may also
discontinue certain features, begin to charge for certain features that are currently free or increase fees for any of our features or
usage of our offerings.
Our new and existing offerings or product enhancements and changes to our existing offerings could fail to attain
sufficient market acceptance for many reasons, including:
• our failure to predict market demand accurately in terms of product functionality and to supply offerings that meet
this demand in a timely fashion;
• real or perceived defects, errors or failures;
• negative publicity about their performance or effectiveness;
• delays in releasing to the market our new offerings or enhancements to our existing offerings to the market;
• release of cloud-based offerings that do not, or are perceived to not, fully meet customers’ security and
compliance needs;
• introduction or anticipated introduction of competing products by our competitors;
• inability to scale and perform to meet customer demands;
• poor business conditions for our end-customers, causing them to delay IT purchases; and
• reluctance of customers to purchase products incorporating open source software.
If our new or existing offerings or enhancements and changes do not achieve adequate acceptance in the market, our
competitive position will be impaired, and our revenue, business and financial results will be negatively impacted. The adverse
effect on our financial results may be particularly acute because of the significant research, development, marketing, sales and
other expenses we will have incurred in connection with the new offerings or enhancements.
Prolonged economic uncertainties or downturns could materially adversely affect our business.
Prolonged economic uncertainties or downturns could adversely affect our business operations or financial results.
Negative conditions in the general economy in either the United States or abroad, including conditions resulting from financial
and credit market fluctuations, changes in economic policy, inflation rate fluctuations, trade uncertainty, including changes in
tariffs, sanctions, international treaties, and other trade restrictions, the occurrence of a natural disaster, outbreaks of pandemic
diseases such as COVID-19, political unrest and social strife, armed conflicts, such as the war in Ukraine, and an act of
terrorism on the United States, Europe, Asia Pacific or elsewhere, have caused and could continue to cause a decrease in
corporate spending on enterprise software in general and negatively affect the rate of growth of our business.
These conditions, including supply chain disruptions due to the war in Ukraine and any indirect effects, could make it
extremely difficult for our customers and us to forecast and plan future business activities accurately, and they could cause our
customers to reevaluate their decision to purchase our offerings, which could delay and lengthen our sales cycles or result in
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cancellations of planned purchases. Furthermore, during challenging economic times our customers may face issues in gaining
timely access to sufficient credit, which could result in an impairment of their ability to make timely payments to us. If that
were to occur, we may be required to increase our allowance for doubtful accounts, which would adversely affect our financial
results.
We have a significant number of customers in the business services, energy, financial services, healthcare and
pharmaceuticals, technology, manufacturing, media and entertainment, online services, retail, telecommunications and travel
and transportation industries. A substantial downturn in any of these industries may cause firms to react to worsening
conditions by reducing their capital expenditures in general or by specifically reducing their spending on information
technology. Customers in these industries may delay or cancel information technology projects or seek to lower their costs by
renegotiating vendor contracts. For example, the continued impact of the ongoing COVID-19 pandemic on the current
economic environment has caused, and may in the future cause, customers to request concessions including extended payment
terms or better pricing. To the extent purchases of our offerings are perceived by customers and potential customers to be
discretionary, our revenues may be disproportionately affected by delays or reductions in general information technology
spending. Also, customers may choose to develop in-house software as an alternative to using our offerings. Moreover,
competitors may respond to market conditions by lowering prices and attempting to lure away our customers. In addition, the
increased pace of consolidation in certain industries may result in reduced overall spending on our offerings.
We cannot predict the timing, strength or duration of any economic slowdown, instability or recovery, generally or
within any particular industry or geography. If the economic conditions of the general economy or industries in which we
operate worsen from present levels, our business operations and financial results could be adversely affected.
We are subject to governmental export and import controls that could impair our ability to compete in
international markets or subject us to liability if we violate the controls.
Our offerings are subject to United States export controls, and we incorporate encryption technology into certain of our
offerings. These encryption offerings and the underlying technology may be exported outside of the United States only with the
required export authorizations, including by license.
Furthermore, our activities are subject to the U.S. economic sanctions laws and regulations that prohibit the shipment
of certain products and services without the required export authorizations or export to countries, governments, and persons
targeted by U.S. sanctions. While we take precautions to prevent our offerings from being exported in violation of these laws,
including obtaining authorizations for our encryption offerings where appropriate, implementing IP address blocking and
screenings against U.S. Government and international lists of restricted and prohibited persons, we cannot guarantee that the
precautions we take will prevent violations of export control and sanctions laws. For example, downloads of our free software
may have in the past been made in potential violation of the export control and economic sanctions laws.
We also note that if our partners fail to obtain appropriate import, export or re-export licenses or permits, we may also
be adversely affected, through reputational harm as well as other negative consequences including government investigations
and penalties. We presently incorporate export control compliance requirements in our partner and customer agreements.
Complying with export control and sanctions regulations for a particular sale may be time-consuming and may result in the
delay or loss of sales opportunities.
Violations of U.S. sanctions or export control laws can result in fines or penalties, including civil penalties of up to
$300,000 or twice the value of the transaction, whichever is greater, per violation. In the event of criminal knowing and willful
violations of these laws, fines of up to $1 million per violation and possible incarceration for responsible employees and
managers could be imposed.
From time to time, as part of our acquisition activity, we have discovered a limited number of instances where certain
activity raised concerns about potential violations of U.S. sanctions or export control laws. For example, we previously
discovered that the SaaS platform or product of an acquired company was accessed (or attempted to be accessed) from IP
addresses potentially located in embargoed countries. As a result, we have submitted and may, in the future, submit voluntary
disclosures with the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) to alert the agency to these types
of potential violations. If we (including the companies we acquire) are found to be in violation of U.S. economic sanctions or
export control laws, it could result in fines and penalties. We may also be adversely affected through other penalties,
reputational harm, loss of access to certain markets or otherwise.
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Also, various countries, in addition to the United States, regulate the import and export of certain encryption and other
technology, including import and export permitting and licensing requirements, and have enacted laws that could limit our
ability to distribute our offerings or could limit our customers’ ability to implement our offerings in those countries. Changes in
our offerings or future changes in export and import regulations may create delays in the introduction of our offerings in
international markets, prevent our customers with international operations from deploying our offerings globally or, in some
cases, prevent the export or import of our offerings to certain countries, governments, or persons altogether. Any change in
export or import regulations, economic sanctions or related legislation, including as a result of geopolitical developments
following the war in Ukraine, or change in the countries, governments, persons or technologies targeted by such regulations,
could result in decreased use of our offerings by, or in our decreased ability to export or sell our offerings to, existing or
potential customers with international operations. Any decreased use of our offerings or limitation on our ability to export or
sell our offerings would likely adversely affect our business operations and financial results.
Factors Related to Customers and Sales
If customers do not expand their use of our offerings beyond the current predominant use cases, our ability to
grow our business and operating results may be adversely affected.
Most of our customers currently use our offerings to support application management, IT operations, security and
compliance functions. Our ability to grow our business depends in part on our ability to help enable current and future
customers to increase their use of our offerings for their existing use cases and expand their use of our offerings to additional
use cases. If we fail to achieve market acceptance of our offerings for these applications, if we fail to predict demand for
product functionality or respond to such demand in a timely fashion, if our customers are not satisfied with our offerings, or if a
competitor establishes a more widely adopted solution for these applications, our ability to grow our business and financial
results will be adversely affected.
Our business and growth depend substantially on customers entering into, renewing, upgrading and expanding
their term licenses, agreements for cloud services and maintenance and support agreements with us. Any decline
in our customer renewals, upgrades or expansions could adversely affect our future operating results.
We typically enter into agreements for our license offerings, cloud services, and maintenance and support services,
which customers have discretion to renew or terminate at the end of the initial term. In order for us to improve our operating
results, it is important that new customers enter into renewable agreements, and our existing customers renew, upgrade and
expand their agreements when the initial contract term expires. Our customers have no obligation to renew, upgrade or expand
their agreements with us after the terms have expired. Our customers’ renewal, upgrade and expansion rates may decline or
fluctuate as a result of a number of factors, including their satisfaction or dissatisfaction with our offerings, our pricing, the
effects of general economic conditions, competitive offerings or alterations or reductions in our customers’ spending levels. For
example, the continued impact of the ongoing COVID-19 pandemic on the current economic environment has caused, and may
in the future cause, customers to request concessions such as extended payment terms or better pricing or be unwilling to
commit to long-term contracts. If our customers do not renew, upgrade or expand their agreements with us or renew on terms
less favorable to us, our revenues may decline.
We employ multiple and evolving pricing models, which subject us to various pricing and licensing challenges
that could make it difficult for us to derive value from our customers and may adversely affect our operating
results.
We employ multiple and evolving pricing models for our offerings. For example, we generally charge our customers
for their use of Splunk Enterprise based on either the estimated daily data indexing capacity or compute power consumed to
support our customers’ workload. We are seeing an increasing number of customers shift to workload-based pricing. In
addition, Splunk Cloud is generally priced based on either the volume of data indexed per day including a fixed amount of data
storage, or purchased infrastructure, data storage and bandwidth our customers require to support the underlying workload,
while Splunk SOAR and Splunk On-Call are priced by the number of seats, or events used for the products and suites are
subscribed based on the number of hosts. We offer term licensing options for license offerings and have some remaining
perpetual licenses with existing customers, which each have different payment schedules, and depending on the mix of such
licenses and cloud subscriptions, our revenues or deferred revenues could be adversely affected. Our pricing models may
ultimately result in a higher total cost to our customers generally as data volumes or compute usage increase over time, or may
cause our customers to limit or decrease usage in order to stay within the limits of their existing licenses or cloud subscriptions,
or lower their costs, making it more difficult for us to compete in our markets or negatively impacting our financial results. As
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the amount of data and analytic needs within our customers’ organizations grow, we face downward pressure from our
customers regarding our pricing, which could adversely affect our revenues and operating margins. In addition, our pricing
models may allow competitors with different pricing models to attract customers unfamiliar or uncomfortable with our pricing
models, which would cause us to lose business or modify our pricing models, both of which could adversely affect our revenues
and operating margins. We have introduced and expect to continue to introduce variations to our pricing models, including but
not limited to, predictive pricing programs, workload-based pricing, entity-based pricing, “rapid adoption” packages and other
pricing programs that provide broader usage and cost predictability as well as tiered pricing based on deployment models, data
source types, compute and storage units and customer environments. Any change in pricing models bears inherent risks as it
may provide customers a choice to go for the lower-cost option, therefore putting renewal and customer lifetime value at risk.
Although we believe that these pricing models and variations to these models will drive net new customers and increase
customer adoption, it is possible that they will not and may potentially cause customers to decline to purchase or renew licenses
or cloud subscriptions, or confuse customers and reduce their lifetime value, which could negatively impact our revenue,
business and financial results.
Furthermore, while our offerings can measure and limit customer usage for the most part, we removed metered license
enforcement via our software under certain circumstances, and in other circumstances, such limitations may be improperly
circumvented or otherwise bypassed by users. For those offerings where we are not fully able to track usage, customers may be
consuming over their licensed capacity, which may reduce our revenue opportunities. Similarly, we provide our customers with
an encrypted license key for enabling their use of our offerings. There is no guarantee that users of our offerings will abide by
the terms of these license limitations or encrypted license keys, and if they do not, we may not be able to capture the full value
for the use of our offerings. For example, our enterprise license is generally meant for our customers’ internal use only. If our
internal use customers improperly make our offerings available to their customers or other third parties, for example, through a
cloud or managed service offering not authorized by us, it may displace our end user sales. Additionally, if an internal use
customer that has received a volume discount from us improperly makes available our offerings to its end customers, we may
experience price erosion and be unable to capture the appropriate value from those end customers.
Our sales cycle is long and unpredictable, particularly with respect to large customers, and our sales efforts
require considerable time and expense.
Our operating results may fluctuate, in part, because of the resource intensive nature of our sales efforts, the length and
variability of the sales cycle of our offerings and the short-term difficulty in adjusting our operating expenses. Our operating
results depend in part on sales to large customers. The length of our sales cycle, from initial evaluation to delivery of and
payment for the software license, varies substantially from customer to customer. This variation is due to numerous factors,
including in the expansion of our offerings and new pricing models, as well as the potential for different buying centers for the
same offering. In addition, Splunk Cloud has generated interest from our customers who are also considering purchasing and
deploying Splunk Enterprise on-premises. In some cases, our customers may wish to consider a combination of these offerings,
potentially further slowing our sales cycle. Our sales cycle can extend to more than a year for certain customers, particularly
large customers. It is difficult to predict exactly when, or even if, an existing customer will convert from a perpetual license to
term license or to cloud services, we will make a sale with a potential customer, or a user of a trial version of one of our
offerings will upgrade to the paid version of that offering. As a result, large individual sales have, in some cases, occurred in
quarters subsequent to those we anticipated, or have not occurred at all. The loss or delay of one or more large transactions in a
quarter could impact our operating results for that quarter and any future quarters for which revenues from that transaction are
lost or delayed. As a result of these factors, it is difficult for us to forecast our revenues accurately in any quarter. Because a
substantial portion of our expenses are relatively fixed in the short-term (subject to rising fixed costs in the longer term as
discussed above), our operating results will suffer if revenues fall below our expectations in a particular quarter.
Our international sales and operations subject us to additional risks and challenges that can adversely affect our
business operations and financial results.
During fiscal 2022, we derived approximately 31% of our total revenues from customers outside the United States, and
we are continuing to expand our international operations as part of our growth strategy. This strategy requires us to recruit and
retain qualified technical and managerial employees, manage multiple remote locations performing complex software
development projects and ensure intellectual property protection outside of the U.S. Additionally, we currently have sales
personnel and sales and support operations in the United States and certain countries around the world. To the extent that we
experience difficulties in recruiting, training, managing, or retaining non-U.S. staff, and specifically sales management and
sales personnel staff, we may experience difficulties in sales productivity in, or market penetration of, non-U.S. markets.
Additionally, our sales organization outside the United States is substantially smaller than our sales organization in the United
States, and we rely heavily on our indirect sales channel for non-U.S. sales. Our ability to convince customers to expand their
27
use of our offerings or renew their agreements with us is directly correlated to our direct engagement with the customer. To the
extent we are unable to engage with non-U.S. customers effectively with our limited sales force, professional services and
support capacity or our indirect sales model, we may be unable to grow sales to new or existing customers to the same degree
we have experienced in the United States.
Our international operations subject us to a variety of risks and challenges, including:
• increased management, travel, infrastructure and legal compliance costs associated with having multiple
international operations;
• reliance on partners, which may have different incentives or may sell competing products, as well as different
approaches with respect to compliance with laws and regulations, business practices and other day-to-day
activities;
• longer payment cycles and difficulties in collecting accounts receivable or satisfying revenue recognition criteria,
especially in emerging markets;
• increased financial accounting and reporting burdens and complexities;
• general economic conditions in each country or region;
• political uncertainty and international conflicts around the world;
• compliance with multiple and changing foreign laws and regulations, including those governing employment, tax,
privacy and data protection, data transfer, data security, data residency, and industry-specific matters, and the risks
and costs of non-compliance with such laws and regulations;
• compliance with laws and regulations for foreign operations, including the United States Foreign Corrupt
Practices Act, the United Kingdom Bribery Act, import and export control laws, tariffs, trade barriers, economic
sanctions and other regulatory or contractual limitations on our ability to sell our offerings in certain foreign
markets, and the risks and costs of non-compliance, including as a result of any changes in trade relations,
sanctioned parties or other restrictions;
• heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales
arrangements that may impact financial results and result in restatements of financial statements and irregularities
in financial statements;
• fluctuations in currency exchange rates and the related effect on our financial results;
• difficulties in repatriating or transferring funds from, or converting currencies in, certain countries;
• the need for localized software and licensing programs;
• reduced protection for intellectual property rights in some countries and practical difficulties of enforcing
intellectual property and contract rights abroad; and
• natural disasters, diseases and pandemics, such as COVID-19, that may disproportionately affect areas in which
we do business.
Recent geopolitical events may impact our operations and financial results. For example in December 2020, following
a 2016 referendum in which voters in the United Kingdom approved an exit from the European Union (the “EU”) (often
referred to as “Brexit”), the United Kingdom left the EU. The political and economic effects of Brexit are still uncertain and
will depend, in part, on the Trade and Cooperation Agreement between the European Union and the European Atomic Energy
Community, and the United Kingdom of Great Britain and Northern Ireland, signed on December 30, 2020. The departure of
the United Kingdom from the EU may cause disruption to our business, including increased friction in our ability to deliver
services across the European Economic Area (“EEA”) and Switzerland, difficulty in recruiting EU nationals in the United
Kingdom due to new immigration requirements, and increased complexities in our relationships with existing and future
customers, suppliers, and employees. For example, most of our sales to customers in the EU are transacted through our
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FORM 10-K
subsidiary incorporated in the United Kingdom and at this time, we are unable to determine the long-term effects of this
arrangement. The economic and legal uncertainty caused by Brexit in the region and globally could also adversely affect the
tax, operational, legal and regulatory regimes to which our business is subject in ways we do not yet anticipate.
Any of these risks could adversely affect our international operations, reduce our international revenues or increase our
operating costs, adversely affecting our business operations, financial results and growth prospects.
In addition, compliance with laws and regulations applicable to our international operations increases our cost of doing
business in foreign jurisdictions. We may be unable to keep current with changes in foreign government requirements and laws
as they change from time to time. Failure to comply with these regulations could have adverse effects on our business. In many
foreign countries, it is common for others to engage in business practices that are prohibited by our internal policies and
procedures or United States regulations applicable to us. In addition, although we have implemented policies and procedures
designed to ensure compliance with these laws and policies, there can be no assurance that all of our employees, contractors,
partners and agents will comply with these laws and policies. Violations of laws or key control policies by our employees,
contractors, partners or agents could result in delays in revenue recognition, financial reporting misstatements, fines, penalties,
or the prohibition of the importation or exportation of our offerings and could have a material adverse effect on our business
operations and financial results.
Our sales to public sector customers are subject to a number of additional challenges and risks.
We derive a portion of our revenues from contracts with U.S. federal, state and local and foreign governments, and we
believe that the success and growth of our business will continue to depend on our successful procurement of government
contracts. For our sales to these public sector customers, we must comply with laws and regulations relating to the formation,
administration and performance of contracts, which affect how our partners and how we do business with governmental
agencies. These laws and regulations provide public sector customers rights, many of which are not typically found in
commercial contracts. Such rights may include price protection, the accuracy of information provided to the government,
compliance with procurement integrity and government ethics, compliance with specified product certifications restrictions and
pre-conditions for access to controlled or classified information, compliance with supply chain requirements, labor regulations
and supplier diversity policies, and other terms that are particular to public sector customers. These laws and regulations may
impose added costs on our business, and failure to comply with these or other applicable regulations and requirements,
including non-compliance in the past, could lead to bid protests, contract cure actions, contract actions grounded in fraud,
claims for damages or other relief, penalties, termination of contracts, loss of exclusive rights in our intellectual property,
substantial audit or re-procurement costs and temporary suspension or permanent debarment from government contracting. Any
such damages, penalties, disruptions or limitations in our ability to do business with the public sector could have a material
adverse effect on our business operations and financial results.
In October 2019, Splunk Cloud received authorization under the U.S. Federal Risk and Authorization Management
Program (“FedRAMP”) that allows U.S. federal government agencies and contractors to have greater integration with our
platform if and when they transition to cloud-based computing. Splunk achieved accreditation against the Protected Level under
the Australian Information Security Registered Assessors Program (IRAP) in June 2021. In September 2021, the U.S. Defense
Information Systems Agency (DISA) granted Splunk Cloud U.S. Department of Defense (DoD) Impact Level 5 (IL5), which
allows U.S. government agencies to use our platform for high sensitivity Controlled Unclassified Information (CUI).
Maintaining FedRAMP, IRAP, IL5, and other such restricted cloud environments places an increased compliance burden upon
us, which may increase our internal costs to provide services to government agencies. If we cannot adequately comply with
these compliance requirements and the complexities of maintaining multiple programs, our growth could be adversely
impacted, and we could incur significant liability and our reputation and business could be harmed.
Factors that could impede our ability to maintain or increase the amount of revenues derived from government
contracts, include:
• changes in fiscal or contracting policies;
• decreases in available government funding;
• ability to adapt to public sector budgetary cycles and funding authorizations, with funding reductions or delays
having an adverse impact on public sector demand for our products;
• changes in government procurement programs or applicable requirements;
29
• changes in government sanctions programs and related policies;
• the adoption of new laws or regulations or changes to existing laws or regulations;
• noncompliance with laws, contract provisions or government procurement or other applicable regulations, or the
perception that any such noncompliance has occurred or is likely;
• changes in the political environment and budgeting, including before or after a change of leadership within the
government administration, and any resulting uncertainty or changes in policy or priorities and resultant funding;
• ability to obtain or maintain the facility clearance required to perform on classified contracts for government
customers, or to obtain or maintain security clearances for our employees;
• changes to government certification requirements or approved product lists;
• ability to achieve or maintain one or more government certifications, including our existing FedRAMP and IL5
authorizations;
• ability to maintain products on key government acquisition contracts;
• an extended government shutdown or other potential delays or changes in the government appropriations or other
funding authorization processes including as a result of events such as war, incidents of terrorism, natural
disasters, and public health concerns or epidemics, such as the ongoing COVID-19 pandemic;
• changes in the duration of, and product expansion and offerings in, our contracts and subcontracts with
government and prime contractor customers;
• delays in the payment of our invoices by government or prime contractor payment offices; and
• bid protests by competitors
The occurrence of any of the foregoing could cause governments and governmental agencies to delay or refrain from
purchasing licenses of our offerings in the future or otherwise have an adverse effect on our business operations and financial
results. To the extent that we become more reliant on contracts with government entities, including foreign government entities,
in the future, our exposure to such risks and challenges could increase, which in turn could adversely impact our business.
In May 2021, the Biden Administration issued an Executive Order requiring federal agencies to implement additional
information technology security measures, including, among other things, requiring agencies to adopt multifactor authentication
and encryption for data at rest and in transit to the maximum extent consistent with federal records laws and other applicable
laws. The Executive Order will lead to the development of secure software development practices and/or criteria for a consumer
software labeling program, the criteria which will reflect a baseline level of secure practices, for software that is developed and
sold to the U.S. federal government. Software developers will be required to provide visibility into their software and make
security data publicly available. Due to this Executive Order, federal agencies may require us to modify our cybersecurity
practices and policies, thereby increasing our compliance costs. If we are unable to meet the requirements of the Executive
Order, our ability to work with the U.S. government may be impaired and may result in a loss of revenue.
Incorrect or improper implementation or use of our software could result in customer dissatisfaction, customer
data loss or corruption and negatively affect our business, operations, financial results and growth prospects.
Our software is deployed in a wide variety of technology environments. Increasingly, our software has been deployed
in large scale, complex technology environments, and we believe our future success will depend on our ability to increase sales
of licenses for use in such deployments. We often must assist our customers in achieving successful implementations for large,
complex deployments. If we or our customers are unable to implement our software successfully, including related to
technologies that we have obtained through acquisitions, are unable to do so in a timely manner or if an improper
implementation or change in system configuration results in errors or loss of data, customer perceptions of our company may be
impaired, our reputation and brand may suffer, and customers may choose not to increase their use of our offerings. In addition,
our software imposes server load and index storage requirements for implementation. If our customers do not have the server
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FORM 10-K
load capacity or the storage capacity required, they may not be able to effectively implement and use our software and,
therefore, may not choose to increase their use of our offerings.
Our customers and third-party partners may need training in the proper use of and the variety of benefits that can be
derived from our software to maximize its potential. If our software is not implemented or used correctly or as intended,
inadequate performance, errors, data loss or corruption may result. Because our customers rely on our software and
maintenance and support services to manage a wide range of operations, the incorrect or improper implementation or use of our
software, our failure to train customers on how to efficiently and effectively use our software, or our failure to provide
maintenance services to our customers, may result in negative publicity or legal claims against us. Also, as we continue to
expand our customer base, any failure by us to properly provide these services will likely result in lost opportunities for follow-
on sales of our offerings.
Factors Related to IT, Privacy and Data Security
If we or our third-party service providers experience a security breach or incident or unauthorized parties
otherwise obtain access to our customers’ data, our data, or our cloud services, our offerings may be perceived as
not being secure, our reputation may be harmed, demand for our offerings may be reduced, and we may incur
significant liabilities.
Our offerings involve the storage and transmission of data, and security breaches and incidents could result in
unauthorized access to, or the loss, destruction, misuse, disclosure, modification, corruption, or unavailability of, this
information, litigation, indemnity obligations, fines, penalties and other liability. We may become the target of cyber-attacks by
third parties seeking unauthorized access to our data or our customer’s data or to disrupt our ability to provide services. There is
also a danger of industrial espionage, misuse, theft of information or assets (including source code), or damage to assets by
people who have gained access (authorized or unauthorized) to our facilities, systems or information. Because there are many
different techniques used to obtain unauthorized access to systems and data, and such techniques continue to evolve, we may be
unable to anticipate attempted security breaches and incidents and proactively implement adequate preventative measures.
Additionally, with many of our employees continuing to work remotely due to the ongoing COVID-19 pandemic, we face an
increased risk of attempted security breaches and incidents. While we have taken steps to protect the confidential information
that we have access to, including confidential information we may obtain through our customer support services or customer
usage of our cloud services offerings, our security measures or those of our third-party service providers could be breached or
otherwise fail to prevent unauthorized access to or disclosure, modification, misuse, loss or destruction of such information.
Computer malware, ransomware, cyber viruses, social engineering (phishing attacks), denial of service or other attacks,
employee theft or misuse and increasingly sophisticated network attacks have become more prevalent in our industry,
particularly against cloud services. The frequency and sophistication of these malicious attacks has increased, and it appears
that cyber crimes and cyber criminal networks, some of which may be state-supported, have been provided substantial
resources and may target U.S. enterprises or our customers and their use of our products. Furthermore, the risk of state-
supported and geopolitical-related cyber attacks may increase in connection with the war in Ukraine and any related political or
economic responses and counter-responses. In the past, we have had to take corrective action against cyber attackers to protect
our cloud environment. In addition, we do not directly control content that customers store in our offerings. If customers use
our offerings for the transmission or storage of personal information or other sensitive types of information and our security
measures are, or are believed to have been breached or otherwise to have failed as a result of third-party action, employee error,
malfeasance or otherwise, our reputation could be damaged, our business may suffer, and we could incur significant liability.
We also process, store and transmit our own data as part of our business and operations. This data may include
personal, confidential or proprietary information. We make use of third-party technology and systems for a variety of reasons,
including, without limitation, encryption and authentication technology, employee email, communication with and content
delivery to customers and prospects, back-office support, credit card processing, human resources services, customer
relationship management, enterprise risk planning and other functions. Although we have developed systems and processes that
are designed to protect our business and proprietary information and prevent data loss and other security breaches and incidents,
and to reduce the impact of a security breach or incident at a third-party vendor, such measures cannot provide absolute
security. We may expend significant resources, adapt our business activities and practices, or modify our operations or
information technology in an effort to protect against security incidents and to mitigate, detect, and remediate vulnerabilities.
There can be no assurance that any security measures that we or our third-party service providers, including CSPs, have
implemented will be effective against current or future security threats, and we cannot guarantee that our systems and networks
or those of our third-party service providers, including CSPs, have not been breached or otherwise compromised, or that they
and any software in our or their supply chains do not contain vulnerabilities or compromised trusted code that could result in a
31
breach of or disruption to our systems and networks or the systems and networks of third parties that support us and our
services. Our ability to mitigate these risks may also be impacted by the acquisition of new companies, requiring us to
incorporate and secure different or more complex IT environments. While we maintain measures designed to protect the
integrity, confidentiality and security of our data and other data we maintain or otherwise process, our security measures or
those of our third-party service providers could fail and result in a compromise of our applications or unauthorized access to or
disclosure, modification, misuse, loss, corruption, unavailability, or destruction of such data.
Any security breach or other security incident impacting us or any of our third-party service providers, or the
perception that one has occurred, could result in a loss of customer confidence in the security of our offerings and damage to
our brand, reputation, and market position, result in unauthorized access to or disclosure, modification, misuse, loss, corruption,
unavailability, or destruction of our data or our customers’ data, reduce the demand for and negatively impact market
acceptance of our offerings, disrupt normal business operations, require us to spend material resources to investigate or correct
the breach and to prevent future security breaches and incidents, expose us to legal claims and liabilities, including litigation,
regulatory investigations and enforcement actions, and indemnity obligations, and adversely affect our revenues and operating
results. These risks may increase as we continue to grow the number and scale of our cloud services offerings, and process,
store, and transmit increasing amounts of data. Additionally, we may need to expend significant financial and development
resources to analyze, correct, eliminate, or work around errors or defects or to eliminate or otherwise address vulnerabilities,
and we and our third-party service providers may face difficulties or delays in identifying or otherwise responding to any
potential security breach or incident and otherwise providing services.
Third parties may also conduct attacks designed to deny customers access to our cloud services offerings. A significant
disruption in access to, or ability to use, our cloud services offerings could damage our reputation with current and potential
customers, expose us to claims and liability, cause us to lose customers, negatively impact market acceptance of our cloud
services offerings or other offerings, or otherwise negatively affect our business.
The attack against SolarWinds, in which hackers inserted malware into a SolarWinds software update, highlights the
growing risk from the infection of trusted third-party software while it is under assembly, known as a supply chain attack. In
addition to software supply chain attacks, third-party vulnerabilities may impact our security posture. We have a threat and
vulnerability management program to track, remediate and help mitigate vulnerabilities in our IT environments. Nevertheless,
the recent attack on on-premise Microsoft Exchange services and the Log4j vulnerability, which could be exploited to allow
unauthorized actors to execute code remotely, highlight the risk that third-party products and open-source software we use may
contain vulnerabilities that can be exploited by adversaries.
Further, if a high profile security breach, incident, or disruption occurs with respect to another cloud-based platform or
service provider, our customers and potential customers may lose trust in cloud-based offerings generally, which could
adversely impact our ability to retain existing customers or attract new ones, potentially causing a negative impact on our
business.
We cannot be certain that our insurance coverage will be adequate for data security liabilities incurred and, will cover
any indemnification claims against us relating to any incident, that insurance will continue to be available to us on economically
reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or
more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies,
including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse
effect on our business, including our financial condition, operating results, and reputation.
Interruptions or performance problems associated with our technology and infrastructure, and our reliance on
Software-as-a-Service (“SaaS”) technologies from third parties, may adversely affect our business operations
and financial results.
Our continued growth depends in part on the ability of our existing and potential customers to use and access our cloud
services offerings or our website in order to download our software or encrypted access keys for our software within an
acceptable amount of time. In addition, we rely heavily on hosted SaaS technologies from third parties in order to operate
critical functions of our business, including our cloud services offerings, enterprise resource planning services and customer
relationship management services. We have experienced and may in the future experience real or perceived website and cloud
service disruptions, storage failures, outages and other performance problems due to a variety of factors, including
infrastructure changes, human or software errors, capacity constraints due to an overwhelming number of users accessing our
website and services simultaneously, and real or perceived security risks, including unauthorized access to our systems or
networks, software vulnerability exploits or cyber security, denial of service or ransomware attacks. In some instances, we may
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not be able to identify the cause or causes of these website or service performance problems or provide an effective remediation
or patch within an acceptable period of time. It may become increasingly difficult to maintain and improve our website and
service performance, especially during peak usage times and as our offerings become more complex and our user traffic
increases or where security exploits may have no available patches or mitigations (“zero day” exploits). If our website or cloud
services offerings are compromised or unavailable or if our users are unable to download our software or encrypted access keys
within a reasonable amount of time or at all, we could suffer damage to our reputation with current and potential customers, be
exposed to legal liability, and lose customers, all of which could negatively affect our business. We expect to continue to make
significant investments to maintain and improve website and service performance and to enable rapid releases of new features
and apps for our offerings. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed
and continually develop and secure our technology and network architecture to accommodate actual and anticipated changes in
technology and evolving security threats, our business and operating results may be adversely affected.
Real or perceived errors, failures or bugs in our offerings could adversely affect our financial results and growth
prospects.
Because our offerings are complex, undetected errors, failures or bugs may occur, especially when new offerings,
versions or updates are released, including related to technologies that we have obtained through acquisitions. Our software is
often installed and used in large-scale computing environments with different operating systems, system management software,
and equipment and networking configurations, which may cause errors or failures of our software or other aspects of the
computing environment into which it is deployed. In addition, deployment of our software into complicated, large-scale
computing environments may expose undetected errors, failures or bugs in our software. Despite testing by us, errors, failures
or bugs may not be found in our offerings until they are released to our customers. In the past, we have discovered errors,
failures and bugs in some of our offerings after their introduction. Real or perceived errors, failures or bugs in our offerings
could result in negative publicity, loss of or delay in market acceptance of our offerings, loss of competitive position or claims
by customers for losses sustained by them. In such an event, we may be required, or may choose, for customer relations or other
reasons, to expend additional resources in order to help correct the problem.
In addition, if an actual or perceived failure of our software occurs in a customer’s deployment or in our cloud
services, regardless of whether the failure is attributable to our software, the market perception of the effectiveness of our
offerings could be adversely affected. Alleviating any of these problems could require significant expenditures of our capital
and other resources and could cause interruptions, delays or cessation of our licensing, which could cause us to lose existing or
potential customers and could adversely affect our financial results and growth prospects.
We are subject to a number of legal requirements, contractual obligations and industry standards regarding
security, data protection, and privacy, and any failure to comply with these requirements, obligations or
standards could have an adverse effect on our reputation, business, financial condition and operating results.
Data privacy and security have become significant issues in the United States and in many other countries where we
have employees and operations and where we offer licenses or cloud subscriptions to our offerings. The regulatory framework
for data privacy and security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future.
These obligations may be interpreted and applied inconsistently from one jurisdiction to another and may conflict with one
another, other regulatory requirements, industry standards, or our internal practices. The U.S. federal and various state and
foreign government bodies and agencies have adopted or are considering adopting laws and regulations limiting, or laws and
regulations regarding the collection, distribution, use, disclosure, storage, and security of certain types of information. For
example, on January 1, 2020, the California Consumer Privacy Act (“CCPA”) went into effect. The CCPA requires covered
companies to provide new disclosures to California consumers, and afford such consumers new abilities to opt-out of certain
sales of personal information. Additionally, the California Privacy Rights Act (“CPRA”), which modifies the CCPA, was
approved by California voters in the November 3, 2020 election, creating obligations relating to consumer data beginning on
January 1, 2022, with implementing regulations expected on or before July 1, 2022, and enforcement beginning July 1, 2023.
Further, in March 2021, Virginia enacted the Virginia Consumer Data Protection Act (“CDPA”), which becomes effective on
January 1, 2023, and on June 8, 2021, Colorado enacted the Colorado Privacy Act (“CPA”), which takes effect on July 1, 2023.
The CDPA and CPA share similarities with the CCPA, the CPRA, and legislation proposed in other states. Aspects of the
CCPA, CPRA, CDPA, and CPA, and their interpretation, remain unclear, and we cannot yet fully predict the impact of these
laws or regulations on our business or operations.
Internationally, virtually every jurisdiction in which we operate has established its own data security and privacy or
data protection legal framework with which we or our customers must comply. Laws and regulations in these jurisdictions
33
apply broadly to the collection, use, storage, disclosure and security of data that identifies or may be used to identify or locate
an individual. These laws and regulations often are more restrictive than those in the United States and are rapidly evolving. For
example, the EU General Data Protection Regulation (“GDPR”) became effective on May 25, 2018, and, in addition to
imposing stringent obligations relating to data protection and security, authorizes fines up to 4% of global annual revenue for
some violations. We relied in part upon the EU-U.S. Privacy Shield Framework developed by the U.S. Department of
Commerce and the European Commission and the Swiss-U.S. Privacy Shield Framework developed by the U.S. Department of
Commerce and the Swiss Administration to provide U.S. companies with a valid data transfer mechanism under EU and Swiss
law to permit them to transfer personal data from the European Economic Area (“EEA”) and Switzerland to the United States.
On July 16, 2020, the Court of Justice of the European Union (“CJEU”) invalidated the EU-U.S. Privacy Shield, concluding it
did not provide adequate protection for personal data transferred to the U.S. On September 8, 2020, the Swiss Federal Data
Protection and Information Commissioner invalidated the Swiss-US Privacy Shield on similar grounds. In its July 16, 2020
opinion, the CJEU imposed additional obligations on companies when relying on standard contractual clauses approved by the
European Commission (“SCCs”) to transfer personal data. The CJEU decision may result in European data protection
regulators applying differing standards for, and requiring ad hoc verification of, transfers of personal data from Europe to the
U.S. On June 4, 2021, the European Commission published new SCCs that are required to be implemented. The revised SCCs,
recommendations and opinions of regulators, and other developments relating to cross-border data transfer, may require us to
implement additional contractual and technical safeguards for any personal data transferred out of the EEA and Switzerland,
which may increase compliance and related costs, lead to increased regulatory scrutiny or liability, necessitate additional
contractual negotiations, and adversely impact our business, financial condition and operating results.
On February 23, 2022, the European Commission proposed new legislation, the Data Act, which imposes obligations
related to access, sharing, portability, and international transfer of non-personal data. The Council of the EU and EU Parliament
will debate the draft Data Act, and, if adopted, the earliest date of entry into force is in 2024. We expect to incur additional
costs to comply with the requirements of the Data Act as it is finalized for implementation.
The United Kingdom enacted a Data Protection Act in May 2018 that substantially implemented the GDPR, and has
implemented legislation referred to as the “UK GDPR” that generally provides for implementation of the GDPR in the United
Kingdom. On June 28, 2021, the European Commission announced a decision that the United Kingdom is an “adequate
country” to which personal data could be exported from the EEA, but this decision must be renewed and may face challenges in
the future, creating uncertainty regarding transfers of personal data to the United Kingdom from the EEA. Additionally, we
cannot fully predict how the Data Protection Act, the UK GDPR, and other United Kingdom data protection laws or regulations
may develop in the medium to longer term nor the effects of divergent laws and guidance regarding how data transfers to and
from the United Kingdom will be regulated in the future. Our EMEA headquarters is in London, causing these areas of
uncertainty with respect to United Kingdom data protection law and cross-border personal data transfers to be particularly
significant to our operations. Some countries also are considering or have enacted legislation requiring local storage and
processing of data, or similar requirements, which could increase the cost and complexity of delivering our services outside of
the United States.
Complying with the GDPR, CCPA, CPRA, CDPA, CPA, or other laws, regulations, or other obligations relating to
privacy, data protection, data localization or security in the U.S. or other regions worldwide, including Australia’s Privacy Act,
Canada’s Personal Information Protection and Electronic Documents Act, and Japan’s Act on the Protection of Personal
Information, may cause us to incur substantial operational costs or require us to modify our data handling practices and policies,
which may compromise our growth strategy, adversely affect our ability to acquire customers, and otherwise adversely affect
our business, financial condition and operating results. Further, any actual or alleged non-compliance could result in claims and
proceedings against us by governmental entities or others, could result in substantial fines or other liability, and may otherwise
adversely impact our business, financial condition and operating results and prevent us from offering certain services where we
operate. Some statutory requirements, both in the United States and abroad, such as the Health Insurance Portability and
Accountability Act of 1996 and numerous state statutes, include obligations of companies to notify individuals of security
breaches involving certain types of personal information, which could result from breaches experienced by us or our service
providers. Any actual or perceived security breach or incident could impact our reputation, harm our customer confidence, hurt
our sales and expansion into new markets or cause us to lose existing customers, and could expose us to potential liability or
require us to expend significant resources on data security and in responding to any such actual or perceived breach or incident.
In addition to government regulation, self-regulatory standards, industry-specific regulation and other industry
standards or requirements may legally or contractually apply to us, be argued to apply to us, or we may elect to comply with, or
to facilitate our customers’ compliance with, such standards, regulations or requirements. Regulators in certain industries, such
as financial services, have adopted and may in the future adopt regulations or interpretive positions regarding the use of cloud
computing and other outsourced services. For example, some financial services regulators have imposed guidelines for use of
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cloud computing services that mandate specific controls or require financial services enterprises to obtain regulatory approval
prior to outsourcing certain functions. If we are unable to comply with these guidelines or controls, or if our customers are
unable to obtain regulatory approval to use our services where required, our business may be harmed. In addition, an inability to
satisfy the standards of certain government agencies that our customers may expect may have an adverse impact on our
business and results. If in the future we are unable to achieve or maintain industry-specific certifications or other requirements
or standards relevant to our customers, it may harm our business and adversely affect our results. Furthermore, because privacy,
data protection and data security are critical competitive factors in our industry, we may make statements on our website, in
marketing materials, or in other settings about our data processing and data security measures and our compliance with, or our
ability to facilitate our customers’ compliance with, these standards. We also expect that laws, regulations, industry standards
and other obligations relating to privacy, data protection and security will continue to evolve worldwide, and that there will
continue to be new, modified, and re-interpreted laws, regulations, standards, and other obligations in these areas. We cannot
yet determine the impact such future laws, regulations and standards, or amendments to or re-interpretations of, existing laws
and regulations, industry standards, or other obligations may have on our business. New laws, amendments to or re-
interpretations of existing laws and regulations, industry standards, and contractual and other obligations, in the U.S. or in
multiple jurisdictions, may require us to incur additional costs and restrict our business operations. Because the interpretation
and application of laws, standards, contractual obligations and other obligations relating to privacy and data protection are
uncertain, these laws, standards, and contractual and other obligations may be interpreted and applied in a manner that is, or is
alleged to be, inconsistent with our data management practices, our policies or procedures, or the features of our offerings. If so,
in addition to the possibility of fines, lawsuits and other claims, we may find it necessary or appropriate to fundamentally
change our business activities and practices, including the establishment of localized data storage or other data processing
operations, or modify or cease offering certain offerings either generally or in certain geographic regions, any of which could
have an adverse effect on our business. We may be unable to make such changes and modifications in a commercially
reasonable manner or at all, and our ability to develop new offerings and features could be limited. Furthermore, the costs of
compliance with, and other burdens imposed by, the laws, regulations, and policies that are applicable to the businesses of our
customers may limit the use and adoption of, and reduce the overall demand for, our offerings. Compliance with these
regulations may also require us to devote greater resources to support certain customers, which may increase costs and lengthen
sales cycles. Any inability to adequately address privacy, data protection or security-related concerns, even if unfounded, or to
successfully negotiate privacy, data protection or security-related contractual terms with customers, or to comply with
applicable laws, regulations, standards, and other actual and alleged obligations relating to privacy, data protection, and
security, could result in additional cost and liability to us, damage our reputation, inhibit sales, slow our sales cycles, and
adversely affect our business. Privacy and personal security concerns, whether valid or not valid, may inhibit market adoption
of our offerings, particularly in certain industries and foreign countries.
Factors Related to Intellectual Property and Other Proprietary Rights
Failure to protect our intellectual property rights could adversely affect our business and our brand.
Our success and ability to compete depends, in part, on our ability to protect our trade secrets, trademarks, copyrights,
patents, know-how, confidential information, proprietary methods and technologies and other intellectual property and
proprietary rights, so that we can prevent others from using our inventions, proprietary information and property. We generally
rely on patent, copyright, trade secret and trademark laws, and confidentiality or license agreements with our employees,
consultants, vendors, customers, partners and others, and generally limit access to and distribution of our proprietary
information, in order to protect our intellectual property rights and maintain our competitive position. However, we cannot
guarantee that the steps we take to protect our intellectual property rights will be effective. For example, with many of our
employees continuing to work remotely, we may be unable to prevent theft or misappropriation of our intellectual property by
departing employees.
Our issued patents and any patents issued in the future may not provide us with any competitive advantages, and our
patent applications may never be granted. Additionally, the process of obtaining patent protection is expensive and time-
consuming, and we may not be able to file and prosecute all necessary or desirable patent applications, or we may not be able to
do so at a reasonable cost or in a timely manner. Even if issued, there can be no assurance that these patents will adequately
protect our intellectual property, as the legal standards relating to the infringement, validity, enforceability and scope of
protection of patent and other intellectual property rights are complex and often uncertain. Any patents that are issued, and any
of our other intellectual property rights may be challenged by others and invalidated or narrowed through administrative
process, litigation, or similar proceedings, allowing other companies to develop offerings that compete with ours, which could
adversely affect our competitive business position, business prospects and financial condition. In addition, issuance of a patent
does not guarantee that we have a right to practice the patented invention. We cannot be certain that we were the first to use the
inventions claimed in our issued patents or pending patent applications or otherwise used in our offerings, that we were the first
35
to file patent applications, or that third parties do not have blocking patents that could be used to prevent us from marketing or
practicing our offerings or technology. Effective patent, trademark, copyright and trade secret protection may not be available
to us in every country in which our offerings are available. The laws of some foreign countries may not be as protective of
intellectual property rights as those in the United States (in particular, some foreign jurisdictions do not permit patent protection
for software, and even in the United States, this protection is limited), and mechanisms for enforcement of intellectual property
rights may be inadequate. We have filed for patents in the United States and in limited non-U.S. jurisdictions, but such
protections may not be available or adequate in all countries in which we operate or in which we seek to enforce our intellectual
property rights, or may be difficult to enforce in practice. For example, many foreign countries have compulsory licensing laws
under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents
against certain third parties, including government agencies or government contractors. In these countries, patents may provide
limited or no benefit. As we expand our international activities, our exposure to unauthorized copying and use of our products
and platform capabilities and proprietary information will likely increase. We are currently unable to measure the full extent of
this unauthorized use of our products, platform capabilities, software, and proprietary information. We believe, however, that
such unauthorized use is and can be expected to be a persistent problem that negatively impacts our revenue and financial
results. Additional uncertainty may result from recent and future changes to intellectual property legislation in the United States
and other countries and from interpretations of the intellectual property laws of the United States and other countries by
applicable courts and agencies. Further, although we endeavor to enter into non-disclosure agreements with our employees,
licensees and others who may have access to confidential and proprietary information, we cannot assure that these agreements
or other steps we have taken will prevent unauthorized use, disclosure or reverse engineering of our technology.
Moreover, third parties may independently develop technologies or products that compete with ours, and we may be
unable to prevent this competition.
We might be required to spend significant resources to defend, monitor, and protect our intellectual property rights,
such as by initiating claims or litigation against third parties for infringement of our proprietary rights or to establish the validity
of our proprietary rights. However, we may not prevail in any lawsuits that we initiate, and the damages or other remedies
awarded, if any, may not be adequate to compensate us for the harm suffered. Additionally, we may provoke third parties to
assert counterclaims against us. Any litigation, whether or not it is resolved in our favor, could result in significant expense to
us and divert the efforts of our technical and management personnel, which may adversely affect our business operations or
financial results. For any of these reasons, despite our efforts, we may be unable to prevent third parties from infringing upon or
misappropriating our intellectual property. If we fail to protect our intellectual property rights adequately, our competitors
might gain access to our technology or use of our brand, and our business might be adversely affected.
We have been, and may in the future be, subject to intellectual property rights claims by third parties, which are
extremely costly to defend, could require us to pay significant damages and could limit our ability to use certain
technologies.
Companies in the software and technology industries, including some of our current and potential competitors, own
large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of
infringement or other violations of intellectual property rights. In addition, many of these companies have the capability to
dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought
against them. The litigation may involve patent holding companies or other adverse patent owners that have no relevant product
revenues and against which our patents may therefore provide little or no deterrence. From time-to-time, third parties, including
certain of these leading companies and non-practicing entities, have asserted and may assert patent, copyright, trademark or
other intellectual property rights against us, our partners, our technology partners or our customers. We have received, and may
in the future receive, notices that claim we have misappropriated, misused, or infringed other parties’ intellectual property
rights, including those obtained through acquisitions of new technologies, and, to the extent we gain greater market visibility,
we face a higher risk of being the subject of intellectual property infringement claims, which is not uncommon with respect to
the enterprise software market.
There may be third-party intellectual property rights, including issued or pending patents, that cover or claim to cover
significant aspects of our technologies or business methods. We may be exposed to increased risk of being the subject of
intellectual property infringement claims as a result of acquisitions, as, among other things, we have a lower level of visibility
into the development process with respect to such technology or the care taken to safeguard against infringement risks. Any
intellectual property claims, with or without merit, could be very time-consuming, could be expensive to settle or litigate and
could divert our management’s attention and other resources. These claims could also subject us to significant liability for
damages, potentially including treble damages or enhanced statutory damages if we are found to have willfully infringed
patents or copyrights. These claims could also result in our having to stop using technology found to be in violation of a third-
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party’s rights. We might be required to seek a license for the intellectual property, which may not be available on reasonable
terms or at all. Even if a license were available, we could be required to pay significant royalties, which would increase our
operating expenses. As a result, we may be required to develop alternative non-infringing technology, which could require
significant effort and expense. If we cannot license or develop technology for any infringing aspect of our business, we would
be forced to limit or stop sales of our offerings and may be unable to compete effectively. Any of these results would adversely
affect our business operations and financial results.
If we are not able to maintain and enhance our brand, our business and operating results may be adversely
affected.
We believe that maintaining and enhancing the “Splunk” brand identity is critical to our relationships with current
customers and partners and to our ability to attract new customers and partners. The successful promotion of our brand will
depend largely upon our marketing efforts, our ability to continue to offer high-quality offerings and our ability to successfully
differentiate our offerings from those of our competitors. In addition, independent industry analysts often provide reviews of
our offerings, as well as those of our competitors, and perception of our offerings in the marketplace may be significantly
influenced by these reviews. If these reviews are negative, or less positive as compared to those of our competitors’ products
and services, our brand may be adversely affected.
Moreover, it may be difficult to maintain and enhance our brand in connection with sales through partners. We have
and will continue to incur a substantial amount of expenditures in connection with our campaigns, and we anticipate that brand
promotion expenditures will increase as our market becomes more competitive and as we attempt to grow our business. To the
extent that these activities yield increased revenues, these revenues may not offset the increased expenses we incur. If we do not
successfully maintain and enhance our brand, our business may not grow, we may have reduced pricing power relative to
competitors with stronger brands, and we could lose customers and partners, all of which would adversely affect our business
operations and financial results.
Our use of “open source” software could negatively affect our ability to sell our offerings and subject us to
possible litigation, and our participation in open source projects may impose unanticipated burdens or
restrictions.
We use open source software in our offerings and business, including as incorporated into software we receive from
third-party commercial software vendors or technologies obtained through acquisitions, and expect to continue to use open
source software in the future. Use of open source software may entail greater risks than use of third-party commercial software.
The terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be
construed in a manner that imposes unanticipated conditions or restrictions on our ability to market or commercialize our
products. We may face claims from others alleging breach of license requirements or infringement of intellectual property
rights in what we believe to be licensed open source software. In addition, under the terms of some open source licenses, under
certain conditions, we could be required to release our proprietary source code that was developed using, incorporating or
linked with such open source software, or apply open source licenses to our proprietary software, including authorizing further
modification and redistribution. These claims or requirements, including any change to the applicable license terms, could also
result in litigation, require us to purchase a costly license, require us to devote additional research and development resources to
change our offerings, or require us to cease offering the implicated products unless and until we can find alternative tools or re-
engineer them to avoid infringement or release of our proprietary source code, any of which would have a negative effect on
our business and operating results. In addition to risks related to license requirements, usage of open source software can lead to
greater risks than use of third-party commercial software, as open source licensors generally do not provide updates, warranties,
support, indemnities, assurances of title or controls on origin of the software, or other contractual protections regarding
infringement claims or the quality of the code. Likewise, some open source projects have known security and other
vulnerabilities and architectural instabilities, or are otherwise subject to security attacks due to their wide availability, and are
provided on an “as-is” basis. Additionally, we, including companies that we acquired, have intentionally made certain
proprietary software available on an open source basis, both by contributing modifications back to existing open source
projects, and by making certain internally developed tools available pursuant to open source licenses, and we plan to continue
to do so in the future. While we have established procedures, including a review process for any such contributions, which is
designed to protect any code that may be competitively sensitive, we cannot guarantee that this process has always been applied
consistently by us or by companies that we have acquired, prior to the acquisition. Even when applied, because any software
source code we contribute to open source projects is publicly available, our ability to protect our intellectual property rights
with respect to such software source code may be limited or lost entirely, and we may be unable to prevent our competitors or
others from using such contributed software source code for competitive purposes, or for commercial or other purposes beyond
37
what we intended. Many of these risks associated with usage of open source software could be difficult to eliminate or manage,
and could, if not properly addressed, negatively affect the performance of our offerings and our business.
Factors Related to Reliance on Third Parties
We increasingly rely on third-party providers of cloud infrastructure services to deliver our offerings to users on
our platform, and any disruption of or interference with our use of these services could adversely affect our
business.
Our cloud services offerings, such as Splunk Cloud, are hosted exclusively by our CSPs. We do not have control over
the operations or the facilities of CSPs that we use, and any changes in a Cloud Service Provider’s service levels, which may be
less than 100%, may adversely affect our ability to meet the commitments we make to our customers and their requirements.
We currently offer a 100% uptime service level agreement (“SLA”) for Splunk Cloud. It may become increasingly difficult to
maintain and improve our performance, especially during peak usage times, as the usage of our offerings increases. If any of the
services provided by the CSPs fail or become unavailable due to extended outages, interruptions or because they are no longer
available on commercially reasonable terms or prices, or if we are unable to deliver 100% uptime under our SLAs, our revenues
could be reduced, our reputation could be damaged, we could be exposed to legal liability, expenses could increase, our ability
to manage our finances could be interrupted and our processes for managing sales of our offerings and supporting our
customers could be impaired until equivalent services, if available, are identified, obtained and implemented, all of which could
adversely affect our business, financial results and the usage of our offerings. If we are unable to renew our agreements with
our Cloud Service Providers on commercially reasonable terms, or our agreements are prematurely terminated, or we need to
add new CSPs to increase capacity and uptime, we could experience interruptions, downtime, delays, and additional expenses
related to transferring to and providing support for these new platforms. Our customers may require that we provide our cloud
services offerings through Infrastructure-as-a-Service (IaaS) Platforms that we do not offer, which could adversely affect our
ability to attract new customers or maintain current customers, either of which could negatively affect our financial condition.
Any of the above circumstances or events may harm our reputation and brand, reduce the availability or usage of our
platform and impair our ability to attract new users, any of which could adversely affect our business, financial condition and
results of operations.
If we are unable to maintain successful relationships with our partners, and to help our partners enhance their
ability to independently sell and deploy our offerings, our business operations, financial results and growth
prospects could be adversely affected.
In addition to our direct sales force, we use partners, such as distributors and resellers, to license, provide professional
services and support our offerings. Historically, we have relied on a limited number of such partners for a substantial portion of
our total sales, particularly in the Europe, Middle East and Africa (“EMEA”) and Asia Pacific (“APAC”) regions, and for sales
to government agencies. For example, sales through our top two partners represented 43% of our revenue in fiscal 2022. We
expect that sales through partners in all regions will continue to be a significant portion of our revenues for the foreseeable
future. As changes in our partner strategy are implemented.
Our agreements with our partners are generally non-exclusive, meaning our partners may offer customers the products
of several different companies, including products that compete with ours. If our partners do not effectively market and sell our
offerings, choose to use greater efforts to market and sell their own products or those of our competitors, or fail to meet the
needs of our customers, our ability to grow our business and sell our offerings may be adversely affected. Our partners may
cease marketing our offerings with limited or no notice and with little or no penalty. The loss of a substantial number of our
partners or any of our key partners, our possible inability to replace them, or the failure to recruit additional partners could
materially and adversely affect our results of operations and could have an impact on the growth rate of our revenue as we work
to obtain new partners or replacement relationships. In addition, sales by partners are more likely than direct sales to involve
collectability and compliance concerns, in particular sales by our partners in developing markets, and accordingly, variations in
the mix between revenues attributable to sales by partners and revenues attributable to direct sales may result in fluctuations in
our operating results.
As we are transitioning our business model, the manner in which we conduct business with and compensate our
partners, as well as the business demands placed upon our partners will likely change, requiring some of our historically
effective partners to adapt their sales and marketing techniques to sell cloud services and term licenses. Such changes may lead
to shorter duration contracts, which require more frequent customer contact by, and different business terms with, our partners.
In some circumstances, new partners may be more effective in adapting to our new business model, particularly when such
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partners have experience selling cloud services. Therefore, our expectations for our partners, and our rubric for evaluating
compatible partners may change, which may adversely impact our results of operations during the transition.
Our ability to achieve revenue growth in the future will depend in part on our success in maintaining successful
relationships with our partners, and to help our partners enhance their ability to independently sell and deploy our offerings. In
order to achieve these objectives, we may be required to adjust our incentives, pricing or discount programs for our partners,
which could adversely affect our operating results. If we are unable to maintain our relationships with these partners, or
otherwise develop and expand our indirect distribution channel, our business, results of operations, financial condition or cash
flows could be adversely affected.
Our future performance depends in part on proper use of our community website, Splunkbase, expansion of our
developer network, and support from third-party software developers.
Our offerings enable third-party software developers to build apps on top of our platform. We operate a community
website, Splunkbase, for sharing these third-party apps, including add-ons and extensions. While we expect Splunkbase to
support our sales and marketing efforts, it also presents certain risks to our business, including:
• third-party developers may not continue developing or supporting the software apps that they share on
Splunkbase;
• we cannot guarantee that if and as we change the architecture of our products and services, third-party developers
will evolve their existing software apps to be compatible or that they will participate in the creation of new apps
utilizing the new architecture;
• as we migrate our on-premises based products to cloud-based services, third-party developers may not convert
their apps to work in the cloud environment or may not find our expanded developer network to be palatable for
their cloud-based apps;
• we cannot provide any assurance that these apps meet the same quality and security standards that we apply to our
own development efforts, and, to the extent they contain bugs, defects or security vulnerabilities, they may create
disruptions in our customers’ use of our offerings or negatively affect our brand;
• we do not currently provide support for software apps developed by third-party software developers, and users
may be left without support and potentially disappointed by their experience of using our offerings if the third-
party software developers do not provide appropriate support for these apps;
• these third-party software developers may not possess the appropriate intellectual property rights to develop and
share their apps or otherwise may not have assessed legal and compliance risks related to distributing their apps;
• some of these apps are hosted in external sites for a fee and are not controlled or reviewed by us, which may lead
to a negative experience by customers that may impact our reputation; and
• some of these developers may use the insight they gain using our offerings and from documentation publicly
available on our website to develop competing products.
Many of these risks are not within our control to prevent, and our brand may be damaged if these apps, add-ons or
extensions do not perform to our customers’ satisfaction and that dissatisfaction is attributed to us.
If poor advice or misinformation is spread through our community website, Splunk Answers, users of our
offerings may experience unsatisfactory results from using our offerings, which could adversely affect our
reputation and our ability to grow our business.
We host Splunk Answers for sharing knowledge about how to perform certain functions with our offerings. Our users
are increasingly turning to Splunk Answers for support in connection with their use of our offerings. We do not review or test
the information that non-Splunk employees post on Splunk Answers to ensure its accuracy or efficacy in resolving technical
issues. Therefore, we cannot ensure that all the information listed on Splunk Answers is accurate or that it will not adversely
affect the performance of our offerings. Furthermore, users who post such information on Splunk Answers may not have
adequate rights to the information to share it publicly, and we could be the subject of intellectual property claims based on our
39
hosting of such information. If poor advice or misinformation is spread among users of Splunk Answers, our customers or other
users of our offerings may experience unsatisfactory results from using our offerings, which could adversely affect our
reputation and our ability to grow our business.
Factors Related to Our Securities
Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our
business to pay our substantial debt.
Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness,
including the $1.0 billion aggregate principal amount of 0.75% Convertible Senior Notes due 2026 (the “2026 Notes”),
$1.27 billion aggregate principal amount of 1.125% Convertible Senior Notes due 2027 (the “2027 Notes”), $776.7 million
aggregate principal amount of 0.50% Convertible Senior Notes due 2023 (the “2023 Notes”) and $862.5 million aggregate
principal amount of 1.125% Convertible Senior Notes due 2025 (the “2025 Notes” and collectively, the “Notes”) that we issued
in July 2021, June 2020 and September 2018, depends on our future performance, which is subject to economic, financial,
competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the
future sufficient to service our debt, including the Notes, and make necessary capital expenditures. If we are unable to generate
such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or issuing
additional equity, equity-linked or debt instruments on terms that may be onerous or highly dilutive. Our ability to refinance our
indebtedness will depend on the capital markets and our financial condition at such time. If we are unable to engage in any of
these activities or engage in these activities on desirable terms, we may be unable to meet our debt obligations, including the
Notes, which would materially and adversely impact our business, financial condition and operating results.
Our current and future indebtedness, including the Notes, may limit our operating flexibility or otherwise affect
our business.
Our existing and future indebtedness, including the Notes, could have important consequences to our stockholders and
significant effects on our business. For example, it could:
• make it more difficult for us to satisfy or refinance our debt obligations, including the Notes;
• require us to raise additional capital to refinance the Notes as they mature;
• increase our vulnerability to general adverse economic and industry conditions;
• require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness,
thereby reducing the availability of our cash flow to fund working capital and other general corporate purposes;
• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
• restrict us from exploiting business opportunities;
• place us at a competitive disadvantage compared to our competitors that have less indebtedness; and
• limit our availability to borrow additional funds for working capital, capital expenditures, acquisitions, debt
service requirements, execution of our business strategy or other general purposes.
Any of the foregoing could have a material adverse effect on our business, results of operations or financial condition.
Conversion of the Notes may dilute the ownership interest of our stockholders or may otherwise depress the price
of our common stock.
The conversion of some or all of the Notes may dilute the ownership interests of our stockholders. Upon conversion of
the Notes, we have the option to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash
and shares of our common stock; provided, in the case of the 2026 Notes, a holder of an SL Note (as defined in the indenture
governing the 2026 Notes) has the right to determine the settlement method for any SL Note converted in connection with our
delivery of a redemption notice. If we elect or, in the case of a conversion of the 2026 Notes in connection with a Redemption
40
FORM 10-K
Notice, are required, to settle our conversion obligation in shares of our common stock or a combination of cash and shares of
our common stock, any sales in the public market of our common stock issuable upon such conversion could adversely affect
prevailing market prices of our common stock. Holders of the Notes may hedge their positions in the Notes by entering into
short positions with respect to the underlying common stock. In addition, any anticipated conversion of the Notes into shares of
our common stock could depress the price of our common stock.
The conditional conversion feature of the 2023 Notes, the 2025 Notes, or the 2027 Notes, if triggered, may
adversely affect our financial condition and operating results.
In the event the conditional conversion feature of the 2023 Notes, the 2025 Notes, or the 2027 Notes is triggered,
holders of such Notes will be entitled under the applicable indenture governing such Notes to convert their Notes at any time
during specified periods at their option. There is no conditional conversion feature with respect to the 2026 Notes and holders
of the 2026 Notes may elect to convert at any time. If one or more holders of a series of Notes elect to convert such Notes,
unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock, we would be required to
settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In
addition, in certain circumstances, such as conversion by holders or redemption, we could be required under applicable
accounting rules to reclassify all or a portion of the outstanding principal of the relevant series of Notes as a current rather than
long-term liability, which would result in a material reduction of our net working capital.
The accounting method for convertible debt securities that may be settled in cash, such as the Notes, could have
a material effect on our reported financial results.
Under Accounting Standards Codification 470-20, Debt with Conversion and Other Options (“ASC 470-20”), an entity
must separately account for the liability and equity components of the convertible debt instruments (such as the Notes) that may
be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The effect of
ASC 470-20 on the accounting for the Notes is that the equity component is required to be included in the additional paid-in
capital section of stockholders’ equity in our consolidated balance sheet at issuance, and the value of the equity component is
treated as a discount for purposes of accounting for the debt component of the Notes. As a result, we are required to record a
greater amount of non-cash interest expense as a result of the amortization of the discounted carrying value of the Notes to their
respective face amounts over their respective terms. We report larger net losses or lower net income in our financial results
because ASC 470-20 requires interest to include both the amortization of the debt discount and the instrument’s coupon interest
rate, which could adversely affect our reported or future financial results, the trading price of our common stock and the trading
price of the Notes.
In addition, under certain circumstances, convertible debt instruments (such as the Notes) that may be settled entirely
or partly in cash are currently accounted for utilizing the treasury stock method for earnings per share purposes, the effect of
which is that the shares issuable upon conversion of a series of Notes are not included in the calculation of diluted earnings per
share except to the extent that the conversion value of such series of Notes exceeds their principal amount. Under the treasury
stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common
stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued.
We are subject to counterparty risk with respect to the Capped Calls.
In connection with the offerings of the 2023 Notes, the 2025 Notes and the 2027 Notes, we entered into privately
negotiated capped call transactions with certain counterparties (collectively, the “Capped Calls”). The counterparties to the
Capped Calls are financial institutions, and we will be subject to the risk that one or more of the counterparties may default, fail
to perform or exercise their termination rights under the Capped Calls. Our exposure to the credit risk of the counterparties will
not be secured by any collateral. If a counterparty to the Capped Calls becomes subject to insolvency proceedings, we will
become an unsecured creditor in those proceedings with a claim equal to our exposure at the time under such transaction. Our
exposure will depend on many factors but, generally, our exposure will increase if the market price or the volatility of our
common stock increases. In addition, upon a default, failure to perform or a termination of the Capped Calls by a counterparty,
we may suffer more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to
the financial stability or viability of the counterparties.
Our stock price has been volatile, may continue to be volatile and may decline regardless of our financial
performance.
41
The trading prices of the securities of technology companies have been highly volatile. The market price of our
common stock has fluctuated significantly and is likely to continue to fluctuate significantly or experience declines in the
future. Your investment in our stock could lose some or all of its value. Some of the factors, many of which are beyond our
control, that could significantly affect the market price of our stock include:
• actual or anticipated fluctuations in our financial results;
• the financial projections we provide to the public, any changes in these projections or our failure to meet or exceed
these projections;
• the impact of our shift to a cloud services delivery model, as well as increased annual invoicing and decreased
multi-year upfront invoicing, which may impact our revenue, deferred revenue, cash collections, remaining
performance obligations, gross margin and operating income;
• failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates by any
securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;
• ratings changes by any securities analysts who follow our company;
• changes in our stockholder base;
• announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships,
joint ventures or capital commitments;
• changes in operating performance and stock market valuations of other technology companies generally, or those
in our industry in particular;
• price and volume fluctuations in certain categories of companies, such as high-growth or cloud companies, or the
overall stock market, including as a result of trends in the global economy;
• public health crises, such as the ongoing COVID-19 pandemic, and related measures by private industry and
governments to protect the public health;
• general economic and political conditions and uncertainty, both domestically and internationally, as well as
economic and political conditions and uncertainty specifically affecting industries in which our customers
participate, including continued impacts from the ongoing COVID-19 pandemic and impacts from the war in
Ukraine;
• any major change in our board of directors or management, including our recent CEO transition;
• lawsuits threatened or filed against us;
• actual or perceived security breaches or incidents; and
• other events or factors, including those resulting from war, incidents of terrorism or responses to these events.
In addition, the stock markets, and in particular the market on which our common stock is listed, have experienced
extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many
technology companies. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate
to the financial performance of those companies. In the past, following periods of market volatility, securities class action
litigation and stockholder derivative litigation have often been instituted. In December 2020, a putative class action lawsuit was
filed in the U.S. District Court for the Northern District of California against us, our former CEO and our CFO alleging
violations of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for allegedly making materially false and
misleading statements regarding our financial guidance. On March 16, 2021, the Court appointed lead plaintiff and lead counsel
in the case. On June 7, 2021, the lead plaintiff filed an amended complaint which alleges that defendants made materially false
and misleading statements regarding our marketing efforts, hiring practices, and retention of personnel. In February, March, and
April 2021, several derivative lawsuits related to the securities class action were filed. These lawsuits could subject us to
substantial costs, divert resources and the attention of management from our business and adversely affect our business, results
42
FORM 10-K
of operations, financial condition and cash flows. If we were to become involved in additional litigation in the future, it also
could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect
our business, results of operations, financial condition and cash flows.
General Factors
Climate change may have a long-term impact on our business.
The long-term effects of climate change on the global economy and the technology industry in particular are unclear,
however we recognize that there are inherent climate related risks wherever business is conducted. Our business operations are
subject to interruption by natural disasters, flooding, fire, power shortages, pandemics such as the ongoing COVID-19
pandemic, terrorism, political unrest, telecommunications failure, vandalism, cyber-attacks, infrastructure disruptions,
geopolitical instability, war, the effects of climate change and other events beyond our control. Physical climate change risks
can include, for example, our California corporate offices are located near major seismic faults, and have also historically
experienced, and are projected to continue to experience, climate-related events including drought and water scarcity, warmer
temperatures, rising sea levels, wildfires and air quality impacts and power shut-offs associated with wildfire prevention.
Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible for us to
deliver our services to our customers, could decrease demand for our services, and could cause us to incur substantial expense.
Our insurance may not be sufficient to cover losses or additional expenses that we may sustain. Climate-related events,
including the increasing frequency of extreme weather events and their impact on critical infrastructure in the United States and
elsewhere, have the potential to disrupt our business, our third-party suppliers, and/or the business of our customers, and may
cause us to experience higher attrition, losses and additional costs to maintain and resume operations. Transitional climate
change risks may subject us to increased regulations, reporting requirements, standards, or expectations regarding the
environmental impacts of our business and untimely or inaccurate disclosure could adversely affect our reputation, business or
financial performance.
We could be subject to additional tax liabilities.
We are subject to federal, state and local taxes in the United States and numerous foreign jurisdictions. Significant
judgment is required in evaluating our tax positions and our worldwide provision for taxes as there are many activities and
transactions for which the ultimate tax determination is uncertain. The relevant taxing authorities may disagree with our
determinations as to the income and expenses attributable to specific jurisdictions. If such a disagreement were to occur, and
our position is not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time
tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations. At any given time,
we are subject to routine inquiries from taxing jurisdictions worldwide and are working to resolve these various routine
questions and potential errors. Our financial statements reflect our best judgement of needed reserves to cover known
contingencies, but there can be no assurances on the final outcome of any tax assessment. In addition, our tax obligations and
effective tax rates could be adversely affected by changes in the relevant tax, accounting and other laws, regulations, principles
and interpretations, including those relating to income tax nexus, by our earnings being lower than anticipated in jurisdictions
where we have lower statutory rates and higher than anticipated in jurisdictions where we have higher statutory rates, by
challenges to our intercompany relationships and transfer pricing arrangements, by changes in foreign currency exchange rates,
or by changes in the valuation of our deferred tax assets and liabilities. Many countries and organizations such as the
Organization for Economic Cooperation and Development are actively considering changes to existing tax laws or have
proposed or enacted new tax laws that could increase our tax liabilities in countries where we do business.
Changes in accounting pronouncements and other financial and nonfinancial reporting standards may
negatively impact our financial results.
Generally accepted accounting principles in the United States (“U.S. GAAP”) are subject to interpretation by the
Financial Accounting Standards Board (“FASB”), the SEC, and other various bodies formed to promulgate and interpret
appropriate accounting principles. We regularly monitor our compliance with applicable financial reporting standards and
review new pronouncements and interpretations that are relevant to us. As a result of new standards, changes to existing
standards and changes in their interpretation, we may be required to change our accounting policies, to alter our operational
policies to implement new or enhance existing systems so that they reflect new or amended financial reporting standards, and to
adjust our published financial statements. Such changes may have an adverse effect on our business, financial position and
operating results, or cause an adverse deviation from our revenue and operating profit targets, which may negatively impact our
financial results.
43
In addition, as we identify ESG topics for voluntary disclosure and work to align with the recommendations of the
Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (“TCFD”), the Sustainability Accounting
Standards Board (“SASB”), and our own ESG materiality assessment, we have expanded and, in the future, may continue to
expand our disclosures in these areas. Statements about our ESG initiatives and goals, and progress against those goals, may be
based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and
assumptions that are subject to change in the future. If our ESG-related data, processing and reporting are incomplete or
inaccurate, or if we fail to achieve progress on our metrics on a timely basis, or at all, our reputation, business, financial
performance and growth could be adversely affected.
The requirements of being a public company and a growing and increasingly complex organization may strain
our resources, divert management’s attention and affect our ability to attract and retain executive management
and qualified board members.
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the
listing requirements of The Nasdaq Stock Market and other applicable securities rules and regulations. Compliance with these
rules and regulations has increased and may continue to increase our legal and financial compliance costs, making some
activities more difficult, time-consuming or costly, and has increased and will continue to increase demand on our systems and
resources.
In addition, changing laws, regulations, standards and practices relating to corporate governance and public disclosure
are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more
time consuming. These laws, regulations, standards and practices are subject to varying interpretations, in many cases due to
their lack of specificity, and, as a result, their application in practice may evolve over time as regulatory and governing bodies
provide new guidance or as market practices develop. This could result in continuing uncertainty regarding compliance matters
and higher costs necessitated by ongoing revisions to disclosure and governance practices.
From time to time, public companies are subject to campaigns by investors seeking to increase short-term stockholder
value through actions such as financial restructuring, increased debt, special dividends, stock repurchases, management changes
or sales of assets or the entire company. If stockholders attempt to effect such changes or acquire control over us, responding to
such actions would be costly, time-consuming and disruptive, which could adversely affect our results of operations, financial
results and the value of our common stock. These factors could also make it more difficult for us to attract and retain qualified
employees, executive officers and members of our board of directors.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our
company more difficult, limit attempts by our stockholders to replace or remove our current management and
limit the market price of our common stock.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the
effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of
incorporation and amended and restated bylaws include provisions that:
• authorize our board of directors to issue, without further action by the stockholders, shares of undesignated
preferred stock with terms, rights and preferences determined by our board of directors;
• require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and
not by written consent;
• specify that special meetings of our stockholders can be called only by our board of directors, the Chair of our
board of directors, or our Chief Executive Officer;
• establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including
proposed nominations of persons for election to our board of directors;
• establish that our board of directors is divided into three classes, Class I, Class II and Class III, with each class
serving three-year staggered terms;
44
FORM 10-K
• prohibit cumulative voting in the election of directors;
• provide that our directors may be removed only for cause;
• provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even
though less than a quorum; and
• require the approval of our board of directors or the holders of a super majority of our outstanding shares of
capital stock to amend our amended and restated bylaws and certain provisions of our amended and restated
certificate of incorporation.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current
management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for
appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the
provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from
engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years
following the date on which the stockholder became an “interested” stockholder.
Item 1B. Unresolved Staff Comments
None.
45
Item 2. Properties
Our corporate headquarters at 270 Brannan Street occupy approximately 182,000 square feet under an office lease
wherein approximately 50% expires in February 2023 and the balance expires in February 2024. Additionally, we have an
office lease for approximately 235,000 square feet located at 3098 Olsen Drive, San Jose, California that expires in August
2027 for our business operations, sales, support and product development. We lease smaller regional offices for our business
operations, sales, support and some product development in various locations throughout the United States. Our foreign
subsidiaries lease office space for their operations including local sales, support and some product development. While we
believe our facilities are sufficient and suitable for our current operations, we are in the process of evaluating future office space
needs and configurations to support our growing workforce post COVID-19.
Item 3. Legal Proceedings
The information set forth under Legal Proceedings in Note 3 contained in the “Notes to Consolidated Financial
Statements” is incorporated herein by reference.
Item 4. Mine Safety Disclosures
Not applicable.
46
FORM 10-K
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
Common Stock
Our common stock, $0.001 par value, began trading on the Nasdaq Stock Market on April 19, 2012, where its prices
are quoted under the symbol “SPLK.” As of January 31, 2022, there were 66 holders of record of our common stock. Because
many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to
estimate the total number of beneficial holders represented by these record holders, but it is well in excess of the number of
record holders.
Stock Performance Graph
This chart compares the cumulative total return on our common stock with that of the Nasdaq Composite index and the
Nasdaq Computer index for each of the last five fiscal years ended January 31, 2022, assuming an initial investment of $100.
The Nasdaq Computer index utilizes the same methods of presentation and assumptions for the total return calculation as does
Splunk and the Nasdaq Composite index.
Period Ending
Index Value
Splunk Inc. Comparison of Total Return Performance
Splunk Inc.
Nasdaq Composite
Nasdaq Computer
Jan 17
Jan 18
Jan 19
Jan 20
Jan 21
Jan 22
0
0.1
0.2
0.3
0.4
Company/Index
1/31/17
1/31/18
1/31/19
1/31/20
1/31/21
1/31/22
Splunk Inc.
$
100.00 $
159.64 $
215.76 $
268.34 $
285.22 $
214.17
Nasdaq Composite
$
100.00 $
133.43 $
132.52 $
168.35 $
242.57 $
222.95
Nasdaq Computer
$
100.00 $
141.37 $
138.37 $
199.09 $
302.71 $
364.73
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table summarizes the share repurchase activity for the fiscal year ended January 31, 2022:
47
Period
Total Number of
Shares Purchased
(in thousands) (1)
Average Price Paid
Per Share (2)
Total Number of Shares
Purchased as Part of
Publicly Announced
Programs
(in thousands) (1)
Approximate Dollar Value of
Shares that May Yet Be
Purchased Under the
Program
(in millions) (1)
August 1 - August 31
1,880 $
143.91
1,880 $
500
September 1- September 30
2,561 $
151.37
2,561 $
112
October 1- October 31
793 $
141.74
793 $
—
_________________________
(1)
In June 2021, our board of directors authorized a program to repurchase up to $1.0 billion of our common stock over time. Under this
program, repurchases may be made from time to time through open market purchases or through privately negotiated transactions,
subject to market conditions, applicable legal requirements and other relevant factors. The repurchase program was complete as of
October 31, 2021. Please refer to Note 8 “Stock Compensation Plans and Stockholders’ Equity” in our accompanying Notes to
Consolidated Financial Statements included elsewhere in this Annual Report on 10-K for additional information.
(2)
The average price paid per share, inclusive of costs associated with the repurchases was $147.23.
Item 6. Selected Financial Data
[Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis of our financial condition and results of operations should be read in
conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on
Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and
uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of
various factors, including those set forth under “Risk Factors” included in Part I, Item 1A or in other parts of this report.
The following section generally discusses fiscal 2022 and 2021 items and year-to-year comparisons between fiscal
2022 and 2021. Discussions of fiscal 2020 items and year-to-year comparisons between fiscal 2021 and 2020 that are not
included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 31, 2021, and are
incorporated herein by reference.
Amounts reported in millions are rounded based on the amounts in thousands. As a result, the sum of the components
reported in millions may not equal the total amount reported in millions due to rounding. In addition, percentages presented
are calculated from the underlying numbers in thousands and may not add to their respective totals due to rounding.
Overview
Splunk provides innovative solutions that use data from digital systems to help organizations identify opportunities for
optimization and innovation and keep those systems secure and performing effectively. This class of data is growing
significantly as a direct result of the prevalence and importance of digital systems used by today’s organizations. Decades of
investment in digital transformation have integrated the hardware and software that comprise digital systems into every aspect
of how modern organizations operate. The data generated by these systems contains a comprehensive, real-time record of
operations, interactions, and transactions that our offerings convert into insights and actions that improve technology and
business outcomes. Our solutions for Security and Observability empower users in technology roles, including Development
Operations (“DevOps”), IT Operations (“ITOps”), and cyber security, to monitor and secure digital systems more quickly and
efficiently. Business users leverage our offerings to gain visibility into their digital processes to deliver better experiences,
improve decisions and drive better results.
Our offerings provide visibility to our customers’ diverse technology infrastructure including systems deployed on the
edge, on premises, and in private and public cloud environments, running software ranging from monolithic apps to cloud
native ones. We also believe our offerings empower operational transformation, helping customers move from reactive, non-
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FORM 10-K
scalable and ineffective approaches to proactive, automated, and AI-assisted processes that drive better outcomes even as the
scale and complexity of their technology continue to grow.
The COVID-19 pandemic significantly increased the importance of being a digital, data-driven organization and we
believe the importance of data-driven innovation will only continue to increase over time. The events of 2020 and 2021
accelerated the adoption of new ways to work and exerted an enormous amount of pressure on organizations of all kinds to
deliver better experiences and outcomes, and to enable entirely new offerings and business models. We believe this global shift
in the business environment and the related challenges are here to stay and that Splunk enables organizations to rise to these
challenges by leveraging technology to achieve greater efficiency, agility, security, and drive a sustained competitive
advantage. When organizations use Splunk to improve their security postures and build resilience, they are able to innovate
more effectively.
We typically base our cloud services annual subscription fees on the volume of data indexed per day including a fixed
amount of data storage or purchased infrastructure and data storage our customers require to support the underlying workload.
We are seeing an increasing number of customers shift to workload-based pricing. We recognize the revenues associated with
our cloud services ratably over the associated subscription term. For our license offerings, we typically base the license fees on
either the estimated daily data indexing capacity or the compute power consumed to support our customers' workload and we
generally recognize the license fee portion of these arrangements upfront. As a result, the timing of when we enter into large
license contracts may lead to fluctuations in our revenues and operating results because our expenses are largely fixed in the
short-term.
Our revenue mix has shifted from sales of licenses to the delivery of cloud services and we expect it will continue to
shift in favor of cloud services. Our transition to a predominantly cloud services delivery model has impacted, and it will
continue to impact, our operating margins and revenue as an increasing percentage of our sales becomes recognized ratably.
Our shift to a cloud services delivery model is dependent on customer choice and our ability to predict our revenue and margins
in any particular period has been, and may continue to be, limited. 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 an annual billings model than it has historically.
We intend to continue investing for long-term growth. We have invested and intend to continue to invest in product
development to deliver additional features and performance enhancements, deployment models and solutions that can address
new end markets. We expect to continue to expand our sales and marketing organizations to market and sell our offerings both
in the United States and internationally.
We have utilized and expect to continue to engage in acquisitions to contribute to our long-term growth objectives.
During fiscal 2021, we acquired companies that expand our observability capabilities, including companies that offer auto-
instrumentation, real user monitoring, application performance monitoring, advanced synthetic monitoring, web optimization
and network performance monitoring. During fiscal 2022, we have continued to invest in our long-term growth including
through our acquisition of TruSTAR Technology, Inc., a provider of an intelligence platform for cybersecurity and threat data.
Impact of COVID-19 on our Business
The ongoing COVID-19 pandemic has created significant global economic uncertainty, adversely impacted the
business of some of our customers, partners and vendors, and has impacted our business and results of operations in the past
and could further impact our results of operations and our cash flows in the future.
COVID-19 has impacted, and could further impact, our business and that of our customers as a result of quarantines,
various local, state and federal government public health orders, and other restrictions. For example, we are monitoring office
use in the global offices we have selected to re-open, allowing all of our employees to continue to work remotely if they prefer,
allowing our employees to elect not to travel, implementing in-person, onsite and travel safety protocols, and we have shifted
certain of our customer-focused and corporate events to online-only or hybrid experiences. These operational changes could
extend into future quarters. The long-term impact of COVID-19 on our operational and financial performance will depend on
certain developments, including the duration, spread, and severity of the virus and its variants, as well as the efficacy of
vaccines and vaccine distribution, the response of our U.S. employees to the federal vaccine mandate, and the timing and
trajectory of the economic recovery as well as consumer behavior as the recovery develops. Our future performance will also
depend on the continuing impact of COVID-19 on our customers, partners, employee productivity and retention and sales
cycles, including as a result of travel restrictions and limitations. These potential developments are uncertain and cannot be
predicted and as such, the extent to which COVID-19 will continue to impact our business, operations, financial condition and
49
results of operations over the long term is unknown. Furthermore, due to our shift to a cloud services delivery model, the effect
of COVID-19 may not be fully reflected in our results of operations and overall financial performance until future periods.
As additional COVID-19 variants emerge, we will continue to evaluate our return to work and distributed workforce
strategies taking into consideration factors such as treatments, vaccines progress, and public health recommendations. We also
continue to evaluate our real estate needs and have in the past made the decision to exit certain office space leases. As we
continue to assess how and to what extent our employees will gradually return to work in our offices, we may decide to exit
additional office space leases which could result in further losses associated with our real estate lease assets.
See Part I, Item 1A. “Risk Factors” in this Form 10-K for further discussion of the impact and possible future impacts
of the COVID-19 pandemic on our business.
Key Business Metrics
We use certain key financial and operating metrics to evaluate our performance and monitor the growth of our
business as we continue to shift to a cloud services delivery model.
Annual Recurring Revenue
We use cloud annual recurring revenue (“Cloud ARR”) and total annual recurring revenue (“Total ARR”) to identify
the annual recurring value of customer contracts at the end of a reporting period and to monitor the growth of our recurring
business as we continue to shift to a cloud services delivery model. Cloud ARR represents the annualized revenue run-rate of
active cloud services contracts at the end of a reporting period. Total ARR represents the annualized revenue run-rate of active
cloud services, term license and maintenance 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. ARR should be viewed
independently of revenue, and does not represent our revenue under U.S. GAAP on an annualized basis, as it is an operating
metric that can be impacted by contract start and end dates and renewal rates. ARR is not intended to be a replacement for
forecasts of revenue.
The following presents our Cloud ARR and Total ARR (in millions):
Cloud ARR
$810
$1,336
2021
2022
Total ARR
$2,365
$3,117
2021
2022
Number of Customers with ARR Greater than $1 Million
We monitor the number of customers with Cloud ARR and Total ARR greater than $1 million at the end of a reporting
period. An increase in this metric is an indicator of our ability to attract and scale with large enterprise customers who may have
a broader array of use cases that align with the Splunk platform. The following presents the number of our customers with
Cloud ARR and Total ARR greater than $1 million:
50
FORM 10-K
Number of Customers with
Cloud ARR > $1 Million
186
317
2021
2022
Number of Customers with
Total ARR > $1 Million
510
675
2021
2022
Dollar-Based Net Retention Rate
We quantify our net expansion across existing cloud customers through our cloud dollar-based net retention rate
(“Cloud DBNRR”). We calculate 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. The following presents our trailing 12-month Cloud DBNRR:
Trailing 12-Month
Cloud DBNRR
129%
132%
2021
2022
Remaining Performance Obligations (“RPO”) Bookings
RPO Bookings is an indicator of overall bookings momentum. We calculate total RPO Bookings as total revenue plus
the change in total RPO. Total RPO is separately disclosed in Note 9 “Revenue” of our accompanying Notes to Consolidated
Financial Statements included elsewhere in this Annual Report on 10-K. The following presents our total RPO Bookings (in
millions):
RPO Bookings
$2,414
$3,266
2021
2022
Below is a calculation of fiscal 2022 and fiscal 2021 total RPO Bookings:
51
Fiscal Year Ended January 31,
(In thousands)
2022
2021
Total revenues
$
2,673,664 $
2,229,385
Change in RPO
591,992
184,319
Total RPO Bookings
$
3,265,656 $
2,413,704
Financial Summary
(Dollars in millions)
Total Revenues
$2,229.4
$2,673.7
2021
2022
Operating Loss
$(780.2)
$(1,146.8)
2021
2022
Revenue From Customers
Located Outside of the U.S.
34%
31%
2021
2022
Net Loss
$(908.0)
$(1,339.1)
2021
2022
Components of Operating Results
Revenues
Cloud services revenues. Cloud services allow customers to use hosted software over the contract period
without taking possession of the software. We recognize the revenues associated with our cloud services ratably, over the
associated subscription term.
License revenues. License revenues consist of revenues from term licenses, and to a much lesser extent
perpetual licenses, under which we generally recognize the license fee portion of the arrangement upfront, assuming all revenue
recognition criteria are satisfied. License revenues reflect the revenues recognized from sales of licenses to new customers and
additional licenses to existing customers, including sales from the renewal of term licenses. Seasonal trends that contribute to
increased sales activity in the fourth fiscal quarter often result in lower sequential revenues in the first fiscal quarter, and we
expect this trend to continue.
Maintenance and services revenues. Maintenance and services revenues consist of revenues from
maintenance agreements and professional services and training.
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FORM 10-K
• Maintenance revenues. When a term license is purchased, maintenance is bundled with the license for the term
of the license period. While we only sell perpetual licenses on an exception basis, for any existing perpetual
license customers, maintenance is usually renewed on an annual basis. Customers with maintenance agreements
are entitled to receive support and unspecified upgrades and enhancements when and if they become available
during the maintenance period. We recognize the revenues associated with maintenance agreements ratably, on a
straight-line basis, over the associated maintenance period. Maintenance revenues as a percentage of total
revenues were 17.6% and 21.4% for fiscal 2022 and 2021, respectively.
• Professional services and training revenues. We have a professional services organization focused on helping
our customers deploy our software in highly complex operational environments and train their personnel. Training
and professional services have stated billing rates per service hour or are provided on a subscription basis,
accordingly, revenues are recognized as services are delivered or ratably over the subscription period. We have
experienced continued growth in our professional services revenues primarily due to the deployment of our
software with some customers that have large, highly complex IT environments.
Cost of Revenues
Cost of cloud services revenues. Cost of cloud services revenues includes salaries, benefits, stock-based
compensation and related expenses such as employer taxes for our cloud services organization, allocated overhead for
depreciation of equipment, facilities and IT, amortization of acquired intangible assets and third-party hosting fees. We
recognize expenses related to our cloud services organizations as they are incurred.
Cost of license revenues. Cost of license revenues includes all direct costs to deliver our products, including
salaries, benefits, stock-based compensation and related expenses such as employer taxes, allocated overhead for facilities and
IT and amortization of acquired intangible assets. We recognize these expenses as they are incurred.
Cost of maintenance and services revenues. Cost of maintenance and services revenues includes salaries,
benefits, stock-based compensation and related expenses such as employer taxes for our maintenance and services
organizations, third-party consulting services and allocated overhead for depreciation of equipment, facilities and IT. We
recognize expenses related to our maintenance and services organizations as they are incurred.
Operating Expenses
Our operating expenses are classified into three categories: research and development, sales and marketing and general
and administrative. For each category, the largest component is personnel costs, which include salaries, employee benefit costs,
bonuses, commissions as applicable, stock-based compensation and related expenses such as employer taxes. Operating
expenses also include allocated overhead costs for depreciation of equipment, facilities and IT. Allocated costs for facilities
include costs for compensation of our facilities personnel, leasehold improvements and rent. Our allocated costs for IT include
costs for compensation of our IT personnel, costs associated with our IT infrastructure and software subscriptions. Operating
expenses are generally recognized as incurred.
Research and development. Research and development expenses primarily consist of personnel and facility-
related costs attributable to our research and development personnel. We have devoted our product development efforts
primarily to enhancing the functionality and expanding the capabilities of our software and services. We expect that our
research and development expenses will continue to increase, in absolute dollars, as we increase our research and development
headcount to further strengthen and enhance our software and services and invest in the development of our solutions and apps.
Sales and marketing. Sales and marketing expenses primarily consist of personnel and facility-related costs for
our sales, marketing and business development personnel, commissions earned by our sales personnel, and the cost of
marketing and business development programs, including advertising programs to promote our brand and awareness, demand
generating activities and customer events. We expect that sales and marketing expenses will continue to increase, in absolute
dollars, as we continue to hire additional personnel and invest in marketing programs.
General and administrative. General and administrative expenses primarily consist of personnel and facility-
related costs for our executive, finance, legal, human resources and administrative personnel; our legal, accounting and other
professional services fees; and other corporate expenses. We anticipate continuing to incur additional expenses due to growing
our operations, including higher legal, corporate insurance and accounting-related expenses.
53
Interest and Other Income (Expense), Net
Interest and other income (expense), net consists primarily of interest expense related to our convertible senior notes,
gain on extinguishment of convertible senior notes, a strategic investment impairment loss, foreign exchange gains and losses,
interest income on our investments and cash and cash equivalents balances and changes in the fair value of forward exchange
contracts.
Income Tax Provision (Benefit)
Our income tax provision (benefit) consists of federal, state and foreign income taxes. Because of our history of U.S.
operating losses, we have established a full valuation allowance on our U.S. deferred tax assets. We regularly assess the need
for the valuation allowance. If we determine that an adjustment is needed, we will record the necessary adjustment in the period
that the determination is made.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the
United States. The preparation of consolidated financial statements also requires us to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on
historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results
could differ significantly from the estimates made by our management. To the extent that there are differences between our
estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows
will be affected.
We believe that the assumptions and estimates associated with revenue recognition, deferred sales commissions and
business combinations have the greatest potential impact on our consolidated financial statements. Therefore, we consider these
to be our critical accounting policies and estimates. Accordingly, we believe these are the most critical to fully understand and
evaluate our financial condition and results of operations.
Revenue Recognition
Our contracts with customers often contain multiple performance obligations. For these contracts, we account for
individual performance obligations separately if they are distinct. We apply significant judgment in identifying and accounting
for each performance obligation, as a result of evaluating the terms and conditions in contracts. The transaction price is
allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. We determine the SSP
based on an observable standalone selling price when it is available, as well as other factors, including the price charged to
customers, our discounting practices, and our overall pricing objectives, while maximizing observable inputs. In situations
where pricing is highly variable, we estimate the SSP using the residual approach.
Deferred Sales Commissions
Sales commissions paid to our sales force and the related payroll taxes are considered incremental and recoverable
costs of obtaining a contract with a customer. Costs related to new cloud services and term license contracts are amortized in
proportion to the transfer of related services and delivery of licenses, including renewals, over the average period of benefit. We
have determined that the average period of benefit related to these costs is five years, which is longer than our customers’ initial
contract periods, but reflects the average period of benefit, including expected contract renewals. In arriving at this average
period of benefit we considered the nature of our customer contracts, the duration of our relationships with customers, and the
estimated life cycles of our technology. Costs related to renewals are amortized over the contract period. In capitalizing and
amortizing deferred commissions, we have elected to apply a portfolio approach.
Business Combinations
We use our best estimates and assumptions to allocate the fair value of purchase consideration to the tangible and
intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of purchase
consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. We apply significant
54
FORM 10-K
judgment in determining the fair value of the intangible assets acquired, which involves the use of significant estimates and
assumptions with respect to revenue growth rates, royalty rate and technology migration curve. While we use our best estimates
and judgments, our estimates are inherently uncertain and subject to refinement. During the measurement period, which may be
up to one year from the acquisition date, we may record adjustments to the fair value of these tangible and intangible assets
acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions and tax-related
valuation allowances are initially established in connection with a business combination as of the acquisition date. We continue
to collect information and reevaluate these estimates and assumptions quarterly and record any adjustments to our preliminary
estimates to goodwill provided that we are within the measurement period. Upon the conclusion of the final determination of
the fair value of assets acquired or liabilities assumed during the measurement period, any subsequent adjustments are included
in our consolidated statements of operations.
For further information on all of our significant accounting policies, refer to Note 1 “Description of the Business and
Significant Accounting Policies” of our accompanying Notes to Consolidated Financial Statements included elsewhere in this
Annual Report on Form 10-K.
55
Results of Operations
The following table sets forth our results of operations for the periods presented and as a percentage of our total
revenues for those periods. The period-to-period comparison of financial results is not necessarily indicative of financial results
to be achieved in future periods.
Consolidated Statements of Operations Data
Fiscal Year Ended January 31,
(In thousands and as % of total
revenues)
2022
2021
2020
Revenues
Cloud services
$
943,785
35.3 % $
554,132
24.9 % $
312,358
13.2 %
License
1,056,481
39.5
971,378
43.6
1,373,367
58.2
Maintenance and services
673,398
25.2
703,875
31.6
673,201
28.5
Total revenues
2,673,664
100.0
2,229,385
100.0
2,358,926
100.0
Cost of revenues
Cloud services (1)
398,274
42.2
252,290
45.5
161,510
51.7
License (1)
9,215
0.9
20,864
2.1
24,116
1.8
Maintenance and services (1)
326,480
48.5
274,191
39.0
244,162
36.3
Total cost of revenues
733,969
27.5
547,345
24.6
429,788
18.2
Gross profit
1,939,695
72.5
1,682,040
75.4
1,929,138
81.8
Operating expenses
Research and development
1,029,574
38.5
791,026
35.5
619,800
26.3
Sales and marketing
1,534,600
57.4
1,336,056
59.9
1,263,873
53.6
General and administrative
522,350
19.5
335,144
15.0
332,602
14.1
Total operating expenses
3,086,524
115.4
2,462,226
110.4
2,216,275
94.0
Operating loss
(1,146,829)
(42.9)
(780,186)
(35.0)
(287,137)
(12.2)
Interest and other income
(expense), net
Interest income
2,583
0.1
13,850
0.6
54,142
2.3
Interest expense
(174,598)
(6.5)
(123,076)
(5.5)
(96,249)
(4.1)
Other income (expense), net
(1,939)
(0.1)
(11,636)
(0.5)
(2,407)
(0.1)
Total interest and other
income (expense), net
(173,954)
(6.5)
(120,862)
(5.4)
(44,514)
(1.9)
Loss before income taxes
(1,320,783)
(49.4)
(901,048)
(40.4)
(331,651)
(14.1)
Income tax provision
18,314
0.7
6,932
0.3
5,017
0.2
Net loss
$ (1,339,097)
(50.1) % $
(907,980)
(40.7) % $
(336,668)
(14.3) %
_________________________
(1)
Calculated as a percentage of the associated revenues.
56
FORM 10-K
Comparison of the Fiscal Years Ended January 31, 2022 and 2021
Revenues
(Dollars in millions)
Total Revenues
$2,229.4
$2,673.7
2021
2022
Cloud Services
$554.1
$943.8
2021
2022
License
$971.4
$1,056.5
2021
2022
Maintenance and Services
$703.9
$673.4
2021
2022
Cloud Services
(% of Revenues)
24.9%
35.3%
2021
2022
License
(% of Revenues)
43.6%
39.5%
2021
2022
Maintenance and Services
(% of Revenues)
31.6%
25.2%
2021
2022
Fiscal 2022 - 2021
Total revenues increased $444.3 million, or 19.9%, primarily due to the following:
+ increase of $389.7 million, or 70.3%, in cloud services revenues
+ increase of $85.1 million, or 8.8%, in license revenues
- decrease of $30.5 million, or (4.3)%, in maintenance and services revenues
57
Our transition to a cloud services delivery model has impacted, and it will continue to impact the timing of our
recognition of revenue as an increasing percentage of our sales becomes recognized ratably. The increase in cloud services
revenues reflects the continued customer adoption of our cloud services offerings. Our customers are increasingly purchasing
our Splunk Cloud service as it delivers the benefits of Splunk Enterprise, while eliminating the need to purchase, deploy and
manage infrastructure. The increase in license revenues is a result of increased license bookings during fiscal 2022, as
compared to fiscal 2021. Maintenance and services revenues decreased as our customers shift to a cloud services delivery
model.
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FORM 10-K
Cost of Revenues and Gross Margin
(Dollars in millions)
Total
Cost of Revenues
$547.3
$734.0
2021
2022
Total
Gross Margin
75.4%
72.5%
2021
2022
Cloud Services
Cost of Revenues
$252.3
$398.3
2021
2022
License
Cost of Revenues
$20.9
$9.2
2021
2022
Maintenance and Services
Cost of Revenues
$274.2
$326.5
2021
2022
Cloud Services
Gross Margin
54.5%
57.8%
2021
2022
License
Gross Margin
97.9%
99.1%
2021
2022
Maintenance and Services
Gross Margin
61.0%
51.5%
2021
2022
Fiscal 2022 - 2021
Total cost of revenues increased $186.6 million or 34.1% primarily due to the increase in cloud services cost of revenues, as a
result of our ongoing transition from a license to a cloud services delivery model.
Cloud services cost of revenues increased $146.0 million or 57.9%, primarily due to the following:
+ increase of $94.0 million in third-party hosting fees to support our cloud services
+ increase of $26.7 million in salaries and benefits, including stock-based compensation expense as we increased headcount
+ increase of $13.1 million in third-party consulting services
+ increase of $10.5 million in overhead expenses
Maintenance and services cost of revenues increased $52.3 million, or 19.1%, primarily due to the following:
+ increase of $34.6 million in salaries and benefits, including stock-based compensation expense as we increased headcount
59
+ increase of $15.2 million in third-party consulting services
Total gross margin decreased primarily due to a shift in the overall revenue mix in favor of cloud services, which have lower
gross margins than our license business. The decrease in maintenance and services gross margin is primarily attributable to a
decline in maintenance and services revenues and an increase in costs as we scale our cloud services related professional
services.
60
FORM 10-K
Operating Expenses
(Dollars in millions)
Research and Development
$791.0
$1,029.6
2021
2022
Sales and Marketing
$1,336.1
$1,534.6
2021
2022
General and Administrative
$335.1
$522.4
2021
2022
Research & Development
(as % of Revenues)
35.5%
38.5%
2021
2022
Sales and Marketing
(as % of Revenues)
59.9%
57.4%
2021
2022
General and Administrative
(as % of Revenues)
15.0%
19.5%
2021
2022
Total Operating Expenses
$2,462.2
$3,086.5
2021
2022
Total Operating Expenses
(as % of Revenues)
110.4%
115.4%
2021
2022
Research and Development Expense
Fiscal 2022 - 2021
Research and development expense increased $238.5 million, or 30.2%, primarily due to the following:
+ increase of $165.0 million in salaries and benefits, which includes a $55.9 million increase in stock-based compensation
expense as we increased headcount
+ increase of $43.3 million in third-party hosting fees to support our product development efforts
+ increase of $17.8 million in third-party consulting services
+ increase of $8.5 million in overhead and other expenses
Sales and Marketing Expense
Fiscal 2022 - 2021
Sales and marketing expense increased $198.5 million, or 14.9%, primarily due to the following:
61
+ increase of $134.1 million in salaries and benefits, which includes a $48.1 million increase in stock-based compensation
expense as we increased headcount
+ increase of $20.8 million in overhead and other expenses
+ increase of $19.5 million in third-party consulting services
+ increase of $14.8 million in marketing expenses
+ increase of $5.1 million in travel-related expenses
General and Administrative Expense
Fiscal 2022 - 2021
General and administrative expense increased $187.2 million, or 55.9%, primarily due to the following:
+ increase of $128.9 million in salaries and benefits, which includes a $48.6 million increase in stock-based compensation
expense as we increased headcount
+ increase of $55.2 million in facility exit costs representing the loss on the termination of a lease in San Jose, CA
+ increase of $3.7 million in overhead and other expenses
62
FORM 10-K
Interest and Other Income (Expense), net
Fiscal Year Ended January 31,
(In thousands)
2022
2021
Interest and other income (expense), net
Interest income
$
2,583 $
13,850
Interest expense
(174,598)
(123,076)
Other income (expense), net
(1,939)
(11,636)
Total interest and other income (expense), net
$
(173,954) $
(120,862)
Fiscal 2022 - 2021
Interest and other income (expense), net reflects a net increase in expense of $53.1 million, primarily due to an increase in
interest expense related to our convertible notes driven by the issuance of the 2026 Notes in July 2021 and the issuance of the
2027 Notes in June 2020, which contributed less than eight months of interest expense during fiscal 2021.
Income Tax Provision
Fiscal Year Ended January 31,
(In thousands)
2022
2021
Income tax provision
$
18,314 $
6,932
Fiscal 2022 - 2021
Our income tax provision increased primarily due to increases in foreign profits and associated taxes, greater sales to countries
that impose withholding taxes, and reduced stock compensation tax benefits in foreign jurisdictions.
63
Seasonality, Cyclicality and Quarterly Trends
Our quarterly results reflect seasonality in the sale of our offerings. Historically, a pattern of increased license sales in
the fourth fiscal quarter as a result of industry buying patterns has positively impacted sales activity in that period, which can
result in lower sequential revenue in the first fiscal quarter. We expect some of this seasonality to continue in fiscal 2023 and
beyond as license sales activity continues, however we expect the impact of this seasonality to decrease over time as a higher
percentage of our revenues come from cloud services. As we continue to expect seasonally higher bookings and billings in the
fiscal fourth quarter, with more of our revenue being recognized ratably there will also be a seasonal impact on our remaining
performance obligations and deferred revenue. Our gross margins and operating losses have been affected by these historical
trends because the majority of our expenses are relatively fixed in the short term. The timing of revenues in relation to our
expense activity, which generally does not correlate directly with revenues, has an impact on cost of revenues, research and
development expense, sales and marketing expense and general and administrative expense as a percentage of total revenues in
each fiscal quarter during the year. The majority of our expenses are personnel-related and include salaries, stock-based
compensation, benefits and incentive-based compensation plan expenses. As a result, we have not experienced significant
seasonal fluctuations in the timing of expenses from period to period. Although these seasonal factors are common in the
technology industry, historical patterns should not be considered a reliable indicator of our future sales activity or performance.
Liquidity and Capital Resources
Fiscal Year Ended January 31,
(In thousands)
2022
2021
Cash and cash equivalents
$
1,428,691 $
1,771,064
Investments, current
286,337
87,847
Investments, non-current
46,431
13,728
(In millions)
Net Cash Provided by
(Used in)
Operating Activities
$(190.9)
$128.0
2021
2022
Net Cash Provided by
(Used in)
Investing Activities
$797.2
$(333.8)
2021
2022
Net Cash Provided by
(Used in)
Financing Activities
$382.9
$(136.7)
2021
2022
Our principal sources of liquidity are our cash and cash equivalents, investments and net accounts receivable. From
time to time, we have also issued convertible debt to supplement our working capital. As of January 31, 2022, we had $1.8
billion of cash, cash equivalents and investments of which $287.6 million was held by foreign subsidiaries. We believe that
these funds will be sufficient to meet our anticipated cash needs for at least the next 12 months.
In June 2021, our board of directors authorized and approved a stock repurchase program of up to $1.0 billion of our
outstanding common stock. During fiscal 2022 we repurchased 6.9 million shares of common stock with a total price of $1.0
billion, under trading plans complying with Rule 10b5-1 under the Exchange Act, at an average price of $145.23 per share. The
repurchased shares are reflected as treasury stock on our consolidated balance sheets and statement of stockholders’ equity. The
repurchase program was complete as of October 31, 2021.
We intend to continue to focus our capital expenditures in fiscal 2023 to support the growth in our operations,
including acquisition-related activities. Our future capital requirements will depend on many factors including our growth rate,
the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the
introduction of new and enhanced software and services offerings, the investments in our office facilities and our systems
infrastructure, the continuing market acceptance of our offerings and our planned investments, particularly in our product
development efforts or acquisitions of complementary businesses, applications or technologies.
64
FORM 10-K
Beginning in fiscal 2020, we shifted from generally invoicing our multi-year contracts upfront to invoicing on an
annual basis. Accordingly, the timing of our cash collections will extend over a longer period of time than it has historically.
In July 2021, we issued $1 billion aggregate principal amount of 0.75% Convertible Senior Notes due 2026 (the
“2026 Notes”) with Silver Lake Alpine, L.P., Silver Lake Alpine (Offshore Master), L.P. and Silver Lake Partners VI, L.P. as
the purchasers. The 2026 Notes are general senior, unsecured obligations of Splunk. The total proceeds from the issuance of the
2026 Notes was $981.7 million, net of issuance costs. In June 2020, we issued $1.27 billion aggregate principal amount of
1.125% Convertible Senior Notes due 2027 (the “2027 Notes”), including the exercise in full by the initial purchasers of the
2027 Notes of their option to purchase an additional $165.0 million principal amount of 2027 Notes. The 2027 Notes are
general senior, unsecured obligations of Splunk. The total proceeds from the issuance of the 2027 Notes was $1.25 billion, net
of initial purchaser discounts and other issuance costs. In connection with the issuance of the 2027 Notes, we entered into
privately negotiated capped call transactions with certain counterparties (the “2027 Capped Calls”). We used approximately
$137.4 million of the net proceeds from the offering of the 2027 Notes to pay the cost of the 2027 Capped Calls and $691.6
million to repurchase, for cash, approximately $488.3 million aggregate principal amount of our outstanding 2023 Notes. In
September 2018, we issued $1.27 billion aggregate principal amount of 0.50% Convertible Senior Notes due 2023 (the “2023
Notes”) and $862.5 million aggregate principal amount of 1.125% Convertible Senior Notes due 2025 (the “2025 Notes”). In
connection with the issuance of the 2023 Notes and the 2025 Notes, we entered into privately negotiated capped call
transactions with certain counterparties (the “2023 and 2025 Capped Calls”). The premiums paid for the purchase of the 2023
and 2025 Capped Calls were $274.3 million. Refer to Note 7 “Convertible Senior Notes” of our accompanying Notes to
Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
In the event that additional financing is required from outside sources, we may not be able to raise it on terms
acceptable to us, if at all. If we are unable to raise additional capital when desired, our business, operating results and financial
condition could be adversely affected.
Operating Activities
Net cash provided by (used in) operating activities consist of our net loss adjusted for certain non-cash items and
changes in operating assets and liabilities during the year.
Fiscal 2022 - 2021
Net cash provided by operating activities was $128.0 million for the year ended January 31, 2022 compared to net cash used in
operating activities of $190.9 million in the prior year. Net cash provided by operating activities in fiscal 2022 was primarily
due to higher cash collections from customers relative to payments to vendors and employees.
Investing Activities
Fiscal 2022 - 2021
Net cash used in investing activities of $333.8 million for the year ended January 31, 2022 primarily consisted of marketable
securities purchases of $210.6 million, net of maturities, cash consideration paid related to the TruSTAR acquisition, net of cash
acquired, of $80.3 million, purchases of strategic investments of $23.8 million, purchases of property and equipment of $10.7
million and cash used for the development of internal-use software of $9.4 million.
Net cash provided by investing activities of $797.2 million for the year ended January 31, 2021 primarily consisted of $908.7
million maturities of marketable securities, offset by cash consideration paid related to the Rigor, Plumbr and Flowmill
acquisitions, net of cash acquired of $56.4 million, purchases of property and equipment of $37.1 million and cash used for the
development of internal-use software of $14.6 million.
Financing Activities
Fiscal 2022 - 2021
Net cash used in financing activities of $136.7 million for the year ended January 31, 2022 primarily consisted of $1.0 billion of
repurchases of common stock and taxes paid related to the net share settlement of equity awards of $201.0 million, offset by net
proceeds of $982.2 from the issuance of the 2026 Notes, and proceeds of $79.9 million from our employee stock purchase plan.
65
Net cash provided by financing activities of $382.9 million for the year ended January 31, 2021 of $440.2 million proceeds
from the issuance of the 2027 Notes, net of capped calls purchases and a partial repurchase of the 2023 Notes, and proceeds of
$79.9 million from employee stock purchase plan.
Contractual Obligations
Our principal commitments consist of obligations under leases for office space. Refer to Note 4 “Leases” of our
accompanying Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for
additional details related to our accounting for leases and related costs. In addition, we hold convertible debt securities. For
more information on our convertible senior notes, refer to Note 7 “Convertible Senior Notes” of our accompanying Notes to
Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. As of January 31, 2022, our other
contractual commitments associated with agreements that are enforceable and legally binding and that specify all significant
terms were payments of $0.2 billion due in the next 12 months and $0.1 billion due thereafter. We expect to fund these
obligations with cash flows from operations and cash on our balance sheet.
Indemnification Arrangements
During the ordinary course of business, we may indemnify, hold harmless and agree to reimburse for losses suffered or
incurred, our customers, vendors and each of their affiliates for certain intellectual property infringement and other claims by
third parties with respect to our offerings, in connection with our commercial license arrangements or related to general
business dealings with those parties.
As permitted under Delaware law, we have entered into indemnification agreements with our officers, directors and
certain employees, indemnifying them for certain events or occurrences in connection with their service as our officers or
directors or those of our direct and indirect subsidiaries.
Claims and reimbursements under indemnification arrangements have not been material to our consolidated financial
statements; therefore, there is no accrual of such amounts at January 31, 2022. We are unable to estimate the maximum
potential impact of these indemnifications on our future results of operations.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
We had cash and cash equivalents of $1.4 billion as of January 31, 2022. We hold our cash and cash equivalents for
working capital purposes. Our cash and cash equivalents are held in cash deposits and money market funds. The primary
objective of our investment activities is to preserve principal while maximizing yields without significantly increasing risk. This
objective is accomplished by making diversified investments, consisting only of investment grade securities. During fiscal 2022
and 2021, the effect of a hypothetical 10% increase or decrease in overall interest rates would not have had a material impact on
our operating results or the value of our available-for-sale debt securities.
In September 2018, we issued $2.13 billion aggregate principal amount of convertible senior notes in a private
placement, which includes $1.27 billion aggregate principal amount of 0.50% Convertible Senior Notes due 2023 (the “2023
Notes”) and $862.5 million aggregate principal amount of 1.125% Convertible Senior Notes due 2025 (the “2025 Notes”). In
June 2020, we issued $1.27 billion aggregate principal amount of 1.125% Convertible Senior Notes due 2027 (the “2027
Notes”), including the exercise in full by the initial purchasers of the 2027 Notes of their option to purchase an additional
$165.0 million principal amount of 2027 Notes. The 2027 Notes are general senior, unsecured obligations of Splunk. In July
2021, we issued $1 billion aggregate principal amount of 0.75% Convertible Senior Notes due 2026 (the “2026 Notes”). As
these instruments have a fixed annual interest rate, we have no financial or economic interest exposure associated with changes
in interest rates. However, the fair value of fixed rate debt instruments fluctuates when interest rates change. Additionally, the
fair value of either series of notes can be affected when the market price of our common stock fluctuates. We carry the notes at
face value less unamortized discount on our balance sheet, and we present the fair value for required disclosure purposes only.
Refer to Note 7 “Convertible Senior Notes” of our accompanying Notes to Consolidated Financial Statements included
elsewhere in this Annual Report on Form 10-K.
Foreign Currency Exchange Risk
66
FORM 10-K
Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates.
All of our revenues are generated in U.S. dollars. Our expenses are generally denominated in the currencies in which our
operations are located, which is primarily in the United States and to a lesser extent in Europe and Asia. Our results of
operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be
adversely affected in the future due to changes in foreign exchange rates. We may seek to minimize the impact of certain
foreign currency fluctuations by hedging certain balance sheet exposures with foreign currency forward contracts. Any gain or
loss from settling these contracts is offset by the loss or gain derived from the underlying balance sheet exposures. We do not
enter into any hedging contracts for trading or speculative purposes. The effect of a hypothetical 10% change in foreign
currency exchange rates applicable to our business would not have a material impact on our historical consolidated financial
statements. As our international operations grow, we will continue to reassess our approach to manage our risk relating to
fluctuations in currency rates.
Inflation
We do not believe that inflation had a material effect on our business, financial condition or results of operations in the
last three fiscal years. If our costs were to become subject to significant inflationary pressures, we may not be able to fully
offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition
and results of operations.
Recent Accounting Pronouncements
For recent accounting pronouncements, refer to Note 1 “Description of the Business and Significant Accounting
Policies” of our accompanying Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form
10-K.
67
Item 8. Financial Statements and Supplementary Data
Splunk Inc.
Index to Consolidated Financial Statements
Page No.
Report of Independent Registered Public Accounting Firm (PCAOB ID: 238)
69
Consolidated Balance Sheets
71
Consolidated Statements of Operations
72
Consolidated Statements of Comprehensive Loss
73
Consolidated Statements of Cash Flows
74
Consolidated Statements of Stockholders’ Equity
76
Notes to Consolidated Financial Statements
78
68
FORM 10-K
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Splunk Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Splunk Inc. and its subsidiaries (the “Company”) as of
January 31, 2022 and 2021, and the related consolidated statements of operations, of comprehensive loss, of stockholders’
equity and of cash flows for each of the three years in the period ended January 31, 2022, including the related notes
(collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over
financial reporting as of January 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of January 31, 2022 and 2021, and the results of its operations and its cash flows for each of the
three years in the period ended January 31, 2022 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of January 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for
leases as of February 1, 2019.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to
express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
69
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue recognition –Identifying, Evaluating and Accounting for Terms and Conditions in Contracts with Customers
As described in Note 1 to the consolidated financial statements, the Company generates revenue in the form of cloud service
fees, software license and related maintenance fees, and other service fees. The Company’s contracts with customers often
contain multiple performance obligations. Management accounts for individual performance obligations separately if they are
distinct. Management applies significant judgment in identifying and accounting for each performance obligation, as a result of
evaluating the terms and conditions in contracts. As disclosed by management, the Company’s revenue was $2.7 billion for the
fiscal year ended January 31, 2022.
The principal considerations for our determination that performing procedures relating to revenue recognition, specifically the
identification, evaluation and accounting for terms and conditions in contracts with customers, is a critical audit matter are the
significant judgment by management in identifying, evaluating and accounting for terms and conditions in contracts with
customers. This in turn led to significant auditor judgment and effort in performing procedures and evaluating audit evidence
related to whether terms and conditions in contracts were appropriately identified, evaluated and accounted for by management.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
revenue recognition process, including controls over the identification and evaluation of the contractual terms and conditions
that impact the identification of performance obligations and determination of revenue recognition. These procedures also
included, among others, (i) testing the completeness and accuracy of management’s identification and evaluation of the terms
and conditions in contracts with customers by examining revenue arrangements on a test basis, and (ii) testing management’s
process for identifying and evaluating the terms and conditions in contracts with customers, including management’s
identification of the performance obligations and determination of the impact of those terms and conditions on revenue
recognition.
/s/ PricewaterhouseCoopers LLP
San Jose, California
March 24, 2022
We have served as the Company’s auditor since 2010.
70
FORM 10-K
(In thousands, except share and per share amounts)
January 31, 2022
January 31, 2021
Assets
Current assets
Cash and cash equivalents
$
1,428,691 $
1,771,064
Investments, current
286,337
87,847
Accounts receivable, net
1,306,666
1,114,199
Prepaid expenses and other current assets
152,871
162,939
Deferred commissions, current
102,322
136,331
Total current assets
3,276,887
3,272,380
Investments, non-current
46,431
13,728
Accounts receivable, non-current
242,689
347,202
Operating lease right-of-use assets
229,198
356,296
Property and equipment, net
124,900
182,780
Intangible assets, net
164,769
206,153
Goodwill
1,401,628
1,334,888
Deferred commissions, non-current
200,876
69,637
Other assets
103,497
85,422
Total assets
$
5,790,875 $
5,868,486
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable
$
59,206 $
9,319
Accrued compensation
396,952
281,986
Accrued expenses and other liabilities
257,979
202,959
Deferred revenue, current
1,384,605
1,030,484
Total current liabilities
2,098,742
1,524,748
Convertible senior notes, net
3,137,731
2,302,635
Operating lease liabilities
225,556
330,970
Deferred revenue, non-current
86,584
110,418
Other liabilities, non-current
19,491
5,710
Total non-current liabilities
3,469,362
2,749,733
Total liabilities
5,568,104
4,274,481
Commitments and contingencies (Note 3 and 4)
Stockholders’ equity
Preferred stock: $0.001 par value; 20,000,000 shares authorized; no shares
issued or outstanding at January 31, 2022 and January 31, 2021
—
—
Common stock: $0.001 par value; 1,000,000,000 shares authorized;
160,044,675 shares outstanding at January 31, 2022, and 163,147,139 shares
issued and outstanding at January 31, 2021
167
163
Accumulated other comprehensive loss
(1,199)
(592)
Additional paid-in capital
5,032,351
4,063,885
Treasury stock, at cost: 6,885,414 shares at January 31, 2022, and 0 shares at
January 31, 2021
(1,000,000)
—
Accumulated deficit
(3,808,548)
(2,469,451)
Total stockholders’ equity
222,771
1,594,005
Total liabilities and stockholders’ equity
$
5,790,875 $
5,868,486
The accompanying notes are an integral part of these consolidated financial statements.
Splunk Inc.
CONSOLIDATED BALANCE SHEETS
71
Fiscal Year Ended January 31,
(In thousands, except per share amounts)
2022
2021
2020
Revenues
Cloud services
$
943,785 $
554,132 $
312,358
License
1,056,481
971,378
1,373,367
Maintenance and services
673,398
703,875
673,201
Total revenues
2,673,664
2,229,385
2,358,926
Cost of revenues (1)
Cloud services
398,274
252,290
161,510
License
9,215
20,864
24,116
Maintenance and services
326,480
274,191
244,162
Total cost of revenues
733,969
547,345
429,788
Gross profit
1,939,695
1,682,040
1,929,138
Operating expenses (1)
Research and development
1,029,574
791,026
619,800
Sales and marketing
1,534,600
1,336,056
1,263,873
General and administrative
522,350
335,144
332,602
Total operating expenses
3,086,524
2,462,226
2,216,275
Operating loss
(1,146,829)
(780,186)
(287,137)
Interest and other income (expense), net
Interest income
2,583
13,850
54,142
Interest expense
(174,598)
(123,076)
(96,249)
Other income (expense), net
(1,939)
(11,636)
(2,407)
Total interest and other income (expense), net
(173,954)
(120,862)
(44,514)
Loss before income taxes
(1,320,783)
(901,048)
(331,651)
Income tax provision
18,314
6,932
5,017
Net loss
$
(1,339,097) $
(907,980) $
(336,668)
Basic and diluted net loss per share
$
(8.29) $
(5.68) $
(2.22)
Weighted-average shares used in computing basic and diluted net
loss per share
161,628
159,744
151,949
_________________________
(1)
Amounts include stock-based compensation expense, as follows:
Cost of revenues
$
79,968 $
56,437 $
44,399
Research and development
327,065
271,120
185,262
Sales and marketing
246,447
198,346
216,276
General and administrative
141,338
92,752
99,487
The accompanying notes are an integral part of these consolidated financial statements.
Splunk Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
72
FORM 10-K
Fiscal Year Ended January 31,
(In thousands)
2022
2021
2020
Net loss
$
(1,339,097) $
(907,980) $
(336,668)
Other comprehensive income (loss)
Net unrealized gain (loss) on investments (net of tax)
(607)
(1,188)
1,114
Foreign currency translation adjustments
—
5,908
(3,920)
Total other comprehensive income (loss)
(607)
4,720
(2,806)
Comprehensive loss
$
(1,339,704) $
(903,260) $
(339,474)
The accompanying notes are an integral part of these consolidated financial statements.
Splunk Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
73
Fiscal Year Ended January 31,
(In thousands)
2022
2021
2020
Cash flows from operating activities
Net loss
$
(1,339,097) $
(907,980) $
(336,668)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization
99,145
93,666
67,661
Amortization of deferred commissions
144,850
142,095
104,353
Amortization of investment premiums (accretion of discounts),
net
1,741
(667)
(9,553)
Loss on strategic investment
—
4,500
—
Amortization of debt discount and issuance costs
140,847
98,977
80,156
Gain on extinguishment of convertible senior notes
—
(6,952)
—
Repurchase of convertible senior notes attributable to the
accreted interest related to debt discount
—
(22,149)
—
Loss on lease termination
47,124
—
—
Non-cash operating lease costs
9,191
25,410
1,198
Stock-based compensation
794,818
618,655
545,424
Disposal of property and equipment
785
1,045
1,974
Deferred income taxes
(579)
(3,590)
(6,120)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net
(87,491)
(153,724)
(679,891)
Prepaid expenses and other assets
(8,215)
(45,476)
(69,575)
Deferred commissions
(242,080)
(160,001)
(149,426)
Accounts payable
33,115
(9,082)
(5,441)
Accrued compensation
114,966
(3,805)
58,898
Accrued expenses and other liabilities
90,079
3,814
(10,392)
Deferred revenue
328,849
134,402
119,766
Net cash provided by (used in) operating activities
128,048
(190,862)
(287,636)
Cash flows from investing activities
Purchases of marketable securities
(388,741)
(87,135)
(1,086,317)
Maturities of marketable securities
178,124
995,878
1,080,812
Purchases of strategic investments
(23,750)
—
—
Acquisitions, net of cash acquired
(80,333)
(56,383)
(594,870)
Purchases of property and equipment
(10,671)
(37,107)
(101,119)
Capitalized software development costs
(9,361)
(14,602)
(2,589)
Other investment activities
980
(3,461)
(3,898)
Net cash provided by (used in) investing activities
(333,752)
797,190
(707,981)
Cash flows from financing activities
Proceeds from the exercise of stock options
2,430
3,473
3,543
Proceeds from employee stock purchase plan
79,938
79,949
60,383
Proceeds from the issuance of convertible senior notes, net of
issuance costs
981,920
1,246,544
—
Purchase of capped calls
—
(137,379)
—
Partial repurchase of convertible senior notes
—
(668,929)
—
Repurchases of common stock
(1,000,000)
—
—
Splunk Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
74
FORM 10-K
Taxes paid related to net share settlement of equity awards
(200,957)
(140,776)
(164,160)
Net cash provided by (used in) financing activities
(136,669)
382,882
(100,234)
Effect of exchange rate changes on cash and cash equivalents
—
3,201
(1,661)
Net increase (decrease) in cash and cash equivalents
(342,373)
992,411
(1,097,512)
Cash and cash equivalents at beginning of period
1,771,064
778,653
1,876,165
Cash and cash equivalents at end of period
$
1,428,691 $
1,771,064 $
778,653
Supplemental disclosures
Cash paid for income taxes
$
5,401 $
9,760 $
17,413
Cash paid for interest
24,900
29,654
15,761
Non-cash investing and financing activities
Increase in accrued purchases of property and equipment
4,273
4,148
1,329
Equity consideration for acquisitions
939
7,254
364,275
The accompanying notes are an integral part of these consolidated financial statements.
Splunk Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
75
Common Stock
(In thousands, except share amounts)
Shares
Amount
Additional
Paid-in
Capital
Treasury Stock
at Cost
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
Balances at January 31, 2019
149,167,298
$
149
$ 2,754,858
$
— $
(2,506) $ (1,232,044) $ 1,520,457
Cumulative-effect adjustment from
adoption of ASU 2016-02
—
—
—
—
—
7,241
7,241
Stock-based compensation
—
—
545,424
—
—
—
545,424
Capitalized software development
costs
—
—
951
—
—
—
951
Issuance of common stock upon
exercise of options
329,155
—
3,543
—
—
—
3,543
Vesting of restricted and
performance stock units
4,003,765
4
—
—
—
—
4
Issuance of restricted stock awards
641,382
1
—
—
—
—
1
Issuance of common stock from
acquisitions
2,948,471
3
344,569
—
—
—
344,572
Fair value of replacement equity
awards attributable to pre-
acquisition service
—
—
19,703
—
—
—
19,703
Vesting of early exercised options
—
—
784
—
—
—
784
Taxes paid related to net share
settlement of equity awards
—
—
(164,160)
—
—
—
(164,160)
Issuance of common stock upon
ESPP purchase
697,477
—
60,383
—
—
—
60,383
Unrealized gain from investments
(net of tax)
—
—
—
—
1,114
—
1,114
Net change in cumulative
translation adjustments
—
—
—
—
(3,920)
—
(3,920)
Net loss
—
—
—
—
—
(336,668)
(336,668)
Balances at January 31, 2020
157,787,548
157
3,566,055
—
(5,312) (1,561,471)
1,999,429
Stock-based compensation
—
—
618,655
—
—
—
618,655
Capitalized software development
costs
—
—
8,019
—
—
—
8,019
Issuance of common stock upon
exercise of options
352,910
—
3,472
—
—
—
3,472
Vesting of restricted and
performance stock units
4,252,183
5
—
—
—
—
5
Issuance of restricted stock awards
78,897
—
—
—
—
—
—
Issuance of common stock from
acquisitions
31,521
—
4,941
—
—
—
4,941
Fair value of replacement equity
awards attributable to pre-
acquisition service
—
—
2,313
—
—
—
2,313
Vesting of early exercised options
—
—
203
—
—
—
203
Taxes paid related to net share
settlement of equity awards
—
—
(140,776)
—
—
—
(140,776)
Issuance of common stock upon
ESPP purchase
644,080
1
79,949
—
—
—
79,950
Equity component of convertible
senior notes, net
—
—
342,062
—
—
—
342,062
Purchase of capped calls
—
—
(137,379)
—
—
—
(137,379)
Partial repurchase of convertible
senior notes
—
—
(283,629)
—
—
—
(283,629)
Unrealized loss from investments
(net of tax)
—
—
—
—
(1,188)
—
(1,188)
Net change in cumulative
translation adjustments
—
—
—
—
5,908
—
5,908
Net loss
—
—
—
—
—
(907,980)
(907,980)
Balances at January 31, 2021
163,147,139
163
4,063,885
—
(592) (2,469,451)
1,594,005
Stock-based compensation
—
—
794,818
—
—
—
794,818
Splunk Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
76
FORM 10-K
Capitalized software development
costs
—
—
3,539
—
—
—
3,539
Issuance of common stock upon
exercise of options
217,982
—
2,430
—
—
—
2,430
Vesting of restricted and
performance stock units
2,761,401
4
—
—
—
—
4
Issuance of restricted stock awards
9,307
—
—
—
—
—
—
Fair value of replacement equity
awards attributable to pre-
acquisition service
—
—
939
—
—
—
939
Vesting of early exercised options
—
—
92
—
—
—
92
Taxes paid related to net share
settlement of equity awards
—
—
(200,961)
—
—
—
(200,961)
Issuance of common stock upon
ESPP purchase
794,260
—
79,938
—
—
—
79,938
Equity component of convertible
senior notes, net
—
—
287,671
—
—
—
287,671
Repurchases of common stock
(6,885,414)
—
—
(1,000,000)
—
—
(1,000,000)
Unrealized loss from investments
(net of tax)
—
—
—
—
(607)
—
(607)
Net loss
—
—
—
—
—
(1,339,097) (1,339,097)
Balances at January 31, 2022
160,044,675
$
167
$ 5,032,351
$
(1,000,000) $
(1,199) $ (3,808,548) $
222,771
The accompanying notes are an integral part of these consolidated financial statements.
Splunk Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
77
(1) Description of the Business and Significant Accounting Policies
Business
Splunk Inc. (“we,” “us,” “our”) provides innovative cloud services and licensed software solutions that deliver and
operationalize insights from the data generated by digital systems. Data is produced by nearly every software application and
electronic device across an organization and contains a real-time record of various activities, such as business transactions,
customer and user behavior, and security threats. This data is growing significantly as a direct result of the prevalence and
importance of digital systems used by today’s organizations. Our solutions help users remove barriers between insights derived
from this data and actions organizations take to thrive in an era of unprecedented digital transformation. We were incorporated
in California in October 2003 and reincorporated in Delaware in May 2006.
Fiscal Year
Our fiscal year ends on January 31. References to fiscal 2022, for example, refer to the fiscal year ended January 31,
2022.
Basis of Presentation
We prepared our consolidated financial statements in accordance with generally accepted accounting principles
(“GAAP”). The accompanying consolidated financial statements include the accounts of Splunk Inc. and its direct and indirect
wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and reported amounts of revenues and expenses during the reporting periods covered by the
financial statements and accompanying notes. In particular, we make estimates with respect to the stand-alone selling price for
each distinct performance obligation included in customer contracts with multiple performance obligations, uncollectible
accounts receivable, the assessment of the useful life and recoverability of long-lived assets (property and equipment, goodwill
and identified intangibles), the period of benefit for deferred commissions, stock-based compensation expense, the fair value of
the liability component of the convertible debt, the fair value of assets acquired and liabilities assumed in business
combinations, income taxes, the discount rate used for operating leases, and contingencies. Actual results could differ from
those estimates.
COVID-19
The novel coronavirus (“COVID-19”) has created, and may continue to create, significant uncertainty in
macroeconomic conditions. The lasting social effects and extent of the impact the COVID-19 pandemic will directly or
indirectly have on the global economy, our business, results of our operations, and our financial condition will depend on future
developments which are highly uncertain and cannot be accurately predicted. These include the duration, spread, severity and
potential recurrence of the virus and its variants, and the global availability of COVID-19 vaccines and vaccination rates. As of
the date of issuance of these consolidated financial statements, we are not aware of any specific event or circumstance that
would require us to update our estimates, judgments or adjust the carrying value of our assets or liabilities. These estimates may
change, as new events occur and additional information is obtained, and will be recognized in the consolidated financial
statements as soon as they become known. Actual results could differ from those estimates and any such differences may be
material to our consolidated financial statements.
Segments
We operate our business as one operating segment: the development and marketing of cloud services and licensed
software solutions that enable our customers to gain real-time business insights by harnessing the value of their data. Our chief
operating decision maker is our Chief Executive Officer, who reviews financial information presented on a consolidated basis
for purposes of making operating decisions, assessing financial performance and allocating resources.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
78
FORM 10-K
Foreign Currency
During fiscal 2022, we reassessed the functional currency of our foreign subsidiaries and determined it was the
U.S. Dollar for all our subsidiaries. The impact of this change was not material. Foreign currency transaction gains and losses
are included in “Other income (expense), net” on our consolidated statements of operations and were not material during fiscal
2022, 2021, and 2020.
Foreign Currency Contracts
We may use foreign currency forward contracts as a part of our strategy to manage exposure related to foreign
currency denominated monetary assets and liabilities. These contracts typically have maturities of one month. They are not
designated as cash flow or fair value hedges under ASC Topic 815, Derivatives and Hedging. These contracts hedge assets and
liabilities that are denominated in foreign currencies and are carried at fair value as either assets or liabilities on our
consolidated balance sheets with changes in the fair value included in “Other income (expense), net” on our consolidated
statements of operations.
Business Combinations
We use our best estimates and assumptions to allocate the fair value of purchase consideration to the tangible and
intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of purchase
consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. We apply significant
judgment in determining the fair value of the intangible assets acquired, which involves the use of significant estimates and
assumptions with respect to revenue growth rates, royalty rate and technology migration curve. While we use our best estimates
and judgments, our estimates are inherently uncertain and subject to refinement. During the measurement period, which may be
up to one year from the acquisition date, we may record adjustments to the fair value of these tangible and intangible assets
acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions and tax-related
valuation allowances are initially established in connection with a business combination as of the acquisition date. We continue
to collect information and reevaluate these estimates and assumptions quarterly and record any adjustments to our preliminary
estimates to goodwill provided that we are within the measurement period. Upon the conclusion of the final determination of
the fair value of assets acquired or liabilities assumed during the measurement period, any subsequent adjustments are included
in our consolidated statements of operations.
Revenue Recognition
We generate revenues in the form of cloud services fees, license and related maintenance fees, and other service fees.
Cloud services are provided on a subscription basis and give our customers access to our cloud solutions, which include related
customer support. Licenses for on-premises software (“licenses”) are typically term licenses and provide the customer with a
right to use the software. When a term license is purchased, maintenance is bundled with the license for the term of the license
period. Other services include training and professional services that are not integral to the functionality of the cloud services or
licenses.
Our contracts with customers often contain multiple performance obligations, which may include a combination of
cloud services, licenses, related maintenance and support services, and professional services including training. We apply
significant judgment in identifying and accounting for each performance obligation, as a result of evaluating the terms and
conditions in contracts. For these contracts, we account for cloud services, licenses, maintenance and support, and other
services as separate performance obligations as they are each distinct. Revenue is recognized when the performance obligations
are satisfied. We satisfy our cloud service performance obligation over the associated contract term and recognize the
associated revenue ratably over the term of the contract once access is provided to the customer, consistent with the pattern of
benefit to the customer of such services. We satisfy our obligation and recognize revenue for licenses upon transfer of control
of the licenses, which occurs at delivery of the license key to customers, or when the license term commences, if later. We
satisfy our maintenance and support performance obligations and recognize revenue ratably over the maintenance and support
term, consistent with the pattern of benefit to the customer of such services. Professional services and training are either
provided on a time and material basis or over a contract term. We satisfy our professional services and training performance
obligations and recognize the associated revenue as services are delivered. With respect to contracts that include customer
acceptance provisions, we recognize revenue upon customer acceptance. Our policy is to record revenues net of any applicable
sales tax, use, goods and services, value added, and excise taxes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
79
Customers can purchase our products under different pricing options. Regardless of the pricing option selected, the
consideration for our cloud services and license contracts is fixed and does not result in variable consideration. The transaction
price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. We determine the
SSP based on an observable standalone selling price when it is available, as well as other factors, including the price charged to
customers, our discounting practices, and our overall pricing objectives, while maximizing observable inputs. In situations
where pricing is highly variable, we estimate the SSP using the residual approach.
Most of our multi-year cloud services and license contracts are invoiced annually. A receivable for multi-year cloud
services is generally recorded upon invoicing. A receivable for multi-year license contracts is recorded upon delivery, whether
or not invoiced, to the extent we have an unconditional right to receive payment in the future related to those licenses. The non-
current portion of these receivables, primarily consisting of unbilled receivables from multi-year license contracts, is included
in “Accounts receivable, non-current” on our consolidated balance sheets.
Payment terms and conditions vary by contract type, although our standard payment terms generally require payment
within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of payment, we have
determined our contracts do not generally include a significant financing component. The primary purpose of our invoicing
terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to receive
financing from our customers or to provide customers with financing.
Deferred revenue is recorded when we invoice a contract or deliver a license prior to recognizing revenue. It is
comprised of balances related to cloud services, maintenance, training and professional services invoiced at the beginning of
each service period, as well as licenses that were delivered prior to the license term commencing.
Deferred Sales Commissions
Sales commissions paid to our sales force and the related payroll taxes are considered incremental and recoverable
costs of obtaining a contract with a customer. Costs related to new cloud services and term license contracts are amortized in
proportion to the transfer of related services and delivery of licenses, including renewals, over the average period of benefit. We
have determined that the average period of benefit related to these costs is five years, which is longer than our customers’ initial
contract periods, but reflects the average period of benefit, including expected contract renewals. In arriving at this average
period of benefit we considered the nature of our customer contracts, the duration of our relationships with customers, and the
estimated life cycles of our technology. Costs related to renewals are amortized over the contract period.
In capitalizing and amortizing deferred commissions, we have elected to apply a portfolio approach. We include
capitalized costs in “Deferred commissions, current and non-current” on our consolidated balance sheets and related
amortization of deferred commissions in “Sales and marketing” expense on our consolidated statements of operations. There
were no impairments to deferred commissions for all periods presented. Commission expense was $177.7 million,
$223.6 million and $208.9 million for fiscal 2022, 2021 and 2020, respectively.
Cash and Cash Equivalents
We consider all highly liquid instruments with original maturities of 90 days or less at the date of purchase to be cash
equivalents. Cash and cash equivalents are recorded at cost, which approximates fair value. We do not hold or issue financial
instruments for trading purposes.
Investments
For our investments in marketable debt securities, we determine the appropriate classification at the time of purchase
and reevaluate such determination at each balance sheet date. All securities are classified as available-for-sale and are carried at
fair value. When the fair value of a security is below its amortized cost, the carrying value of the security will be reduced to its
fair value if it is more likely than not that management is required to sell the impaired security before recovery of its amortized
basis, or management has the intention to sell the security. If neither of these conditions are met, we determine whether the
impairment is due to credit losses by comparing the present value of the expected cash flows of the security with its amortized
cost basis. The amount of impairment recognized is limited to the excess of the amortized cost over the fair value of the
security. An allowance for credit losses for the excess of amortized cost over the expected cash flows is recorded in “Other
income (expense), net” on our consolidated statements of operations. Non-credit related impairment losses are reported as a
separate component on our consolidated statements of comprehensive income (loss). The cost of securities sold is based on the
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
80
FORM 10-K
specific-identification method. Interest on securities classified as available-for-sale is included in “Interest income” on our
consolidated statements of operations.
Investments in entities where we have the ability to exercise significant influence, but not control, over the investee are
accounted for using the equity method of accounting. Our results of operations will include, as a component of “Other income
(expense), net,” our share of the net income or loss of the equity investments accounted for under the equity method of
accounting. Those equity investments over which we do not have the ability to exercise significant influence and that do not
have readily determinable fair values are accounted for at cost, less impairment and adjusted for subsequent observable price
changes obtained from transactions for identical or similar investments issued by the same issuer. Changes in the basis of these
investments will be recognized in “Other income (expense), net.”
Concentration of Risk
Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash
and cash equivalents, investments and accounts receivable. We maintain the majority of our cash balance with two financial
institutions that management believes are high-credit, quality financial institutions and invest our cash equivalents in highly
rated money market funds.
Our accounts receivable is subject to collection risk. Our gross accounts receivable is reduced for this risk by an
allowance for doubtful accounts. This allowance is for estimated losses resulting from the inability of our customers to make
required payments. It is an estimate and is regularly evaluated for adequacy by taking into consideration a combination of
factors. We look at factors such as past collection experience, credit quality of the customer, age of the receivable balance, and
current economic conditions. These factors are reviewed to determine whether an allowance for bad debts should be recorded to
reduce the receivable balance to the amount believed to be collectible.
The following table presents the changes in the allowance for doubtful accounts:
Fiscal Year Ended January 31,
(In thousands)
2022
2021
2020
Balance at beginning of period
$
4,430 $
1,003 $
445
Add: bad debt expense
5,981
3,533
1,062
Less: write-offs, net of recoveries
(6,894)
(106)
(504)
Balance at end of period
$
3,517 $
4,430 $
1,003
Goodwill, Intangible Assets, Long-Lived Assets and Impairment Assessments
Goodwill and indefinite-lived intangible assets are carried at cost and are evaluated annually for impairment, or more
frequently if circumstances exist that indicate that impairment may exist. When conducting our annual goodwill impairment
assessment, we perform a quantitative evaluation of whether goodwill is impaired by comparing the fair value of our reporting
unit to its carrying value. We consider the enterprise to be the reporting unit for this analysis. If the carrying amount of our
reporting unit exceeds its fair value, we recognize an impairment loss in an amount equal to that excess, limited to the total
amount of goodwill allocated to that reporting unit.
In-process research and development is initially capitalized at fair value as an intangible asset with an indefinite life
and assessed for impairment thereafter. When in-process research and development projects are completed, the corresponding
amount is reclassified as an amortizable intangible asset and is amortized over the asset’s estimated useful life.
Finite-lived intangible assets are amortized over their useful lives. Each period we evaluate the estimated remaining
useful life of our finite-lived intangible assets and whether events or changes in circumstances warrant a revision to the
remaining period of amortization. In addition, we evaluate the recoverability of our long-lived assets including intangible and
tangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may
not be recoverable. Recoverability of these assets is measured by comparison of the carrying amount of each asset to the future
undiscounted cash flows the asset is expected to generate. If the undiscounted cash flows used in the test for recoverability are
less than the carrying amount of these assets, then the carrying amount of such assets is reduced to fair value.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
81
Property and Equipment
Property and equipment are stated at cost net of accumulated depreciation and amortization. Depreciation is calculated
using the straight-line method over the estimated useful lives of the assets ranging from generally three to five years. Leasehold
improvements are amortized over the shorter of the estimated useful life or the remaining lease term. When assets are retired or
disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are
included on our consolidated statements of operations. Maintenance and repairs that do not improve or extend the lives of the
respective assets are charged to expense in the period incurred.
The following table presents the estimated useful lives of our property and equipment:
Property and Equipment
Useful Life
Computer equipment and software
3 years
Furniture and fixtures
5 years
Leasehold improvements
Shorter of the useful life of the asset or the lease term
Capitalized Software Development and Implementation Costs
Capitalization of software development costs for software to be sold, leased, or otherwise marketed begins upon the
establishment of technological feasibility, which is generally the completion of a working prototype that has been certified as
having no critical bugs and is a release candidate. Amortization begins once the software is ready for its intended use, generally
based on the pattern in which the economic benefits will be consumed. We did not capitalize any software development costs
for fiscal 2022 and 2021 because the cost incurred and the time between technological feasibility and product release was
insignificant. We had no amortization expense from capitalized purchased technology during fiscal 2022, 2021 or 2020.
We capitalize certain costs incurred in connection with the development of software (“development costs”) and the
implementation of cloud computing services and on-premise software purchased for internal use (“implementation costs”).
Costs incurred during the preliminary planning and evaluation stage of each project and during the post implementation
operational stage are expensed as incurred. Costs incurred during the application development stage of each project are
capitalized. We define the configuration and coding process as the application development stage. Capitalized development
costs are included in “Property and equipment, net” on our consolidated balance sheets. The current portion of capitalized
implementation costs are included in “Prepaid expenses and other current assets” and the non-current portion are included in
“Other assets” on our consolidated balance sheets. We capitalized $12.9 million and $20.3 million of development costs in
fiscal 2022 and 2021, respectively, and capitalized $22.1 million of implementation costs in fiscal 2021. We did not capitalize
any implementation costs in fiscal 2022. Development costs capitalized are amortized on a straight-line basis over their
estimated useful life of 3 years and implementation costs capitalized are amortized on a straight-line basis over the term of the
related arrangement. We recognized $7.1 million and $1.5 million in amortization expense related to capitalized
implementation and development costs during fiscal 2022 and 2021, respectively, and no amortization expense was recognized
during fiscal 2020.
Leases
We determine if an arrangement contains a lease and the classification of that lease, if applicable, at the inception of a
contract. We primarily lease our facilities under operating leases. Operating lease right-of-use assets and liabilities are
recognized at the present value of the future lease payments at the lease commencement date. We calculate the operating lease
right-of-use assets based on the corresponding lease liability adjusted for (i) payments made at or before the commencement
date, (ii) initial direct costs we incur and (iii) tenant incentives under the lease. We do not account for renewals or early
terminations unless we are reasonably certain to exercise these options at commencement. Operating lease right-of-use assets
are subject to evaluation for impairment or disposal on a basis consistent with other long-lived assets. Operating lease expense
is recognized on a straight-line basis over the lease term. We account for lease and non-lease components as a single lease
component for our operating leases. We do not include leases with terms of 12 months or less on our consolidated balance
sheets.
As the implicit rate for our operating leases is generally not determinable, we use our incremental borrowing rate as
our discount rate at the lease commencement date to determine the present value of lease payments. We determine the discount
rate of our leases by considering various factors, such as our credit rating, interest rates of similar debt instruments of entities
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
82
FORM 10-K
with comparable credit ratings, the lease term and the currency in which the lease is denominated. Our discount rate was
determined using a portfolio approach.
Our operating lease assets are included in “Operating lease right-of-use assets” and the current and non-current
portions of our operating lease liabilities are included in “Accrued expenses and other liabilities” and “Operating lease
liabilities,” respectively, on our consolidated balance sheets. As of January 31, 2022, we had no finance leases. Refer to Note 4
“Leases” for details.
Advertising Expense
We expense advertising costs as incurred. We incurred $25.5 million, $36.8 million and $30.1 million in advertising
expenses for fiscal 2022, 2021 and 2020, respectively. Advertising costs are included in “Sales and marketing” expenses on our
consolidated statements of operations.
Stock-Based Compensation
We recognize compensation expense for all share-based payment awards, including stock options, restricted stock
units (“RSUs”), performance units (“PSUs”) and restricted stock awards (“RSAs”), based on the estimated fair value of the
award on the grant date over the related vesting periods. The expense recorded is based on awards ultimately expected to vest
and therefore is reduced by estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in
subsequent periods if actual forfeitures differ from those estimates. Options are generally only granted in connection with
business combinations for the purpose of replacing unvested awards of acquiree employees. We calculate the fair value of
options using the Black-Scholes method and expense using the straight-line attribution approach.
The fair value of each option grant and stock purchase right granted under the Employee Stock Purchase Plan
(“ESPP”) is estimated on the date of grant using the Black-Scholes option pricing model. We recognize stock-based
compensation related to our ESPP using the graded-vesting attribution method over the offering period, which is twelve
months. Stock-based compensation expense is recognized net of estimated forfeiture activity.
The determination of the grant date fair value of options using an option-pricing model is affected by assumptions
regarding a number of other complex and subjective variables, which include our expected stock price volatility over the
expected term of the options, stock option exercise and cancellation behaviors, risk-free interest rates and expected dividends.
The expected term of the options is based on the average period the stock options are expected to remain outstanding calculated
as the midpoint of the vesting terms and contractual expiration periods, as we do not have sufficient historical information to
develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. The
expected stock price volatility for our stock is determined by examining the historical volatility of our common stock. The risk-
free interest rate is calculated using the average of the published interest rates United States Treasury zero-coupon issues with
maturities that approximate the expected term. The dividend yield assumption is zero as we do not have any history of, nor
plans to make, dividend payments.
The number of PSUs earned and eligible to vest is determined based on achievement of certain performance conditions
and/or market conditions and the recipients’ continued service with us. For awards subject to service and performance
conditions, the number of shares of our stock issued pursuant to the award can range from 0% to 200% of the target amount.
For awards subject to service and performance conditions that also include market conditions, the number of shares of our stock
issued pursuant to the award can range from 0% to 300% of the target amount. Compensation expense for PSUs with
performance conditions is measured using the fair value at the date of grant and recorded over the vesting period under the
graded-vesting attribution method, and may be adjusted over the vesting period based on interim estimates of performance
against pre-set objectives. We use a Monte Carlo option-pricing model to determine the fair value of PSUs with market
conditions.
Income Taxes
We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for
the future tax consequences of differences between the financial statement carrying amounts of assets and liabilities and their
respective tax basis and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
83
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that
includes the enactment date.
We record a valuation allowance to reduce deferred income tax assets to the extent that we believe any deferred tax
assets are not more-likely-than-not to be realized. Because of our history of U.S. net operating losses, we have established a full
valuation allowance on our U.S. deferred tax assets. We regularly assess the need for the valuation allowance, and if we
determine that an adjustment is needed, we will record the necessary adjustment in the period that the determination is made.
Our tax positions are subject to income tax audits by multiple tax jurisdictions throughout the world. We recognize the
tax benefit of an uncertain tax position only if it is more likely than not that the position is sustainable upon examination, based
solely on its technical merits. We measure the tax benefit recognized as the largest amount of benefit which is more likely than
not to be realized upon settlement.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
84
FORM 10-K
Recently Adopted Accounting Standards
We did not adopt any new accounting standards in the period ended January 31, 2022.
Recently Issued Accounting Pronouncements
Standard
Description
Effective Date
Effect on the Consolidated Financial
Statements (or Other Significant Matters)
ASU No. 2020-06,
Debt - Debt with
Conversion and Other
Options (Subtopic
470-20) and
Derivatives and
Hedging - Contracts
in Entity's Own
Equity (Subtopic 815
- 40)
In August 2020, the FASB issued new
authoritative guidance to simplify the
accounting for certain financial
instruments with characteristics of
liabilities and equity, including
convertible instruments and contracts on
an entity’s own equity. The standard
reduces the number of models used to
account for convertible instruments and
simplifies both the classification of debt
on the balance sheet and the earnings per
share calculation.
First quarter of
fiscal 2023.
We will adopt this standard in our first quarter
of fiscal 2023 using the modified-retrospective
approach, under which, financial results
reported in periods prior to fiscal 2023 will not
be adjusted. The previously recorded equity
components of the convertible instruments
outstanding and amortization of the debt
discount and issuance costs classified as equity
are reclassified from equity to debt through an
adjustment to the opening balance of
accumulated deficit as of February 1, 2022
which will result in reduced interest expense in
future periods. Adoption of the standard will
result in a decrease to accumulated deficit of
$304.0 million, decrease to additional paid-in
capital of $1 billion and an increase to
convertible senior notes, net of $737.6 million.
ASU No. 2021-08,
Business
Combinations (Topic
805): Accounting for
Contract Assets and
Contract Liabilities
from Contracts with
Customers
This ASU amends the guidance on
accounting related to contract assets and
liabilities acquired in business
combinations. Entities will be required to
recognize and measure contract assets and
contract liabilities acquired in a business
combination in accordance with Topic
606. Prior to this ASU, an acquirer
generally recognizes contract assets and
contract liabilities at fair value on the
acquisition date. The guidance should be
applied prospectively to business
combinations occurring on or after the
effective date of the amendment in this
update.
First quarter of
fiscal 2024. Early
adoption is
permitted.
We will adopt this standard in our first quarter
of fiscal 2023 and apply the standard to any
contract assets and liabilities acquired in a
business combination occurring on or after
February 1, 2022.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
85
(2) Investments and Fair Value Measurements
The carrying amounts of certain of our financial instruments including cash equivalents, accounts receivable, accounts
payable and accrued liabilities approximate fair value due to their short-term maturities.
Assets and liabilities recorded at fair value in the consolidated financial statements are categorized based upon the
level of judgment associated with the inputs used to measure their fair value. Hierarchical levels that are directly related to the
amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:
Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted
prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value
of the assets or liabilities.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is
significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement
in its entirety requires management to make judgments and consider factors specific to the asset or liability.
The following table sets forth the fair value of our financial assets that were measured on a recurring basis:
January 31,
2022
2021
(In thousands)
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Assets:
Money market funds
$ 1,056,296 $
— $
— $ 1,056,296 $ 933,058 $
— $
— $ 933,058
U.S. government and
agency securities
—
8,024
—
8,024
—
75,068
—
75,068
Corporate bonds
— 131,015
— 131,015
—
12,779
—
12,779
Commercial paper
— 160,230
— 160,230
—
—
—
—
Reported as:
Assets:
Cash and cash
equivalents
$ 1,059,296
$ 933,058
Investments, current
286,337
87,847
Investments, non-
current
9,932
—
Total
$ 1,355,565
$ 1,020,905
Our investments in money market funds are measured at fair value on a recurring basis. These money market funds are
actively traded and reported daily through a variety of sources. The fair value of the money market fund investments is
classified as Level 1.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
86
FORM 10-K
The following table presents our investments in available-for-sale debt securities as of January 31, 2022:
(In thousands)
Amortized Cost
Unrealized Gains
Unrealized Losses
Fair Value
Cash and cash equivalents:
Commercial paper
$
3,000 $
— $
— $
3,000
Investments, current:
Corporate bonds
131,253
2
(240)
131,015
Commercial paper
155,469
—
(147)
155,322
Investments, non-current:
U.S. government and agency securities
8,036
—
(12)
8,024
Commercial paper
1,914
—
(6)
1,908
Total available-for-sale investments
$
299,672 $
2 $
(405) $
299,269
The following table presents our investments in available-for-sale debt securities as of January 31, 2021:
(In thousands)
Amortized Cost
Unrealized Gains
Unrealized Losses
Fair Value
Investments, current:
U.S. government and agency securities
$
75,032 $
36 $
— $
75,068
Corporate bonds
12,765
14
—
12,779
Total available-for-sale investments
$
87,797 $
50 $
— $
87,847
The following table presents the fair values and unrealized losses related to our investments in available-for-sale debt
securities classified by length of time that the securities have been in a continuous unrealized loss position as of January 31,
2022:
Less than 12 Months
12 Months or Greater
Total
(In thousands)
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
U.S. government and agency securities
$
8,024 $
(12) $
— $
— $
8,024 $
(12)
Corporate bonds
130,007
(240)
—
— 130,007
(240)
Commercial paper
145,231
(153)
—
— 145,231
(153)
Total
$ 283,262 $
(405) $
— $
— $ 283,262 $
(405)
As of January 31, 2021, we did not have any investments in available-for-sale debt securities in an unrealized loss
position.
The contractual maturities of our investments as of January 31, 2022 are as follows (in thousands):
Due within one year
$
289,337
Due within one to two years
9,932
Total
$
299,269
Investments with maturities of less than 12 months from the balance sheet date are classified as current assets, which
are available for use to fund current operations. Investments with maturities greater than 12 months from the balance sheet date
are classified as non-current assets.
Convertible Senior Notes
Refer to Note 7 “Convertible Senior Notes” for details regarding the fair value of our convertible senior notes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
87
Equity Investments
Our equity investments are included in “Investments, non-current” on our consolidated balance sheets. The following
table provides a summary of our equity investments:
January 31,
(In thousands)
2022
2021
Equity investments without readily determinable fair values
$
33,744 $
10,244
Equity investments under the equity method of accounting
2,755
3,484
Total
$
36,499 $
13,728
During fiscal 2022, no equity investments were impaired. During fiscal 2021, we determined that one of our equity
investments was impaired and recognized an impairment charge of $4.5 million in “Other income (expense), net” in our
consolidated statements of operations.
(3) Commitments and Contingencies
Legal Proceedings
A putative class action lawsuit alleging violations of the federal securities laws was filed on December 4, 2020 in the
U.S. District Court for the Northern District of California (the “Court”) against us, our former CEO and our CFO. The initial
complaint alleged violations of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for allegedly making
materially false and misleading statements regarding our financial guidance and asserted a putative class period of October 21,
2020 to December 2, 2020. On March 16, 2021, the Court appointed Louisiana Sheriffs’ Pension & Relief Fund as lead plaintiff
and approved its selection of lead plaintiff counsel in the case. On June 7, 2021, the lead plaintiff filed an amended complaint
which expands the putative class period to run from March 26, 2020 to December 2, 2020 and alleges that defendants made
materially false and misleading statements regarding our marketing efforts, hiring practices, and retention of personnel. The
lead plaintiff seeks unspecified monetary damages and other relief. On July 27, 2021, defendants filed a motion to dismiss the
amended complaint. On March 21, 2022, the Court issued a decision granting in part and denying in part the defendants’
motion to dismiss. The decision dismissed some claims with leave to amend and permitted other claims to proceed.
Several derivative lawsuits related to the securities class action were filed in February, March, and April 2021 in the
U.S. District Court for the Northern District of California and California Superior Court, San Francisco County. The lawsuits
name our former CEO, our CFO, and many of our board members, including our interim CEO, as defendants, and the company
as a nominal defendant. The lawsuits allege claims for breach of fiduciary duties, unjust enrichment, waste of corporate assets,
abuse of control, and gross mismanagement against the defendants, and claims for contribution under Sections 10(b) and 21D
of the Exchange Act against only our CEO and CFO. The plaintiffs seek unspecified monetary damages and other relief on
behalf of the Company. The court has stayed the actions pursuant to stipulation of the parties until after a ruling on the motion
to dismiss the federal securities case. On August 9, 2021, we received a demand letter alleging claims similar to those in the
derivative lawsuits and requesting that our board of directors launch an investigation on such matters.
We are also subject to certain routine legal and regulatory proceedings, as well as demands and claims that arise in the
normal course of our business. We make a provision for a liability relating to legal matters when it is both probable that a
liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least
quarterly and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and
other information and events pertaining to a particular matter. In our opinion, resolution of any pending claims (either
individually or in the aggregate) is not expected to have a material adverse impact on our consolidated results of operations,
cash flows or financial position, nor is it possible to provide an estimated amount of any such loss. However, depending on the
nature and timing of any such dispute, an unfavorable resolution of a matter could materially affect our future financial position,
results of operations or cash flows, or all, in a particular period.
Indemnification Arrangements
During the ordinary course of business, we may indemnify, hold harmless and agree to reimburse for losses suffered or
incurred, our customers, vendors, and each of their affiliates for certain intellectual property infringement and other claims by
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
88
FORM 10-K
third parties with respect to our offerings, in connection with our commercial license arrangements or related to general
business dealings with those parties.
As permitted under Delaware law, we have entered into indemnification agreements with our officers, directors and
certain employees, indemnifying them for certain events or occurrences in connection with their service as our officers or
directors or those of our direct and indirect subsidiaries.
Claims and reimbursements under indemnification arrangements have not been material to our consolidated financial
statements; therefore, there is no accrual of such amounts at January 31, 2022 or 2021.
(4) Leases
We have operating leases for office space, used for our business operations and sales support, and data centers, used
primarily for product development.
In April 2021, we entered into an agreement to terminate our lease of certain office space located in San Jose, CA and
ceased use of the space as of April 30, 2021. As of January 31, 2021, we had $155.5 million in related operating lease
commitments. As a result, the related right-of-use asset and leasehold improvements balances were written off and we have no
remaining liability as of January 31, 2022. In total, a $55.2 million loss was recognized during fiscal 2022, which includes
certain termination-related fees. The loss is included in “General and administrative” expenses on our consolidated statement of
operations.
During fiscal 2022, 2021, and 2020, operating lease costs were $59.4 million, $82.5 million, and $49.6 million,
respectively, excluding short-term leases, variable lease costs, and sublease income, all of which were immaterial in each of
these periods.
As of January 31, 2022, the weighted-average remaining lease term and discount rate related to our operating lease
right-of-use assets and related lease liabilities were as follows:
January 31,
2022
2021
Weighted-average remaining lease term (in years)
7.7
8.4
Weighted-average discount rate
6.0 %
6.0 %
As of January 31, 2022, the maturity of lease liabilities under our non-cancelable operating leases were as follows:
Fiscal Period (In thousands)
Future Payments
Fiscal 2023
$
53,389
Fiscal 2024
45,281
Fiscal 2025
36,724
Fiscal 2026
37,550
Fiscal 2027
38,483
Thereafter
131,004
Total lease payments
342,431
Less imputed interest
(72,839)
Total current and non-current operating lease liabilities (1)
$
269,592
_________________________
(1)
The current portion of our operating lease liabilities is included in “Accrued expenses and other liabilities” on our consolidated balance
sheets.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
89
Supplemental Disclosures
Fiscal Year Ended January 31,
(In thousands)
2022
2021
Cash paid for operating lease liabilities
$
53,910 $
58,018
Operating lease liabilities arising from obtaining right-of-use assets
26,392
148,721
(5) Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and amortization. These assets are
depreciated and amortized using the straight-line method over their estimated useful lives. Property and equipment consisted of
the following:
January 31,
(In thousands)
2022
2021
Computer equipment and software
$
73,411 $
70,628
Furniture and fixtures
26,840
33,142
Leasehold and building improvements (1)
141,496
180,956
Capitalized software development costs (2)
36,695
23,795
Property and equipment, gross
278,442
308,521
Less: accumulated depreciation and amortization
(153,542)
(125,741)
Property and equipment, net
$
124,900 $
182,780
_________________________
(1)
Includes costs related to assets not yet placed into service of $6.0 million and $25.4 million, as of January 31, 2022 and 2021,
respectively.
(2)
Includes costs related to projects still under development of $7.4 million and $16.7 million, as of January 31, 2022 and 2021,
respectively.
Depreciation and amortization expense related to Property and equipment, net was $41.3 million, $34.9 million and
$29.0 million for fiscal 2022, 2021 and 2020, respectively.
Geographic Information
The following table presents our long-lived assets, which consist of property and equipment, net of depreciation and
amortization, and operating lease right-of-use assets by geographic region:
January 31,
(In thousands)
2022
2021
United States
$
301,309 $
476,575
United Kingdom
41,483
50,460
International
11,306
12,041
Total long-lived assets
$
354,098 $
539,076
Other than each of the United States and the United Kingdom, no other individual country represented 10% or more of
our total long-lived assets as of January 31, 2022 or 2021.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
90
FORM 10-K
(6) Acquisition, Goodwill and Intangible Assets
Fiscal 2022 Acquisition
TruSTAR
On May 28, 2021, we acquired 100% of the voting equity interest of TruSTAR Technology, Inc. (“TruSTAR”), a
privately-held Delaware corporation that provides an intelligence platform for cybersecurity and threat data. This acquisition
has been accounted for as a business combination. The total consideration transferred for this acquisition was $82.1 million, of
which $81.2 million was in cash. The purchase price was allocated as follows: $16.5 million to identified intangible
assets, $1.1 million to other net liabilities acquired, with the excess $66.7 million of the purchase price over the fair value of net
assets acquired recorded as goodwill, allocated to our single operating segment. Goodwill is primarily attributable to the value
expected from the synergies of the combination, including combined selling opportunities with our products. This goodwill is
not deductible for income tax purposes. The results of operations of TruSTAR, which are not material, have been included in
our consolidated financial statements from the date of purchase.
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives
as of the date of acquisition:
(In thousands, except useful life)
Fair Value
Useful Life
(in months)
Developed technology
$
10,100
36
Customer relationships
6,400
36
Total intangible assets acquired
$
16,500
Fiscal 2021 Acquisitions
Rigor
On November 5, 2020, we acquired 100% of the voting equity interest of Rigor, Inc. (“Rigor”), a privately-held
Delaware corporation that offers advanced synthetic monitoring and optimization tools. This acquisition has been accounted for
as a business combination. The total consideration transferred for this acquisition, all of which was in cash, was $37.6 million.
The purchase price was allocated as follows: $15.4 million to identified intangible assets, $0.9 million to net assets acquired and
$1.8 million to net deferred tax liabilities, with the excess $23.1 million of the purchase price over the fair value of net tangible
and intangible assets acquired recorded as goodwill, allocated to our single operating segment. Goodwill is primarily
attributable to the value expected from the synergies of the combination, including combined selling opportunities with our
products. This goodwill is not deductible for income tax purposes. The results of operations of Rigor, which are not material,
have been included in our consolidated financial statements from the date of purchase.
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives
as of the date of acquisition:
(In thousands, except useful life)
Fair Value
Useful Life
(in months)
Developed technology
$
10,700
36
Customer relationships
4,500
36
Other acquired intangible assets
200
12
Total intangible assets acquired
$
15,400
Other Acquisitions
During fiscal 2021, we acquired 100% of the voting equity interest of OÜ Plumbr (“Plumbr”) and Flowmill, Inc.
(“Flowmill”) that specialize in application and network performance monitoring capabilities. The acquisitions have been
accounted for as business combinations and were not material individually to our consolidated financial statements. The
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
91
aggregate purchase price of $31.6 million consisted of $24.4 million paid in cash, $4.9 million for the fair value of shares of our
common stock issued and $2.3 million in fair value of replacement equity awards attributable to pre-acquisition service. The
purchase price was allocated as follows: $10.2 million to identifiable intangible assets, $2.9 million to net assets acquired and
$0.5 million to net deferred tax liabilities, with the excess $19.0 million of the purchase price over the fair value of net assets
acquired recorded as goodwill, allocated to our one operating segment. Goodwill is primarily attributable to the value expected
from the synergies of the combination, including combined selling opportunities with our products. This goodwill is not
deductible for income tax purposes. The identifiable intangible assets, which primarily consisted of developed technology, have
an estimated useful life of 3 years. The results of operations of the acquisitions which are not material, have been included in
our consolidated financial statements from the date of purchase.
Fiscal 2020 Acquisitions
SignalFx
On October 1, 2019, we acquired 100% of the voting equity interest of SignalFx, Inc. (“SignalFx”), a privately-held
Delaware corporation that develops real-time monitoring solutions for cloud infrastructure, microservices and applications. This
acquisition has been accounted for as a business combination. The total fair value of consideration transferred for this
acquisition was $961.4 million, which consisted of $619.1 million in cash, $324.5 million for the fair value of 2,771,482 shares
of our common stock issued and $17.8 million in fair value of replacement equity awards attributable to pre-acquisition service.
The purchase price was allocated as follows: $173.7 million to identified intangible assets, $62.1 million to net assets acquired
and $3.3 million to net deferred tax liabilities, with the excess $728.9 million of the purchase price over the fair value of net
tangible and intangible assets acquired recorded as goodwill, allocated to our one operating segment. Goodwill is primarily
attributable to the value expected from the synergies of the combination, including combined selling opportunities with our
products. This goodwill is not deductible for income tax purposes. The results of operations of SignalFx have been included in
our consolidated financial statements from the date of purchase.
Per the terms of the merger agreement with SignalFx, certain unvested stock options, restricted stock units and
restricted stock awards held by SignalFx employees were canceled and exchanged for replacement equity awards under our
2012 Equity Incentive Plan. Additionally, certain shares of stock issued pursuant to share-based compensation awards held by
key employees of SignalFx were canceled and exchanged for replacement equity awards consisting of unregistered restricted
shares of our common stock subject to vesting. The portion of the fair value of the replacement equity awards associated with
pre-acquisition service of SignalFx’s employees represented a component of the total purchase consideration, as discussed
above. The remaining fair value of $104.7 million of these issued awards, which are subject to the recipients’ continued service
with us and thus excluded from the purchase price, will be recognized ratably as stock-based compensation expense over the
required service period.
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives
as of the date of acquisition:
(In thousands, except useful life)
Fair Value
Useful Life
(in months)
Developed technology
$
108,800
84
Customer relationships
60,900
60
Other acquired intangible assets
4,000
36
Total intangible assets acquired
$
173,700
We applied significant judgment in determining the fair value of the intangible assets acquired, which involved the use
of significant estimates and assumptions with respect to revenue growth rates, royalty rate and technology migration curve.
Omnition
On September 13, 2019, we acquired 100% of the voting equity interest of Cloud Native Labs, Inc. (“Omnition”), a
privately-held Delaware corporation that develops a platform for distributed tracing and application monitoring. This
acquisition has been accounted for as a business combination. The total fair value of consideration transferred for this
acquisition was $52.5 million, which consisted of $31.6 million in cash, $20.2 million for the fair value of 176,989 shares of
our common stock issued and $0.7 million in fair value of replacement equity awards attributable to pre-acquisition service.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
92
FORM 10-K
The purchase price was allocated to $8.0 million of identified intangible assets, with the excess $44.5 million of the purchase
price over the fair value of net tangible and intangible assets acquired recorded as goodwill, allocated to our one operating
segment. Goodwill is primarily attributable to the value expected from the synergies of the combination, including combined
selling opportunities with our products. This goodwill is not deductible for income tax purposes. The results of operations of
Omnition which are not material, have been included in our consolidated financial statements from the date of purchase.
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives
as of the date of acquisition:
(In thousands, except useful life)
Fair Value
Useful Life
(in months)
Developed technology
$
8,000
60
Total intangible assets acquired
$
8,000
Streamlio
On November 1, 2019, we acquired 100% of the voting equity interest of Streamlio, Inc. (“Streamlio”), a privately-
held Delaware corporation that specializes in designing and operating streaming data solutions. This acquisition has been
accounted for as a business combination. The total fair value of consideration transferred for this acquisition was $19.8 million,
which consisted of $18.7 million in cash and $1.1 million in fair value of replacement equity awards attributable to pre-
acquisition service. The purchase price was allocated as follows: $3.6 million to identified intangible assets and $0.1 million to
net assets acquired, with the excess $16.1 million of the purchase price over the fair value of net tangible and intangible assets
acquired recorded as goodwill, allocated to our one operating segment. Goodwill is primarily attributable to the value expected
from the synergies of the combination, including combined selling opportunities with our products. This goodwill is not
deductible for income tax purposes. The results of operations of Streamlio have been included in our consolidated financial
statements from the date of purchase.
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives
as of the date of acquisition:
(In thousands, except useful life)
Fair Value
Useful Life
(in months)
Developed technology
$
3,600
36
Total intangible assets acquired
$
3,600
Unaudited Pro Forma Financial Information
The following unaudited pro forma information presents the combined results of operations as if the acquisitions of
SignalFx and Omnition had been completed in the beginning of the applicable comparable prior annual reporting period. The
unaudited pro forma results include adjustments primarily related to the following: (i) amortization associated with preliminary
estimates for the acquired intangible assets; (ii) recognition of post-acquisition stock-based compensation; (iii) the effect of
recording deferred revenue at fair value; (iv) elimination of historical interest expense related to debt extinguished in the
acquisition of SignalFx; (v) the inclusion of acquisition costs as of the earliest period presented; and (vi) the associated tax
impact of the acquisitions and these unaudited pro forma adjustments.
The unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies or the effect of the
incremental costs incurred from integrating these companies. Accordingly, these unaudited pro forma results are presented for
informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company
would have been if the acquisitions had occurred at the beginning of the period presented, nor are they indicative of future
results of operations:
(In thousands)
Fiscal Year Ended January 31, 2020
Revenues
$
2,376,181
Net loss
$
(434,998)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
93
Goodwill
Goodwill balances are presented below:
Fiscal Year Ended January 31,
(In thousands)
2022
2021
Beginning balance
$
1,334,888 $
1,292,840
Goodwill acquired
66,740
42,048
Ending balance
$
1,401,628 $
1,334,888
There was no impairment of goodwill during fiscal 2022 or during prior periods.
Intangible Assets
Intangible assets subject to amortization as of January 31, 2022 are as follows:
(In thousands, except useful life)
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Weighted-
Average
Remaining
Useful Life
(in months)
Developed technology
$
283,400 $
(164,529) $
118,871
46
Customer relationships
92,710
(47,701)
45,009
29
Other acquired intangible assets
7,394
(6,505)
889
8
Total intangible assets subject to amortization
$
383,504 $
(218,735) $
164,769
Intangible assets subject to amortization as of January 31, 2021 are as follows:
(In thousands, except useful life)
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Weighted-
Average
Remaining
Useful Life
(in months)
Developed technology
$
273,349 $
(127,072) $
146,277
57
Customer relationships
86,310
(28,778)
57,532
41
Other acquired intangible assets
7,420
(5,076)
2,344
19
Total intangible assets subject to amortization
$
367,079 $
(160,926) $
206,153
Amortization expense from acquired intangible assets was $57.8 million, $57.7 million and $38.5 million during fiscal
2022, 2021 and 2020, respectively.
The expected future amortization expense for acquired intangible assets as of January 31, 2022 is as follows:
Fiscal Period (In thousands)
Expected
Amortization Expense
Fiscal 2023
$
55,448
Fiscal 2024
48,892
Fiscal 2025
33,010
Fiscal 2026
17,058
Fiscal 2027
10,361
Total amortization expense
$
164,769
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
94
FORM 10-K
(7) Convertible Senior Notes
Convertible Senior Notes Due 2026
On July 9, 2021, we issued $1.0 billion aggregate principal amount of 0.75% Convertible Senior Notes due 2026 (the
“2026 Notes”). The 2026 Notes are general senior, unsecured obligations of Splunk. The total proceeds from the issuance of the
2026 Notes was $981.7 million, net of issuance costs.
The 2026 Notes will mature on July 15, 2026, unless earlier redeemed, repurchased or converted. The 2026 Notes will
bear interest from July 9, 2021, at a rate of 0.75% per year, payable semiannually in arrears on January 15 and July 15 of each
year, beginning on January 15, 2022.
The initial conversion rate for the 2026 Notes is 6.25 shares of our common stock per $1,000 principal amount of the
2026 Notes, which is equivalent to an initial conversion price of approximately $160.00 per share of our common stock, subject
to adjustment upon the occurrence of certain specified events. The initial conversion price of the 2026 Notes represents a
premium of approximately 30.0% to the volume weighted average price of our common stock over a 10-day period of
approximately $123.08 per share ending on June 21, 2021, which was the date the pricing of the 2026 Notes was determined.
Convertible Senior Notes Due 2027
On June 5, 2020, we issued $1.27 billion aggregate principal amount of 1.125% Convertible Senior Notes due 2027
(the “2027 Notes”), including the exercise in full by the initial purchasers of the 2027 Notes of their option to purchase an
additional $165.0 million principal amount of 2027 Notes. The 2027 Notes are general senior, unsecured obligations of Splunk.
The total proceeds from the issuance of the 2027 Notes was $1.25 billion, net of initial purchaser discounts and other issuance
costs.
The 2027 Notes will mature on June 15, 2027, unless earlier redeemed, repurchased or converted. The 2027 Notes will
bear interest from June 5, 2020 at a rate of 1.125% per year, payable semiannually in arrears on June 15 and December 15 of
each year, beginning on December 15, 2020.
The initial conversion rate for the 2027 Notes is 3.9164 shares of our common stock per $1,000 principal amount of
the 2027 Notes, which is equivalent to an initial conversion price of approximately $255.34 per share of our common stock,
subject to adjustment upon the occurrence of certain specified events. The initial conversion price of the 2027 Notes represents
a premium of approximately 35.0% to the volume weighted average price of our common stock of approximately $189.14 per
share on June 2, 2020, which was the date the pricing of the 2027 Notes was determined.
Convertible Senior Notes Due 2023 and 2025
In September 2018, we issued $1.27 billion aggregate principal amount of 0.50% Convertible Senior Notes due 2023
(the “2023 Notes”), including the exercise in full by the initial purchasers of the 2023 Notes of their option to purchase an
additional $165.0 million principal amount of 2023 Notes, and $862.5 million aggregate principal amount of 1.125%
Convertible Senior Notes due 2025 (the “2025 Notes”), including the exercise in full by the initial purchasers of the 2025 Notes
of their option to purchase an additional $112.5 million principal amount of 2025 Notes. The 2023 Notes and the 2025 Notes
are general senior, unsecured obligations of Splunk. The total proceeds from the issuance of the 2023 Notes and the 2025 Notes
was $2.11 billion, net of initial purchaser discounts and other issuance costs.
The 2023 Notes will mature on September 15, 2023, and the 2025 Notes will mature on September 15, 2025, in each
case unless earlier redeemed, repurchased or converted. The 2023 Notes bear interest from September 21, 2018 at a rate of
0.50% per year and the 2025 Notes bear interest from September 21, 2018 at a rate of 1.125% per year, in each case payable
semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2019.
The initial conversion rate for each of the 2023 Notes and 2025 Notes is 6.7433 shares of our common stock per
$1,000 principal amount of each of the 2023 Notes and 2025 Notes, which is equivalent to an initial conversion price of
approximately $148.30 per share of our common stock, subject to adjustment upon the occurrence of certain specified events.
The initial conversion price of each of the 2023 Notes and 2025 Notes represents a premium of approximately 27.5% to the
$116.31 per share closing price of our common stock on September 18, 2018, which was the date the pricing of the 2023 Notes
and the 2025 Notes was determined.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
95
Other Terms
The 2026 Notes are convertible into shares of our common stock at the option of the holder at any time prior to the
close of business on the business day immediately preceding the maturity date. We may not redeem the 2026 Notes prior to July
20, 2024. We may redeem for cash all or any portion of the 2026 Notes, at our option, on or after July 20, 2024 if the last
reported sale price of our common stock has been 140% of the conversion price for the 2026 Notes then in effect for at least 20
trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such
period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a
redemption price equal to 100% of the principal amount of the 2026 Notes, plus accrued and unpaid interest to, but excluding,
the redemption date. Whether to exercise our redemption option is solely within our control.
The 2023 Notes, 2025 Notes and 2027 Notes will be convertible at the option of the holders at any time prior to the
close of business on the business day immediately preceding June 15, 2023, June 15, 2025 and December 15, 2026 for the 2023
Notes, 2025 Notes and 2027 Notes, respectively, only under the following circumstances:
• during any fiscal quarter commencing after the fiscal quarter ending on January 31, 2019 (and only during such
fiscal quarter) for the 2023 Notes and the 2025 Notes and October 31, 2020 (and only during such fiscal quarter)
for the 2027 Notes, if the last reported sale price of our common stock for at least 20 trading days (whether or not
consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the
immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price for the relevant
series of notes on each applicable trading day;
• during the five business day period after any 10 consecutive trading day period (the “measurement period”) in
which the trading price (as defined in the indenture governing the relevant series of notes) per $1,000 principal
amount of the relevant series of notes for each trading day of the measurement period was less than 98% of the
product of the last reported sale price of our common stock and the conversion rate for the relevant series of notes
on each such trading day;
• if we call the relevant series of notes for redemption, at any time prior to the close of business on the scheduled
trading day immediately preceding the redemption date; or
• upon the occurrence of specified corporate events as set forth in the relevant indenture.
On or after June 15, 2023, June 15, 2025 and December 15, 2026 for the 2023 Notes, 2025 Notes and 2027 Notes,
respectively, until the close of business on the second scheduled trading day immediately preceding the relevant maturity date,
holders of the relevant series of notes may convert all or any portion of their notes of such series, in multiples of $1,000
principal amount, regardless of the foregoing circumstances.
Upon conversion, we may satisfy our conversion obligation by paying and/or delivering, as the case may be, cash,
shares of our common stock or a combination of cash and shares of our common stock, at our election, in the manner and
subject to the terms and conditions provided in the relevant indenture; provided, in the case of the 2026 Notes, the holder is to
determine the settlement method related to any notes converted in connection with the exercise of our redemption option as
mentioned above. Subject to the provisions described in the immediately preceding sentence, upon any conversion of the 2023
Notes, 2025 Notes, 2026 Notes, and 2027 Notes (together the “Notes”), it is our current intent to settle the first $1,000 of
conversion value of each $1,000 principal amount of such notes in cash and the remaining conversion value, if any, in shares of
common stock. If we undergo a fundamental change (as defined in the applicable indenture governing the relevant series of
notes), holders may require us to repurchase for cash all or any portion of their notes of the relevant series at a fundamental
change repurchase price equal to 100% of the principal amount of the relevant series of notes to be repurchased, plus accrued
and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events
that occur prior to the relevant maturity date of a series of notes or if we deliver a notice of redemption in respect of a series of
notes, we will, in certain circumstances, increase the conversion rate of the relevant series of notes for a holder of such series
who elects to convert its notes of the applicable series in connection with such corporate event or notice of redemption, as the
case may be. During fiscal 2022, the conditions allowing holders of the Notes to convert or redeem were not met. The Notes are
not required to be settled in cash within the next twelve months and as such are classified as long-term debt on our condensed
consolidated balance sheet as of January 31, 2022.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
96
FORM 10-K
We may not redeem the 2023 Notes, 2025 Notes and 2027 Notes prior to September 20, 2021, September 20, 2022 and
June 20, 2024, respectively. We may redeem for cash all or any portion of the 2023 Notes, 2025 Notes and 2027 Notes, at our
option, on or after September 20, 2021, September 20, 2022, and June 20, 2024, respectively, in each case if the last reported
sale price of our common stock has been at least 130% of the conversion price for the relevant series of notes then in effect for
at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading
day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of
redemption at a redemption price equal to 100% of the principal amount of the relevant series of notes to be redeemed, plus
accrued and unpaid interest to, but excluding, the relevant redemption date. Whether to exercise our redemption options under
each respective indenture is solely within our control.
Partial Repurchase of the 2023 Notes
On June 5, 2020, we used a portion of the net proceeds from the issuance of the 2027 Notes to repurchase
$488.3 million aggregate principal amount of the 2023 Notes (the “2023 Notes Partial Repurchase”), leaving $776.7 million
aggregate principal outstanding on the 2023 Notes immediately after the 2023 Notes Partial Repurchase. The 2023 Notes Partial
Repurchase was not made pursuant to a redemption notice and constituted individually privately negotiated transactions. The
holders of the repurchased 2023 Notes also invested in the 2027 Notes. For each holder, the 2023 Notes and the 2027 Notes
exchanged were deemed to be substantially different as the present value of the cash flows under the terms of the 2027 Notes
was at least 10% different from the present value of the remaining cash flows under the terms of the 2023 Notes and
accordingly, the 2023 Notes Partial Repurchase was accounted for as a debt extinguishment. We used $691.6 million of the net
proceeds from the issuance of the 2027 Notes to complete the 2023 Notes Partial Repurchase, of which $407.4 million and
$283.6 million were allocated to the liability and equity components of the 2023 Notes, respectively, and $0.5 million was
related to the payment of the interest accrued.
Accounting for the Notes
In accounting for the issuance of the Notes, we separated each of the Notes into their respective liability and equity
components. The carrying amounts of the liability components of the respective notes were calculated by measuring the fair
value of similar debt instruments that do not have an associated convertible feature. The carrying amounts of the equity
components, representing the conversion option, were determined by deducting the fair value of the liability components from
the par value of the respective notes. This difference represents the debt discount that is amortized to interest expense over the
respective terms of the relevant series of notes using the effective interest rate method. The carrying amounts of the equity
components representing the conversion options were $266.9 million, $237.2 million, $293.0 million and $347.4 million for the
2023 Notes, the 2025 Notes, the 2026 Notes and the 2027 Notes, respectively, which are recorded in additional paid-in capital
and are not remeasured as long as they continue to meet the conditions for equity classification.
In accounting for the issuance costs related to the Notes, we allocated the total amount incurred for the relevant series
of notes to the liability and equity components based on the proportion of the proceeds allocated to the debt and equity
components for that series. Issuance costs attributable to the liability component of the 2023 Notes, the 2025 Notes, the 2026
Notes and the 2027 Notes were $10.4 million, $6.5 million, $12.9 million and $14.2 million, respectively. The issuance costs
allocated to the liability component are amortized to interest expense over the contractual terms of the 2023 Notes, the 2025
Notes, the 2026 Notes and the 2027 Notes at an effective interest rate of 5.65%, 6.22%, 8.37% and 6.26%, respectively.
Issuance costs attributable to the equity component of the 2023 Notes, the 2025 Notes, the 2026 Notes, and the 2027 Notes
were $2.8 million, $2.5 million, $5.4 million and $5.4 million, respectively, and are netted against the equity components
representing the conversion option in additional paid-in capital.
The cash consideration of the 2023 Notes Partial Repurchase allocated to the liability component of the 2023 Notes
was based on the fair value of the liability component of the 2023 Notes as of June 5, 2020 utilizing an effective discount rate
of 6.25%. This rate was based on our estimated rate for a similar liability with the same maturity, but without the conversion
option. To derive this effective discount rate, we observed the trading details of the 2023 Notes immediately prior to the
repurchase date to determine the volatility of the 2023 Notes. We utilized the observed volatility to calculate the effective
discount rate, which was adjusted to reflect the term of the remaining 2023 Notes. The cash consideration allocated to the
equity component of the 2023 Notes was calculated by deducting the fair value of the liability component from the aggregate
cash consideration and was recorded as a reduction to “Additional paid-in capital.” The gain on extinguishment was
subsequently determined by comparing the allocated cash consideration with the carrying value of the liability component,
which includes the proportionate amounts of unamortized debt discount and the remaining unamortized debt issuance costs.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
97
The net carrying amount of the liability component of the 2023 Notes immediately prior to the repurchase was as
follows:
June 5, 2020
(In thousands)
2023 Notes Total
2023 Notes Partial
Repurchase
Principal
$
1,265,000 $
488,339
Unamortized debt discount
(184,336)
(71,161)
Unamortized debt issuance costs
(7,194)
(2,777)
Net carrying amount
$
1,073,470 $
414,401
The 2023 Notes Partial Repurchase resulted in a gain on extinguishment of convertible senior notes, which is included
in “Other income (expense), net” on our consolidated statements of operations, and was calculated as follows:
(In thousands)
2023 Notes Partial
Repurchase
Net carrying amount of the liability component associated with the 2023 Notes Partial Repurchase
$
414,401
Less: Cash consideration allocated to the liability component
(407,449)
Gain from the 2023 Notes Partial Repurchase
$
6,952
The net carrying amounts of the liability and equity components for each series of notes as of January 31, 2022 was as
follows:
(In thousands)
2023 Notes (1)
2025 Notes
2026 Notes
2027 Notes
Liability component:
Principal amount
$
776,661 $
862,500 $
1,000,000 $
1,265,000
Unamortized discount
(58,269)
(135,436)
(265,608)
(278,251)
Unamortized issuance costs
(2,274)
(3,727)
(11,531)
(11,334)
Net carrying amount
$
716,118 $
723,337 $
722,861 $
975,415
Equity component, net of purchase discounts and
issuance costs
$
264,129 $
234,712 $
287,671 $
342,062
_________________________
(1)
Reflects the impact of the 2023 Notes Partial Repurchase on June 5, 2020, as discussed above.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
98
FORM 10-K
The following table sets forth the interest expense related to each series of notes:
Fiscal Year Ended January 31,
(In thousands)
2022
2021
2023 Notes:
Coupon interest expense
$
3,884 $
4,697
Amortization of debt discount (conversion option)
33,448
38,215
Amortization of debt issuance costs
1,304
1,492
Total interest expense related to the 2023 Notes
$
38,636 $
44,404
2025 Notes:
Coupon interest expense
$
9,704 $
9,704
Amortization of debt discount (conversion option)
32,417
30,615
Amortization of debt issuance costs
893
841
Total interest expense related to the 2025 Notes
$
43,014 $
41,160
2026 Notes:
Coupon interest expense
$
4,208 $
—
Amortization of debt discount (conversion option)
27,420
—
Amortization of debt issuance costs
1,192
—
Total interest expense related to the 2026 Notes
$
32,820 $
—
2027 Notes:
Coupon interest expense
$
14,232 $
9,290
Amortization of debt discount (conversion option)
42,445
26,724
Amortization of debt issuance costs
1,728
1,089
Total interest expense related to the 2027 Notes
$
58,405 $
37,103
As of January 31, 2022, the total estimated fair values of the 2023 Notes, the 2025 Notes, and the 2027 Notes were
approximately $0.84 billion, $0.96 billion and $1.16 billion, respectively. The fair value was determined based on the closing
trading price per $100 of the applicable series of notes as of the last day of trading for the period. We consider the fair value of
the 2023 Notes, the 2025 Notes, and the 2027 Notes to be a Level 2 measurement. As of January 31, 2022, the estimated fair
value of the 2026 Notes was $0.72 billion, which represents the present value of future principal and interest payments. We
consider the fair value of the 2026 Notes to be a Level 3 measurement.
Capped Calls
In connection with the issuance of the 2023 Notes, the 2025 Notes, and the 2027 Notes, we entered into privately
negotiated capped call transactions relating to each series of notes with certain counterparties (the “Capped Calls”). The Capped
Calls are expected to reduce potential dilution to our common stock upon conversion of a given series of notes and/or offset any
cash payments that we are required to make in excess of the principal amount of converted notes of such series, as the case may
be, with such reduction and/or offset subject to a cap. The Capped Calls are subject to adjustment upon the occurrence of
certain specified extraordinary events affecting us, including merger events, tender offers and announcement events. In
addition, the Capped Calls are subject to certain specified additional disruption events that may give rise to a termination of the
Capped Calls, including nationalization, insolvency or delisting, changes in law, failures to deliver, insolvency filings and
hedging disruptions.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
99
The following table sets forth other key terms and premiums paid for the Capped Calls related to each series of notes:
Capped Calls
Entered into in
Connection with
the Issuance of
the 2023 and
2025 Notes
Capped Calls
Entered into in
Connection with
the Issuance of
the 2027 Notes
Initial strike price, subject to certain adjustments
$
148.30 $
255.34
Cap price, subject to certain adjustments
$
232.62 $
378.28
Total premium paid (in thousands)
$
274,275 $
137,379
For accounting purposes, the Capped Calls are separate transactions, and not part of the terms of any series of notes.
As the Capped Calls qualify for a scope exception from derivative accounting for instruments that are both indexed to the
issuer’s own stock and classified in stockholders’ equity in its statement of financial position, the premium paid for the
purchase of the Capped Calls has been recorded as a reduction to “Additional paid-in capital” and will not be remeasured.
(8) Stock Compensation Plans and Stockholders’ Equity
Equity Incentive Plans
In November 2003, our board adopted the 2003 Equity Incentive Plan (the “2003 Plan”). The 2003 Plan authorized the
granting of common stock options and restricted stock awards to employees, directors and consultants.
In March 2012, our board approved the 2012 Equity Incentive Plan (as amended, the “2012 Plan”), which became
effective on April 18, 2012 and expired in March 2022 pursuant to its terms. The 2012 Plan provided for the grant of incentive
stock options, within the meaning of Section 422 of the Internal Revenue Code, to our employees and any parent and subsidiary
corporations’ employees, and for the grant of nonstatutory stock options, restricted stock awards, restricted stock units, stock
appreciation rights, performance units and performance shares to our employees, directors and consultants and any parent or
subsidiary corporations’ employees and consultants. Upon the effectiveness of the 2012 plan, all shares that were reserved but
not issued under the 2003 Plan became available for issuance under the 2012 Plan and no further awards have been granted
pursuant to the 2003 Plan. Canceled or forfeited equity awards under the 2003 Plan became available for issuance under the
2012 Plan. The term of an incentive stock option may not exceed 10 years, except that with respect to any participant who owns
more than 10% of the voting power of all classes or our outstanding stock, the term must not exceed 5 years. Options and RSUs
generally vest over 3 or 4 years.
The 2012 plan provided for annual automatic increases on February 1 to the shares reserved for issuance. The
automatic increase of the number of shares available for issuance under the 2012 Plan was equal to the lesser of 10 million
shares, 5% of the outstanding shares of common stock as of the last day of our immediately preceding fiscal year or such other
amount as our board may determine.
In January 2022, our board approved the 2022 Inducement Plan (the “Inducement Plan”) in accordance with Listing
Rule 5635(c)(4) of the corporate governance rules of the Nasdaq Stock Market, which will become effective on April 1, 2022.
The 2022 Plan provides for the grant of nonstatutory stock options, restricted stock awards, restricted stock units, stock
appreciation rights, performance units and performance shares to eligible employees in accordance with Listing Rule 5635(c)(4)
of the corporate governance rules of the Nasdaq Stock Market. No awards were made under the Inducement Plan during the
fiscal year ended January 31, 2022.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
100
FORM 10-K
The following table summarizes the stock option, restricted stock unit (“RSU”) and performance unit (“PSU”) activity
under our equity plans during the fiscal year ended January 31, 2022:
Options Outstanding
RSUs and PSUs
Outstanding
Shares
Available
for Grant
Shares
Weighted-
Average
Exercise
Price
Per Share
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value (1)
Shares
(in years)
(in thousands)
Balances as of January 31, 2021
24,923,677 418,743 $
11.37
5.85
$
64,342 11,236,903
Options granted (2)
(41,772)
41,772
16.83
Options exercised
(217,982)
11.41
Options forfeited and expired
29,510 (29,510)
11.79
RSUs and PSUs granted
(7,838,416)
7,838,416
RSUs and PSUs vested
(4,325,009)
Shares withheld related to net share
settlement of RSUs and PSUs
1,607,813
RSUs and PSUs forfeited and canceled
3,063,530
(3,063,530)
Balances as of January 31, 2022
21,744,342 213,023 $
12.35
5.82
$
23,767 11,686,780
Vested and expected to vest
210,397 $
12.35
5.81
$
23,475 11,028,943
Exercisable as of January 31, 2022
123,530 $
12.11
5.14
$
13,812
_________________________
(1)
The intrinsic value is calculated as the difference between the exercise price of the underlying stock option award and the closing market
price of our common stock as of January 31, 2022.
(2)
All options granted during fiscal 2022 were equity awards assumed in connection with the TruSTAR acquisition.
During fiscal 2022, upon each settlement date of our outstanding RSUs and PSUs to then current employees, shares
were withheld to cover the required withholding tax, which was based on the value of a share on the settlement date as
determined by the closing price of our common stock on the trading day of the applicable settlement date. The remaining shares
were delivered to the recipient as shares of our common stock. The amount remitted to the tax authorities for the employees’ tax
obligation was reflected as a financing activity on our consolidated statements of cash flows. These shares withheld by us as a
result of the net settlement of RSUs and PSUs were not considered issued and outstanding. These shares were returned to the
reserves and were available for future issuance under our 2012 Plan. We may also require employees to sell a portion of the
shares that they received upon the vesting of RSUs or PSUs in order to cover any required withholding taxes.
During fiscal 2022, we granted 516,686 PSUs to certain executives under our 2012 Plan, which includes both PSUs
awarded but not yet earned, as well as PSUs earned and eligible to vest. The number of PSUs granted that were earned and
eligible to vest were determined after a one-year performance period, based on achievement of certain company financial
performance measures and the recipient’s continued service with us. The number of shares of our stock to be received based on
financial performance measures can range from 0% to 200% of the target amount. Compensation expense for PSUs with
financial performance measures is measured using the fair value at the date of grant and recorded over the vesting period of
three or four-years under the graded-vesting attribution method, and may be adjusted over the vesting period based on interim
estimates of performance against the pre-set objectives. Additionally, beginning in fiscal 2019, our PSUs granted contain an
additional market performance measure that can increase the number of shares earned by up to an additional 50% of the shares
received based on the financial performance measure.
On October 27, 2020, the Compensation Committee of our board of directors approved a modification to the
performance thresholds of our fiscal 2021 PSU awards. We accounted for this change as a Type III modification under ASC
718 as the expectation of the achievement of certain performance conditions related to these awards changed from improbable
to probable post-modification. As a result, we reversed $10.8 million of stock-based compensation expense previously
recognized for these awards, during fiscal 2021. Post-modification stock-based compensation expense related to these awards
will be recognized based on the modification date fair value over their remaining service period, under the graded-vesting
attribution method.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
101
The following table presents unrecognized compensation cost related to stock options, RSUs, PSUs and restricted
stock awards (“RSA”) as of January 31, 2022:
Unrecognized
Compensation Cost
(in thousands)
Weighted-Average
Remaining
Contractual Term
(in years)
Stock options
$
8,460
1.2
RSUs
1,294,097
2.3
PSUs
54,517
0.9
RSAs
26,478
1.4
Total unrecognized compensation cost
$
1,383,552
The following table summarizes our RSA activity during the fiscal year ended January 31, 2022:
Shares
Outstanding as of January 31, 2021
485,683
RSAs issued in connection with acquisition
10,932
RSAs vested
(249,069)
RSAs forfeited and canceled
(1,440)
Outstanding as of January 31, 2022
246,106
The aggregate intrinsic value of options exercised was $26.3 million, $52.6 million and $43.7 million for fiscal 2022,
2021 and 2020, respectively. The weighted-average grant date fair value of options granted was $105.32, $134.26 and $106.85
per share for fiscal 2022, 2021 and 2020, respectively.
The aggregate intrinsic value of RSUs vested was $511.3 million, $771.3 million and $629.9 million for fiscal 2022,
2021 and 2020, respectively. The weighted-average grant date fair value of RSUs granted was $145.11, $161.64 and $135.39
per share for fiscal 2022, 2021 and 2020, respectively.
The weighted-average grant date fair value of PSUs granted was $155.53, $197.55 and $166.57 per share for fiscal
2022, 2021 and 2020, respectively.
The weighted-average grant date fair value of RSAs issued was $121.20, $175.98 and $115.53 per share for fiscal
2022, 2021 and 2020, respectively.
Employee Stock Purchase Plan
Our 2012 Employee Stock Purchase Plan (the “ESPP”) allows eligible employees to purchase shares of our common
stock at a discount through payroll deductions of up to 15% of their eligible compensation, at not less than 85% of the fair
market value, as defined in the ESPP, subject to any plan limitations. The ESPP provides for overlapping 12-month offering
periods, starting on the first trading day on or after June 15 and December 15 of each year. The ESPP provides for an automatic
increase of the number of shares available for issuance under the ESPP equal to the least of 4 million shares, 2% of the
outstanding shares of our common stock on the last day of the immediately preceding fiscal year, or such other amount as may
be determined by our board of directors.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
102
FORM 10-K
Stock-Based Compensation Expense
Stock-based compensation expense related to our stock-based awards and ESPP was allocated as follows:
Fiscal Year Ended January 31,
(In thousands)
2022
2021
2020
Cost of revenues
$
79,968 $
56,437 $
44,399
Research and development
327,065
271,120
185,262
Sales and marketing
246,447
198,346
216,276
General and administrative
141,338
92,752
99,487
Total stock-based compensation expense
$
794,818 $
618,655 $
545,424
We capitalized $3.5 million and $8.0 million of stock-based compensation for fiscal 2022 and 2021, respectively,
related to our software development and implementation projects.
During fiscal 2022, 2021 and 2020, we recognized tax benefits on total stock-based compensation expense of
$5.9 million, $4.0 million and $3.9 million, respectively, which are reflected in "Income tax provision" on our consolidated
statements of operations.
Valuation Assumptions
PSUs granted in fiscal 2022 and 2021 contain an additional market performance measure that can increase the number
of shares earned. The following table summarizes the assumptions used in the Monte Carlo simulation model to determine the
fair value of PSUs granted during the fiscal years ended January 31, 2022, 2021 and 2020:
Fiscal Year Ended January 31,
2022
2021
2020
Expected volatility (1)
46.0 - 47.5%
42.8 - 43.9%
37.9 - 40.2%
Risk-free rate
0.3 - 0.4%
0.2 - 0.6%
2.3 %
Dividend yield
—
—
—
Expected term (in years)
2.7 - 3.0
3.4 - 4.0
4.0
_________________________
(1)
Equal weighting of Splunk historical and implied volatility.
The following table summarizes the assumptions used in the Black-Scholes method to determine the fair value of
options granted during the fiscal years ended January 31, 2022, 2021 and 2020:
Fiscal Year Ended January 31,
2022
2021
2020
Expected volatility
43.1 - 45.7%
43.8 - 44.1%
38.5 - 42.8%
Risk-free rate
0.3 - 1.0%
0.4 - 0.5%
1.5 - 1.8%
Dividend yield
—
—
—
Expected term (in years)
3.2 - 5.7
4.7 - 5.5
3.0 - 6.4
The following table summarizes the assumptions used in the Black-Scholes option-pricing model to determine the fair
value of our common shares under the ESPP:
Fiscal Year Ended January 31,
2022
2021
2020
Expected volatility
40.6 - 47.4%
53.2 - 70.2%
37.4 - 46.6%
Risk-free rate
0.1 - 0.3%
0.1 - 0.2%
1.6 - 2.0%
Dividend yield
—
—
—
Expected term (in years)
0.5 - 1.0
0.5 - 1.0
0.5 - 1.0
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
103
Stock Repurchase Program
In June 2021, our board of directors authorized and approved a stock repurchase program of up to $1.0 billion of our
outstanding common stock. As of October 31, 2021, we repurchased 6.9 million shares of common stock with a total price of
$1.0 billion, under trading plans complying with Rule 10b5-1 under the Exchange Act, at an average price of $145.23 per share.
The repurchased shares are reflected as treasury stock on our consolidated balance sheets and statement of stockholders’ equity.
As of October 31, 2021, the repurchase program was complete.
(9) Revenues, Accounts Receivable, Deferred Revenue and Remaining Performance
Obligations
Disaggregation of Revenues
The following table presents disaggregated revenues by major product or service type:
Fiscal Year Ended January 31,
(In thousands)
2022
2021
2020
Revenues
Cloud services
$
943,785 $
554,132 $
312,358
License
1,056,481
971,378
1,373,367
Maintenance, professional services and training
673,398
703,875
673,201
Total revenues
$
2,673,664 $
2,229,385 $
2,358,926
Revenues by geography are based on the shipping address of the customer. The following table presents our revenues
by geographic region:
Fiscal Year Ended January 31,
(In thousands)
2022
2021
2020
United States
$
1,843,288 $
1,467,260 $
1,676,395
International
830,376
762,125
682,531
Total revenues
$
2,673,664 $
2,229,385 $
2,358,926
Other than the United States, no other individual country exceeded 10% of total revenues during any of the periods
presented.
The following table presents revenues by channel partners representing 10% or more of total revenues:
Fiscal Year Ended January 31,
2022
2021
2020
Channel Partner A
29 %
28 %
29 %
Channel Partner B
14 %
13 %
19 %
The revenues from these channel partners are comprised of a number of customer transactions, none of which were
individually greater than 10% of total revenues during fiscal 2022, 2021 or 2020.
Accounts Receivable
The following table presents total current and non-current accounts receivable by channel partners representing 10% or
more of total current and non-current accounts receivable:
January 31,
2022
2021
Channel Partner A
30 %
26 %
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
104
FORM 10-K
The COVID-19 pandemic and the recent economic downturn prompted us to perform additional credit reviews of our
existing customers. After performing our additional reviews using a current expected credit loss model, we determined that,
while there may be delays in certain of our collections, the risk of credit loss on our accounts receivable as of January 31, 2022
is low. As this is consistent with the results of our risk assessment, no significant adjustments to our allowance for doubtful
accounts were made.
Deferred Revenue
Revenues recognized from amounts included in deferred revenue as of January 31, 2021 and 2020 were $943.2 million
and $785.2 million during fiscal 2022 and 2021, respectively.
Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been
recognized, which includes deferred revenue and non-cancelable amounts that will be invoiced and excludes performance
obligations that are subject to cancellation terms. Our remaining performance obligations were $2.58 billion as of January 31,
2022, of which we expect to recognize approximately 64% as revenue over the next 12 months and the remainder thereafter.
(10) Income Taxes
Loss before income taxes consists of the following:
Fiscal Year Ended January 31,
(In thousands)
2022
2021
2020
United States
$
(1,338,946) $
(907,201) $
(363,053)
International
18,163
6,153
31,402
Total
$
(1,320,783) $
(901,048) $
(331,651)
Income tax provision consists of the following:
Fiscal Year Ended January 31,
(In thousands)
2022
2021
2020
Current tax provision:
Federal
$
95 $
859 $
316
State
271
748
627
Foreign
18,527
8,915
10,194
Total current tax provision
18,893
10,522
11,137
Deferred tax benefit:
Federal
(305)
(1,306)
(2,124)
State
(481)
(698)
(2,213)
Foreign
207
(1,586)
(1,783)
Total deferred tax benefit
(579)
(3,590)
(6,120)
Total tax provision
$
18,314 $
6,932 $
5,017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
105
The reconciliation of federal statutory income tax rate to our effective income tax rate is as follows:(1)
Fiscal Year Ended January 31,
(In thousands)
2022
2021
2020
Expected benefit at U.S. federal statutory rate
$
(277,364) $
(189,220) $
(69,647)
State income taxes
(211)
50
(1,585)
Stock-based compensation
35,097
(31,284)
(18,017)
Research and development tax credits
(30,428)
(37,503)
(27,480)
Non-U.S. tax rate differential
15,613
5,805
4,345
Non-deductible expenses
4,231
2,064
4,874
Change in valuation allowance
271,662
259,208
114,335
Other
(286)
(2,188)
(1,808)
Total tax provision
$
18,314 $
6,932 $
5,017
_________________________
(1)
Prior year amounts have been reclassified to conform to current year presentation.
Deferred tax assets and liabilities consist of the following:(1)
Fiscal Year Ended January 31,
(In thousands)
2022
2021
Deferred tax assets:
Net operating loss carryforwards
$
730,071 $
694,261
Capitalized research & development costs
285,181
122,303
Tax credit carryforwards
264,968
220,019
Operating lease liabilities
57,459
87,610
Stock-based compensation
57,438
28,262
Accrued liabilities
45,617
26,816
Deferred revenue
22,142
23,666
Interest deduction carryforward
15,060
4,617
Other
5,645
5,350
Valuation allowance
(1,180,117)
(925,844)
Total deferred tax assets
303,464
287,060
Deferred tax liabilities:
Convertible senior notes
(152,205)
(110,439)
Deferred commissions
(61,919)
(44,214)
Operating lease right-of-use assets
(49,176)
(79,100)
Depreciation and amortization
(35,481)
(48,228)
Total deferred tax liabilities
(298,781)
(281,981)
Net deferred taxes
4,683
5,079
Recorded as:
Non-current deferred tax assets (2)
5,049
5,368
Non-current deferred tax liabilities (2)
(366)
(289)
Net deferred tax assets
$
4,683 $
5,079
_________________________
(1)
Prior year amounts have been reclassified to conform to current year presentation.
(2)
Non-current deferred tax assets and non-current deferred tax liabilities are included in “Other assets” and “Other liabilities, non-current”,
respectively, on our consolidated balance sheets.
ASC Topic 740, Income Taxes, requires that the tax benefit of net operating losses, temporary differences and credit
carryforwards be recorded as an asset if we believe that realization is more likely than not. Realization of the future tax benefits
is dependent on our ability to generate sufficient taxable income in future periods. Due to our history of U.S. operating losses,
we believe that realization of our U.S. deferred tax assets is not more likely than not and, accordingly, have provided a full
valuation allowance. The valuation allowance totaled $1.2 billion and $925.8 million for fiscal 2022 and 2021, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
106
FORM 10-K
The valuation allowance on our net deferred tax assets increased by $254.3 million, $282.4 million and $162.1 million during
fiscal 2022, 2021 and 2020, respectively.
If we reverse all or part of our valuation allowance in the future, our consolidated financial statements in the period of
reversal may reflect a material increase in balance sheet assets and a corresponding material tax benefit to our consolidated
statements of operations.
As of January 31, 2022, we had net operating loss carryforwards of $2.93 billion for federal income tax purposes, a
portion of which will begin to expire in 2025 if unused. We had net operating loss carryforwards of $1.88 billion for state
income tax purposes, which will begin to expire in the year 2023 if unused.
As of January 31, 2022, we also had research and development tax credit carryforwards of $204.1 million for federal
income tax purposes and $155.0 million for state income tax purposes. The federal research and development tax credits will
begin to expire in 2026 if unused. State research and development tax credits carry forward indefinitely.
As of January 31, 2022, we have an immaterial amount of earnings indefinitely reinvested outside of the U.S. We do
not intend to repatriate these earnings, so we do not provide for U.S. income taxes and foreign withholding tax on these
earnings.
As of January 31, 2022, our unrecognized tax benefits were $82.1 million, of which $11.1 million would, if
recognized, impact our effective tax rate. The remainder will not, if recognized, affect the effective income tax rate due to the
valuation allowance that currently offsets deferred tax assets.
Unrecognized tax benefit balances are presented below:
Fiscal Year Ended January 31,
(In thousands)
2022
2021
2020
Balance at beginning of year
$
60,661 $
39,774 $
32,905
Increase related to prior year tax positions
2,720
2,969
—
Decrease related to prior year tax positions
(447)
(446)
—
Increase related to current year tax positions
19,179
18,364
6,869
Balance at end of year
$
82,113 $
60,661 $
39,774
We identify, evaluate and measure all uncertain tax positions taken or to be taken on tax returns and record liabilities
for positions that may not be sustained upon examination by the relevant taxing authorities.
We are subject to federal, state and local taxes in the United States and numerous foreign jurisdictions. Our federal tax
returns for the years 2005 through the current period remain subject to examination.
The potential change in unrecognized tax benefits during the next 12 months is not expected to be material.
We accrue interest and penalties related to unrecognized tax benefits as a component of income tax expense. Accrued
interest and penalties as of January 31, 2022 and 2021 were not material.
(11) Net Loss Per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common
stock outstanding during the period, less the weighted-average unvested common stock subject to repurchase or forfeiture.
Diluted net loss per share is computed by giving effect to all potential shares of common stock, including convertible senior
notes, stock options, RSUs, PSUs and RSAs to the extent dilutive.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
107
The following table sets forth the computation of historical basic and diluted net loss per share:
Fiscal Year Ended January 31,
(In thousands, except per share amounts)
2022
2021
2020
Numerator:
Net loss
$
(1,339,097) $
(907,980) $
(336,668)
Denominator:
Weighted-average common shares outstanding
161,966
160,397
152,653
Less: Weighted-average unvested common shares subject to
repurchase or forfeiture
(338)
(653)
(704)
Weighted-average shares used to compute net loss per share,
basic and diluted
161,628
159,744
151,949
Net loss per share, basic and diluted
$
(8.29) $
(5.68) $
(2.22)
Since we were in a net loss position for all periods presented, basic net loss per share is the same as diluted net loss per
share for all periods as the inclusion of all potentially dilutive securities outstanding would have been anti-dilutive. Potentially
dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as
follows:
Fiscal Year Ended January 31,
(In thousands)
2022
2021
2020
Shares subject to outstanding common stock options
213
419
824
Shares subject to outstanding RSUs, PSUs and RSAs
11,933
11,723
13,999
Employee stock purchase plan
1,709
641
548
Shares underlying the conversion spread in the convertible senior
notes
—
1,871
—
Total
13,855
14,654
15,371
As of January 31, 2022, the aggregate outstanding principal amount under the Notes is potentially convertible into
22.3 million shares of our common stock. Since we expect to settle the principal amount of our convertible senior notes in cash,
we use the treasury stock method for calculating any potential dilutive effect on diluted net income per share, if applicable. As a
result, only the amount by which the conversion value exceeds the aggregate principal amount of the Notes (the “conversion
spread”) is considered in the diluted earnings per share calculation. The conversion spread has a potentially dilutive effect on
diluted net income per share when the average market price of our common stock for a given period exceeds the initial
conversion price of $148.30 per share for the 2023 Notes and the 2025 Notes, $160.00 per share for the 2026 Notes, and
$255.34 per share for the 2027 Notes.
During the three months ended January 31, 2022, the average market price of our common stock was $126.21, which
did not exceed the initial conversion price of the 2023 Notes, the 2025 Notes, the 2026 Notes or the 2027 Notes. Accordingly,
we excluded the potentially dilutive effect of the conversion spread for the Notes.
In connection with the issuance of the 2023 Notes, 2025 Notes, and 2027 Notes, we entered into Capped Calls, which
were not included for purposes of calculating the number of diluted shares outstanding, as their effect would have been anti-
dilutive.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
108
FORM 10-K
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures as of January 31, 2022. The term “disclosure controls and procedures,”
as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that
are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and
communicated to the company’s management, including its principal executive and principal financial officers, as appropriate
to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of
January 31, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure
controls and procedures were effective at the reasonable assurance level.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as
defined in Rule 13a-15(f) of the Exchange Act. Our management conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the criteria set forth in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this evaluation,
management concluded that our internal control over financial reporting was effective as of January 31, 2022.
The effectiveness of our internal control over financial reporting as of January 31, 2022 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included in
Item 8 of this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation
required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended January 31, 2022 that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure
controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving
their objectives and are effective at the reasonable assurance level. However, our management does not expect that our
disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control
system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of
the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur
because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by
collusion of two or more people or by management override of the controls. The design of any system of controls also is based
in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because
of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent
limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
109
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
110
FORM 10-K
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Executive Officers and Directors
Information responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to
our 2022 Annual Meeting of Stockholders (the “Proxy Statement”) to be filed with the SEC within 120 days after the end of the
fiscal year covered by this annual report on Form 10-K.
As part of our system of corporate governance, our board of directors has adopted a code of business conduct and
ethics. The code applies to all of our employees, officers (including our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar functions), agents and representatives, including our
independent directors and consultants, who are not employees of the Company, with regard to their Splunk-related activities.
Our code of business conduct and ethics is available on our website at http://investors.splunk.com/corporate-governance. We
will post on this section of our website any amendment to our code of business conduct and ethics, as well as any waivers of
our code of business conduct and ethics, that are required to be disclosed by the rules of the SEC or the Nasdaq Stock Market.
Item 11. Executive Compensation
The information required by this Item is incorporated herein by reference to the Proxy Statement to be filed with the
SEC within 120 days after the end of the fiscal year covered by this annual report on Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
The information required by this Item is incorporated herein by reference to the Proxy Statement to be filed with the
SEC within 120 days after the end of the fiscal year covered by this annual report on Form 10-K.
Item 13. Certain Relationships and Related Transactions, and Director
Independence
The information required by this Item is incorporated herein by reference to the Proxy Statement to be filed with the
SEC within 120 days after the end of the fiscal year covered by this annual report on Form 10-K.
Item 14. Principal Accountant Fees and Services
The information required by this Item is incorporated herein by reference to the Proxy Statement to be filed with the
SEC within 120 days after the end of the fiscal year covered by this annual report on Form 10-K.
111
PART IV
Item 15. Exhibits and Financial Statement Schedules
Documents filed as part of this report are as follows:
1.
Consolidated Financial Statements: Our Consolidated Financial Statements are listed in the “Index to Consolidated
Financial Statements” Under Part II, Item 8 of this report.
2.
Financial Statement Schedules: Financial statement schedules have been omitted because they are not applicable or the
required information is shown in the Consolidated Financial Statements or Notes thereto.
3.
Exhibits: The documents listed in the Exhibit Index of this report are incorporated by reference or are filed with this
report, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).
Item 16. Form 10-K Summary
Not applicable.
112
FORM 10-K
EXHIBIT
INDEX
Exhibit
Number
Description
2.1*†
Agreement and Plan of Mergers among the Registrant, certain of its wholly owned subsidiaries, SignalFx,
Inc. and Fortis Advisors LLC, as Securityholders’ agent, dated as of August 21, 2019 (incorporated by
reference to Exhibit 2.1 filed with the Registrant’s Quarterly Report on Form 10-Q filed on December 4,
2019).
3.1
Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit
3.1 filed with the Registrant’s Quarterly Report on Form 10-Q filed on June 13, 2012).
3.2
Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 filed with the
Registrant’s Current Report on Form 8-K filed on March 25, 2019).
4.1
Specimen common stock certificate of the Registrant (incorporated by reference to Exhibit 4.1 filed with the
Registrant’s Registration Statement on Form S-1 filed on April 6, 2012).
4.2
Indenture, dated as of September 21, 2018, by and between the Registrant and U.S. Bank National
Association, as Trustee (incorporated by reference to Exhibit 4.1 filed with the Registrant’s Current Report
on Form 8-K filed on September 21, 2018).
4.3
Form of Global Note, representing Splunk Inc.’s 0.50% Convertible Senior Notes due 2023 (incorporated by
reference to Exhibit A to the Indenture filed as Exhibit 4.1 filed with the Registrant’s Current Report on
Form 8-K filed on September 21, 2018).
4.4
Indenture, dated as of September 21, 2018, by and between the Registrant and U.S. Bank National
Association, as Trustee (incorporated by reference to Exhibit 4.3 filed with the Registrant’s Current Report
on Form 8-K filed on September 21, 2018).
4.5
Form of Global Note, representing Splunk Inc.’s 1.125% Convertible Senior Notes due 2025 (incorporated
by reference to Exhibit A to the Indenture filed as Exhibit 4.3 filed with the Registrant’s Current Report on
Form 8-K filed on September 21, 2018).
4.6
Indenture, dated as of June 5, 2020, by and between Splunk Inc. and U.S. Bank National Association, as
Trustee (incorporated by reference to Exhibit 4.1 filed with the Registrant’s Current Report on Form 8-K
filed on June 5, 2020).
4.7
Form of Global Note, representing Registrant’s 1.125% Convertible Senior Notes due 2027 (incorporated by
reference to Exhibit A to the Indenture filed as Exhibit 4.1 filed with the Registrant’s Current Report on
Form 8-K filed on June 5, 2020).
4.8
Description of Common Stock (incorporated by reference to Exhibit 4.6 filed with the Registrant’s Annual
Report on Form 10-K filed on March 26, 2020).
4.9
Indenture, dated July 9, 2021, between Splunk Inc. and U.S. Bank National Association, as Trustee
(incorporated by reference to Exhibit 4.1 filed with the Registrant’s Current Report on Form 8-K filed on
July 9, 2021).
4.10
Form of 0.75% Convertible Senior Notes due 2026 (included in Exhibit 4.9).
113
10.1#
Form of Indemnification Agreement between the Registrant and its directors and officers (incorporated by
reference to Exhibit 10.1 filed with the Registrant’s Registration Statement on Form S-1 filed on January 12,
2012).
10.2#
2003 Equity Incentive Plan, as amended, and Forms of Stock Option Agreement under 2003 Equity
Incentive Plan (incorporated by reference to Exhibit 10.2 filed with the Registrant’s Registration Statement
on Form S-1 filed on January 12, 2012).
10.3#
2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 filed with the Registrant’s
Registration Statement on Form S-1 filed on April 6, 2012).
10.4#
Amendment to 2012 Equity Incentive Plan, effective as of September 14, 2017 (incorporated by reference to
Exhibit 10.1 filed with the Registrant’s Quarterly Report on Form 10-Q filed on December 6, 2017).
10.5#
2012 Employee Stock Purchase Plan, as amended (incorporated by reference to Exhibit 10.5 filed with the
Registrant’s Annual Report on Form 10-K filed on March 26, 2020).
10.6
Office Lease, dated as of April 29, 2014, between 270 Brannan Street, LLC and the Registrant (incorporated
by reference to Exhibit 10.2 filed with the Registrant’s Quarterly Report on Form 10-Q filed on June 9,
2014).
10.7
First Amendment to Office Lease, dated as of March 1, 2018, between 270 Brannan Street, LLC and the
Registrant (incorporated by reference to Exhibit 10.2 filed with the Registrant’s Quarterly Report on Form
10-Q filed on June 8, 2018).
10.8
Office Lease, dated as of August 24, 2015, between FRIT San Jose Town and Country Village, LLC and the
Registrant (incorporated by reference to Exhibit 10.1 filed with the Registrant’s Quarterly Report on Form
10-Q filed on December 10, 2015).
10.9
First Amendment to Office Lease, dated as of May 23, 2016, between FRIT San Jose Town and Country
Village, LLC and the Registrant (incorporated by reference to Exhibit 10.2 filed with the Registrant’s
Quarterly Report on Form 10-Q filed on September 8, 2016).
10.10
Second Amendment to Office Lease, dated as of December 12, 2016, between FRIT San Jose Town and
Country Village, LLC and the Registrant (incorporated by reference to Exhibit 10.12 filed with the
Registrant’s Annual Report on Form 10-K filed on March 29, 2017).
10.11#
Employment Offer Letter between the Registrant and Doug Merritt, dated as of November 16, 2015
(incorporated by reference to Exhibit 10.21 filed with the Registrant’s Annual Report on Form 10-K filed on
March 30, 2016).
10.12#
Amendment to Employment Offer Letter between the Registrant and Doug Merritt, dated as of June 4, 2019
(incorporated by reference to Exhibit 10.3 filed with the Registrant’s Quarterly Report on Form 10-Q filed
on June 6, 2019).
10.13#
Amendment to Employment Offer Letter between the Registrant and Doug Merritt, dated as of May 7, 2020
(incorporated by reference to Exhibit 10.1 filed with the Registrant’s Quarterly Report on Form 10-Q filed
on June 1, 2020).
10.14#
Amendment to Employee Offer Letter between the Company and Doug Merritt, dated as of November 22,
2021.
10.15#
Amended and Restated Employment Offer Letter between the Registrant and Tim Tully, dated as of April
25, 2018 (incorporated by reference to Exhibit 10.1 filed with the Registrant’s Quarterly Report on Form
10-Q filed on June 8, 2018).
10.16#
Amended and Restated Employment Offer Letter between the Registrant and Scott Morgan, dated as of
October 30, 2018 (incorporated by reference to Exhibit 10.1 filed with the Registrant’s Quarterly Report on
Form 10-Q filed December 7, 2018).
114
FORM 10-K
10.17#
Employment Offer Letter between the Registrant and Jason Child, dated as of April 16, 2019 (incorporated
by reference to Exhibit 10.2 filed with the Registrant’s Quarterly Report on Form 10-Q filed on June 6,
2019).
10.18#
Form of Amendment to Employment Offer Letter between the Registrant and certain of its executive
officers (incorporated by reference to Exhibit 10.4 filed with the Registrant’s Quarterly Report on Form 10-
Q filed on June 6, 2019).
10.19#
Employment Offer Letter between the Registrant and Teresa Carlson, dated as of March 2, 2021
(incorporated by reference to Exhibit 10.1 filed with the Registrant’s Quarterly Report on Form 10-Q filed
on June 9, 2021).
10.20#
Employment Offer Letter between the Registrant and Shawn Bice, dated as of April 29, 2021 (incorporated
by reference to Exhibit 10.2 filed with the Registrant’s Quarterly Report on Form 10-Q filed on September
8, 2021).
10.21#
Employment Offer Letter between the Company and Graham Smith, dated as of November 13, 2021
(incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K filed on
November 18, 2021).
10.22#
Summary of Amendment to Employment Offer Letters between the Registrant and certain of its executive
officers.
10.23#
Executive Bonus Plan (incorporated by reference to Exhibit 10.15 filed with the Registrant’s Registration
Statement on Form S-1 filed on April 6, 2012).
10.24#
Form of Stock Option Agreement under the 2012 Equity Incentive Plan (incorporated by reference to
Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K filed on April 24, 2012).
10.25#
Form of Restricted Stock Unit Agreement under the 2012 Equity Incentive Plan (incorporated by reference
to Exhibit 10.2 filed with the Registrant’s Current Report on Form 8-K filed on April 24, 2012).
10.26#
Form of Subscription Agreement under the 2012 Employee Stock Purchase Plan (incorporated by reference
to Exhibit 10.3 filed with the Registrant’s Current Report on Form 8-K filed on April 24, 2012).
10.27#
Form of Performance Unit Award Agreement under the 2012 Equity Incentive Plan (incorporated by
reference to Exhibit 10.1 filed with the Registrant’s Quarterly Report on Form 10-Q filed on June 9, 2015).
10.28
Form of Confirmation for Capped Call Transactions (incorporated by reference to Exhibit 10.1 filed with
the Registrant’s Current Report on Form 8-K filed on September 21, 2018).
10.29
Form of Confirmation for Capped Call Transactions (incorporated by reference to Exhibit 10.1 filed with
the Registrant’s Current Report on Form 8-K filed on June 5, 2020).
10.30
Investment Agreement, dated as of June 22, 2021, among Splunk Inc. and Silver Lake Alpine, L.P., Silver
Lake Alpine (Offshore Master), L.P. and Silver Lake Partners VI, L.P. (incorporated by reference to Exhibit
10.1 filed with the Registrant’s Current Report on Form 8-K filed on June 22, 2021).
10.31#
Inducement Plan
21.1
List of subsidiaries of the Registrant.
23.1
Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
31.1
Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities
Exchange Act of 1934, as amended.
115
31.2
Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities
Exchange Act of 1934, as amended.
32.1
Certification of Principal Executive Officer and Principal Financial Officer Required Under
Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350.
101.INS
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Schema Linkbase Document
101.CAL
Inline XBRL Taxonomy Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Labels Linkbase Document
101.PRE
Inline XBRL Taxonomy Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
#
Indicates management contract or compensatory plan.
*
The schedules and other attachments to this exhibit have been omitted. The Registrant agrees to furnish a
copy of any omitted schedules or attachments to the SEC upon request.
†
Certain portions of this exhibit have been omitted as the Registrant has determined (i) the omitted
information is not material and (ii) the omitted information would likely cause harm to the Registrant if
publicly disclosed.
116
FORM 10-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 24, 2022.
SPLUNK INC.
By: /s/ Graham V. Smith
Graham V. Smith
Interim Chief Executive Officer, Chair and Director
117
POWER OF ATTORNEY
KNOW ALL THESE PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints Graham V. Smith, Jason E. Child and Scott Morgan, and each of them, his or her attorneys-in-fact, each with full
power of substitution, for him or her in any and all capacities, to sign any and all amendments to this Annual Report on Form
10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each said attorneys-in-fact or their substitute or substitutes, may do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been
signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
118
FORM 10-K
Signature
Title
Date
/s/ Graham V. Smith
Interim Chief Executive Officer, Chair and
Director (Principal Executive Officer)
March 24, 2022
Graham V. Smith
/s/ Jason E. Child
Senior Vice President and Chief Financial
Officer (Principal Financial Officer)
March 24, 2022
Jason E. Child
/s/ Timothy C. Emanuelson
Chief Accounting Officer (Principal
Accounting Officer)
March 24, 2022
Timothy C. Emanuelson
/s/ Sara J. Baack
Director
March 24, 2022
Sara J. Baack
/s/ Sean Boyle
Director
March 24, 2022
Sean Boyle
/s/ Mark T. Carges
Director
March 24, 2022
Mark T. Carges
/s/ Kenneth Hao
Director
March 24, 2022
Kenneth Hao
/s/ Patricia B. Morrison
Director
March 24, 2022
Patricia B. Morrison
/s/ Stephen G. Newberry
Director
March 24, 2022
Stephen G. Newberry
/s/ Elisa A. Steele
Director
March 24, 2022
Elisa A. Steele
/s/ Dennis L. Via
Director
March 24, 2022
Dennis L. Via
/s/ Sri Viswanath
Director
March 24, 2022
Sri Viswanath
119
Copies of Splunk Inc.’s Annual
Report, as well as other
financial reports and news
from Splunk Inc., may be read
and downloaded from our
website at
http://investors.splunk.com.
If you do not have online
access, you may request
printed materials by
contacting Splunk Inc.
Investor Relations at:
415.848.8476.
Auditors
PricewaterhouseCoopers LLP
San Jose, CA
Corporate Counsel
Wilson Sonsini Goodrich
& Rosati, Professional
Corporation
Palo Alto, CA
Stock Transfer Agent
and Registrar of Stock
AST
6201 15th Avenue
Brooklyn, NY 11219
Phone: 800.937.5449
www.astfinancial.com
Email: help@astfinancial.com
Stock Listing
Splunk Inc. common stock is
traded on NASDAQ Global
Select Market, listed under
the symbol “SPLK”
Investor Relations
Contact Information
Splunk Inc.
3098 Olsen Drive
San Jose, CA 95128
Email: ir@splunk.com
Phone: 415.848.8476
Sara Baack
Former Chief Product Officer,
Equinix
Sean Boyle
COO and CFO, Wildlife
Studios Limited
Mark Carges
Former CTO, eBay
Kenneth Hao
Chairman and Managing
Partner, Silver Lake
Patricia Morrison
Former EVP and Chief
Information Officer,
Cardinal Health
Stephen Newberry
Former Chairman,
Lam Research
Graham Smith
Independent Chair, Splunk
Elisa Steele
Independent Board Member
Gary Steele
President and Chief Executive
Officer, Splunk
General Dennis Via (ret)
EVP, Booz Allen Hamilton
and Retired Four-Star
U.S. Army General
Luis Visoso
CFO, Unity Software
Gary Steele
President and Chief Executive
Officer
Shawn Bice
President of Products
and Technology
Jason Child
Senior Vice President and
Chief Financial Officer
Garth Fort
Senior Vice President,
Chief Product Officer
Claire Hockin
Senior Vice President,
Chief Marketing Officer
Ammar Maraqa
Senior Vice President,
Chief Strategy Officer
Scott Morgan
Senior Vice President,
Chief Legal Officer, Global
Affairs and Secretary
Jeremy Rishel
Senior Vice President,
Engineering
Kristen Robinson
Senior Vice President,
Chief People Officer
Christian Smith
Senior Vice President,
Chief Revenue Officer
Sri Viswanath
CTO, Atlassian
Prepared by www.argyleteam.com
Corporate
Headquarters
270 Brannan Street
San Francisco, CA 94107
Phone: +1 415.848.8400
Fax: +1 415.358.5757
splunk.com
Europe, Middle East
and Africa
Splunk Services UK Limited
Brunel Building
1 & 2 Canalside Walk
London, W2 1DG
United Kingdom
Phone: +44 0.20.3204.4300
Asia Pacific
Splunk Services Hong Kong Limited
思博服務香港有限公司
Suites 2909-2913, 29/F, Tower 6
The Gateway, Harbour City,
Tsim Sha Tsui, Kowloon
Hong Kong
Phone: +852 3975.4000
Splunk, Splunk> and Turn Data Into Doing are trademarks and registered trademarks of Splunk Inc.
in the United States and other countries. All other brand names, product names or trademarks
belong to their respective owners. © 2022 Splunk Inc. All rights reserved.