SPLK - Earnings call transcript Q1 2021

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Splunk First Quarter 2021 Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised, today's conference call is being recorded. [Operator Instructions]

to conference like for your now Mr. today, would hand to the speaker I Tinsley. Ken begin. may you Sir,

Ken Tinsley

Great. Thank and and press website. call market you, Also Valerie today, release, today on With close posted are the which me is Doug on issued Merritt we Jason also After good Child. replay a afternoon, our note, webpage live conference audio This being broadcast be as via call, have and will call supplemental the on material our posted we on well. that the Relations following webcast website. Investor available is an everyone.

we being or our and including full contain as update today, as mix, call, in the to not These file from documents may our in trends well presented expectations, the today's today's disclaim or statements forecast will information with cause filed this factors may guidance documents as flow, SEC, revenue duration, year actual and best On we on and release. are the forward-looking Those be judgment our and making results results statements, such is to information. X-K to press quarter, events made investments. current after contain reviewed as of financial contained this that statements. strategy, including long-term expectations forward-looking revise those obligation for risks with as our we If any ARR and today, markets, customers, second as call forward-looking these other statements. us accurate our and cash during call differ based may and our materially. our and refer markets, to These actual well reflect known products, technology, statements Please or differ currently regarding factors acquisitions

release A which of press also are will provided not on principles. and with accordance presented our financial generally in GAAP non-GAAP accepted the accounting and is website. measures, in results reconciliation non-GAAP We discuss

Doug. let With over it me to turn that,

Doug Merritt

face them and the they keeping trusted and we us. changes thanks customers for how fundamental uncertainty, their remaining and to Thank you, of everyone are accessible help unprecedented focused navigate joining while In data our and secure. Ken a to operate and on volatility partner

continue which customers growth contract or a prioritize our value accelerated total year, also expectations. with customer with more contract sales Splunk transition This last shifted XX% our while ahead ARR annual our aligns our and of the shift cloud over first drove to better of QX, is a to fully In in sales cloud-based to with our preferences, investments subscription-oriented buying was from force delivery. focus, cloud consistent motion we TCV value toward or and believe ACV quarter and

a to impact that the a I'd have to emerged few quarter With discuss like this our as and that business. patterns backdrop,

our Splunk driving First, expectations cloud into time demand we've north work, highest of XX%, and in the this in for ever seen cloud, the increased above our going our quarter. history, mix of remote well

and gained complexity, faster In to improvements addition accelerated with rate insights. releases clean to innovation and to also higher the of avoidance, an experience real-time from quality cloud, customer continuity customers business and our decreased faster from cross value risk time

all Second, understand of to business sectors not surprisingly, across the environment. current customers economic are COVID-XX the impacts trying

the hardest months quarter in contracts being tended in be As duration quarter. shorter shorter and duration is contract hit which especially overall the recognized We growth, in to total and from crisis, TCV, going RPO this in slower to this prominent like travel. retail, signed lower see in a revenue The impacted result, by hospitality XX QX. months sectors XX QX reflected bookings in

duration, of we've year-over-year cuts QX actually which the seen four changes multi-year at an looking on when through than last in in higher contract quarters. value noise However, was basis, growth ACV the in

to the due of the visibility out, further Looking macro few limited, environment. primarily next is quarters

of investments. organization Cloud-first in a be our will bring pride One data this through question, our digital well journey every than can ensure clear so well-being, their continue to every us, on we world thing to with We taking a and is is that product and bring to environments, and ever ourselves dynamic in they optimize to more data care to everything. their on as and company, employee's as innovation tightly matters and decision as every to data mindset. every work we to we're customers focus customers action on Our our our to the being leaning worldclass partners help enabling connected productivity, are

shift aggressive doubling Google, our news available that will offers on for flexibility saw Google This environments. are our visibility Exemplifying mindset builds more Splunk Cloud. you and customers, our and the continue hope bringing be on now our increased choice multi-cloud across recently hybrid our cloud and and I on customers investments Cloud-first we in with partnership cloud, the more on data down we to announced As focus this area. to real-time

addition, strengthen the to relationship strategic with Splunk and to AWS the enterprise running cloud Splunk migration working on Recently, and across workload go-to-market In product, help to Splunk AWS launched program on migrate workloads continues AWS. Splunk legacy it's field. premises

We AWS to Lambda recognizes and server-less manage also applications. announced Splunk's which newly customers proven launched build, service-ready solutions program, ready, the run for

world's integrated DevOps native application distributed provides a monitor to complete space, portfolios. development SignalFx observability In complex that and robust released we cloud and recently Microservices and APM scalable our the most and solution offering, way manage the application

Gartner's meet for category in large the to Magic this the our are by capable was and of up space enterprises, We of scaling company work APM. visionary validated only Quadrant in recently needs in replacement

positive, customers an rapid of fundamental providing the environment. helping tenets Splunk we've on quickly COVID core have organization. act our to this used out across trials virtually efforts, These to free been data tenants to and cases provides including been Splunk's connectedness customers, several our to offerings the priorities key look RWI, response insights has key and to at response as transition metrics RWI, near recently which have applying a dashboards and infrastructure, to with data. are and rolled new gauge one IT of our and from populations the to most visibility, about pandemic, their productivity enhance working overwhelmingly or ability to usage been their of remote virtual our our customers with to they ways our zoom and Since work real-time continuing The start customers unlimited work. remote rapidly we're shift cloud

also the County, largest public fifteenth COVID-XX a the live now managing The collaboration and appointment agencies. online and to health with platform, platform free-of-charge citizen end-to-end customers in is available we testing In scheduling. U.S. developed symptom delivers county health It an evaluation, intake, partners, public Texas, in Tarrant experience,

the by trusted to Splunk more of and to this about to help this in they We're encouraged country. the We help them quarter continue volatile excited that are they're that are vendor. the first trained and the strategic support touch solution close are many value We our environment we've than customers the governments they state [ph] across as potential with we stories hearing to them getting ensure in data. a with of heard power need, ever navigate to Splunk customer and where from local stayed organizations the

Enterprise leader the new some wins share Splunk Security the me video customer. Zoom; of quarter. became communications, in our Let from a

connected. driven security visibility SIM threats has speed. into helped security, [ph], During analytics enterprise world potential Splunk an keep COVID-XX, giving machine at Zoom the gain them Zoom With will

grateful I'm customer, in support Zoom connected. long-time a keep and are their Splunk We very for helping

and on to Enterprise XX,XXX a Allied citizens. contactless new public COVID-XX. ensures ITSI This transaction ensure on services Banks of monitor systems can of critical payment for Illinois track To their their payments, systems, the customer, for use digital people Longtime to has Splunk of Splunk them experience to insights increased remote servants and to continuity or expanded effort state. and can the emergency overburdened State [ph] provide them Splunk, by customer better a a cards helping AIB, reliable Prairie versus to use the action payment The and their brought help data stay increased benefits cash. workforce Illinois. encouraging online Irish that or State became of leveraged across mitigate AIB to on and quickly their provide of spread their help that of the With help customers. COVID-XX ITSI Cloud response take customers monitor mobile threshold With stable the devices and also raised to activity AIB Splunk ensure critical COVID-XX,

selected newly their Splunk and a distributed and Longtime to Shopify, they Shopify the they in quickly maintain customer, significantly commerce grow expand use can Shopify Splunk launched of and scale purchasing platform. help SignalFx APM standards their source and With platform, challenges in complexity. Splunk, identify leading as application observability high omnichannel environment. complex their Microservices is

for their entertainment Interactive Software, Grand XK; Redemption, marketer into V, publisher when Theft their use and globe of leading consumers renowned the Splunk Dead developer, interactive a well games, online including and Auto expand to And around their fun games. of Red and helps ensure environment NBA of safe have Take-Two Splunk that Take-Two's security run consumers playing visibility their Cloud increase environment.

us the and wins data great was crisis, customers depleted. the all systems provided Splunkers. these be quickly action, are chains we All by become available with analyzed could showing our support that overrun committed At to onset which tirelessly thanks this healthcare will global supply without our of

XXXX into have part travel well want to their for Splunkers they be effect. truly offices all passion, to mandate and result, as culture which so closed our business a voluntarily a government I'm we empathy our As we've created and normal; thank new froze went a the of. adjusted unique I proud tenacity to before

and very and organizations and helping based to ensuring frontline are with those their accurate In thank who pursuing expectations. during to are us. available. times. and that We're customers essentials a I of need, those who these can lives the who've decisions and to ever field has the also our want the us to closing, partners want make strong decision-making keep healthcare been grocery ahead the all matters on retail data and risking data-driven are cloud in than are those workers, of in I original the thank more supportive their quarter our most who information well fuelled transition we tremendously aggressively us in healthy, reliable for

QX. I'll more Jason in color hand now Jason? to over

Jason Child

Thanks afternoon, Doug us. good for joining Thanks, and everyone.

fundamentals of indicate the remained business challenges created expected, but signs there positive strong. number QX that our in were As environment a many

As in demands. by had and work-from-home high Doug security engagement driven cases, customer IT we sustained demand used saw scale mentioned, and we increased largely for

larger many unexpected rapid overall to time contracts, to shift customers orders; and duration to our long-term An cloud it's as hesitant turn for in lower has faster value. contract attributes. positive SaaS commit value resulted a been cost avoidance total to and increasingly this to However, contract customers given especially were service average infrastructure

software total 'XX. of our last a On XX% XX% bookings reported I contributed last in that clouds over fiscal of year, call, with about target

We Again, cloud trajectory we be transition likely expected higher customers in XX% to fairly but even driven bookings had of response we to think our was that we to it's represented that COVID planned. by this than total linear, software faster. but far can Cloud QX

rapidly as model, term in is transitioning replaced expect. ratable greater you'd to license term faster said, a will growth we've revenue headwind cloud revenue revenue a is upfront growth overtime; a As on services total as muted revenue transition create with

assess a As momentum primary growth to on in are the the we business. other overall result, bookings focused metrics

as impacts duration. normalizes as ARR as it the term optimal contract growth cloud indicator well We've the because of mix, highlighted from

which business growth. momentum well the measure RPO in mix stabilizes, new ARR, as growth indicator as distorted versus Until also by mix changes is to growth durable lower shift, best for cloud track we as addition a In bookings revenue duration. is of RPO from ARR good

pleased end, up quarter the over last uncertain cloud maintenance expect $X.XX total with RPO ended in was and with billion over our XX comprised XX% appeal is volatile contracts. we The of our as with the which XX% license to QX from execution ended revenue ARR XX% next As million is, about over year. period term overall. the $X We in period $X.XX from ARR QX up the $X.XX at $XXX year-over-year. billion, total last up recognize we're current which and of We was billion, and months, billion year. of of portion of environment

total high adoption both in our value XX Additionally, customers. the we've quarter, up million and to year, QX last from value recorded $X indicating during XX orders greater we strategic greater than delivered in contract

up into cloud XX% were revenues structure. $XXX revenue cloud year. year-over-year. On high revenue million, target our on million, scale growth in driving the was overall flat essentially cloud Turning in breaking business are statement. at the now P&L; the year. last face of quarter our which related is of XX% milestone margin, Non-GAAP the in $XXX first Cloud our To COGS significant progress nearly the a over improving cost cloud, was margin out gross is QX income least towards of and XX% highlight gross we next

Total cloud. Non-GAAP a plan. year-over-year in which was margin XX% XX%, down from line to contribution was QX, non-GAAP the basis coming was gross negative in proportion of in greater QX operating on due with revenue margin

balance Just sheet. a on few comments the

is and with $X.X billion strong, the in and cash Our liquidity quarter we ended investments.

material unchanged receivable accounts Our some of in receivable high, The and any this and impact to modest accounts quality basis. target. our asked payment year customers point, was our turnover we which case-by-case cash at exceptionally accommodating full we're quarter, for overall mostly the concessions, have although collection anticipate on a evaluating don't remains

want ensure that items three are clear. crystal are there guidance; to I Turning to

strong. remain fundamentals our First,

our we consistent in year. ARR operating flow will that with expect confident to our of target year, growth mid-XX% last continue this be and are cash We

to targets Second, operating QX plan. our lower variability duration, for due and and in original than primarily acceleration revenue cloud our are margin

we the Slower of is of pressure which expected revenue in range, million is be highest XX% Specifically, put so will growth margin cloud margin, high negative $XXX negative expect the non-GAAP XX% year-over-year. flat related QX. XX% in higher expect ever. total This now in to mix, directly to QX, revenues roughly to our on operating we also approximately

of our of cloud the and revenue Third, for accelerating our operating variability the for the remainder given margin. year, duration, unpredictability we're and and withdrawing guidance transformation

progress strong increasing in and momentum ARR was of our remainder look outlook updating forward year it gain with growth more visibility. a to cloud. We on great for closing, we and quarter as the you In

With that, let's open it up for questions.

Operator

Our comes Fargo. first Winslow [Operator of you. Phil Wells question Instructions] from Thank

Your line is open.

Phil Winslow

from say Hey hope great well guys, want you and we taking question I for that hear than all congrats well out glad we quarter. your as team on all And us to in to to family. little accelerated for thanks some hearing mix were the for my also, with what guys obviously, a first, are color you're the [Indiscernible] a year-over-year. mean especially considering just accomplished I deals just quarter; much is you customers and your of you know mentioned, this just obviously, on huge of that the mean, Two big really strength more things a just number it I metric just we're was north to a was looking a too. cloud? just shift other million; while duration. I and number, increase have shorter jumped cloud. higher And easier seeing you -- and

provide just in that of you big those if sort So, Thanks. strength what's driving some more deals? color,

Doug Merritt

are the Hello very we predict and we've all Yes, well. were Phil, this as impossible healthy it's glad you beginning, that in -- said you thank much, very as want. customers really fall what to

so the really continued acquisitions And to cloud-based. the on cloud. we been see all of momentum focused always some cloud of the past pleased years do. almost in have five offering, now we've we've that couple in in at We quarters, offering that been I'm it's with everything are the that hard work done, for choice great customers

we've got top one an I now of cloud in think SRE development the basis, teams. the all the spectrum the teams way [ph] through from

to So, customers there. it's see rotate good in

of to what's It's pinpoint total hard driving it. accuracy with

was And as piece sure cover I everyone seen you events never when a of is of the virtual, apparent. this of thousands customers thousands to the I of other get in power think seen portion as go ease-of-use, work you've to before; remote the cloud people we've you a companies that I with had we reaction move watch virtually said, overnight, but more hundreds the turning think it like other to and from is reliability, offering the to little the to awesome. becomes time of tens flexibility the cloud I'm that unpredictable is, bit

agree you with So it was and I -- there to see guys. it was good

written to they quarter was an lot, the do of of; with was deals deals. and one was [ph] response needs that I are you with one things people Splunk mean, should, a get two for big transformation deals guys continue have sales up force be as as enterprise We to many and working to there read unsure view to customers million that as daily business. their able critical and XX our see they to big refreshing need Splunk plus really digital their and I

Phil Winslow

Great, thanks. a I'll queue. in on quarter. get Once great again, congrats back

Jason Child

Phil. you, Thank

Doug Merritt

Phil. Thanks,

Operator

Thank you.

BOA. comes of question Rangan next Our from Kash

open. Your line is

Kash Rangan

much. I Doug, cloud accelerating, this this million is when and terrific deals; activity. of number is your ARR like accomplishment, you're you're in April indicators pipeline; accounts, most software it very curious, guys. thank your Hey, I'm your rebound of big at a a saw dollar is you -- I and doing outstanding. of leading mean, the mean, by transition XX%, simply record month look bit growing you looks the

versus the congratulations. between accelerated think I three ACV, for ACV how many one, you So have curious, I talk don't, or growth curious, securing if work material congrats thoughts just you pipeline for how And that said generally is And also can, you nuance? speaking, is forward-looking specific And post-COVID? can of okay. That Difference you great. be on if I looking is guys you combination those And you if any the have [indiscernible] time, you omniscient? the if like expand on wins that progress if cloud it's fourth can am in extremely if this acquisitions? will how quarter; or tracking the quarter rate about again,

Doug Merritt

serving really, And was again, it's you, performance I amazing company and seen time Yes, what strongest just of we've that supported across rest field honored over the It's four at this an quarters. effort the teams our said them. past be growth had to Thank customers ACV need. has the Kash. of

So, quarters were have And we again react. the to the remote critical. to negative and work, quarter, the what The on people and that three Splunk efficacy their front, activity, effective seen existing was during the full happen, you transitioned learn things we was to as rapidly could are this pretty and in importance to we've there many backbone, of was, people cyber that going ensure to that positive a cyber ensure efficiency are activity. and so and of sadly, saw over cyber absolutely increase given pandemic, IT big COVID how that of resiliency

the is you to brand sure offerings to positive make [ph] effective. and doing more help impressive, really they're an now in of need numbers suite really observability customer think I think low developer suite that people where then, we're QX Splunk the the seen you suite. observability COVID, And in And speed with results that world them in said, from of ephemeral impressive. And going we're even we've around that world and huge game now. the that to I And there to omniscient integration with and obviously, now them, as quarter second is all Splunk's a new And quickly. went that Splunk; with It's they're complexity effects doing that they're -- we've spin right with application up that work that growth other of the new activity side-by-side the to the answer seeing respond going volume, to a they're pieces about way in right signal really across quickly talked if cloud-based is customers oriented the but once certain only awareness some still offering. to offering get and that

Operator

Thank you.

Our next…

Ken Tinsley

please. Valerie, Thank next question, you.

Operator

Thank you.

Zelnick from next Suisse. comes Credit Brad Our of question

open. line Your is

Brad Zelnick

Great. you Can me? hear guys

Ken Tinsley

you. got we Yes,

Brad Zelnick

results, am I like Kash. Congratulations great the on I does, It's keeping pleased maybe he momentum. but fantastic. up to just It's it don't express is see as -- Awesome. as the he

let truly mean that. So -- I

the can me mean, weeks a given you just week-by-week that into you couple and granular that expect you're forecast get a through that to months, we've business sense of this; feel Let ask just us seeing all calls post give gone Doug months, CEOs, making? level field last details I at talking typically But and of feel distortion you know, us. in the would months the all they're the of with maybe I investments of don't time like like the CIOs us the quarters; and what you

of would just you're now, business what the for and I've maybe be a even May? from April, And some to That March into appreciation for follow-up the early seeing got helpful. cadence And Jason.

Doug Merritt

agree the with couple lot that in don't I Kash front two yet, a there to years -- world ago of bringing is XX surprised successful. on me. XX, and with there which said, the folks, you. Susan post-COVID of still people very, folks, Brad, headquarters, We I I Sure, very customer I would a mean, etcetera; customer. sorry road -- executive success me, you'd is development I volatility think virtual has to think I foresee that take I let's to compliment right people post-COVID; of things usually know a briefings What We us. managers, -- been top so and -- to or -- go moved product joins X, me our

full down, first did And when Washington we perfectly in DC I I New was week, that Our to customer the I York and the after gave option in City not be and place, for that cancel; whereas I we cancel and that last mean, but we picked to week everybody of the week. was right to predicting have we would were most a it on supposed shelter be oversubscribed was road March, only every went especially, week. EBC and

think and on important on CFOs, Zooms, citizens, the to at our I've to of serve CSOs, which sales constituencies. stayed right their their of happening they're so beauty much -- sales been I've teams seen and with they all, keeping that with with that cadence, be I we've and people so the and they everywhere, top to chaos CIOs, there haven't negotiations. drumbeat focused occasion channels our and contract just the So, [ph] on can everything to to there is day-out customers, sadness to as well resiliency the over from craziness it's to and pandemic, best never now with lean the seen people is that's like before; I much what's rising CEOs mean in to email, phones, on drive business, proof-of-concept got they're to activities going sure day-in going going make slack on they're be deterred have in be they be going the they're fact that one enterprise the requirements

strong felt and that and As ARR XX, the just sure we as appreciate results, have to legal quarter who's down, it. departments be is, we similar in we and have digital talking shows and March. results the that colleagues know And possible. I footprint what strong and of end saw -- and to on of accounting us as with the sales team of is it chaos important whining first in to our people data And would is able far have different weeks the in and what particular, for to to April May some with much X, seen think, departments, a from we've done, the stay for different XX just few making deals our persons humanly how people my very get and ACV -- in and through visibility have so to and we teams, got I've

Brad Zelnick

target on think $X there? And as the on cash statement, the the on sense. that about shapes visibility given can get out about appreciate world? the what's guidance billion us of in pulling this should I Just think horizon, you lot of lack of totally just the a income given mix we makes how flow That the going of Jason, various the year's curves you. cloud. from But Thank

Jason Child

would driver think for I tied say I cash question. flow ARR Yes, forward, the much is -- going of to the than more well, thanks would I revenue.

-- gave the to mid-XX% we to we going reiterated we're this so, then out the CAGR XX% year ARR 'XX. and the see expecting that growth And

cash take to were we impacts the yield gets we five 'XX see similar now. that you over yield years range. if for six past, the numbers, as billion ARR we get XX% ARR those in between out revenue you the to on use have think to historic number, shift basis, to have somewhere you had seen or not you've an a of going cash where on And you yield cloud $X that should $X a If we're that right us then mix the I billion kind

Brad Zelnick

Awesome. so Great guys. the Thank questions. you much for taking job,

Jason Child

Thank you.

Doug Merritt

Thanks, Brad.

Operator

you. Thank

Our [ph] comes of Morgan Keith from next question Wise Stanley.

Your line open. is

Unidentified Analyst

how for taking And and I had little pipeline where sort versus a bookings sort of sort you a April saying April? you. coming the of the of follow-up into and few and Hi, Or I sort then weeks into [ph]. of in of Keith bit are the question. quarter, and This question changes end is May? of March April, want talk May end of Wise out for you of to thank about Sanchez sort for seeing momentum

Doug Merritt

enterprise angles a pipe. different are and companies, visiting, take an to everyone's along We There any is the software with you Like haven't effort [ph], that their as pipeline. that of marketing It's interest customers teams seen activity. sales virtually. make customer and to that visiting lot material they adequate concerted obviously would that now got imagine, build activity is definitely from responsible teams we build the driving and and day-out comes in a to field are they difference for that of lot gen with the many day-in sure helping are pipe

the to the marketing of remains people year and have the events. -- shifted the events high different so got really cloud a with seen end ultimately, you companies, software campaign I'm far our we've the of high, other seeing with ton in that rest virtual we're and sessions participating we've information So, as of through format, virtual we're sure cloud -- attending cadence events, turnouts we

bit through ERP of with workflow for the cases manage to laying job works manage not layering website, top information of partners the especially you'll people side think would for couple efforts colleagues engaged essential workflow infrastructure and be do teams are on serving on effectively; data and returned a are backbone people used well. customers a what's people helping getting have cyber in and teams, their critical helping on see effectively We profile to staying to back tight obviously with. work oriented data, workers, to from -- activities the to to work get product, how we're business would with that we have actually quite that messaging of that line workforces, around our So, of are helping we're software on teams, and

Unidentified Analyst

That's portfolio. a real-time know potentially could of as more we'd acquisition, to product just in follow-up the is, year the SignalFx capabilities of of and my Mission unifying my can't that mentioned a was portfolio creating of lot Jason with terms guess of Last take very past-COVID environment; big a And sort think the And through in certainly this something that share of yet, with. boosting in VictorOps. I operations I that, of agree wanted see helpful. conservative year a question, product question the terms sort portfolio of IT I converged digital that's positioning sort we management sort

is wallet And share your far ability so more able in portfolio being with how and customer to to markets, in vision? new core the product execute in customers; terms base, potentially that of take your the from

Doug Merritt

us. the on cloud the -- in work our there of to think it's an all Splunk of there cyber to all own I really platform offering. the those shipping that cloud. data tripling operating about a the But we to sure provide Splunk classic do at cloud progress around down be that that while from has the And suite, was ground the complimentary talked the teams leading have security [indiscernible], integrate also cloud, efforts orientation folks ops a continues think effective that are be made third-party the on with to framework lot suite, to -- to will core as in offerings really will integrate with different suite can single sure have we elements, our app-dev data help IT a are the that element as the offerings, well UI is Splunk that's we nice We've pace, would been always interface officially our new I up to our make at to making open next-generation cloud-first are is every control from in factors aspects, and those and for technologies to continue portfolio. we the now. Enterprise similar that to the [ph] more mission on a built And even with to

we've that currently heterogeneous recognize that be we got a pieces if there, and our cooperative a with But customers other that out to it's player use. super the landscape

can we So to every question, and answer help data every them bring action. every

Unidentified Analyst

on [ph], QX. the you. Appreciate the strong And hard congrats Splunk thank

Doug Merritt

Thank you.

Jason Child

Thanks much. very

Operator

you. Thank

comes Our from next of question Mark Murphy JPMorgan.

Your line is open.

Mark Murphy

to you add I competency very data it just congrats. and environment? adapt common I'll more Or to cash maybe you more Doug, flow? in across own April, of ingest base. -- was try it much. preserve customers maybe VPN was them otherwise the in protect to And increasing traffic to this think my kind to reduce curious Thank aggregate see their trying if or about just March to actually Was customer ingest their

Doug Merritt

question. Good

first there. interesting seeing to we're our results of customers and data gets metric really, all, more from of moving which So away ingest the piece, an more some pricing infrastructure-based now and really

they XX%, of watched left data we and footprint additional the at by end the that time; gated a problem. their long virtual towards our to cores core felt -- to customers the up of still a volumes go and framework, throw last I -- them XX% have they have for to at year, got data big by One

have their through to as they roof cases and to demand has the and by powered ramp for be them used So, online gone rapidly able can positive more really Splunk. be more

to working not or HR is the the endpoint way critical literally a customers support we're VPN What we home, most our seen an And got functions, thing piece. finance for. functions, this if quarter now. back was but degree manufacturing functions back out of and working, getting or customer as data connection not the We've in it they interruption functions, looking I've were saw risking source are never with all functions, bad that of data experience just now increase to that from saturation from risking becomes

can to visibility volumes we've so So, seen forms they within mean I they customers, data most new begin the flow higher get Splunk, need. that into

Mark Murphy

Yes. your And it, sales to wouldn't ACV Doug, and kind might to energy teams adapted they I why the model? of then And more of much they I into have have ask to wanted was were have since distracted that how you mentioned new you that? gross framework? how an ACV of dragged put during or digesting trying down results; the kind pricing that ARR QX if with understand

Doug Merritt

many incredible actually the coming that they putting our our sales team who -- are of Vegas sure job really did that have were end of at together an in that SKO enablement got up under proud of we for I'm materials them of the February. curve, Linda, thankfully, to still

there a will that this planning they the sure mean, own for honestly, But ACV versus advantage plans. efficiencies of they more understand and get means comfortable internalize customers as helped really year whole of I of TCV. I'm how what took that. the their we we that for be their reps optimize had sure we So, as to that more comp and year possible, course make really much as with it

prospects on training getting reps think understand The we've I had to shifts sessions the getting pricing, even ways more important, and to we made. go of to with is a it's there comfortable same think are The I better bunch the well. and thing; at and a But better, we're have marketing every as it. still customer SKO better that it,

where the can into so a that give quarter heard "Hey, people of less which when I honestly me say, ton or now a less getting pricing?" Although infrastructure-based there have ago. zoom about and I stare blank until up are I you say, was accounts I

and is which typical I'm to my really good. the Trying digest seems good that, it, response with rep that. thing." it is, on Working understand try it, a Now, like "Yes. see happy to

Mark Murphy

you Thank understood. Okay, much. very

Ken Tinsley

Thanks, Mark.

Operator

you. Thank

Our question of Bachman from BMO. comes next Keith

open. line Your is

Keith Bachman

was lower, is you on flow revenue those it less flow durations lower targets? that back out, wouldn't so speak, but which appear views the are I why to about as that will very we thank two stay doesn't shorter think cash curious Hi, a quicker? have perhaps moving duration on questions is with or and ask moving start ask your concurrently. targets won't of them operating operating you Or have the I'll that compressed you; changed. and get and proxy, cash I'll I transition make If understand Jason, if thinking duration flex to that much.

And then know pricing? a Doug, top on I lot facing changing landscape at regarding you pricing is any have it how of a are versus that leading tilting And to landscape? how given organizations the discussions headwinds; are that you of a so the infrastructure changing? on to lot to competitive but are with the me. And consumption, question going speak ask net-net for And that's and discussions line competitive pricing, all

Jason Child

is Hi, -- ahead Doug start Jason. breather this a and minute. give since I'll a for go

basis. overall report the so duration; the contract a of duration is, we terms that duration in is on so TCV Okay,

to reality have could thinking… whether future ratable impact the cash years. of deals; the is, a your actually really three deals really have you that impact any one, more And so it's cash. then doesn't duration, What have you're so year so we going the contract; in or possibly we more shorter billing the billing have is on we're -- The last every moved do year an regardless duration to two started to year, to -- have

Keith Bachman

what was Yes, that's I thinking. actually

Jason Child

yes. Yes,

we we see really and retention, have ARR do continue you're so grow as have to as long to net going well, really strong those continue we to So strong expansion forecast. as

Keith Bachman

Okay.

Doug Merritt

team any or past the see and between able and up a given structure, far competitive set with be had right to definitely unusual and cash to pace rapidly whole that everyone's that this customers properly on question, structure needs as pricing finance as then We and sales different needed now. some budget payment your And pricing; quarter. pressure [ph] work strong to trying our we didn't various

it's to think a in again, friendly most cases seems pricing lean not in infrastructure-based much ability up, pricing the quarter. an And more because I have probably helps discounting held So unusual metric. with to

I do cost worried the On of to swirling turns spend." through basis. no about what there because of know, there people So thing; a as in pretty it to is we've bad "Hey, are jump out on ownership front, as competitive they total delivery value a and time yourself of -- projects same do is more to lot big far be basis, yourself years, seen it -- change. equation for out five thought well and a time a

pressure that go pricing those it probably their especially probably headcount time ACV I piece competitors crunch don't. kicked that more bit badly we'll are pressure, new by and butts for do them of focus. yourself little a would feel mechanisms huge for and cloud with orgs to So under to their a down get a and our because

Keith Bachman

right. Right,

many it. team. appreciate Okay, I thanks,

Doug Merritt

you. Thank

Operator

you. Thank

Our Lenschow Raimo next of question from comes Barclays.

Your open. is line

Raimo Lenschow

is well. for one as and little Thanks. about And Doug, you were also bit from a cloud; what like home can offering; it Two from me force there? Jason. congrats on were your like Doug, already me possible like sales makes talk like what mentioned for driving focusing and but cloud [indiscernible] in a working optimism move on customers little more for quickly to that squeezing and thanks and questions that to one more your you pushing the cloud -- -- increased

next -- like And level get today you there to in but a to years? are the new little a the -- is there I Jason, you for couple step coming that's think from are the just you. architecture about what's expect like, driving -- then And cloud like little a obviously, driving new it up there mean, Can where it bit? that helping talk a I bit nicely. what's Thank we margins it? is are a of

Doug Merritt

Thanks, Raimo.

is high out cloud what Autobahn, we've think cloud. One want and a with this is on actually with that value. say going native effective two or So elements, get very work I they difference, more to financial time way Splunk native help literally call focus to so their not, is is feedback to importantly, people on-prem is transition get for of it's we degree to of now services, worked getting rapid which our very a do data people have to two try transition data; just and to to POC but from it me production with immediate sources

consultants area; in pioneer launch Cloud Splunk our number our our Enterprise on-prem migration that and things trained got with the workload third-party to helping footprints. consultant -- got we people own awards from helps move footprints and like they migration -- got own on Amazon, one we've where cool piece; work type we've vendor programs, Splunk that we program where And to On cloud. together are to move

So, customers, out customers both little new to a for through it cloud. new those used cases of get make existing easier bit of value rapid

And then on Jason, you're piece? the margin

Jason Child

really Yes, on there things. say the piece; margin is three I'd

And the you to point us we're started different then, doing across say had see I'd is recently, was cases, something third the allows the of last public kind last better moved now the in think that really And benefiting that at where and bigger; architecture, a of cloud, to elasticity; I we're job just to in cloud overall to manage helping it's managing better. moving and I'd mostly we're terms, -- drive year so us bit a couple truly Most or multi-tenant First, so we've cost of a much -- getting and us better architecture used over better stateless to so. with better workloads -- much providers. getting it growth volume. the terms moved large through

have of go progress. we've but we made So, to a ways still long lot

like our way. next quarter, the XX% on and over said our we so think to target our I we're to last -- or is we feel get year plan

Raimo Lenschow

Congrats. Perfect.

Jason Child

Thank Raimo. you,

Doug Merritt

Raimo. Thanks,

Operator

Thank you.

[ph] Brent question of next comes Dale Our Jefferies. from

line Your is open.

Unidentified Analyst

when probably in kind just think environment. down, could business of this accelerate out are things the don't settles a of in reporting Doug, of you new partners expect you guess beyond coming your actually as new major this what catalyst, that starts; major Thanks. catalyst many a stabilize? But this effectively I is would this

Doug Merritt

plus are we XX% for. through how told you FY of these targets by hoping revise what internally. target of bookings cloud for we're to looking the think that definitely I of a started is and We to This guys end anticipating Hi. setting 'XX. going to

there. is the same we'll get you it's of turned get expansion I [ph] XXs; of and something period, it bad. sales we've even in was for think good to is cohort shows red as The the like know, or and good or same-store forever this wackiest to quarter next to hard it's twists norm. time it efforts opportunity even with our back looks normal we're blip perspective and of up one that that of -- And cloud to pretty what been shared on the a to all in have that with definitive new whether duration, quarters us, and over XX% guys be you trend kind the XX%, XX that see our couple focusing is the

give a could over immediate more shorter us a value period. longer chance a over time better duration get customers So, -- from to a actually even

our made and over into for for who've month to future. butts they've that's and their us center there, off been working really And get definitely customers going and month really, to been got the Obviously, being teams that on is worldclass upsell really and with John's a to Susan program. field on we renewal us what again, pressure now sure upgrade do -- a be progress. some front the nice us, cloud the we've term And make and

Unidentified Analyst

Great, thanks.

Ken Tinsley

Thanks.

Operator

next from Steve of Wedbush Our Securities. comes question Koenig

Your line open. is

Steve Koenig

are various on taking here, are toss out give just my dynamic them? us for doing with more for? I'll to a and do color one. Hey the And them questions. What customers? two what a the thanks things them the I'm other are combine going asking for impacted they Can little as I'll for guys, the with one. just you And then, you

lot. perpetual it more was too. the there of end perpetual the has you? a changed started the Just helpful with would think doing Thanks that So with sales; What be sales I motion? How color customers are November.

Doug Merritt

as that to deeper might level bit our what definitely if we sorry, and and I do those industries. Two for But, might great to Thank a programs to questions can neutral, a you. ties able and look it affected be started who a affected, and buckets, We who it prepare to we class at we coming different might would -- be see went with. scenarios didn't how with we make [ph] both you effective are think Jason into March them bucketed sure affected help in and be customers industries. visibility and who do expected those can portfolio, difference I'm that who those to we through go those flyby as as to -- you. high much affected in those versus on a expand definitely and expanded for the be benefit, up

Now lot a with they've got all right they're that now. working

back that a and bright I was we to future long-term sales is And have through imagine think opportunity a I airline, and you can all going us. process every number you payment hotel renewals one Through of customers, sure expansions fall earlier, that chain, are a we things hardship, single cruise that as long-term what's But of feel from bit some These of company or this we off lot we the I'd then, as virtually bunch we've and great we they long-term tested terms have are as us were get little cancel for way or anyone interesting this there as view. but major saw of discounts a saying tough, companies, to which successful contracts is; a through are a there. of all got with are with as a And within partnership requests is, they've help switch be that and vendors of seen sure a got that and -- a lot make really able what the they other is, category. concerned believe in yet. to and I'm consistency, those. when go team well. scrub don't every happened some mettle for to view a effective Jason seeing we and the are or we as

Jason Child

Yes.

of -- on there by of bit the customers, terms. been little just some a it's has the terms payment In asks some been mostly of

having relatively -- of the As the we you very which small I changes amount see in the well we be managed. expect folks -- to are in little throughout why overall, QX, so to diminimis to be I QX. but reiterated reflect in call $XX maybe I but significant, -- of a target if been cash million been flow, well to -- adjust delivered have movement can [ph] in we discount rest year small is that. then as there we want the it's pay and flexible, been relatively hasn't sometimes hasn't later, But it really

Steve Koenig

market do new -- -- you to perpetual engaging of with on are real can comment those once Got the are as they you How the just guys -- it. with And go you you sales. briefly how you with them customers, capacity? need end

Doug Merritt

perpetual; trade to pay your I've program -- think I is a there is said you in no motion. we that times, there to So, we'll no couple incentivize

we they trade top -- people cloud-first we to on bill up we're our to customers are come And third is going is Splunk the and basis. they and or For moved to one consistent is of wind obviously on pay motion them, perpetual either and cloud they collect their obviously or two -- their continue those But we've layer motions; frozen licenses bought use cloud, development all got across there -- perpetual of that from they to seeing cloud a approach; own or or happy we're installers. the is, to that go to we've term and understand map, in growth a term we there main cloud. now and updating

get increasingly have what is software that So our on-prem gapped overtime, customers cloud. versus can you in will

asset So how or of and aspect that deal financial more not. deal, we're to you continuing to the it, that choose a on retire to have on, the of you timing, and you whether it Obviously, you less becomes the time decision make it. best want the goes with depreciate

Steve Koenig

gentlemen. a Thanks it. Got lot,

Jason Child

Steve. Thanks,

Doug Merritt

you. Thank

Operator

Thank you.

RBC from Our of Markets. question next Matt comes Capital Hedberg

line open. Your is

Matt Swanson

deeper This just call newest Matt on of more congratulations Swanson Doug, the normal? yet; in echo current Matt. the monitoring is kind the guess post-COVID a here. for thanks. is, changing thinking I also of into I'll you SignalFx? But little into maybe a how could or on version then we the dive in and broadly world moving about Yes. environment in don't increasing post-COVID new this importance or like Yes,

Doug Merritt

Yes.

very was, announcements about instrumentation, quarter this when the nice big microservices-oriented released And we make should should really not. do etcetera. we bought coming tracing ephemeral of the obviously rapid being similar the APM. on environments trajectory touchy and you you these of one critical we So cloud whether and we logs, activity indication that -- had [ph] talked and metrics and that Kubernetes, mission drivers dashboarding mission convergence we've was, to saw native traces SignalFx APM-based cockpit the in into together. The Trace; piece arena real-time to key or that metrics anything the to APM give to and for the in an you being dive what an sure was once try

to once work team been of very We and Splunk. had continue integration between proud with have of that release was convergence Omnition do really I've metrics trace piece. Omnition, SignalFx to drive quick what to the SignalFx the their We the and and three; combined those ability a

is next-gen and that well. and the some UI roadmap we're You'll interesting interesting really on us on. There the really think stuff as focused -- componentry, the ease-of-use see logging movement really on from front I

but Achilles of -- and easy-to-use was the be some to heel, have. think up we part of that running a an UI as that get as scalable experience Now the there different alternatives with SignalFx, would as and I not be SignalFx

onboarding So of low bring both get worldclass but is we difficulty, do easy bar best of it the worlds. an our most best those and to scaled so the robust focus with of to capability, that world's

importance, effective I like whole suite, going working something organization continue think just increase that transition. experiences. area as all difficult hard very of an new job to delight for is online and our think with I are to that without our customers us mobile in any And really to with to it's do

Matt Swanson

of makes drive I one is environment one. that think trend but If new customer Yes. do quick maybe and additions? adding for sense. get -- that success the kind you Splunk obviously hire not This more new of could could buck you easiest logos cloud, No, the with that

Doug Merritt

we to cloud-based; capability, not the we I move going customers core UI and and portfolio. think we're that super-easy The is, the -- of without get about guess hypothesized transaction talking year. the just and I with [ph] centered new over the back X,XXX of couple per quarters you observability eventually all past beyond roughly just needle experience, the to sort of onboarding, importance on act

two and a see over starting long-term, think I a to higher and net the do difference rate So much maker of the half that is two, that years; next new.

that of those high is we've Our to sure renewal, make number one front capability got high though, focus serve. in that expansion for we sticky, customers that do

one and go ones expansion as think winds I given talked up we for Phil's determined critical of overtime us been question going cloud with that through. helping are early transition or of where we've with renewals we mission now obviously from as the was, I but us forward we about, ease onboarding is think

Matt Swanson

you. Thank

Ken Tinsley

Thanks, Matt.

Operator

you. Thank

of Our Boolani next question UBS. comes from Fatima

open. line Your is

Fatima Boolani

guys, afternoon, Good questions. taking safe. well you're for the hope thanks I doing staying and

I the case, Doug, to excuse you're follow-up I with to to what [ph] But as that value begin the the a monetizable the me. then the niggling have within effectively wanted start observability. same at at modular market and dining to going -- you, customer used selling AI are solution Just selling? areas versus and effectively the particularly suite have a with arena, And Jason. balancing with observability very platform managing know, a with discrete you case comprehensive AIO used that how you for to for time,

Doug Merritt

Thanks, Fatima.

teams and And of application the and great I'm doing decision-making ops given [ph] continue center the outside our different this I've day-in from specialization? SignalFx life we the to the on So, calls even about to pretty across of the difference infrastructure so team great than development from blinking team, get and focused on and positions And of put to we market. to that see sales and force and a to Splunk continue and couple app-dev day-out it as the and that teams, some the that. retain model team. teams, accompanying it's relationships, IT have and sales in independent is as team independent leaders an in I cyber and buying budget think we pre-sales I dramatically And the sales top talked grow the what did more really ago, can with, force the our job and do is vernacular, a all between worked It's areas. sides experimentation them they've sales mean, an the really taken teams added out to been need far work, one-size-fits-all begin well. obviously and the see excited infrastructure

of being a absolutely long-term one. and success; that -- Within on with choice the books skews over media seen is necessarily the certainly app-dev to choice sounds the there multi-product not arena, about you; as more to and a good, but paradox good talk more surface having the that got years it good we've there simplify multi-product, and is agree is you lesson yes, I not agree critical I business

you skewer a wind So, app-dev decide the we're or into suite without a of four don't getting singular so can groups we the team. to cycles, series whole of three, not or up general trying capabilities to that within that micro five license with with a sales take license much more independent

may a far, team, we're we've And smaller teams of that dev you -- powered got all it's working across If again, seems high a brought suite. you've together well. landscape. when and the work then whistles set scrum [ph] so We pretty under broad not need pretty bells it observability the fast to going and our

Fatima Boolani

about of that you, the that I 'XX, XX% be first? to on 'XX should me. you. the appreciate over in transacted the the to cloud stepping term you. for it those fiscal think periods through really interim come appreciate that XX% going Thank I'd cadence virtually are of the mix guidance business, fiscal that renewal how the That's up color, you of based you. But to effectively next fiscal going with 'XX the that shared. then, Doug. by appreciate dynamics just cadence term business Jason, for period, three renewals for Thank business years? in we is And you

Jason Child

hopefully Thanks would -- for XX% I that question. Doug I to or say the could… just will said, XX%

Doug Merritt

yes. Yes,

Jason Child

That target. was a not

Doug Merritt

a not target. definitely Sorry,

Jason Child

That was a brainstorm.

know, we'll update a -- that Okay, so now you target. make ready to when you we're

I solidify hard think -- question, unfortunately, like, the is But to looks shifts we timeline convert the you exactly -- it's -- it's what I great contracts how know, right cloud. your say, to fast what mix question. really think term until a it question

I -- in the that are it at to think and term they're were environment, finding in this look certainly starting we cloud. certainly is middle of contract, customers a

And so, to that's the one have of think help. things we I

to something to then going to need how customers we to make out that's do, whatever customers that We are if have do figure need, that work.

the because to overtime -- online, period that even And that's say ASP growth that when why of cloud it renew base into timing growing, renewal comes large. think cloud, I hard talked or I is those to it's just that our how think draw have just it's kind that to to us a from you or and 'XX of gives started contracts. very majority just 'XX contracts you as That renewal reasons know, should it exactly vast in higher about, base hard great license about term think just so, do really what growth growing upgrade targets the will a from convert base the shift one term confidence ARR -- base -- will and is to is significant we the primary how move you expect say. And I be. how cloud; it's

more lose you -- think we did Let's you see, question her? well, or I had one

Operator

you. Thank

will This Evercore. of [ph] Mennen be final our Kirk from comes question question. next Our

Unidentified Analyst

then I'd had guys about that in. you're in difference just of March in internationally; on much in what's can tough client domestically is cloud your coming any fitting guess, on cloud into for terms Jason, sort about to of Yes, seeing here maybe and might versus a that you about there And if Thanks. imagine good there just discussions you talk a versus you're process thinking thanks the now? whereas Doug, I about internationally? your what [ph] how environment. maybe really rethink might congrats be very clients me on thought constantly with based for hiring, process -- And quarter thought of have sort this year;

Doug Merritt

XX%. -- in quarter, forget Really see And to page. numbers to is XX% revenue the that still was go think is, good was yet revenue it answer and to cloud [indiscernible] I and cloud will upfront. that get now, for And point. overall, they But the you'll and term which gets every the the XX% recognized consistent -- I'll pretty is release international I every answer. point internationally something are quarter-over-quarter than actually from

where in -- strong, where the Germany to and falls [ph] stronger, less as UK, resident We And FCCPS and long Canada, [ph] strongest the very you France, but the there footprints follow cloud there. the still map keep data the strong you strong if as -- in and cloud Australia again bit be are we U.S. traction exactly. In just seeing in in

do that create customers to to are us I think could that cloud; back slower to counters where that, there have going to defer upon the would selling. move those and that, I'd sit customer. and product cloud to we've already didn't closer XX% done And not crowded to solutions, now accounting on-prem my a to because have the until XX% because maybe used and/or XX%, still probably say cases we brainstorm XXX% countries way already are So love be demand see that we I then to that to countries data

at that able different on to been therapies have in you're because So is strong respond and as XX months way another this very that they're we a going it's they need XX, perspective whether to on be vaccines. on definitely U.S. a XX, to tilted is my going that XX, global not for goes see cloud as very, has very to although work belief been it that way one while assuming phenomenon, may countries that this probably

headcount? On

Jason Child

headcount. regarding Yes,

underlying you everything going try we get to it in look freeze when So -- down at of the put early pretty kind very the know, a to slowing unfold. our how was was a did been business yes, hiring growth what mid-March, to became on -- have better was started when -- and going of definitely healthy, so sense environment that clear within headcount up It SignalFx opening And DQCs needs to the going continue. with hiring a engineering then of to related [ph], as in the work continuing are there. related really as of well some of -- migration work course, within growth within that do also, are the with some of serve to we're to cloud, to particular cloud, and bunch that there course, integration what

our again, that make to it it we'll going structure But doesn't definitely especially that hiring, or we're mostly up; really hire like need a for something the will necessary make through of So, our that around are still make to sure on growth manage we carefully. us most transformation, those were us areas cost growth And very on outpace watching other revenue a to most companies focused structure a I sure sure catch we're to of closely. the -- watching our we areas; sure that's make are ratable with to trying focused while targets. cost so take making think

Unidentified Analyst

much. That's very super helpful. Thanks

Ken Tinsley

Thanks.

Operator

you. Thank

at We further this closing to Doug to any have back over question like I'd call remarks. time. no for turn the

Doug Merritt

us. you much. you Thank joining for very all Thank

that more really customers To -- years and criticality see say both, things being quarter. world a I'd that more data transition, for on, past is but focus gain of can on necessity to get have We are I and product, can think to got three with driving is awesome build the our they've market the and as on couple appreciation offering closing, lot ultimately much that in are keep data our focused tools cloud positive acceleration getting continue in term teams quarters, the and heartening. very data; serve to past going acceleration know ARR over we a hold they empowered, is of value from a mature, so quarters, in continues coming continues very we being which relentlessly make luxury consistently -- moved over renewable the Just conversations of with We've we the more possibly today's to been model effectively. SaaS think a to clear that the so [ph] I our sales customers, and a that to focus to there and those unknowns cloud. can all ACV, of high is on team we the sure we're

more So, driving. Thank hopefully in we'll good have quarters we're the tell, highlight coming all. that rapid stories you, transformation to to the

Operator

you Thank Ladies gentlemen, conference. does participating. you. and today's this Thank concludes for

You may all disconnect. Have day. a great

Splunk (SPLK) 21 May 202021 Q1 Earnings call transcript