SPLK - Earnings call transcript Q2 2021

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Splunk Second Quarter 2021 Financial Results Conference Call. At this time, all participants’ lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. and of Treasurer Relations. Corporate Tinsley, Vice Investor President Ken Thank you. sir. Please ahead, go

Ken Tinsley

revenue statements ARR markets, as will via as forward-looking and Child. today, Thank our be will we afternoon, which note macroeconomic and regarding forecast are markets. we an call call the Jason such with currently risks to other statements. These including strategy, good may our economic is statements, factors of customers Daniel, relate is COVID-XX conference environment. overall Many and documents Doug prepared market documents assumptions With posted changing our to our material obligation or beyond our technology, release. and statements. and supplemental and This of information. we made to Great. known call, and our and trends financial margin, results that materially. is in contain the These forward-looking reflect website. our also everyone. disclaim posted the today, business including you, website. on press contained issued control have this we as SEC, on differ a file be as call after to the these as expectations, today, Those update may broadcast me measures, any reviewed available our We’ll operate, the will on to on guidance Merritt refer press the full-year forward-looking is non-GAAP and cloud today’s webcast. with on are If Based cash mix, environment gross during these current or After actual of financial and well and flow, call or release, presented best long-term us live not third expectations closed revise being including discuss our Also as pandemic On information also well. accurate audio we rapidly, following Investor the our the our replay is on generally the and are based Relations statements website. me in release webpage Form GAAP that those principles. may call, And events being well impact on today’s making we judgment. factors for accounting the results matters and in quarter, as With Doug. provided that as in cause products, actual to assumptions results which Please our on of the X-K accordance turn our not from are non-GAAP press in that are which our accepted to differ A filed over with let reconciliation the today contain

Doug Merritt

two cloud products cloud-first a our us years Splunk confirming continues growth a Thank has annual company. or delivered squarely over for are hope schedule. FYXX This of us. total quarter in far the history, accelerate. Ken. of target ARR second year. put drove you expectations mix to cloud-based everyone with thanks We of and strong and ones bookings, ahead momentum a healthy. time trajectory in first software And our I you, And joining as last to loved safe our reach and over recurring to on shift outpacing staying half XX% the in Cloud up revenue your call for XX%

in ownership. than environment thanks and faster ever saw Cloud rapid is move macro The total organizations QX. Splunk in to high more purchasing to the before, to pandemic. or response turning the to and more are to as value, playing too time cloud-based we Many lower its accelerated of features in here role of accelerate velocity trends of a customers Our innovative their QX, cost services continued current

to technologies. to these remote and the Since a and with the customers digital expansion working increasing all to with now cases on Google from some the for with tele-health, distance customers on learning Lambda traction continue Splunk’s current continue we’re little AWS all and And release, announcement, across to environments. build of as how customers Cloud, drive strong organizations, pandemic, seeing availability acceleration Directors. primarily that on data many announced our customers to choice powered AWS metrics society. supplement In and front cloud larger enhanced And seeing recent generating journey. Ready we ROI and data organizations, with new element our cloud, our customers welcome deployments. and and as and work, first create cloud-first offering are essential communities. you driving dependent limited for President saw or we Data deep digitizing It extend the recognizes we of online Hopefully, most a Splunk also retail is CFO nearly shop, available leaves the the learn. rapidly QX, kinds and relationship increased an experience is for of trends They our are Splunk data especially and byproduct cloud use of Splunk is to AWS. IT, existing Boyle the and rapid value set remain our him Vice expand of working. mindset. strategic that we hybrid as new shift Sean continue visibility flexibility and real-time no The they production orders, to commit serverless new In announcement by appointment long-term cloud. are Splunk months age. contracts, data and a today’s security hesitant to of substantial as we to transformations solutions to DevOps enterprise, of Splunk communicate due of proven ways shape doubt build, in lines applications. every which Cloud high-performing our this new realize technologies Although their to customers. use is age, run entered of program have are longer manage scaling In thrilled the Board Sean Service with multibillion-dollar leading we of at recently we age Ready, aspect work, brings to about multi-cloud of the organizations into governments,

the The from we are collects, or Pulsar, and including a foundational other the streaming has Data processes, to of in out that data DSP the analytics. rolled the enhancements the leverages technology cloud also Stream release best-of-breed provider continuously unified milliseconds. our fall. capabilities advanced Splunk learning all platform, from of our Processor open source Splunk latest capabilities platform Streamlio, the X.X strengthen or We Apache series of that extend of technologies cloud, delivers platform. With streaming our DSP and acquired founders introduced or machine only most we now the last within full DSP, which destinations on-premise software across

operations with announced powerful are greater and by detections to machine providing offline our entirely and security online to in deployment ingest. customers to when threats learning Mission contain that machine Our security perform cloud. approaches across we security of all the cardinality availability customers ease visibility functionalities Ultimately, and in general platform QX, advanced the and SIEM the of course infrastructure speed new foundational streamline investigation, processes, product processing applied gain your and with novel approach barriers enables and Control. the approaches data and volume batch ease-of-use, key state-of-the-art through elements presents. This data entire enable remediate to quality unified In with the break learning stream, surfaces integrations,

release view, monitoring for enables to event accelerated deployments. and framework enhance investigation service for Splunk and our management Next, deliver Service features one IT centralized schedule large Intelligence a us in and monitoring support for scale Cloud to

deploy to in second source Finally, increasing Mobile take OpenTelemetry, and the connected capabilities now device to workforce. management computing Splunk a VMware to to moment and to project has the celebrate I’d about a foundation, Splunk increasingly providers, bring contributor MobileIron at also is Kubernetes. solutions which that. community, expanded like AirWatch securely cloud support mobile Splunk largest and mobile popular scale native the experience behind also an Splunk Splunk’s to number is only open including in involvement one getting

have open is component indispensable the world. services an doubt and We software source no in that

platform. the customers, be to so thrive to continue embrace number back, all to is We to We data accelerate our as Data-to-Everything to transformation are multi-cloud between a Stepping growing their organizations for the and bring shift everyone digital on strategic want and source action, a environments. journey our hybrid remove barriers projects of Splunk’s partner within data in and open mission the initiatives And Data-to-Everything. age. can they

global Splunk’s marquee powerful the Here quarter. This been are their honored increase customer help to were XXX Splunk dramatically the transformation. to incredibly and at a footprint their in highlights accelerate longtime a We company in offerings cloud. beneficiary of search digital has see indexing few

Now, offering flexibility, Splunk growth, provided pricing and online as unexpected significant using impacts Cloud the workload-based of scalability properties. of unparalleled the demand performance. and resolved, confidence during and the through saw channels increase in this they Renewing COVID while portion provided customers digital clarity Splunk

Splunk broader Their to to provide this their metrics, of to and portfolio channels quality swath as consumer Data-to-Everything to customer experience. the further Splunk traces commitment digital and support consumer experience, highest to deep their addition, cemented capabilities our across their for unmatched commitment In observability logs chose a digital platform. increased

them COVID-XX. could their review XXX,XXX Polytechnic attacks metropolitan all to to to serving New expanded activity compromised been San Secondly, the Poly according lead top further hours. remote in learning. first district both Enterprise largest Cloud resolve the better phishing shift United Cal and Cloud their remote so and help or School hospitals learning students is on take few Yale Cloud address Cal third to U.S. their brought campus, COVID-XX only Security, Public California Chicago and virtual States. help their their Chicago Splunk visibility emergence by increased as since is allowing in Public they and among and With Obispo, with of serve University, a They’ve Chicago responders across on students protect area. the Splunk Splunk recently teachers challenges, Health Splunk support Splunk on improved training cloud, emails, the block Luis into students, better nearly to use expanded Poly State System of Haven XXXX, suspicious malicious a Schools ranked accounts the to school customer

after World Hospitals Insights offering. customer Work new & became our Remote a Report’s listing, News Best Splunk America’s trialing

underline Enterprise Now, scale analytics impressive Yale Splunk customer data virtual at These and to Security threats scale. organizations can importance environments. the New wins Haven their combat leverage Cloud Health plays power System the with of advanced as

I in their continued for for needs over and our ever-evolving thank connected all tightly age. explicitly just commitment Splunkers QX I’m the partners, staying our for our our to moves and want In and meet what’s creativity partners our to their closing, We’re importantly data making passion, empathy, of other. and customers platform. and Splunk and want we’re performance, right confident as and to right their proud thank Data-to-Everything are And customers to doing customers, X,XXX to each for our and

We’re QX. thousands looking of tens October, most Jason? at everyone for in and Jason with customers we’ll seeing .confXX virtually to hand more to where innovations. over our on I’ll passionate of latest forward now product our sharing be engaging

Jason Child

well perpetual the in for Thanks, In surpassed exceptional in which result we’re delivering with high over a metrics, Doug. and legacy metrics maintained our renewal to the value a making the customer uncertainty suited and upsell from report, us. In rate. hard as which company, our with these buying services. captured and billion rates, indicators. joining expansion evaluate In for a Cloud out cloud-based cloud plus have products model, performance eight-year a quarter in replacing Thanks forward. level, phasing best retention pivot everyone. volatility satisfaction better execution high our model, continued were ARR. public our or and of are our SaaS we and going are history of to them trends $X.X a was Good At as strong TCV-based COVID, we’re With afternoon, today’s we face

prior trailing above rate and XXX% slides. was reference, Our included retention rates XX-month your been net for cloud are XXX% in dollar-based in the has QX. consistently for period And supplemental

first as is XX% Doug XX% half to last cloud shift accelerating cloud XX% first We in QX. of their we faster cloud total year, the hit In now this rapidly transitioning originally bookings, upfront As as in pushing the year, revenue planned XX% year. ratable cloud half revenue to momentum to replaced a milestone cloud an model FYXX. adoption to believe QX, compared services sustainable Cloud. year term customers over reach is time. said, plan revenue we term we’re Splunk had the XX% for of the software muted was QX last and transition this even in ours, contributed versus and mix In to in is mix growth XX% which cloud are like is with of a In to license

of ARR to ARR next $X with ended business. customer account was better metrics and to expect with of of XXX momentum better the of you recognize billion, ARR in look cloud $X QX. from than QX accelerating we We XX% We supplemental was model TCV-based last assess months growth period. QX Total is moving up of an up also XX% are greater just sense metrics customers So, of engagements, with ARR RPO the included which revenue last nature and ended period-end, over To to the the metric rate million, in better which a XX% portion retiring we in overall and billion, the as recurring this total XXX RPO growth Cloud ended year and a XX to over four-quarter slides give from $X.XX over number. are at the $XXX you’ll QX XX% year-over-year. over billion year-over-year, year-ago growth with to is which $X.XX We of a compares up see bookings QX an acceleration of million, our back year. with the RPO, slides. customer our And ARR-based in the align

the P&L. to Turning

cloud basis in margin, improving QX, business cost growth drive was progress $XXX continued cloud compared overall Cloud revenue our cloud. our structure. up Second gross $XXX leverage target QX, coming margin higher margin quarter last to year. down XX% year-over-year next was year in down QX cloud to greater to high mix. total the million, due gross in Total XX%, revenues the margin was of year-over-year, line which On contribution substantially were XX-plus-percent operating million, non-GAAP gross negative with XX% revenue XX% Non-GAAP towards with over last proportion slightly was XX% a our reflecting from in on Non-GAAP continues in in year. was plan.

within seven-year maturity which the during $X.X quarter $X.X XXXX proceeds roughly completed a some the next added We the the investments. repurchase convertible and notes, ended portion offering notes. flattened majority the bond approximately and placed the utilized We in quarter, towers cash of existing five of On with a cash due total to of balance we sheet, the and billion of debt opportunistically years. billion the

long-term. and important highlight in guidance. continued the to It’s remain confident to ability our we’re that to fundamentals strong over the deliver high-growth the Turning of business

XX% Given of year, current visibility, through mid of we XX% FYXX. this targets ARR a are maintaining growth and three-year CAGR our total

drive mix relative on our statement, and outperformance revenue to variability cloud targets. plan operating our margin the income in On continues to

and cloud saw in million, QX, Just flat $XXX depending expected on put relatively QX pressure our contribution. mix total are and to to basis will between million revenues in on continue QX or year-over-year margin $XXX Increasing well. be as as a we cloud on

up expect of billion now between $X.X and ahead cash cloud both So, total we margin with positive ARR to closing, flow our target that, QX. building now businesses In in tracking the over Current With rates, transition billion in cash better growing one than high scale. and the of plan, reach of let’s X% Operating ARR slightly turn and is of to questions. rapidly faster. we growing expect billion it we are $X trends plan, operating and it we’re operating year. With fastest is ahead nearing at accelerate substantially in our flow FYXX. $X FYXX last and year will non-GAAP Cloud should current leveraging X% even at SaaS for open be

Operator

Our of first Bank question America. with Kash [Operator from Rangan Instructions] comes

open. is line Your

Kash Rangan

relates the grow you tailwinds of $X a ‘XX? you transitions, company fiscal to cash transformation, Unbelievable clearly, much flow all the business, software to at billion question briefly growth? while levers are quarter. for it’s The for to it to $Xbillion cloud it to behind manage the much. get this business transformation and you the sustainable size very team. strong Splunk me. what Doug, the cloud in and is, are Jason, how digital at as for as you so you quickly, for is Thank we the your cash these can to And is pivoting rare very flow tipping assumptions see the one getting in so cloud That’s and how the look how scale digital what Congratulations rapidly are this point, in hitting appreciated. revisit

Doug Merritt

always. Kash, is transition. cloud that thank environment doubt is you, no our There as the macro helping propel

SaaS all went other we seen to XX%. that saw decelerating we from while XXs However, a flat low have momentum or cloud quarter, this plays pure

got besides to be there’s more the play So, macro. just

handful there’s us a think, I that are helping right of really now. things

our very, observability. with step we’re $X cloud-only our doing is helping think, observability We’ve pleased up investment to know there. certainly that plus very big and with you and billion within observability, suite progress success willingness continued the all I been and is

and down our of a so and seeing growing help customers. can increasing businesses their to of portfolio, I can we teams the lot our out heads all to there’s And environment, Our and and hurdles reports, focus this think while teams another you there’s lot nice elements in lot scrutiny increasing push spend, environment, our pressure, for through streaming adding imagine, continuous on this execution, of call a expansion there want on is just is like under human the tailwind us. as a, put a continue

as to an that element think, I well. there’s

Jason Child

flow Kash the $X on billion cash question.

a we’re returning level, at just the really there Just going the in past. high to to where get way by been we’ve is

invoicing where which only started last we getting roughly versus or three is of thirds, we right since third just made shy the which roughly about ratable instead is, before. started when cash means So, change of of the What year, this were now we before we’re upfront, years. that three our -- we average a collecting annually contract getting upfront

from to We years year two lap us of one by from one middle that last takes started questioning and year. or to change lapping year We will moving years stop that next it. down years three it to three

the we will in QX And so, when right the to will of come out that be then which side, it other to the be be. FYXX, used back inflow level

go and back in XXXX, one I XX%, of those XX% you was through of was as we XXXX actually history, yield think years. cash between a had percentage it If revenue every

so, because by targets, and to XX% that billion. And look ARR revenue think you cash looking $X our be at revenue of of opposed as ARR ARR apply you our roughly ‘XX, I to you get when differential, recognition you as to the if percentage should target

roughly by XX% billion take of on the ARR So, end X.Xish FYXX. dollar

Kash Rangan

compared much. Thank Congrats. pure-play standout you of fraction your tools Thank you that are to outgrew you monitoring much. Real so so them. but size

Doug Merritt

Kash. you, Thank

Operator

Thank you.

comes Stanley. Keith question from Morgan next Our with Weiss

line now is Your open.

Keith Weiss

what aggressively. very the guys. cloud spending transition to so performance is it’s there. taking congratulations, for see that the difficult really also, a you taking Thank place And in really Excellent. this out And question, environment is to great still nice

ability. to guys the understand One, your questions doing in user I to cloud, that to or people that there helping sales you more push push maybe two pushing more Is anything cloud? one. in that. direction So, guys aggressively of the are people environment’s incent proactively to customers around Number sort

sort much towards now to we’re the model how any so the have of does CAGR impacts couple and how sort impact get is, state -- progression about we thinking the shape end there Second that on and flow of billion not towards XX% of next through question maybe that be that target? the of we end $X any years earlier, sort that XX% should getting that over state, that of target curve? but cash Are sort the and of

Doug Merritt

desirable. We kick-off perpetual, this keep the -- cloud calls, attractive have past have Why at initially with vehicles, least than were on don’t made modifying we to we make plan said perpetual ratable were we’ve the qualitative year, on But, I we -- to where trying as point the to term. aspects? just year-over-year a in eventually in was commission been more less to more then and parity cloud trying term we got neutral, we

more significantly deploying cloud it’s on We is have decreased customers our seen you’d significantly time is features, dramatically, Their velocity without the only The far cloud. with when resiliency value and drive the learning as possible higher. pretty we help a to better of them expect insights doubt insightful area and that is for security they’re proactive are machine with and can critical, cloud. can recommendations our we really with in on IQ

we that what the and nuances sold others sell are in human is our leadership there reps Christian, are said, everyone excellent So, the -- Splunk sure management and on definitely many sales has cloud, an is not change focused educating it not job, on means to Susan, Head the it. the of team team sales their before so Linda, done the has landscape Enablement, cloud That in easy. make past. The of reps cloud to

continue. do and got and that want you internally any we’ve sure the we to to see that multi-pronged the coming So, through, make impacts? growth externally of message walk efforts through is cloud Jason,

Jason Child

there cloud Yes. to well, really assumptions. Revenue cash, course no since a is on mix independent the targets, those ARR of is keep affected. To on the and targets, impact are of to those long-term of change kind

occurs, transition see you the the stronger will growth. faster a in snapback quicker the revenue So,

seeing right into rebound, ‘XX. you’re quicker change see revenue with next is cash. But, no and a year, P&L more on But ARR now So, and a I would havoc growth. our this say this to you’ll little our as year

Keith Weiss

much, so you Thank Excellent. guys.

Doug Merritt

Thanks Keith.

Operator

you. Thank

with question Barclays. Raimo Lenschow next from Our comes

Your line is now open.

Raimo Lenschow

more -- stay on Hey. for Thanks. quick well. question. one me Congrats the from me let cloud one A on as

we in cloud Signal we’re and on stages. have but If now early there, portfolio, the you still look your at Mission

kind cetera? motivated new Signal could So, you for year, sales broadens of this to for broader? about getting the which et adopt customers think and further think drivers at well, about later offering, as you there the do the time, how cloud being UI on your an there, get product the how you or then, like And see acceleration force cloud question Jason. Like, are one we -- do like you more side have

think a accelerated, about given of the then calculation? like you bookings we aware Thank like that Anything also you. puts If -- you’ve the be number. of calculated us bookings and when kind RPO but and do takes we should we

Doug Merritt

Thanks, Raimo.

So, a to of the FYXX our targets bookings were FYXX. total going based into have XX% cloud of be end by

IT and different and new in and love there we that’s talking our have you I there buying But we’re Splunk going security this I to been that well two. what’s to a additional add. talking and product adjacency, is there. contributor to those center still are really after, items, We about, about center slash love It’s add I and rapid buying multiple to And go all close as is is it’s Burlington, main [ph] a think continue going execute we the is ops, that. observability is observability the up buying center. line think acceleration when appropriate

there do, in workloads Splunk. make one we and cloud think are for a I on is helping this six is about that three-year Achieving There’s years and edge, There a what are this cloud, scenarios So, talked momentum. finite target year we at for sense. my given where doesn’t cloud exciting. propel to us

upper science still can better. or we top a out. this, So, on have XX% is but that will range sooner in that get cloud And don’t XX% see the somewhere a probably the we of we to end, perfect

acceleration Obviously, good. make the growth that shorter-term transition. at expense is comes at the term, hit, and longer-term come we but consistency will revenue as consistent which acceleration So of ARR revenue

Jason Child

bookings those the mentioned focal as they’re at the on we from metric, because quarter, were transformation. confusing with just that least question, Raimo, a pulling last our primarily slides, we

that bookings term because term they’re pressure lot primarily in is down in the not that’s months so, wanting mean, total under a is half a because because And duration RPO you duration And and almost to are seven, our that to is term slide can commit I particular, about seven interested longer on down. customers of year-on-year. contracts see cloud. in shows

though just makes can so, the ARR RPO continues that is look And to our current look very the because ARR booking you also at translation be very, one which ACV to then, strong, shift. total to bookings, and ACV you best see be confusing, the if continues of cloud that is number And low. very strong. RPO

in at looking you’re recognized XXX when so, upfront. of the revenue, revenue all And under change revenue plus is RPO, term course term --

of year And a mix. ago, term bunch so, we had higher a much

adding the that in up if So, front, then front revenue revenue and change booked which mean all we have a RPO. would you’re much and more booking that you’re selling three-year up you’re deal,

have problem is with revenue those next in and that months. the And a of pulling mix, XX really you’re less cloud the relate to so, not beyond higher you revenue periods

of the building we XX which and drivers be more durable we are next two the ARR growth are, why really most then and that’s build So, recommend look through kind months, how over at is we’ll what growth, delivering is revenue RPO. the important just backlog then growth

And so, focused growth those you two picture, really what we’re metrics give that’s and the on.

Operator

you. Thank

comes question next Thill Jefferies. with from Our Brent

now is open. line Your

Brent Thill

that think just are getting real building on made seem that’s just last I color you and been kind and pointed great how like pricing you’re in of well, things with how the statement? more business the be general just accepted to you quarter couple and any among the be clients they’re channel? could seeing. questions how just pivots, think quick seems things curious of would And some And you. you Salesforce to and agree that you’ve what if every price side now for talk out on would Thank look pipeline, sales at resonating Jason, then, been back? helpful. the throughout That Doug, seeing week. the to And better you Thanks. trends you a Maybe if

Doug Merritt

Brent. Absolutely,

What QX end we in So, have number again. clean, the all rosy deals, aware were we the significant wants at of signed economic and as our any is It CFO senior with the unexpectedly. and wasn’t saw or who a being said, definitely where throughout it saw just review deals all constantly of thrown to picture on CEO Board let’s forward. cases wants scrutiny see especially financial minute buyer, don’t spend it, was going towards in to the QX last There wants had review Splunk the exec clear the significantly go more in of CSO super a CIO procurements, deals. we any who approvals changing docs a approvals environment I budget nope, again, review the it tell the quarter and of on

toward QX. election, of upbeat with it’s chaos for the in the very going we around economy Pollyannaish surprised one super marching stimulus we’re through variability, all neat or we’d fundamental dislocations with to are positive seeing and had think, with think just COVID way that people not all we were the QX a I a to V I the ,QX, felt if other think the be be pretty

the variable, to that sure my to. is continues and something down, us There’s actually the smooth to extraordinarily I of goes up, up in anytime the have it they and power macro are a team, excuses they anticipate going really phenomenal is doing -- we I back be give their on still rigor to doesn’t have right? work landscape I That which way think on execution. So, in future. that’s but The on that make it foreseeable -- doing that execution, heads are there And some remain go lot believe. focused to sales up of need diligent colleagues, we environment easy they and a this, kept don’t

Jason Child

increase cloud And continue in clarity as on more the said pricing that very just way -- to and Splunk of exactly Splunk. both have what than to instance to folks by well particular, will very, we’re we’re for customers predict been the -- options past, Because they past, push strong their offered they able And echo very customers that Brent the was students. are on acceptance So, on-prem. reacted enable that very Virtual price for kind positively [Ph] that. be in really done in be have receptivity. I high that Core accepted a volumes faced vCPU the what question, providing to And now the of would received is have data the or to rates to kind the those we’ve for

contract, beyond and though because relatively typically The early a they’re contract, one see I still they’re for out the is new or way multiyear under that to capacity. -- customers second every is innings, would going not up virtually they’re thing renewal unless since our if of they it under the is point are pricing,

customers our And program half a think close a a it, and is and us. so, year, average in as being of third not been two us between between roughly not to just three this we’ve since years, somewhere actually quite the to since -- of for have a -- seen contract probably half, customer

and from very but so, we’re still to I go awareness, ways we program go. continuing seeing refine liking think in a then have And terms the of as to much we what customers,

Operator

you. Thank

Phil next Our from Wells comes Fargo. question Winslow with

is now line open. Your

Phil Winslow

great better lack focus on questions want beyond I on of just in of And of Thanks taking another term. quarter. because this index already question. been DSP, themes Sticking to guys call, guess, congrats lot sort on asked have observability. of the my the a one I of for expanding for

what now DSP? you quality, and in could So of are or give observability terms be interacting suite? how customers an potentially DSP, for Pulsar from I guess you on and hearing even a about they the its are And terms us Doug, can platform think be sort of Splunk, end in in it of with front release, itself whether the X.X with update

Doug Merritt

Thank reiterate. just Phil. portfolio and our years it’s this -- now, for but we’ve to I a you, when I Yes, think think been couple I framing about a want

any the as with team, I and other use and to that targets, teams. ops being is management/IT and still DSP, be case, team, provide world, view we think our three to no the meaning that index is ton serve as data data, upfront platform platform, -- on different three to four the four, incredibly the in the part and index the about foundational that It DSP structuring powerful. structure awesome areas, of And -- of cyber infrastructure was app the the areas beyond it think, is storage elegantly move and of and still remains demands vehicle the only and query. unique in I areas able there industry dev-observability that it’s the of

portfolio. Druid multi-dimensional data stack than our we But, classic critically find is which to remains more help need you’ll to important processing, more the in the why there’s world with like cloud that elements indexing, it’s why to stream data. So

open-source we we It initiative enhances Pulsar things Flink, typical the efficiency within point as view clearly increases complex critically in this and as as We for So, scale observability the important and the a development landscape view of and the very with are like and And elements friendly well-mannered Kafka robust. at Company. time dramatically team. streaming suite. this

that elements to managed seeing are stream data and the stream that effectively. that platform are lands, is there of We based metrics size clearly in unique. a on only processing extracted and stream. of the help to is then orchestration, another drop but being highly it sample, the sure wherever is intelligent Not transformations accurate, interrogation, automation, enrichments and traces all data our ML And of to that really the there on are top there’s happening on. data do It DSP no other scope whole make reduce being petabytes no by

So, it’s portion the portfolio. becoming a pretty and of indispensable non-elective platform

opportunities more the are new our those the ability very continue that that that to centers. more to wound continue those observability toward and maintain growth. components to us into remain different target like DSP three streaming We we’re bullish and that and gives fuel the see for we think high solutions on platform You’ll seeing get buying of some

Phil Winslow

Awesome. Thanks guys. again. Congrats

Doug Merritt

Phil. you, Thank

Operator

you. Thank

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

is open. now Your line

Matt Hedberg

little is the guys. also your But, macro a question. Thanks comment Doug, could actually if of also on SaaS? that’s accelerating appreciate having COVID question, Great. you I’m wondering And to my adoption if wondering, taking for bit a more prior specifically. comments I Is is on adoption? where or it is for customer environment or it new not great a addition I some deployed. impact Cloud this customer adds. But adds? new accelerating Splunk new customer actually new an within base customer your curious is know, being

Doug Merritt

and COVID particular at I think three at industry when QX cloud travel industry purchasing we we industries organizations with activity have was look to for tracking wanted industries you were do, the and Splunk in easiest time. QX amazed like macro retail. pretty activity, as arena, that And out and manufacturing, that in not transportation, absolutely to the to called is we’re sure that three know, as look there QX. make with, increased and -- that help actually their in globally They us. those accelerating I between I we had

So, or communicate business through that’s never that externally we we to is, direct dreamed the categories need getting I we of have those ways in we’re think in any with lines new reinforcement footprint, business. only only was accelerate to of and type have we’re the And the way have that this internally conversations going customers way do that going I that, to can that and of the to reinforcement. invent digital because have chance hey, our of

That to it had out equivalent last a it scale But, like tailwind. healthy organizations accounts. year, trusted new find get net way give issue. to engagements new you brand of definitely said, with prospecting it’s an have sources rate and versus likely customers, work So, within I crazy found we to like still we customers baby have clear think that it of Net new are customers. a most harder break new not size to for to. want We

million customers net part of were number. ARR some of the plus And new those

something is well affects familiar that those already are this seeing as that impacted. aren’t, with both as we’re that being and So, organizations Splunk,

Matt Hedberg

been mix that That’s great. given I’m we’re do has would’ve kind the Just wondering if to sort expected you and I closer then, in been I’m line, relative Jason, and wondering, revenue obviously directionally, you end -- appreciate would mix of mix really done the to That’s have would If And super in seeing guys cloud revenue would helpful. the ARR Thanks, where outperformed this focus your of of have the similar high QX though. sort to Doug. expected? cloud how what on the you that of CRPO, mix. And color come range? above guide, shift curious

Doug Merritt

Yes.

basis-point a take we if $XX in what a the TCV mix and contract it and at just guided cloud value you had to to differential to, between million we take total XXX high versus to $XX mean, level, the the million. that that add had, So, quarter, I translates

$XX below I we so, And were think about million guidance.

have right so, And the would on, we aspect. been absent cloud

Operator

Mark Murphy JP Morgan. question next Our from comes with

line open. Your is

Mark Murphy

you cases the into to in everything try interested think of use it learning, else. demand remote like if I’m work, versus what you were curve the shape remote split looks to

wins. which this have all products you that in back types school But versus monitoring, you WebEx all called is today Doug, would call, activity, you words, is that districts these VDI the I’m around Zoom that other mentioned package in of remote lot and the of I a to environments around particularly think more this So, you VPN logs. of contribution new understand everything monitoring, insights, for have say work trying and how trending and material April? how

Doug Merritt

us the for of going from definitely be ingest Splunk it from that of At options them. that helped this are had the networks, power with you the let VPNs, number hundreds can a of see organizations end saw something that to help say, data need. that had was instigator we it They So, me can for the probably is And to hey, and do us. to burning different applications, used Splunk from the of opportunities. day, from if

got it because pay work, once the think visibility overall someone intrigued for about volume the in is use a platform it but you power again the then deployed and I that guys talk of dimensions. analytics it -- and missed but Splunk gets new deployed model away of visibility data New Splunk you us then was security then IT, we our multitude remote is for like classic -- finally get pricing is that different volume and from of that when who for classics to that that so, the thing data And Haven Yale and

an similar a to capability gen the But becomes having I impact. data the cases. and remote ultimately So, lead of work for our or the intrigue engagement use it’s think rest then data

Mark Murphy

a uplift than bookings of follow-up, today quick understood. adoption if or at look has trying security And Okay, you a looking if there was Jason, the Again, because different a it percentage mix, to an understand COVID? is pandemic. been whether in any of just of as interested percentage the in it it revenue, security pre I did

Jason Child

business. half half pretty would remains half is be our maybe slight the to observability, say would we I’d certainly say. about consistently of what But used IT growing. is difference the It say, that’s other and IT, -- I’d be at the which other now

Operator

Thank you.

comes question next Our UBS. Fatima from Boolani with

Your line is now open.

Fatima Boolani

perpetual dollar ARR the the detail Doug, with But, Thanks you and Good about taking model, you. around you wondering, the was EAA was some for could sort because with appreciate of in I the if format license important color conduit is for if deals. questions. the think I historically larger the customer have an of start characterize progressing, afternoon. the motion base. billion TCV, I sales how I’ll that engagement

into then, in move Jason. do and transitioning ACV So, I’m based you you large quick And large model, that wondering ARR follow-up deals those how how velocity and of how deals? a and to as for I that’s factors evolving an or transact have

Doug Merritt

really, about with durable and more you the you cloud, number wind much to TCV I ACV, a of think with really Yes. And I’m a from reasons. excited move healthy business. just combine up for that

pricing. big, consistent. cloud that in is You as pretty outliers, impact weren’t one, the XXX they to had we’re workload-based all shifting this quarter. a big get lump [ph] What up But, for could big in transactions default is these TCV,

beyond use infrastructure the to And pay pricing. based ELA, you based and volume and terminology, data away very thing, from clearly the So, we you unlikely if consume. a got for cloud we’re a mentality, rare standard and in and is

a app this portfolio, pricing the So, IT with portfolio. this platform approach, combined an portfolio and dev portfolio, observability then we’ve got security workload portfolio and portfolio

and driven is that with land then contract on workloads sure all and ARR is I more do make of or that then to will one is traversing facilities, either consumes to more platform depending continue the type expand portfolios, within is that’s security that users, that think, the meaningful that portfolio, and way the the job a using or those portfolio, of departments. begin be -- that other

also So, to that’s two make important really came for rate guys wanted we figure why the ARR we sure view as forward we that and that and renewal dollar-based with you net that’s database what net to field X and renewals but of ARR, million plus on. renewal aspects effective complementary going the needs to come focus drive to Land, through rate. the right you

Fatima Boolani

of super business, of started a you’re That’s really I’m modality when large you, renewal term for appreciate off. helpful. Thank ‘XX, kick to the to license ‘XX up for back cusp term we the so of wave Jason, on much coming so and detail. pretty that sort the thinking you

that’s model? for the And me. So, you you the potentially that a and opting fiscal ‘XX, some think of with assumptions operating of base? help cloud consumption based us procurement and Can it conversions for you. maybe of stable with of happen these you’re some in with as under Thank do accelerating sort existing that, renewal how I cloud as we that ‘XX, modulating see term guess, fiscal customers, business, about

Jason Child

question. Thanks. That’s a good

We renewal the mix base, -- is cloud, that which I after. a say, tell ARR the even product a pick. to say it in talked than don’t questions, hard That cloud are base is cloud if that which customer tricky that continued is really a faster what expect from seen because to towards works using for line are of continued, in And what you year latest to be of those one. it’s buy product, know, would is pick yes, and faster. about that hard year, growth, ultimately year, such to going that we probably are renewals think model we’ve growing stays greatest, we’ve them. then, to past. more updates we’ve more I’d cloud to we then determine growing the this to have accelerated is best we’re seen the acceleration and the to percentage with that’s But, first or bit rate, we tailwind -- maybe a certainly see the little get you’re next move The getting to and really moved all said, a substantially, as you we we’ll like we our happen overall renewal environment in to the a going significantly assumes it’s past. cloud. but now, They’re that’s they the going side, if whatever the good

likely And will that that’s sensitivities so, one to moving year. a as superior our of the be so it’s view, product, I definitely guess, we look cloud. folks is bigger, But, faster next it towards and

Fatima Boolani

Thank appreciate I that. you.

Jason Child

Thank you.

Doug Merritt

Thanks, Fatima.

Operator

you. Thank

question Our from next comes Andrew Nowinski D.A. Davidson. with

Your line is now open.

Andrew Nowinski

you. Okay, great. Thank

me. two Just quick ones for

know is focused you’re license on I the billion So, service, business but $X cloud business. still the

think do had Elastic pricing the addition landscape the prices and made changes competitive to the segment be know that made to there. question So, in customer, you to some adding on pressure shift more but a cloud? competitors like to transparent might the I the I and the you

Doug Merritt

I consistent buying and as presented see impressive feels we all prime fairly stable competitive in that We’ve way rolled that. still have term are to anyone environment our we’ve pricing answer very And great that pricing with cloud an which from license equivalent engagements customers. the Elastic, rates a And probably is are that we rates maintained got changes the are That’s involved the question. very I for know is that win win a that is well. against there in. I’d mean, out option workload-based universal. the being

Andrew Nowinski

All but the know federal Thanks. I’m contributed July And just one last how right. stronger onto a quarter. U.S. period, to it. spending we’re then quarter U.S. me. wondering Got in your deals I for Thank you. up coming the fed

Doug Merritt

is year It’s is that pub-sec more Pub-sec end. quarter got uncertainty the federal time. years at their is The as team diligently we’ve seen has working usually nice QX six always, and that team environment in did a Splunk. environment There head But a is uncertainties QX. and the can. this given long whatever most they the I’ve volatile to and for seen biggest really in in inconsistency variability high a pub-sec mitigate try down probably quarter. the job, in

wait federal Splunk So, see volatility and about passionate that within allowed, I the in all the buyers we about are spending be our And that the of QX -- passionate that hopefully end what segment. teams the and will access passionate will that happens really federal the to agencies know get segment. making are are given by and teams sure

Operator

Thank you.

final Bachman from of with Montreal. Our comes question Keith Bank today

Your now line open. is

Keith Bachman

I you for transition mix, you because data retention total -- is suggesting the ARR, that have mentioned that, that’s of number? of do you. retention net just or questions. And the though? two XXX. skews durable think which part at rate, you Thank is to ARR? had that cloud Doug, What cloud first, that or XXX is type also is the you’re Cloud set net which XXX, for rate strong you ARR the And the the really reason the that XXX, be would on as a

Doug Merritt

Yes.

we a and we gave from more from overall Jason in be So, levels that’s that going to we make to consistent we felt we something benefit retention we bit But that know that overall the portion we the gave to little The actually higher base rate higher we the actually forward. maintain. And is want than it term that a -- because is net can to give meaningfully of perpetual was was detailed. whereas should that moving sure there purpose performance down cloud it was license come cloud cloud. going durable. get But, expect

Jason Child

Yes.

host they because the see cloud-based retention Just at rate. cloud higher initial growing to the moving add going on-prem be with over, the boost. one-time to solution, over and time, moving is over selling should And on are an solution then, folks versus average net that, to like customers there a price cloud

are little put high. So, number to longer what deck, when over were conflated higher we in retention slide period cloud ago, of the bit to a making are to net customers that showing look is the The rate, cloud it time customers makes switch cloud, best that year it’s a at we XXX. the our today. measure they exactly a thought by it over where way that buying That’s

Keith Bachman

strong it’s retention Well, really Okay. rate.

my that’s great. cloud question gross follow-up So, margins. on Jason, is

bit the transition, the cloud cloud thinking we said, transition margins you particular? be How a seen the gross about faster. happened You’ve should in as

Jason Child

for effort a Yes. A [ph] couple has progress That’s margin. Sundar’s ongoing been of years. and made of particular been on by, team lot an Tim in

in So was of on past talked there’s lot building a stateless first how, the to I’ve about being a architecture. that work done,

overall a increases price just discounts. So, think or bit I to that business focus we pricing. better of along. you that probably building And also certainly was That yes, we’re able effort little as for size terms multitenant compute, could architecture, actually the there’s of also and the so process. is. can service in one, in a step then, most That’s -- kind whatever getting was storage better and negotiate far compute best There’s on from of earlier separate, pretty processing the the

those can next end we to that And plus three gross XX over the so combination being in believe structure margin a we hit is percent of why we’re year. by able get to time of the where things confident

end that expect it’s to We of this year. that ago. two we XX% something But roughly years started said, hit the by above

we low that was it think, XX%. as mentioned I past as in the

or at The are they really us XX oriented the done that in reason maybe just services already look work. is were other mostly they’ve you execution are typically it’s native percent so, businesses that to why most that similar Florida. range work, because offering to And plus cloud

it’s not get So, plus that we’re way. we year to they or it’s a work. percent in XX execution our definitely perspective, half And a But, that were that can innovation get -- so. targets and from built confident work, those

Operator

remarks. question-and-answer over session. concludes like this you. call the Merritt back closing Thank gentlemen, now Doug and Ladies I’d our for to to turn any

Doug Merritt

for by few Thank you. the maniacally to seen you we run willingness past into remain the our results quarters, that’s difficult Hopefully, on for as because have transformations, headfirst consistent what’s focused consistent all execution, so and we to very success stay our the necessary can for Company. rigorously of we our success durable do focused customer And while that, simultaneously on long-term drive results.

what’s I have. metric rates. we have been same the unique made control. for increasingly as trying X.XXX is guys on past driving manifest both appreciation the to thank the a to grow plus you’ll of way one support of built we really we’re my that then, continue in driving our graciousness lot started a our other to monumental our ability in Splunker, of on learned to to ecosystem side, the the out that manage when transformation. our the our think risk billion and at other and rates with our single And more and belief But, I’d your I of of more to we’re market, are years, urge over the environment think, the incredibly most everything scope and to is partner come healthy. at are a is -- and the The I us of I macro ability to get the their risk Splunk $X little of have take we or And think of is portfolio off you the of you is I through we’re that irrespective side that bit continue five cloud as support demand rates growth ARR we and lessons from guess nothing, compare every companies driving, standout bit add more and that quickly. the a confident just the in and something transformations the And believe or a that all some very fundamentals needs in the and call breadth the hats I interesting done. on Company. to am excited macro and execution of our pleased we’ve progress going you to And business. customers combined the magnitude with us I growth And category

Operator

call. participating. conference today’s concludes you this for gentlemen, Thank and Ladies

You disconnect. now may

Splunk (SPLK) 26 Aug 202021 Q2 Earnings call transcript