SPLK - Earnings call transcript Q3 2021

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Splunk Inc's Third Quarter 2021 Financial Results 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] As a reminder, today's program maybe recorded. I would now like to introduce your host for today’s program, Ken Tinsley, Corporate Treasurer and Vice President of Investor Relations. sir. ahead, go Please

Ken Tinsley

business recently which today's Jonathan, today afternoon, Jason have are today, material press be customers, replay market you, and following And benefits and statements, our expectations in fourth Also On will cash our the on and documents including our Investor and with and quarter statements overall environment. operating that to note these are Child. SEC, and With the on judgment expectations us, full-year on mix; closed on regarding impact financial our release, COVID-XX release. changing being products, for intent as These a results or our the contain the statements of such press during well best the events reflect those are that control assumptions cause any issued an call Doug we factors may during differ as the which call rapidly, guidance audio margin; documents disclaim on call our economic we we well these as based posted our and be Thank accurate acquire and revenue as are trends flow not or on everyone. website. Form made good me close and After is If we to our Great. to Relations our forward-looking may to the operating in to forward-looking we and well. available information to to making as of website. presented our forward-looking we as Merritt Those to webcast. obligation the quarter page posted live update we cloud demand call today's assumptions forecast beyond conference or will the statements. actual via revise supplemental announced will ARR as refer acquisitions, long-term risks currently results statements other on relate of with regarding from including and statements. markets. today, This pandemic this X-K our made is strategy, Please materially. file filed our the actual information. Many that web current gross These contained including call, matters and this which being expect macroeconomic and environment and broadcast call, may this our as and today, markets, Flowmill; in factors technology, after differ known reviewed is contain

prepared and discuss release is We will press turn let which accordance results it me over A with on and reconciliation generally principles. non-GAAP are in accounting non-GAAP the Doug. accepted of financial measures, GAAP website. in provided our also not that, to With

Douglas Merritt

on similar of Welcome Thank we by for half There you, to macro brought continued is in environment and Ken. long-term customers everyone, the hesitating the joining which The first some year. us was to third quarter the today. contracts. in pressure conditions resulted commit thanks to saw

Despite fall As did not much remains among QX and software quarter which our our third we these one our companies a performance, rate our end our headwinds saw fastest short of enterprise Overall, history. largest us close we Splunk near-term target. reached in lower-than-normal the caused the deals bookings of to meet growing October, expectations. of

Day, Investor continues we our and grow. in penetration our Analyst at we are of early the to Demand $XX billion As outlined TAM.

our seven adopting and their to customers and throughout QX commitments, is of through data robust. through are infrastructure pipeline Our more eight More and is increasing seen customers which and figures the ARR’s are buying more broadly over Splunk time expansion. organizations and

DevOps We to important be enterprise, up ARR continue of cloud front been this XX%. part the lines transformations they Splunk are, how of over continued last the $X to And growth our XX% cloud, journey, success. create customers quarter, customers every digitizing of the of The growth and with exceeding ARR, in on momentum on-prem whether also able cloud driving being new IT, they rapidly Splunk are us platform that’s accommodates to reached of in operate, where uniquely ways an XX% year. our security and cloud and to milestone billion a they cloud revenue stage our critical working. the want of has when cloud meet need

by is in and the capabilities the federated customers’ delivering Data-to-Everything index market, learning, scalable our platform machine on bringing expansive with our and processing, and stream most analytics including orchestration. collaboration powerful needs, Our together of heterogeneous and data search some

we the acquisitions of industry, momentum confXX In the DevOps the yet. customers, to and Our intent win conference, observability hosted .conf enabling TAM user $XX a space Flowmill rate where partners continue where observability we our of to opinion, as against my our best switch a biggest as to across and in recent this well in acquire comprehensive XX,XXX October, us and event the over Splunkers billion a made and portfolio virtual see opportunity. our at our most incumbent extending Plumbr our of announcement into the Rigor vendors strengthening are Splunk’s

their are stories Department NASDAQ, customers City who the and Arizona, the New life of Companies more. the Splunk hundreds Zoom, with grateful University brought of Education We of York on us. to like to stage

use Nu action is which global security Enterprises Skin now this a historical effectively and Skin at nutrition train and were who take support Enterprise expanded continues and customer I’m Enterprise In This data to infrastructure adopter our their increase monitoring from was cloud and they Nu data avoiding solutions, can more Herbalife skincare ecosystem. A DevOps include models. business AWS Splunk an friends standardized online by grow. across costly particularly the to in access manage addition Cloud customer to upgraded those as in and for machine With early better a Herbalife our cases. on retail Security is deal. experience its application thanks online recently distributors. that business outages the independent expanded IT, global a we of recently and significant accommodate on share. story across increase customer to a major also our excited Splunk retailer for Cloud their of learning leader custom-built Splunk to COVID-XX. is a long-time use IT, use brought to retailer Global security of e-commerce their number in wins environment company’s better impressive customers, entire stories to company Special to of Nutrition, quarter. saw this premier to improving instrumental

a XX deal and going orchestration, of data can response. petabytes on what Splunk to our multiple with no significant build This and great scale the us, organization customer their this Enterprise, technology solutions, per ingests of use and in-house all-in With Splunk Phantom. expansion, how custom with day like. of organizations technology world’s their looks security of signed automation another expanding is and One leverage example is infrastructure Phantom largest Fortune this ITSI eight-figure companies major matter

Via Dennis General Directors. from of technology, on years welcome public General brings military, sector customer I to over retired wins, Moving Board and our experience. XX Via to pleased am of leadership

Data sector will the and accelerate results help customer base. and public despite our addition of to summary, to with to confident our QX continue and and partners I short thank along We their experience are delivering our Age. is his for on opportunity extensive thrilled falling expectations, I strong. believe Board our our that data-driven commitment our customers in our impact want broader opportunity that today’s In his massive fundamentals insights remain with Splunkers

it Jason. more for Now, over the I’ll on quarter, to hand

Jason Child

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

saw uncertainty in and commitments, high-value customers factors macro contracts. in for to we as delay QX, Just from particularly volatility causing spending QX, persisted

demand the will point final close to several large quarter, result, uncertain. of and revenue in are as continued our but well factors closing below slowed strong the As transactions bookings transactions they see total rates. RPO. weeks end, the scrutinized will the pipeline, impacting close Since our actually a reported transaction you for the as pipeline in close we plan, in significantly in remains coming All which quarter resulting delayed we reflected and in rates overall in of when indicators eventual confident

growth a remain cautious we result, long-term near-term As trajectory. on our market but confident in dynamics,

ARR as of the environment remained performance momentum and challenging bookings software total million, quarter cloud $XXX XX% in and As up XX% the of our cloud the nearly with were, Cloud period in was we ended year-over-year. bookings strong.

of XX% with we the with up surpassed XXX with XX% ARR QX at $X.X year entire billion and $X expect We $X portion from over just RPO over XX% the ARR last was million QX a months, ago. business, For last QX more which end, billion, as XX in billion, or last next of ended customers recognize total over to RPO, of We total up ended to compared year. the over $X year. revenue period up year of XXX

P&L. Turning to the

Cloud to higher up Third in of contribution quarter cloud customer substantially over which at with of year $XXX and due reported platform. our of in total XX%, to was Non-GAAP revenue services QX, total below Total reflecting cloud. least our to the XX% down QX a basis million, were total down long-term Professional operating XX% negative margin plan in cloud gross continued XX% continued cloud QX ever was from lower was mix X% XX%. reflecting year-over-year highest education our XX% $XXX year-over-year, due coming non-GAAP acceleration below of was revenue bookings last proportion margin greater compared margin to gross revenues revenue. was at last were Non-GAAP towards X% target on progress migration plan. million, and revenues year, revenues.

to Turning guidance.

Given our for QX ARR year. are expectations we tightening remainder current or visibility the and of lack the performance thereof,

a While to account market the range incorporating to have uncertainty. lower to we are for we end mid-XX% path a growth growth,

QX $X.XX expect between we ARR of end As and billion. with billion total such, $X.X to

revenue On the margin the in cloud continues transition operating income variability statement, drive our and of our to results. acceleration

relatively range. seen year, negative year-over-year to and between between contribution of margin X% to $XXX basis total quarters mid-XX% million revenue the in prior cloud of we’ve of this given X% on our as non-GAAP a million positive operating are plan wider QX $XXX based expected Just revenues the be a with on flat from

our of growth confident flow Looking health long-term remain volatility driving is ARR the our in long-term further while near-term variability rates, in cash operating out, in significant and the targets. we

out we withdrawing operating we to close result, an are the a our of the otherwise FYXXXX macro the remain unusual believe finish selling have OCF underlying a that we guidance demand let’s until we’ve seen strong In durable, solid it and quarter. strong, at affecting and session create for was long-term and was environment. the a ARR is growth. and closing, drivers We QX confident Analyst we this the environment for the With this year .conf questions. build most ever market condition cloud during factors up that, remains and to slow As particularly outlined understanding a greater a open foundation temporary

Operator

Instructions] of line from Our the Raimo question comes from Lenschow [Operator first Barclays.

Your please? question,

Raimo Lenschow

a leave. had is How much that. versus that Can some the slippage space the Hey. back obviously the in And bit not disruption have like changes coming about the Like confidence quarter? at Head follow-up. it kind and I the you is deal of you about talk internal this really talked you QX? related what's just Sales in side had vendors And of execution this your coming Because then little the the gives from on end other of market? many looks one of of

Douglas Merritt

making of team thought they or of larger deals just Thanks, eight-figure in deals, at high QX acquisition, we Raimo. exec to hours and this I days et at buying the in deals, economic that unusual cycles understand customer the C-suite, that and compounded QX, that an interventions team routing which they're CFO. started stopped the CEO CIO, the the is Yes. end typically by for were describe that that pretty effective the Board QX rigorous is in got and are final that the extraneous our And CISO. seven-figure, approved going with of team got has dealing when in our through or group, budget, darn cetera. make to for the the or And buyer of What Directors we approval the own sure saw

XX of top with, As and a a deals. went back deals to we we the when XX close context, we into tend quarter-over-quarter, go those eight, top seven, look or that quarter nine

I talked enterprise about backend Many loaded. software as we we guess of This quarter, of the And every up wound the realities those quarter closing dynamics business. are deals, three. and

internal capabilities at shift end. or unusual but a view process sudden a with that in have surprises had the don't that issue salesforce, the authority or customers within that very pulled I So as authority this

Raimo Lenschow

Yes.

duration kind pretty of marry Okay. please. engagement. that didn't And to bigger normal then That I'm that, show customers one that at looking for kind just and duration, Jason there. like of me – engagement, commit understand how all Because that up? Thanks. help your looks I doesn't do Like, longer-term anything.

Jason Child

is Yes. sector Well, didn't see of down quarter a this had because that with unusually number an exceptionally strong so so even beyond duration last dynamic and deals, high we three-year because year. year, we duration and public an specifically, of

would year-on-year. I But, definitely expect It So probably a year so bigger down it year-on-year. continues has or headwind. think look that something to duration I XX% forward. yes, all sequentially, consistent overall, going like yes, like duration was looks It's relatively

Raimo Lenschow

Okay. Perfect. Thanks.

Douglas Merritt

Raimo. Thanks,

Operator

you. Thank

question Our of Weiss Keith the Stanley. from from comes line Morgan next

question, please? Your

Keith Weiss

questions. in to guys, you, I for Thank Excellent. little taking a Doug, bit. the want dig

You I this. touching of started know are on sales going execution. go to investors to lot a

You the isn't where than a this you that execution with that of doesn't in of confidence have to understand an of change leadership. a like Can that do you Splunk issue, have leadership, change had the if was help event event sort market a this will? more us this you

Douglas Merritt

Yes. Thanks, Keith.

continuing the transition So announced and Susan obviously, we Sales Christian John Carrie, had Chief Customer she leaders. when our past Smith what been as Sabino continuing two-plus our strong three CMO as leading had Global Officer. years, said for had her was

management activities. process flow, same those and the So from from engagement, day-out customer Susan underneath everything build, day-in, still the pipeline overall it's team driving that's

has play. of that, looking quarter, QX. largest number before. unusual this in the at into pushed the That They are deals progression still way by happened got Just never component just of in the the was our

finance the I've is past seven software, been And large some the really was the XX% XX seen that that leaders, quarter that here, QX happening team, every across aberrant scrutiny past ops growth years never still over the probably enterprise that years way in of sales the so this scrutinizing cloud team, – a revenue with there level field concerns or possible scrutiny got in had myself, transactions the as in one is really we sales I've years delivered behavior again, buying and yet ARR the the thread of XX that past common XX% growth. that

growth So it's those still expectations but our of – communication on of our a contextual basis, is certainly expectations. and an quarter, impressive both short

Keith Weiss

expecting? or well, guys that cloud side cloud were there equation it. of Was as tend was in smaller been term of total as so you in see more ARR like side kind Got kind like that my on we equation the of ARR, the is And impacts business? of the then on too? at has in ARR it And versus did a always like Did cloud come if that look deals be size. number, that where expectation cloud you to the weakness follow-up, the

Douglas Merritt

transactions. both affected transactions It cloud and term large large

Keith Weiss

Okay.

Douglas Merritt

two, per are within Yes. of RPO. transactions to material deals past years cloud plus range now of There got high well. total then That three business had of a $X terabytes current terabytes much number the million noticeable the about that some RPO impact I parts the term footprint our XXX tens cloud on pushed. day a interesting would in is were think, But as through approaching there and and have, revenue, more obviously flows both one which large

Keith Weiss

it. Got

Jason Child

XX%. decelerated more On you ARR, I saw thing Hey, the it cloud, to would that Keith, one add. just

If this XX%. SignalFx, you started which been quarter, have now adjust it comping would we for

not why of And an is accelerated, you year-on-year. aspect actually for look if so going it adjust that, to at you XX% from if it's much of up impact, revenue which XX% cloud, the

Keith Weiss

retention the dollar-based the cloud underlying assuming gross in Got just two past any one point thinking the that versus rate, expansions the about lower then down sort quarters. it. correct really interpretation? over of ticked more one. be When like retention degradation that's that's a net Would I'm we're And rate? percentage last

Douglas Merritt

a great question. That is

Jason Child

what, at number it's Look, year growing still look I The ago cloud quickly. business, overall it's significantly. an where – at, the mean, XXX a was very – basis, it on growing

Our that's and view anything target, about our XXX%, over that. is feel we good

think I was million what year ago you're a down But time it XXX% of off $XXX-plus I it? to revenue. going bounce bit to think a see little from – time.

Douglas Merritt

Yes. million of $XX revenue.

Jason Child

we a that $XX Yes, our strong the Still still million. and ago million annualized, is be million. target expected. would ARR $XXX $XXX within year

Keith Weiss

guys. you, it. Thank Excellent. Got

Jason Child

Thanks, Keith.

Douglas Merritt

Thanks.

Operator

Thank you.

of next line question Jefferies. Brent the Our comes Thill from from

Your please? question,

Brent Thill

hard XX, had assume numbers. at half reiterated all spoke that to this that, October pretty a meaning the guys us that loss effectively and timing the leave more obviously, were pretty to stage, part I was the was strong And guess and back scenario. you back of would us deals competitive these all Doug, sell a of this scenario, that not probably conviction, late

So I that's lost this that this that and competitors? Analyst XX Day on you confirm where that just you the to saw want believe to really fall was secondarily, post don't that apart

Douglas Merritt

countries, although and working pandemic There is of lots XXX-plus active, them three competitor global aggressively on least and relatively bringing suspension of up the Two obviously, all that as buying the losses buying all Yes. loss. multiple And seven following do are slight those dealing every is across was We well. in the people so as to QX long-term industry. readjustment guess the customers, They you virtually good one brought at across centers are variability of there's out that seeing it we're Part suspension pandemic. major points, the a XX,XXX-plus model in QX. I the what push to guidance, play not the high. of Brent. said know I QX of is wins as deals, is – there from news, and and really No. we still customers are And with –

I unusual. super party. approved an it's sponsored by within an So get executive stalled deal a budget C-level have seen outside never honestly approved a envelope by

the what's unusual deals continue confident XX late-stage the some Day still deals the no, they're play. coming obviously then least yes, team's in process through .conf losses. or landscape. But to the of occur, let's the quarter into were vantage going at the Analyst in in competitive had are And happening watch the which this They're on of very, top ability going nine our deals are part activity from very generally in point. We of seven, felt to so all and – close top XX. is not those rates why perform and very at unexpected just And routing PO aspect, approval the that eight, in

Brent Thill

That's And in you pushed you closed Okay. that can QX helpful. if transactions those any already? confirm of

Douglas Merritt

we think specifically. to in. back we I that go coming I closed yes, one look have have and I have or that at looked have closed should – two.

Brent Thill

for the color. Thanks Okay.

Jason Child

Brent. Thanks,

Operator

Thank you.

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

question, please? Your

Matthew Swanson

Yes. Swanson platform kind a accelerate build lot of market just more Could more a is you us the now to Thanks. out you the little on quarter around Plumbr Matt of in Doug, observability? holistically that's encouraging for seen and Matt. M&A with seeing and give then during Rigor you're color This what the we've on Flowmill.

Douglas Merritt

by it the to excited I and can world-class around obviously IPOs, beginning SecOps. on still that. CI/CD cloud-first of We're shifts highlighting Again, convergence really days focused teams. and team, DevOps seeing a They're trend recent these guys But and feel and you next-gen is that's SRE irrefutable. of move think next-gen motion we full natural you well, perspective, are happen. the move as happening in this both are They're intertwined the development seeing, DevOps fully thank you are see we functioning with a I to built this all as are all to some framework. very with is trend. massive Certainly, Yes. We think up a to observability a early very driven for that

$XX critical tools positive transactions and observability many bit that movement cloud own more get can Our see companies with we to and side aggressive think real, set development that next-gen And become to trends premier has to capabilities. organization sell teams. more their within that the we and SignalFx Flowmill The and likely TAM that representing this that pandemic on pushed companies lean of one strong arena. that accelerating. excitement billion, on and is We the roughly Rigor, many, cloud the and number DevOps is on cloud And are then people as companies the to and with cloud development. back that the Omnition in just intent our see is on our have really in the sector the to teams and those moving our a world is through serving SecOps and that their guide we online be Plumbr,

Matthew Swanson

of same Sorry, could follow-up that kind just I one if on line. ask

You've suite and lately. been more talking strategies more about

more suite on So Can of those get talking like simplify Control. of Mission on .conf launched seems for and strategy two to on-ramp things? observability then just kind could Splunk elaborate you enterprises this were the the that It kind the about. go-to-market you that DevSecOps to really at

Douglas Merritt

Yes.

teams, infrastructure We shift the teams, buying this and centers, that's have now. many the development teams. for huge opportunity security dev we key the in occurring really DevOps ramp-up and those big years teams Obviously, been see management within serving three the hey, DevOps is,

et sure like in So we with let's security in and capabilities and us making ops, there. rating through But AIOps to cetera. Caspida in in that number and years we with add cetera, VictorOps, lean to wind I the acquisitions security and getting have ITOps aggressively vendor adding one up et Phantom think, good, acquisitions capabilities our more been that SIM and like lean even

that make past the teams buying that three So there's security the all the ITOps suite the integrated the teams, portfolio we've suite, got that or security underlying of the observability that suite services, approach integrated needs year three these suite that addresses teams, suites. on, includes powers automation, orchestration, is suite, which sure IT stream been the the the goes collaboration and the similar, ML back DevOps have now an frameworks centers to platform observability key those an processing, but right, and focusing then we

suites And core processes four with all getting UI make So they'll in now SignalFx. front the Omnition, the is in observability ramping sure with Flowmill consistent homogenized. experience, core leaned of we've much impact and being teams capabilities, well. integrate of are up consistent we hard suite to and as now Splunk uniform Plumbr at a with work a Rigor really to type more the be same are the The and in as the

Matthew Swanson

you. Thank

Jason Child

Thanks, Matt.

Operator

you. Thank

Our Montreal. of of next the Bachman Bank line from Keith question from comes

please? Your question,

Keith Bachman

concurrently very have Thank I much. and I ask if I you them two, Hi. could. will

first The Jason. for

competitive the, On out out current say, deals? aren't was startling what then, just of to drop you and XX%. two its a COVID, longer-term et even one XX a are RPO, numbers. too drop or to Analyst it closing, you had than XX if just the these a and cetera. part want out you reiterated suggested these is of said, a just losses, that And pushouts deal I pretty it that is, on they're question a an second. those Because seems of guys said ago that macro, direct fairly second not tease Day that for large targets, bit my from But Was and base precipitous is as you've of on And is you Doug, XX% gross Brent could what broader for like pushouts. long you big clearly

you FYXXXX targets that out of altogether giving are you're be context, the can you speak board a given those longer-term stamp, pushouts withdrawal lines. and deals that why to not might these along these hear bit or to And withdrawing something of altogether? competitive losses, of guidance so you feel pushed But given time-based than off surprising or kind it's rather altogether take a any

Jason Child

Yes.

it's it there's you add I And that so are impact lapping look So think that XX% we impact. RPO. that you be SignalFx, would current you you versus million That current into the aspects RPO push, closer to get actual we've seen to if comes to an a from on more if number two much at would second, similar or add if you look that One, that impact. our what then $XX get the would $XX has to And then million, the that at if what that ARR expectation shortfall deal historically. was. also and the

Keith Bachman

Okay. withdrawal of for guidance And on Doug, then just XXXX? the altogether

Douglas Merritt

Yes.

made Given we pre-COVID a to effects. continue talk we would at year It with up guidance accuracy begin for the of we Maybe that to don't. Day you exist to again, went $XX in come into didn't with factor mid-October, that we that it when that of $XX did the this pandemic the could amount difficult the that, really quarter through I see Analyst the confidence that. in that would chunk million in make million because then and that want, variability of us we we because a Ideally, variability QX. of big in want the the

us, we feel quarter, wise Splunk any this the to a think and of adjusted reinstatement for our we what felt see for more quarter or over QX. forward guidance need prudent of and what it impact So months and given like disappointment the lean with on piece, And with happens call, given guidance the either then March in a ideally, next company really for magnitude but fourth size, included. enterprise to three happens that an I see

Keith Bachman

Thank you. Okay.

Douglas Merritt

Thanks, Keith.

Operator

Thank you.

KeyBanc. Michael of comes the from Turits next Our question from line

please? question, Your

Michael Turits

afternoon. Hey. Good

macro. bit First, the little for down and just Doug on Jason, to a drill

there's seeing tech mentioned and you strong. overall It's certainly, of I transformation So areas some pretty But been been security. is the same have digital peers not, not and mean, thing.

you a you're this macro other it So deprioritization? segments? to – do you seeing why than is So Is you do think analytics? what think do particular this impact more

Douglas Merritt

had we just compare So just the of are our and Datadogs, what QX, majority of what at big other XX SignalFx those in quarter, ourselves can Sumos, posted Michael, guess look I who you last and the versus the a the or competitors, in direct it's of they in company, and/or on did majority those the you what end QX close smaller companies with a point XX%. projecting of the ARR and guys QX – on the to, XX%, out companies, posted the at contrast New the that then Salesforces, to XX% vast we declines compare and XX% tech and cloud-only year, Relics Workdays, and the basis, of would and basis; take ARR their between if they at some look lapping Elastic, roughly XX QX for

hold really we ourselves billion $X-plus technical three that and we core We at ARR, $XX see centers the billion – So our standards. $XX billion and across buying to that's TAM that roughly TAM incredibly believe all exciting. high buying across extremely centers

I have a think growth enterprise $X nine XX-plus gotten history companies above in rate. software billion with percent

billion billion there. still small, $XX billion there. billion $X and out to great So But a $X huge versus versus is $XX there's get or opportunity

us. over anything we less great, minus years. know and pandemic high-variety externally, XX growth but what that that higher felt landscape. what are we My for So a the ourselves and and bookings is that continued possible that internally, in is QX we really and above short of have to companies impacts, a other XX, we would there delivery hold definitely beyond believe what software been believed enterprise to falls was XX% rate have communicate disappointment we contextually, And done have expectations on the past

Michael Turits

XX% of And then TCV. think just I did you

there XX% a Software to bookings quarter tripped would bit? to and have So last percentage some for logic were looking that is it why exit? were little you cloud XX% Wasn't cloud. down

Douglas Merritt

cloud is From QX basis, QX historically to Yes. a QX our lowest quarter.

this we've year, think, is our year that we that XX% come bigger that One year fed went half, cloud to that to pub XX% manage public at year, ago, QX at our contracts to software QX. us the to we business, medium revenue than, still But quarters bigger wasn't I quarter. is really very to in past and think, public Splunk rate again, in the of of tends data some companies, what cloud, manage have. within public if while in these cloud the of especially any go to across sectors. the want the majority And companies. chance now pure-play recently in other the it it's, for a and their But and is dependent seen effects basis, as centers as the any upon sec to in or that I – this recently business been back a growth FedRAMP it very, there they looking saw below is all cloud, theaters high The the own XXs QX. sec the term out you not close the cloud that for two quarter, year for enterprise pub big those companies government maybe deals it has surprise $XXX high tends of final in public look revenue Again, if we rate. cloud consistent, years, cloud few other we're cloud million And acceleration themselves a or they get last is still highest QX those got XX%

remain as and very excited we're So cloud continuing strong with about viewing momentum, we extremely cloud.

Michael Turits

Jason. Thanks, Doug. Thanks, Okay.

Douglas Merritt

Thanks, Michael.

Operator

you. Thank

of from Materne Evercore ISI. from comes next line question the Kirk Our

question, Your please?

Kirk Materne

commonality then I to that client of cloud. were natural the about very for Yes. Thanks there Doug, just term time, that And to be with could license but was not rub to was slipped, of shifting They can deals license expect. of I talk into has wondering going that you term some re-up deals in if paying deal much. a over happens, in mean there's that sort meaning if the maintenance, point I sort or you at slips? the keep with some guys, what would any

shift of they of terms or any play top frankly, two? then of I back that the you when cadence of think us color, sort in I customer. guess in slip to sort of deals model just back the guess sort if can that's into business coming the this of give associated, your need Because a on pandemic? Or is confidence of closures these commonality there's your maybe how natural the concern I just that come anything just and that, a quarter does So that risk to is on for are kind within of impacting kind

Douglas Merritt

exec amongst the that's and material Deals obviously in that most $X we've reasonable seven-figure, million had number is on million be or factor. multiyear the think $XXX the I most these that, down million biggest a they are seen different organizations There – CIO, total $X come don't slowdown. size. that were so is companies obviously, impact, higher aware below not the a is million And of Board $XX a So the only worried were scrutiny as that. kind They our big. Those what often or the buyer going It million the company, ARR But low is was surprised CEO I well. material the impact those in of. ACV and is in they thresholds. commonality again, as ceiling all to think all eight-figure deals. contract are highlighted of $XXX some coming deals. within Right? to we've seen that a still or even as unexpected And them not spend the a the high about but deals our slip,

well industries. all that the international those I multiple across that's U.S.-based. as were different one Not comment seeing U.S. They're them deals as So of were was

terms. were Some cloud, were some

variety, a all larger they were but So there's deals.

needed as or better capacity. of QX. companies deals those to disappear that and For our buying need the there's without to is almost more we'll of centers, all that expansion. all They're buyers no able that digital, need expanded into In they're get teams Splunk they're flows. in gauge sure different expanding data into with visibility continuing they continue to it wanted play in at the sure, what a at cover can against approval champions. not they the very the landscape our help them obviously, to they the those sure work we upset, have our need the organizations' they currently those least to heads for visibility make buyers, That's they a they They that that to – to where them them across they organizations that cover. over and as make isn't yet, forward get teams line. are to are QX – gun organizations cases, course additional But competitive while least have. get there But as need still It's that work those loss the and those and continue they work and the have those current any manage have get still it, had maintain lean

Kirk Materne

anything versus, the Thanks. more just this beat just where perspective. a sense an seen I'm And or from just say, – subject, potentially to to pressure but you have starting not get global, more the trying on see Okay. on is Europe? horse to a dead in economic you're U.S.

Douglas Merritt

Our bigger deals tend to be U.S.

that sectors with and across ships, seven-figure probably was actually airlines, are companies to QX in good that surprised same the in sectors. I be all in deals U.S., industries, were still cruise QX those I've a and impact. industry there as handful Splunk, seem cruise all been So about that, saw a actually but notable any that beleaguered – doesn't uniformly, numbers there or not the There preponderance big of but business hotels, talked I've expanding surprisingly are doing high think them

feels a basis. more company-by-company it to be of So

that this kind Going what and are to individuals, their in my means and the mind conservative perception demand within flows to that reaction for able others they're of belief sure companies are that are People the the around and comfortable those meet socially TAM running in hiding that huge markets. as super forward the homes, being that and are of making well. back to and those more prudent variety much and still pandemic of leaning that

Kirk Materne

very Thanks, Okay. much.

Jason Child

Kirk. Thanks,

Operator

you. Thank

for Our from Chris line of Goldman Merwin today final question Sachs. comes the from

Your question, please?

Christopher Merwin

I guidance Okay. closed but for talk know slipped the a QX what were stage. assuming already, like couple seven to they what's Great. QX? just just guidance. large into ARR deals, think right, Can you're about closes curious wanted QX. you. very was ask late think that I in that that actually about baked I you I Thanks. it Thank actually

Jason Child

the for This Chris. question, Jason. Thanks is

$XX that there quarter, So the – expectation same would say is because quarter. given impact see some us lost that's thing of we that I offset or would last that would saw happens. get we at assume But don't by pushes pushes. million possibly the million is then And see then of portion last whatever I we got that the pushed further to occur, that closes to same likely you whatever $XX the end the extent the the

Christopher Merwin

on And Got it. just Thank maybe you. one cash then flow. follow-up

the I I think that, you light and target. income a op that guidance a QX mentioned little in was op in little the is But income. exceeded well release think light, as

thinking about years? we're relative with also should So the we we how EBIT? cash be how just Thanks. And seeing outperformance what's few on the should driving flow cash on updates to next progression – curious, any the over what flow

Jason Child

Yes.

next than overall, more doing talk the been we But quarter. we'll better cash flow expectation. yes, our projection about So multiyear have

– obviously, pre-pandemic environment. think I was different a

there really then business collections some There And this there assume throughout has we think aspects. I been would travel maybe other as the some say collecting and and might of and only hoped, we'd three-year year, has annually hasn't upside a been period. move kind the I upfront reduced inflow some that exactly collecting risk. been. over increased the be certainly aspect to from of is

lapping cash then of by the with least by positive we're, and so to of middle the invoicing this getting back right kind on at expectations flow XXXX. track change next fully our of And at point, year

Christopher Merwin

Got it.

Okay. Thanks very much.

Jason Child

Thanks, Chris.

Operator

any remarks. session program. I'd does the like conclude Doug Merritt for hand This you. question-and-answer to program today's Thank further to back the of

Douglas Merritt

you. Thank

our We more history. quarter. much with this difficult enterprise fastest-growing I deeply to achieve reiterate haven't in that for in the my I'll not us to This made we're while pre-pandemic in the in started, we're software companies I are But that prospects. way wavered satisfied I we that our overall remain it to have. of one going outlook, the optimism is want any original as about So not also environment quarter express anticipate that we

continues peers grew you to outpace We mark. billion look $X at non-burdened where the faster than business, companies smaller, separately, when if their continue cloud to singularly they And that larger grow at in focused, our were our execution.

than to shift expected. happening cloud we is faster Our

capabilities delivers the most Data-to-Everything powerful Our in the Platform market.

out invest We that buyers. to push continue our and in for solutions we observability the heavily security, IT,

be continue the We to and partner continue their to digital for our those. strategic company with ability transformation. forward about more we're more, And to our and growing we internally. fulfill the excited the opportunities, lean customers TAM, to And the accelerate

into execution of robust pipeline to So optimistic and and call positive effective out more and quarter. forward we look that to forward going look a more QX our coming across a QX

Operator

your Thank you, ladies today's This does and in gentlemen participation the for program. conference. conclude

may Good day. disconnect. You now

Splunk (SPLK) 2 Dec 202021 Q3 Earnings call transcript