SPLK - Earnings call transcript Q3 2022

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Operator

Good day and thank you for standing by, and welcome to the Splunk Inc.

Third Quarter 2022 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. Please be advised this call is being recorded. now today, hand of Ken and Treasurer. would to conference Investor I Corporate host your Tinsley, Instructions] like the to over Relations [Operator Vice President Please ahead. go

Ken Tinsley

and Jason Child, made Bice on operator, Thank today, With market Carlson. Shawn afternoon, reviewed this press we are today, those If to our Smith, These today information. issued and in me a not update statements. you, current Graham the good press After call call as closed Teresa results the expectations or release. cloud statements, fiscal everyone. our release, and call, fourth today's Those be known Investor forecast trends as statements be currently being available judgment as based supplemental our with materials. actual products, following call this is documents and to results which events quarter expectations from making broadcast any well which information today's via These and being gross with we other markets. the environment we our or flow; is This as assumptions differ us, on along statements may future based be will our and the on risks posted on contain customers, our contained factors disclaim our website. and 'XX will On Relations of will our including materially. are we operating with call website, our in to on Form forward-looking the and forward-looking revise financial live actual or our that we for webcast, as cash filed during margin of the X-K RPO guidance and expectations well such of and revenue demands to and obligation these bookings, our differ and file may documents technology, 'XX renewals, operating and year factors refer Please as SEC, mix, and including as contain full duration, strategies in cause our accurate markets strategy, our best business, growth, to growth, forward-looking cloud conference may presented regarding are statements. macroeconomic reflect after is today,

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

Graham Smith

Thank you, Ken, and good afternoon, everyone.

results to business Before first like myself. about and I momentum, QX I'd our introduce talk

ago, Interim all CEO, down Doug while you learned Splunk's a next has As of power serve few weeks Merritt decade CEO the appointed Board extraordinary on and innovators the products, landscape. search Board, leaders spent of a across a an SaaS the me is to role identify Splunk conduct but the stepped retired on I as leader. they always our I've and the company. on to category Boards Having platform. a it's a still when index differentiated and customer-focused its be became component true I critical What passionate, unique Board scalable is our to leading of employees. honor unmatched member, Splunk's have and has and a our Chair technology I've XXXX, served of of in Directors since from our as taking role Board served CFO Salesforce continue XXXX. at the Since the I member a in XXXX, President appreciated

is. our by data Splunk's tech and the customers billion in Splunk work million break power ability leader to annual years, become platform the index which Doug's immense investigate, solutions a created navigated I extensible Doug and leadership, enabled to business contributions future Splunk. that of foundation tens propelling which to product Over giving go-to-market offer where a scale. Splunk amazing powers to the incredible from correlate model on every and over then innumerable down muscle on at critical can has observability, action environment data security revenue, challenges the upon that for organization recurring full to an it Under the now of want took organizations that a What's take to opportunities and to his silos his have more, thank and the data. data its the grown of nearly revenue global built has adapted Splunk towards in early X.X have the $X last harness become on for years, global $XXX transformations, we've remote thousands in pandemic. Doug us built company purpose-built years and and at

Turning to our quarterly results.

high was execution This was was our value deliver world. reaching and growth. billion our cloud we to cloud QX billion with as cloud year-over-year. QX the growing around strong straight first ARR to percent Splunk's quarter continued of XX% $X.X XX-plus ARR $X quarter customers Our XXth

faster than to we customers, dollar-based action group data customers and to gaining XX,XXX Total Ingest platform resilience, wherever it user manage their cloud ways new retention jumped external for companies action on growing world. hybrid as revealed numerous to security innovation the We October, can ago just .conf helping rate to how is Splunk Splunk to new filter data of Splunk in grew year one to multibillion-dollar are our enabling conference. and to the customers storage. rarefied our unlock our ever. Actions We In and of XX%. take we end-to-end showed motion ARR Ingest customers originates. foundation partners our And the innovations than we building the visibility prospects high-value redact, highest by mix net showcased welcomed from economically. organizations data. data more more of to on their Actions And announced route take data data capability, SX help improving bookings We or our keeping Splunk XX% the cloud Our XX%, XXX%. our period, increased

in data highlighted capability We as even search cloud our or Splunk hybrid a of to enhancements the providing differentiate type unified on-prem. This search, federated also continues transformation. whether accelerate to cloud experience we is the

to essential digital to continues transformation. be As we know, all security

also we at So to respond risk-based and visual investigate like playbook management intelligence alerting, threat to detect, increased and SOAR faster threats help automation. highlighted capabilities customers editor .conf, through our

wins was One important security U.S. with of in Navy. the most QX our

Our significantly monitoring and partner, continuous and cybersecurity, Leidos, observability systems, and and which the U.S. innovation mission-critical includes secure Navy use mission expanded to across performance, their further real-time complex, Splunk systems, Splunk's productivity cloud-native NetOps Splunk monitoring. offering improve architectures. their for hybrid of adding of

a innovation. are reliability empowering auto their pricing for new the expanded systems phase and and count running IT we customers, proud to engineers during commercial of America, professionals that QX. developers, Mobile companies Monitoring Our User Fortune than stack insurer to that #X decided XXX gaining Content already power XX during more full to Real newly AlwaysOn Progressive, to offerings and entire as in with visibility the Splunk Splunk's capabilities, site with of announced one the which are the for has Progressive, Packs, App is are quarter, including next transition just digital of Profiling our workload Observability Cloud Splunk keep Suite. the few

all the world. true security offerings differentiated hybrid platform, our very powerful. thrive to customers solutions unpredictable in data come the they data need of today's power together when observability these and providing Our individually on But foundation is Splunk are

entire a act connected variety users observability Splunk platform to decide Splunk QX, through keep chose to They data-driven team across phone the and a selected services. and during search, of the visualize Virginia platform. example, infrastructure. enable University data their analyze millions For security Cloud single for Canadian to and security IT the their of to QX, security selected in on help understand, TV of a and ability Also and instance telco upon from observe, wireless Splunk

our Splunk Cloud. Beyond to we unveiled providing We product platform when their cloud help pricing want the our availability migrations to Cloud use more into more freedom accelerate value the of it Splunk customers workload .conf even organization. choice bring to of to a and the data to put number customers, expanded all to advancements the customers their news, of at to Splunk

also Government Modernization new mandates. further launched agencies to program, U.S. meet Logging We which government our new cybersecurity equips

XX an to of next as launch Program took partnership the of Finally, joined Splunk Splunk companies our we Accenture the group and the and with Partner announced our level reimagined software other Accenture-Splunk elite Group. Business

well will work As focus CEO as we and quarter. execute be in our look most team, will and maintaining renewals we new our momentum a confident important I'm alongside into Interim to throughout QX on management grateful who my forward, immediate 'XX. ensure I'm business world-class fiscal

for year, building position As to excited we success. best foundation prepare I'm strong long-term on to our next Splunk for continue

Cloud Splunk didn't step our today as more data move the turn welcoming even hesitate questions. of strong based We've doing. huge and We our Jason? thank at and in who Interim have you Cloud. latest innovations. and the higher-value all flexible Splunk more use our an customers technology, help scale product answering resources make on take employees customers CEO in able ahead belief and opportunity for customers your tasks, into opportunity extraordinary to seen enable pricing my to to to from to the I look Splunk to reallocate that me forward I to to are rapidly benefit advantage

Jason Child

billion, Onto stronger with here. customers Thanks, $X up to position than cloud with his my in fuel these ended we leadership over time, been up XX% billion, up and just my XX%. year-over-year. had continued of over total $X.XX XXX Doug $X.X of million, with We've customers again, and We growth. partnership year. XX%. over ARR appreciation Cloud for was execution quarter the last million, ARR ARR quarter. Graham. for $X our very Once time ARR first the adding thanks ending ended and a in the our greater XXX to And billion XX% never $X surpassed at up strong,

XX-point cloud sharp customer highest new drove new double quarter a more on in up from XX%. million for year; rate of sequential we've million, adoption focus reported. accounting cloud XX% continued software than ARR total with a this almost and the net grew Our ever mix and cloud bookings net QX last bookings, in increase $XXX resulted ARR, $XXX This of total increase

we field drive out has transformation adoption to related we've duration the term will cloud contract term strategy. found by Splunk well downward, to customers' Cloud the our near plans, customers overall durations, duration to in change specifically between By our before, months. bookings intended average and called As which XX the our sooner trending view to contract engage been expansion XX shorter of as on that contract or shortening we’ve see compensation as skewed in

momentum. up million, XX% indicator $XXX bookings factors over RPO becoming And these was year. in normalize, QX, of bookings better is bookings last continuing With a total RPO to

somewhat we margin adoption and Total customer last leverage down Total negative cloud. On realized million, up due significantly slightly from in our virtual. a $XXX over $XXX was for quarter. contract revenue as revenue muted the was our cloud the margin some in points fully expense proportion X year converting basis XX% better were was outperformance P&L. margin from scale shorter-term accounted in to of Operating was XX%, to the gross On durations. platform. due last to QX of Cloud up non-GAAP. which contribution platform. X% million of year-over-year all from services line elasticity greater year, margins, the than education gross of top QX, on planned and and savings acceleration of bookings QX, in from cloud plus XX% are XX% .conf and from up QX, reflecting XX% revenues revenues Professional total

$XXX the X.X million the $XXX.XX offsetting share, completing Partners under sheet, our from early shares Silver On of cash this repurchase we the quarter than repurchased average balance we Lake and billion the total price common stock of July, the Since $X.X a with issued began in potential we an to shares aggregate repurchases and our notes we million. after the per for of X.X repurchase of in program $X more the billion year an dilution of ended at million conversion investments have authorization.

approximately is in target $X.XX ARR at billion between customers see engagement in especially planning mix cloud demand than you billion higher cloud on Turning can total this, will remains mix. customer our we're previously our and and their billion to while we're excellent, we The hybrid cloud continue, momentum the as to $X.XXX our for strong, higher to guidance. expecting deployments, in target We believe now environment XX% Based existing expected. ARR billion range. $X.XXX remains $X.XXX QX, year-end, increasing and

growth higher we the anticipated On With to as will the margin $XXX of drive the projected expect total QX, be in we've revenues our quarter. revenue fourth transition mix income With cloud statement, in $XXX cloud significantly highest-ever in cloud of and million and tempered, results. XX%, between seen revenue prior mix operating in our variability continues million quarters. several just

side, expense than realizing services planned. cloud our the gradual slightly lower margin On gross been line, while the of cost pace in been we expansion leverage of have has

For to be with will our QX, the cloud roughly we of on are in margin migrate services. we expecting continue QX gross as base our version installed to newest line

our expense OpEx, overall rate expect operating minus better and For than slightly run margin X% X% of non-GAAP is we minus a in between planned, QX. and

negative year, mix revenues, XX% negative to between total pushing lower and full cloud operating driving For margins is higher the and therefore, lower XX%.

unchanged million. at for approximately Our $XXX outlook full flow operating cash year was

demand customer Looking will strong. further next as about remain expect we we start out, thinking year,

reaching it QX demand another is was phase. our ARR year-end. approximately environment will least billion, $X billion To $XXX excellent on expect strong XX remains it $X took into an with growth, business accelerating quarter transition 'XX, For grow cloud to ARR billion final accelerating from $X.X first its grow years cloud view is up only The billion $X our million to our take total In of our robust, and half. highlight to billion. us push to X fiscal and ARR months adoption we overall cloud $X at now of continued initial from closing, following our us by

and the is With well a for on that, team, open success, we're year. a for to let's our questions. As relentless up finish up strong it set focus customer

Operator

Kash [Operator from Instructions] from Goldman Rangan And first question Sachs. comes our

Kasthuri Rangan

also I'm XX% significant the CEO tremendous out are in The to on the thoughts a I wanted attributes the the curious is Board to the call get cloud your search. quarter. What for? performance is looking metric. And

I that, for to a And XX%. Jason. guiding becomes You're question guess,

respect What ARR the for Kudos. you cash to mean cash from is generation fiscal is that more business? as even than confident longer-term the the with come next you -- more project generation to does As your of How of out, year going cloud. much actually, going the transition, in cloud is XX% we XX% of potential result the are a which business playing expected? quicker or not of out the longer-term that

Graham Smith

to you, thank good Yes, Well, Kash. reconnect.

be it's It's think we I necessarily to thought. very back. no, But great energizing.

a is the start. CEO fast think of In the I terms search, Board off to

a We are finalizing headhunter. the spec. We've already engaged

needs So I great I operated process. obviously, clearly personally we technology someone not probably a also the multibillion-dollar setting do [APA] into a point very comfortable of business of fast. is of then a technology have and we're want And can running the view business From job a to scale, for product, someone great who vision basically really important. think, attributes, think, product, And think translating would customers has an a someone technology of is who who I value. at

want you have. the Kash's do Jason, part question? answer I for think to important skills are to second really of those CEO the

Jason Child

Yes. Yes.

overall of cash impact on know or had do primary cash divided margin of cash -- by that, I cloud still that on. We X yield on of working course, and we're of believe occur kind operating still timing, in levers. And we ARR. XX% gross So expect impact previously a the flow there's said future. on we will The that, the generation, had long-term a we target kind

large-scale we is is do You at XX% pointed one and I customer our out of margin. and first That success We do at we cloud XX%. focus of cloud go on the work that piece. then kind optimization. migrations, have where cloud gross about on-prem's the margin meeting time. course, on working mix. of over up certainly do on to second, the Today, expect -- the to -- We're nuances still our

-- second cloud the piece tuning mix. piece is The the margin gross cloud was first

limited years, The changing cash And we've past third second We're X now is the piece was invoicing had The negative operating flow of gross the then our last margin. cash expenses. past We're or that. because approach. cloud flow that. on piece really

that tied inflow a a we're hope be provide be quarter. margin, pieces. be that much in target It's be will update ARR. cloud just to we're of more very different that to those number. little X tied cloud our working to these to next more that I on But specific do outflow confident a what to It's will And still XX% work timing the predicting factors. mix. the more -- through will to So gross able

Operator

And Brent our from Jefferies. next Thill comes from question

Brent Thill

Graham, maybe quite perhaps greenfield you the impact? you where are with seeing have quickly Where a think time. the Obviously, bigger involved see And opportunities. for can just the on your you you Jason. biggest company been get some perspective biggest where for

we're to now investors just where been expect we're to numbers miss-make taken should and understand the past cloud at where are. settle really moving there's that terms we numbers? is feel now think out in from cloud quarter-to-quarter kind relates where the in cloud do now mix that, I point it that as the guide? And and frustration mix you curious about the feel the I relative over, less some is mix of where the expect if the to approach of But volatility you you around.

Graham Smith

transition that a already to cloud days, Brent. looking good reconnect. to All move right. I the cloud, X it’s think clear pretty over to Also early are but once workloads the moving But think I at is super think that time. increase company Obviously, the things focus for successful. Thanks, I -- key customers only I'm we obviously customers making

biggest obviously, if we you And look It's account there's from of with So in up have within XX% year-on-year of in many of lot XXX large more I our sort upside customers million growth, a future amazing, with world. at than $X the of the cloud. accounts. accounts expansion think quite the

lot a there. So of opportunity

clearly Asia of deals think is region. QX think there's I think in And a And in hope like we Americas or in pick time, were exciting international and there a third sort more Europe observability. over we with obviously But I I'd those Pac. could opportunity has kept I some feels really that. area as the huge both regions. It I would then accelerate pace less --

of about I we product, think observability, in launch metrics tended our to to understand, clearly we we I little late focus think to think there's it's were important a but tracing that as of years did logging as on ago we also to of a outcome we ITSI observability and but related under acquisitions umbrella. really, couple the part that have that's the really that's

So I clearly, But even think I room our us happy overall and better, the market, good. We're to it's in with rate. area. there do that a business growth there's think huge is for better

Jason Child

And assumption. cloud then on the mix

saw expectation So, in high remarks motivation. last we success quarter. know time all is previously, QX. really And remarks customer our prepared where it tops to for We XX% as XX% XX% again, our I about but mentioned probably, is probably range out, we don't primary said -- the XX%

going path The for from and XX customers. obviously XX -- to XX that So to we're not we're away. whatever works do a far is

get on volatility margins the revenue and or or I’m -- sorry should dissipate cloud continue -- smaller. to minimize cloud So operating

year, last X% X% If revenue for were you look what, year. growth minus or the at we

percent First to of of range. been high year, three this XX-ish the we've teens quarters kind in

we So it. of out coming are

plus XX% strong. year-on-year. is booking bookings also RPO at RPO saw also Current You

that's in focus big ARR. on a revenue So quarter, a the to That cause single we number does why like is the little quarter really a this said, you the up number. last metrics pressure step did are best when on more really said, normalizing. it That have

cash to than come probably that for see had then in volatility think ARR in continue and cloud steady, metrics I and next line the to less more by start And think will then flow. and be GAAP the ARR, recent the you'll to be 'XX, year, revenue quarters. I -- start have they've

Operator

from Michael from KeyBanc. Turits And our next comes question

open. Your line now is

Michael Turits

especially you cloud wanted ask transition, I CFO's a the just from to So about bit more Jason perspective. the

help You're is and and multi-tenant a gross should really margins. to with new platform those cloud moving platform, also that is

on year-to-date gross in So what's expansion why And moving been we progress margins? to newer slowdown that are seeing platform? that of cloud over that the

Jason Child

Michael, all is expert The thanks expert we really kind the for and migration the around have, of that. that is infrastructure the on the things Jason. Shawn cloud challenges is and the guy of on opportunities some question. that This

take love I'd have Shawn over. actually So to

Shawn Bice

Sure.

is it's and meet this to nice So Bice, Shawn everybody.

going at SQL haven't before, data led to For XX early of running in spoken with I days. for a Microsoft my was of most those the years building data as many I've software last cloud spent X spent about who box much of -- company from then from career services. a pretty well data. as those Amazon in Plenty Azure company. And scars Server for I years, the I

So able the in cloud of data that build were to in services some context, the today. largest we

like things that's Aurora, Amazon DynamoDB So RDS. or Amazon

Splunk when of lot a with pretty backdrop, small that started, customers with workload. workload And a that. to So basically start they smaller take reason simple the with is start it's

of then, last charged it. the And chance not because type afford that something cannot the built take risk foundational capacity these interruption. data of And really, need And what say thing in Splunk some how that on operates the in Cloud the they largest with learning on-premise. really getting they're of these they workloads, don't differences ensure put cloud any And we fine-tune gone when They and need between wrong would of bringing something can't the on they And run Cloud. basically and is work massive now systems, systems exact course, familiar. And to have You that I this, bring you capacity they're it. workloads journey, when gain our today customers as when you then -- systems what that just any Splunk customers you're these close having we they the for any confidence. doing have they can't understanding on see getting that it them massive is to become customers or workloads. data, being to with let then

not videos; people you If of or of tens millions are of Netflix, order car. interrupt application, you literally can't have the you interrupt if just people a hundreds rideshare that could or track watching millions of

So we point And and run and very, build systems very intentional got around you've to those you underneath is, everything that got diligent that covers. the automate that's bit basically we'll is we're And along cloud would a incremental and say thing updated make on always way. the behind why margin. last the keep of -- then going to spend be always you the how to effectively we're I progress,

Michael Turits

Okay.

So is from moving on it expanding a question not margins are just your that more Jason, themselves or cloud perspective, that simply gross faster shift? of the you're mix

Jason Child

is XX-plus Well, a large when that I workloads, when about the the compound and focused standard at being fact margin. get then the because that cloud of would the sure customer than optimization that you say said working what then the of confident to making said just cloud margin through matter percent look to We with the double a and the the these are success basically aspect all and on That the things have able mix you we've slower migrations you larger still the significantly effect. It's is last has working industry that accelerated second. pretty gross the we're out first previously. benchmarks. kind little of quarter, Shawn moving But in

Operator

question our from next comes from Raimo And Lenschow Barclays.

Raimo Lenschow

with quick that's level as Is kind of -- a the duration? -- X look level? down. that, have about that it I'm comfortable feel The you out are the more there still Jason. services levels bit Because cloud one will back kind financial related as you a that obviously coming if bookings. for new kind cloud you're a industries, Is Can all where there adventure. the new we And whatever, company, there think on-premise. Graham, at talk of about you little like becoming or questions, a right level because on of thinking more your then here

actually in to I the But and level where should You theory, at QX, soon. of a stable? actually you numbers that. we be get are and And that stabilization close about getting seem guide come so the we if numbers the XX now, to closer more hence, be to for coming should guidance like hinting think

to speak Just please. that,

Jason Child

Thanks, on guess Raimo. the duration first impact. I

We said team bounce because up I incent primary to per we term. to quarter it around the bit that we to make down the try -- term. to last or sales think to not want seen cloud actually we've wanted vast reason customers is our going a their think helpful to hybrid And we actually drive durations full migration that to it's know our we on deployment. of want majority either

And so we for not only compensate XX and months beyond that.

kind that's manage of kind the best it. lever of to So

on mix customers in as see number We best to our the the a so quarter for focused do And of result, we're customers. guess, some, really what works is. I variableness what on the duration just based

focus quarters know you've as different, as then that to high a of going pretty on the if is forward. for a XX-ish good past couple range you seen range XX-ish range the let as We'll as think, think I we term. anything the for low good near and that's, I but see pretty

mix the know of kind that's And to by -- ends little you the you translate mix. mix that's being ARR following, of the And the terms mix similar ARR, revenue indicator. seen before a it after that reason done see a flow so into bookings even TCV because lead that the the that's on is bookings you've of that provide a mix stabilization, is yes, up a the this we lot whatever Raimo. basis, bookings year In kind takes And you've cloud I of about roughly then a When way. that.

the been even stabilize see numbers you're more year. think to I going stabilizing So this They'll to they've year. next start --

percent already seen. I positive and RPO lot of I range. to positive, XX%, in bit bookings the to seen you've that when revenue XX-ish with really they'll current said, percent back line you've quite be That a think growth, done stabilization a RPO in hopefully XX% with actually kind also teens of is the of transformations think high XX-ish

to so. I I the think or the it So normalize -- continue seeing next we're you'll year over think but it, see

Operator

comes And our RBC Matt Markets. Hedberg Capital question from next from

Matthew Hedberg

I customer about pricing out customer adoption? in you new business, new you're guess strong cloud are customer of Obviously, but seeing for guys workload either cloud the talk of you. seeing side? talked for You -- additions Could acceleration? new the about seeing results comp. your acceleration cloud you on Are you all

Teresa Carlson

I'm This going Carlson. take is to that. Teresa

of President at me, months, I've not the X For here and been almost who for you I'm those have Chief and Officer. met Splunk Growth

Services, years I our Web business. at for our And years, I Sector our business, Satellite I XX Before our Amazon to I XX business, Aerospace coming founded Microsoft Government that, where was I ran Public where industries. ran almost Federal here, at spent prior and and

win have So the improved across to continue board. cloud greater on are at that new XXX%, cloud, term the customers rates we which XX% is been overall also mix show cloud. in up. than $X And ARR the particular, moving our year-over-year. is cloud that and XX% saw to have with obviously, And what now million, win with XXX what we've -- net at we go rates our We customers cloud

is that saw they're and someone of previous about services if a of see just financial And my -- we on-prem here I in what the them combination go like faster what that grows. trend, to how does big pipeline end a earlier actually AWS that in -- world and that's wanting So and trend. But asked of using cloud? then

is across So that is to addition the new board. wins the net in opportunity workloads that new

growth So get customers cloud overall of cloud-first. to positive and both that that it's new very net existing then customers moving new are on to want

Matthew Hedberg

maybe Actually, it. follow-up a you. Got for

the and where the to your of it capacity is sales force think be guess, in ARR next terms fiscal to As we year? 'XX, productivity to calendar start guide to relative both, about I needs turning

Teresa Carlson

start let Well, productivity. me with

Our productivity is really high.

feel about I fantastic So our productivity.

And I selling I X I something of if the in have differentiator past, think actually our you at of that are competitive Splunk know don't have aware we used but organization. motions is not kind a that that in

you a huge that help customers and working I've customers. here, focuses a net motions moving renewal that these terms team you're and faster We found in been we and our with focuses been a adoption. parallel new, have team because them in working And have of directly on have have X on since I that has with

really that. good feel I about So

industry, we're people just However, the general with in happening immune to what's the not leaving. industry in in

news good were and AWS, so hiring myself we know rapid anything didn't Shawn for we the at think but I is onboarding. fast both growing and

just here we is team within are to So employing slow as leadership And what we all our not going a decided are go-to-market, that. down. we've

U.S. an train Graham possible. the rapidly other going we then look world fast the because world, thing we're said, growth in doing the and taking around great are we're that the is recruit, regional So just to we're hire at what growth approach to not And as as seeing around

taking approach keep what on their But great now. them. of So good. focus around right fast. world, shape to the matters want we're and I to feel to really sales moving I orgs technical in just We're

Operator

question our next comes ISI. from And Materne from Kirk Evercore

Kirk Materne

just Obviously, talk you federal quarter have while quarter? we federal. the I'll just up performance big Can Maybe start, of with usually about for the her. a business this to Teresa follow

particular And Some -- maybe you're industry? Jason. a just that I have of in follow-up for then and seeing trends the Graham on

Teresa Carlson

it very So with business, expect to good our also. federal federal QX and a actually have did we well,

the that's of ready FedRAMP. announced customers really had we actually you We remember few -- a waiting were quite had think FedRAMP, our One pipeline. last quarter, go, we I that on actually that things to and helped

pilot, So which we're will into now production. seeing go them start their

and that You of Leidos. have also FedRAMP. result super a was about also that win, our I'm about heard to ability excited

of in programs. of to trend where a my the working So throughout expect to seen end with the OTAs. not I've general, new we just moving quarter year the Splunk, year, with not government, buying with federal of just CR But actually that's government even more the years they're because just get actually net in a to with also everything moving is happened lot and

I strong. want So business it see business. get stronger. get even And that think to that like FedRAMP, with our stronger Hopefully, I I'm you'll here, federal to see is because I because continue

Kirk Materne

you the are I'm call disposal, That's provide hope are that's to where little and Board would. and a if the obviously, you shareholders. from could you you today Obviously, CEO. don't thinking Obviously, between they was pretty be? lot with sure how was that, buybacks, a a just I that the your -- a I on bridge is to, at trading. very How are a perspective if the if is really frustrated wondering to things of that, are. on wondering Graham, of helpful. you And just like there's then, some there's in I a maybe bit obviously give Board things try know, stock where about, maybe what the you. where stepping are I optics I big are stock But view as member guess, think

Graham Smith

to good Kirk, Thanks, Sure. and reconnect.

of just internal that job strengths. my of, running obviously, we certainly to think business my improvements a part So make I can as play right

customer to yes, I I big at now. -- assets, afraid. certainly to that reach, things are of presence discussion disconnect disconnect. team I important here, there account think begin might beyond global large employees, there I have on whether our I'm do, the our base, in we'll just that, our to technology those can't many I I mean, on want -- there, the mean, so look our a we but I management our wouldn't enterprises, Board-level want a And other speculate sort describe the frankly, is

time So that that's to leave -- we'll for solve.

Operator

Karl And Keirstead UBS. comes our next question from from

Karl Keirstead

to We And I call. hear 'XX direct on this guide nice this your fiscal question to Jason. to Graham, wanted expecting again. weren't voice

providing for you thank that. So

somewhat the the tough of to Jason, have ARR. you that couple a extent, probably the just environment might $X.X I And to there, a search if to the macro guide little undertaking meet. out might but incoming billion of which and you ask particular, a an too wanted a embedding a positive. think that's you're be CEO and not conservatism things, in CEO also you unpack in murky it leave fact And for measure a to I bit, desire a

embedding like that ARR? you what things factors or other extent might So be to in year-end your for outlook

Jason Child

are ARR XXX%. I Karl. the net of the bookings I XX%, and think fundamentals Thanks, strong. XX%, say at clearly, very, growth would very -- RPO retention dollar-based The first,

strength, there's been clearly that our long-term still questions with think about I outlook. So

felt felt, view really was it provide an and we I And early think I like, necessary 'XX. just so for to FY

there past out quarters uncertainty. X their And hybrid is We've about to and our certainly, transformations. ARR most talked going in of the We on guidance. cloud time are our trying customers

uncertainty, a hit ensuring we high that that million wanted just number. alone. with range very so had that to provide a on QX we have we we And confidence on $XX could Clearly, we felt number

are. at early So that year, as on confidence progress important an we we I number. maybe we'll just tighten our expectations high a think And to what get through as of again, I was have QX, it thought we'll But least next little range. into tighter a indicator get

Karl Keirstead

Great.

appreciated. could it's really a -- you're on I think the line. revenue sympathetic of us, think and that's ask all with model. to And tough Jason, follow-up then, It's I if I

above as understand million and good why revenues. in up increasing pretty guys bit times, that XXX team the and the as her you Sometimes your shifts. guess mix the beat might a bookings lighter mix, on it's your third some Other pretty cleanly. a cloud guidance. job came quarter, compresses I create do actually, I Teresa as duration appreciably pressure But little can term

caused So why the despite that in upside reverse in what the quarter? pressures, revenue And would October necessarily these XQ?

Jason Child

Yes.

of -- -- a beat was pretty comping a is we're year ago. weak there's I million I but think $XX combination factors, the mostly reality the QX also mean the a

we as recall. think I all

we is so which you to it QX, I at would kind if growth, were XX%. percentage pretty think, year-on-year positive saw XX%. of is about. expected was in The feel for revenue range Last guidance the that what to the were to, hit normalize, range. good we single-digit negative. have I And But now been obviously given growth a heavily closer the we're year, And overall, cloud, fact that

so have been quarters, the rely these reconcile hoping tough to continue as But And more -- during know next I to overall growth. guys I around on been few there's comfort coming more number you to other ARR growth, you numbers. I'm think line metric. and in for you'll just it's that the now bookings much see that to top RPO current bookings little line hopefully, a ARR as provides with

Operator

question from Bank our Securities. Brad America And next Sills comes of from

Bradley Sills

logs, the integrating reception was since with run regard pipelines maybe in question And year, the the even of you what have on, been has one? delivered work on deals in you Signal of release, one Curious and under or suite this and and Plumbr earlier for and please. then Teresa, with Observability to of cloud Suite traces terms we concept interest to customer -- while metrics the a lot There a Omnition Rigor.

Teresa Carlson

throughout new going We -- bit it launched and their saw, things time the get to you field, positive. the word course, down that motions actually the better, underneath. happy. because starting we really to take since understand how get always observability learned to where good. I've little the May, to with We're May. of and And gone really talk field So are. getting of and really kind as you motion we launched it's they big well The do really but But in We this Customers workloads takes we're are customer. of is multiple we're of mission actually. to pretty really years happy into a more wins significant there's launching want over things observability are the for

of with when happy. we good then Tell the The we're So sharing so motion. "Okay. and they more. diving the And has a say, Can me start pilot?" and in solutions, we team customers types workloads run

customer closely build accounts in and into because then early we launching, the of we and that field. targeted new feedback good that and take taking we it make can that we're we're he sellers Shawn's with in feature working, year. next working, as so the days specialists course, from customers And the have functionality to of really team have feedback, technical we get team we're sure want into his have We in field

Observability feel really it. to in to And you're see continue about positive -- to we So I we're good growth our going going Suite. think really

Bradley Sills

for duration the if contract may, hear. And on more, great That's one just Jason. I Teresa. to Thanks,

are shorter an of signing cloud? go with a going does term In they you the other the duration that to relationship that planning you're cloud? one-to-one that with deal? tandem the deals in With shorter-duration a here, anticipation that kind kind when to of seeing move words, Is to customer shorter-duration of have

Jason Child

what what I'm why not we it's exactly intention is. they're compensation XX high. sure Largely, know But but yes, mechanism customer more months. that's the away that's the definitely than rSquared for We correlated. is, took

place expect obviously, have, well a We and migrations to cloud in those as cloud as hybrid lot of continue.

So I highly they're correlated. think

Operator

Bachman And Keith BMO. from our next question comes from

Keith Bachman

I'd to ask one Graham, back and questions, like X come Jason. I'll for then to

transition has And starting over a to pretty settling used tough. year one a the ask of and previous question, change. "stock metrics make certainly on embedded And speak. But hill, kind it last coming are like is in phrase to leadership so those, the to out you be where to seems lot of it of seems been Splunk and the to valuation. that like the disconnect," a Graham, around is the First I'd

that this disconnect signal to why the leadership is that in So it not time right is Because for a stock working. contributing something the sends really change?

that? speak to just could you if So

Graham Smith

the better spot some -- with where and all managers people level I Doug skills. operation I zone Keith. more years, think Sure. Board a if hat would and think to -- question, of over at is sweet open the frank and shareholders discussions where and ultimately the think we've as my sort Doug's and I a be friendly of tenure Board on, long the And very his point great some represent there's have about at and honest And is of had It's value. long-term how a build job what And put CEO. shareholder relevant I most

became, it year $X.X revenue, $X got billion this we so just as Splunk, you fairly I we'll year, look the next finish milestones in that somewhere as around to ARR. obviously, think this think, of I the at billion clear And end over for

the You point. really next at a clearly, that following we're large guidance, look company year, to be year's at getting

companies in aspirations top all the clearly be of to have XX software We time.

time a some when you to discussion, was have it that the And got so that point change. conclusion at for we --

a leaving in So to role bring search kind And then change. ultimately, of a company. it's predecessors the think CEO that I a about uncertain in question the of I what's for think, tough long is Doug while the to put potentially period way best the for place --

this long that Board Board the the And on was transition, us fourth my with for experience our judgment, helping I and the stand the -- as me here still concluded quarter. transition certainly is route the so tenure this I plan. forward. was to a as led good there's I absolutely I'm believe to was here be. my s helping need and the and we by right think mean to Doug And team it. management ease with with

-- I The a got meet So at I great had now no strength. recognition, of have transition that And We've think outlook. think, better, to strength. strong together. we Always there's simply sort of I strong a of mystery of think, that relative of of the quarters time business, the a a know those And Board time was time It QX going sort are is But I to is growth, fundamentals growth, of really are can our kind the and we behind this. company the each explaining well. cloud us, fair you we the a think business I confusing, numbers spend views which, tell strong. I amount ARR feel quarter. those really

So...

Keith Bachman

come we Jason, I'd expenses be about just like enough. should and Okay. to Fair you it. how on thinking to operating

many could can directional that grow was expenses quarters in that for thanks. flow. OpEx up next X year-over-year. any your -- it be that mid-XX% barometers year, give be That’s directional there you to give us control? is -- Will those it are And we first to any because a range? contributor that will within was be OpEx OpEx you about going cash continue as the helpful. is But Or key me think on and the XX% to barometers mentioned you about would So

Jason Child

process, why still through annual now. we're update We're an going provide mean, OCF our -- I that's honestly, didn't I and planning

as especially cloud the We the is margin; of point growth out of kind well biggest will all which cloud and definitely a gross mix we having that important really the as as is an in and well get you -- levers, support something migrations the business that's and next levers of well piece in cloud X on-prem as as quarter. OpEx OpEx because the both as really go-to-market between. have to mix, the I large very did business function

update We'll to an those those on next provide quarter. so And assumptions get work those we'll for details. through --

Operator

Stanley. Keith And Weiss from our last question comes Morgan from

Keith Weiss

of here. Graham, got admit, I are I'm kind to confusing. you said -- confused the pretty numbers

$X.XX guys billion $X.X You cloud guided QX. for ARR billion to

in came below that. You

is that right, the guidance than You your the guidance -- you're range. didn't came sound was of midpoint your to at but like in of Like ARR, expected in is like of is that the cloud cloud me just doesn't why right billion, in revenue middle quarter. cloud mix range? and the at it strong $X.XXX like higher you the range. lower an mix Like when overly if beat middle or your in higher like Like

Jason Child

Okay.

QX we year quarter net So new behind $XXX We yes, a ever. second biggest million, on had deliver fairly cloud cloud. ARR of a ago did of tight range

And $X below. yes, so it's million

it something I'd the $X a the impact. but We I what, certainly ahead, what, So had range, our of overall ARR. percent certainly And in, a X.X% to million new, range. lot in just overall end sight difference. top couple so very of or of million above ARR And and and came the net a We $X cloud parts. that's, below of line call on moving -- think small there's it's

I really what a that we're had second cloud. most in we that's a the significant to And next mean, quarter, of of quarter overall, So ARR, fact pretty new think, increase I couple guiding percent in below kind net there. we're of. best proud strong

realize and provide, new the itself. if you net them. fundamental to lot at a for But ARR I overall moving overall, pieces of So slides look reconcile the the speaks there's it's strength, we hard that growth

So I but... don't know to what else say

Keith Weiss

poor extremely cloud. XQ just made a had quarter very year that but guys because pressuring like to want you But compare cloud I in didn't growth, the earlier an the ago. easy a targeting -- this your your Right. revenue you understand I And is you mean like exceed point you against is

on target exceeded You your ARR. non-cloud

understand to like seems don't down would you're on terms ARR. QX revenue a how you had QX aligns to in and just on where revenues that come it growth. of like non-cloud buttress after There's kind why revenues So to beat I of guiding --

Jason Child

has because impact and going quarter, Well, that mix revenues. on in is cloud biggest to the the up XX%

Keith Weiss

You of is didn't exceed target? but target, your cloud ARR cloud mix ahead your

Jason Child

bit Cloud mix was basis. on quarter, next mix is Cloud a ahead is TCV is a little ahead. this the And other of now our thing cloud target it mix, quarter.

And of so the reconciliation fruit little or apples to I doing think, bit a you're is apples -- unfortunately, oranges. to

yes. So,

Keith Weiss

happening So ARR? value different like happening than what's within -- contract happening with what's is what's

Jason Child

they correlate. mean They Well, I don't correlate not but directly. directly do

Keith Weiss

And this it. guess I then Got for is one Graham.

kind to have seems ahead about succession planning times heads the like talked Board of often to way transition, Like of have transitions planning the QX kind trying all was What I going do of was CEO life QX, of in than biggest like right? talked it I in are your right it's many sort do something year? of the place? I in middle in companies and transitions rather the do time, talk think sort terms after close had and to like Just quarter you're doing it time, the it have in CEO the CEO place would or And scratching What cycle. we people impetus on of like of of QX after impetus what planning. the in plans the succession do sort that that assumed understand the more around. QX? succession the how of of unusual that middle about in timing their about to a you

Graham Smith

end then Head of done our best the think previous the Actually, to sort these that, QX. of we of is kind of at I QX the and one, Sales did Doug; of before generally free transitions: time to -- end X do go the Keith, transitions. actually, we've Well,

QX think momentum generally has its a own. I of

there's bring hopefully, who think in to So -- of they working I are fourth salespeople quarter. deals, who've been a the fruition lot

So in exist other that I probably think QX the in there's quarters. of doesn't a any momentum

looked management at yes, Splunk good So the I of from to And we and weren't want And to to that a that team, think time. we course, in time done this certainly that be to considered at but promote always you do if internal has an was ready this possible. it. do that able particular certainly past,

So just work out. it didn't

Operator

closing would I turn now to like the for remarks. call And to Smith over Graham

Graham Smith

of really the few All you absolutely blood, again with long-term few for right. many years. success just navigated company tough into a can want a success us. joining nobody I to sweat I again. and thank the from Doug, some reconnect part Great the I huge in Doug Well, underestimate of transitions over huge, is company can't and the do the tears of put to the -- years of last and amount thank you back. mean

in earlier I account I is company dollar-based net to cloud the growth, recognize an back want -- rate. There's that. X fundamentals, Splunk around that. growth, come no retention I important about ARR to ways the talked So just industry.

numbers the I this in think year. will start normalize to

and will lot back I you think kind we talk excited we excited really And I February 'XX QX think I -- of be the to and go a to year. in in normal, we're they're it here. extremely but to energized all be call. I we're think be, to prove clear think, QX, as things FY for through have this to back I will before really am

So thanks so much for joining today. us

Operator

for Thank today's concludes you. participating. conference call. This you Thank

You may now disconnect.

Splunk (SPLK) 2 Dec 212022 Q3 Earnings call transcript