SPLK - Earnings call transcript Q4 2022

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Operator

Thank you for standing by, and welcome to Splunk's Fourth Quarter Fiscal Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's call is being recorded. [Operator Instructions] I would now like to hand the call over to Ken Tinsley, Corporate Treasurer and Vice President of Investor Relations.

Ken Tinsley

good and operator, you, afternoon, everyone. Thank on Bice and me the call Shawn Smith, Graham are Jason today With Child. website, material. After market posted Relations is press release, with closed today, we on issued our our which along supplemental Investor

guidance metrics with disclaim during update or these as This this of statements, We current also release an expectations, and accurate is our These today, is those call, statements made press and and to website. markets. issued audio the our contain webcast will our cause reviewed growth, on will including guide or and and our actual replay in revenue cloud broadcast via making including the strategies are available we based conference operating to press If contain judgment SEC, and on with materially. total full may documents presented as On and forward-looking report our Those contained new growth, macroeconomic live today's the this our best we events RPO as cloud regarding being to filed in risks following us, releases. forecast the information our well regarding call as from our quarter demand to our business, first in results Please a future, other financial year known and CEO. bookings, markets not statements our any forward-looking statements. differ call, forward-looking renewals, will and which actual XXXX be the will factors fiscal file or and and may gross such be products, our be margin, assumptions today's currently duration, environment differ expectations for based cash of statements. trends the and we documents our Form we information. call may to expectations we growth, customers, to These our call operating the factors are on in gross reflect on revenue after revise future margin, results X-K as refer obligation today, mix, that and technology, flow

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

Graham Smith

in and everyone. Ken, and recent by like to events we resolved hope I'd that situation quickly. the saddened we begin Thank Ukraine, good are you, afternoon, and be shocked by saying can

While any members have in we have family who do and affected. Ukraine, don't are friends we based Splunkers

Child. will market are just got Russian a Splunk QX cover, lot Products and Europe. Bice Jason by monitoring the our confirm, employee status results, a normalization strategy. to safety joined in and and On prioritize guidance call, new and the to situation We customers I And be set President XXXX. CEO, and, in Eastern of our financials business of carefully, to of the from Shawn will of Technology, withdrew today's transformation, continue course, we Splunk I've

recurring detail, team flow I'm were ARR, but operating execute results. will When with cloud November, margin put and really our that in cloud DBNRR, Jason QX, the was I'm Board more all revenue, back revenue, Annual its happy Let's get a Splunk delighted delivered. report our team trust CEO to started. the the outstanding announced in cash strong. and operating to get transition very into strong

of of Steele, Proofpoint, In has experience XX. and effective Visionary XX next record a appointment Founding SaaS over April enterprises. successfully addition to operations to Gary global the great of executive a CEO and track growing Splunk CEO scaling multibillion-dollar QX, equally announce excited the years Gary as I'm of and Technology a of

provider led of success driving will past billion to of he's two an and excited of the I have we're to Proofpoint's Gary's him recurring and early-stage security-as-a-service commitment with Splunk leading team. know on say operational Board, a speak beyond. the and the startup be and I deep to path cybersecurity looking focus unwavering for decades, revenue the from forward some to on invaluable models, innovation are we software working our customer how world's I much whole to understanding and to when growth $X expertise, Over best-known Gary, how organizations.

Teresa In Splunk addition at career be Officer, made President this Chief Teresa our to many important this thank opportunities. time Splunk. improvements personally wish I'd her to and her Growth update, contributions very that quarter has other go-to-market leaving announcing later the will also Carlson, we're her best Teresa leadership during and pursue like future. for to strategy for the operations to and both

during further from Cloud Box, cloud expanded their services, of and Cloud transactions purchased group. its Splunk Fred adding Moving quarter, Hispanic the We and Splunk while expansion customer content including of some also in to platform, new to commitment to data application Insurance, performance a the our and provider our one the new exciting largest pricing safeguard who customers' a workload renewal with Loya observability U.S. owned Splunk Splunk success. customer companies fourth and monitoring operated had initiatives. automate product security

their boosting Enterprise, use expanded One ITSI efficiency across travelers from decrease minutes, to optimal to and with by expanded up provide speed finally, ensure accessing platforms reduce hotels, of costly largest impact Health using Splunk timely richer and of auto and National Splunk releases Splunk and travel for the U.K. experiences customer Enterprise and drive monitoring one allowing platform discover insights experience in Security product new the investigation detection And from The more. than for Japan's expand is environment to book to now into as end-user of use the Cloud are downtime, pricing, of Enterprise NHS flights their cloud times isolation migrating workload XX%. synthetic their Splunk more its to manufacturers Splunk hours problem application and apps. citizens leading online development, Digital U.K. them platform, Enterprise the Service and

to cloud transformation. Turning our business

are our and progress total in very XX% pleased with XX% XXXX and with Cloud XXXX. in represented execution FY bookings our XXXX. software of in FY We XX% fiscal compared

during And the than of thousands ARR at end year. We of pricing. launch. renewing continue job total this business our done great to on customers based of expanding cloud cloud traction a all has make on progress quarter, of XX% more its pricing also QX, workload was improving model margin, model. gained since nearly based and We've new and cloud was workload our the on the gross significant In Splunk

Moving on to financials.

As from revenue factors that contract you The and significantly growth. of of know, bookings affect there both duration, our which term percentage driven average cloud bookings by are choice. are two customer and

that XX% and to we bookings For full XXXX it's going percentage useful will point-in-time a ARR reconcile our some be term approach be difficult believe more anticipate forward. changes normalization financials. for changes making you XX metric will in while the year-over-year a significant details measure for year, during guidance to the year-over-year how months. has the that's many stabilized also less our cloud We're of of provide we with contract result We've to would average provide of been business later. heard FY XXXX, we for transformation, revenue. operational the has range Because XX from will FY duration FY XXXX, the Jason a our changes than

guidance quarter only growth, for that annual decided to each close growth for this report is will numbers we retrospectively. ARR normalizing our to we've the Now revenue provide and metric, although is ARR

will dispense a our We annual metric. with ARR fiscal ARR as be also of reported our appropriate. end by to guidance if It's that and the will able expectation we XXXX, update when

our sustained to the more periphery. than core. of to is why our operations show thank that course, I'd I their customers' personally want strong us. our And, this in for Before I fundamental. on that's over we close our observation. trust into months. see X.X our choose customers It's center When been that Splunk, center Splunk, That's or using you quarter honor to network important most Shawn, the walk It's work. great year. renewal XX to hand executing is XXX the and such not Fortune of also over with call security day-to-day and like focus my why It's the It's to in the rates. past any of Splunkers you so well thank platform to continue to out all operations you I and work central partners with want placing

Shawn. turn I'll call the over Now to

Shawn Bice

and significance about three beyond. in and to join some a Graham. It's I'm things our innovation. share you, to Thank operations, pleasure Splunk's today's here believe call, XXXX FY we thoughts grow Splunk will is our mission-critical and customer’s and to opportunity

they want on. customers can First, platform a build

starts observability siloed and business or across security the record data make set cloud, of in edge disjointed things environment. third, merely in don't that multi-cloud and data full now. building platform Only Splunk from supports flexible platform, use observability end-to-end security an on extensible We're that it want experiences. consistent that And their happen and the edge. happened with want of customers expansive integrated offers to combination differentiation, any past. They the a an stack to on-prem scalable be want cases. and what They of data our customers to don't Second, and want coverage

solution, built, excess Splunk leverage your than can needs. search You reporting, more build X,XXX Base observability specific apps applications security and on and custom Splunk tuned to available and

that. have different at analytics We're we have fundamentally our scalable hope for do us that, we massively announce we'll because takes to platform a With improvements platform than you'll pure-play advanced core. so XX, that with data join Splunk security security, We vendors. Comp a at exciting able approach June in

being complementary as to problem, data. a to threats environments. from to across hybrid With security hiding leaving positioned of are open complex help is threats protect subset solutions Our data XDR security solutions capabilities, ever-evolving a organizations only fundamentally best organizations data, and Splunk XDR collect missing

customer On the with announced innovated with contextually broader and integrate visibility investigations. Logs AI-powered infrastructure can Log observability with recently across front, performance application We provide telemetry digital Observer experience data customers Splunk now Connect. rich we've end-to-end observability health, that to

of We that requires are organizations Innovation of three without is one integrated security it performance the help fast named movers monitoring. traction. security uniquely data month, and outcomes. To application clear data-driven GigaOM achieve and we for critical opportunity resilience. sum And future vision, and a are We're platform, gaining significant about accelerating of positioned were our With Radar in the it's and last observability and these us. only foundation succeed ahead a transformation extensible digital can't innovation. up, to of market all leader we two excited

more over for the I'll numbers. Jason on Now, it to turn

Jason Child

transformation are excellent importantly, QX largely the Most Shawn. financial Thanks, related behind an our us. year. now was strong a finish to significant headwinds to

customers full almost from core XXX cloud XXXX. the expect billion ARR negative up over of returned with year, $XXX minus XX% total growth financial customers bookings over ARR $X our billion, to We normalization and had of XXXX, of from For year financial cash XXX reaching beyond, year-over-year, to ended up we for with minus all accelerated XX% simplifying story. year and positive to XX%. To positive our are million these X% year. million, RPO with $XXX dramatically XX%. XX% of XX%. FY million, And XX%. growth than metrics we ARR up accelerated $X year last be flow FY $X.XX the cloud revenue ended up this clear, in of greater ARR We last these from of Operating $X.XX and measures will improve set million continue positive, the

cloud migration and to develop drive customers. adoption strategies with continue We our

from mix to gradually cloud more likely is As said, this increase Graham point.

points it Our increase fiscal year XX mix this XXXX. from the bookings fiscal percentage gain XXXX of for estimate XXXX, FY compared XX% was we year. X we XX% percentage roughly fiscal saw will that point approach to full cloud to and This

metric indicator going term is and Now normalizing an bookings that, is a be of year-over-year bookings momentum a becoming average revenue forward. RPO better important duration is on contract will overall and basis, growth more comparable

XX%, up adoption is billion on we renewal QX, up which revenue sales XX% million of than year from million, DB contract annual platform. based L. gross quarter. QX, XX% NRR, up all Our platform. outperformance. Total was elasticity ratio due estimated. P& continued $X.X significantly we XX% of a value cloud over year. quarter. Total consistently non-GAAP, on was reached Operating a In bookings QX, margin confidence the better for revenues bookings which in over cloud contribution average of last the revenue the margin of to $XXX to RPO term gross than the was five basis to planned in and last billion, year-over-year $X.X customer X% due last revenues total cloud greater XXX% down Professional were significantly are was and in XX% high higher more reflecting services margins, On longer our than and of cloud. as the XX% this up margin planned year, of cloud approximately line and realized from accounted our growth due quarter, last $XXX to from contract the top was proportion slightly and education volume On scheduled bookings year, and in in leverage points QX the

we’re us, financial Turning entering current to lifting With model FY heavy the the normalizing. with year, behind transformation most of guidance. XXXX, the on

revenue As will converge growth Graham expect and ARR rates this mentioned, year. we

we traditional metrics, operating operating cash Going revenue, on profitability guidance and forward, margin provide flow. more to and will continue

all up our strength at As year year retire of ARR XXXX. on end update indicators and of demand quarterly XX $XX billion this we although maintaining our the than $X customers by targets end on $X.X total billion fiscal outlook the the and as million, ARR greater are ARR from Graham to Based this XX year, last fiscal at of least a environment. expect point with you metric cloud with ARR strength, we we in of also will year. core continued ended the ARR maintain noted, to year, ARR full the throughout and We actual

$X.X We revenues billion XX% and of total will $X.XX seasonal XX% expect trend and half which between second half. follow billion, of our first

for gradually Improving the our version the fourth On positive X% and should cloud total expand to to leverage growth. the expansion the of gross expense side, operating XX% we we towards expect as services. as revenue by strong continue drive Non-GAAP to a margin result migrate newest to should quarter, year. cloud margins of XX% customers gross gross expand margin nearing cloud also margin breakeven and between our of expense

our our non-GAAP finish a strong, negative for set year On In QX and million billing to for cycles, XX%, total closing, questions. $XXX reflecting at the With we're our normal growth up our operating to for of year. QX the margin fiscal operating rebound between The $XXX base $XXX simpler expecting worked excellent. seasonality. cash transformation impacts remains with negative demand from flow with up cash on sharply great million was Near-term, side, now revenues the full it let's with should XX% environment flow least QX, a annual model financial with open mostly much customer of a is and in million to business are that, through, continued XXXX.

Operator

question comes Brent of Our the Jefferies. of first Instructions] [Operator from line Thill

Your line open. is

Brent Thill

and Graham for question A Shawn.

believe if provide around you said can seeing security XX% and past pipeline. As I follow in very color you've more story, what happening it the that Thank if between of us of could segment? a sense a little security just and particular Maybe relates to driver your up you're just the in element the this give revenue. Jason a of XX% is you. what's in

Graham Smith

mean just important high driver at biggest Brent, clearly of I today. level, business still Sure. our -- most the it's a the

terms in we're later. you XX%, but it's approximately think can up customer say activity? of what would Shawn, around seeing what of Jason follow I kind

Shawn Bice

risk is no we with customer around us from that's increase to right today. posture look heightened they And activity The strengthen Yes. there's their -- as question. cybersecurity to all really being demand customers anticipate now, with heightened

that is, quickly confused how detect things. customers can are resolve business-critical. customers always cybersecurity really, at and about is And think they not talking what I all are

that example, where then Enterprise, average, time Enterprise there's a And for turn take Security, incident Splunk then So stories an about would resolve share customers on without will with week. week day. would that their to into Splunk a

problems, they are become another much Analytics, capability have that and thrilled we called context and they resolve of Splunk can So, then alerting. it have they quicker. It's about. efficient. using They're rules-based And customers more

alerting, from a are And playbook day Drop day, it those Splunk issues. just really from go editors, X,XXX mission-critical we a is. automated quickly how resolve that's XX week actions to rule-based built our into able minutes, a and customers going over to visual Dragon system, with you underscores how to have and So

Brent Thill

Thank you.

Graham Smith

Thanks Brent.

Operator

Thank you.

Our next of Kash Goldman question comes from Rangan Sachs.

Your question please.

Kash Rangan

very Hey got on transition? so. in GTM thank XX many months certainly are Teresa and or congratulations about in sales the have you appreciate. you've much you space front settled Graham thinking guidance, And the of leadership very there. the team, which how nicely we Obviously, last

transition. next GTM? targets the so a new transition leader the You're that GTM since through and look Thank interim you you to toughest of involved parts before a of head in you find for -- are out laid you've When the the what milestones the have much.

Graham Smith

as here, super we're Well, but do Teresa's Kash. I Sure, exciting. prepared her I'm go, she'll something remarks, and -- we'll unfortunate sure to said in see it's grateful my for time

Going weeks an we've just will forward, approach employees My got for mean, will be managing about starts. clearly, intent of discussed and he'll think already want customers, we've a go-to-market and Gary's I'll it, X that then lot And very I he's want -- I'll I certainly to leaders. period. -- he meet much is Gary lot to of position priority, interim just meet directly I before is be know a for

Growth he'll replace point structure. would that if necessarily his I the another so be role, intent And Chief whether Officer, at have don't know to this or

he'll he'll sure premature any it he give any -- mind a into So insight -- attempted of will think an data to ingest before be lot his just would makes of decisions. want you I'm kind want I to to be. where

Kash Rangan

so much Thank Graham. you

Graham Smith

Kash. Thanks

Operator

you. Thank

of from comes Lenschow question ahead. Barclays. go next Please Raimo Our

Raimo Lenschow

-- doing? leadership kind we that to is the it conversion get an little on seeing Are and in Thank bit existing signal moving starting to new using seeing workloads some to monitoring you're a you. idea are how so for cloud congrats momentum there, see you new the infrastructure, and of from on-premise. The over thanks -- announcement. much like actually FX, expansions just talk Hey people are what net that can versus customers a APM? cloud? the So, that like into of Is

Shawn Bice

our over, come end-to-end. a start believe -- sign a on start typically cloud, expect, absolutely way they'll Yes, workloads and It what platform. Shawn. customers with -- Splunk say we're customers with then then start as customers, big build Cloud, different And using observability workload. allows and once But good smaller What customers really they their this take to that get they'll what will security it's is think familiar capabilities. see to we they'll a would I some the they're about customers quite and hand-in-hand. is off like new going they expand the expected get confidence, them comfortable And they how few if to of to tools see, There's that et the and in land, cetera. things

So, so pretty of that's our a is common thing. platform And then, course, extensible.

find for whatever custom applications basically business. every they You'll their case have in customer building virtually use

from start all up looking we off to small end grow they how portfolio. So, manage really we they're things using our then That's and start pretty more and capabilities product end-to-end. then to -- big, they

Graham Smith

remarks, a little using names travel more automotive of Certainly, in observability, is, so the NHS, give the Box the to you talked info. is manufacturers. the just prepared large is Raimo, large company customer And we

expansions in year, pleased only year. this our flavor just some look integrated May really suite you you we've very quarter. observability we giving we a remember, and if been I'm of this So, if launched of this the observability wins Overall, of at

the don't growth been have And we're obviously but of have certainly any of year. So, a the year for we next we got full our ended has with the kind aggressive fastest and of year, delighted goals groups. product where

Raimo Lenschow

one really you. clear. then, And Jason, for That's Perfect.

just at end kind to got the good finally probably of we the kind thing. that of the kind a we moving Now to which But year, on understand used logic. of is ARR, of

at end think is very Is the properly the don't we have the business. so that much which we right anymore cloud, it's the need way XXXX, So, all dynamic about to ratable, of in the it? idea understand means to that ARR

Jason Child

first is we're it been something while, going not that the the still Yes, yes. it's this just actually of is We're -- to of really guys transition. just that Raimo, -- for the that the normalization provide make getting seeing Again, time asking on we I'd way. will now to thing a of full now revenue you know rest it. say year. ARR, we're out It's is guide which to I the for about have it

to you revenue. it pretty is tough ARR reconciliation know, As do to the to

very it's fully amount fact, granular In of detail. not really without possible

other little The cloud the And mix. ARR hard to is is to is thing a reason that by forecast hard it's forecast. actually ARR is impacted

we've about hosted told to as who in of fully you a an average think, I move guys get due past, in choose to being customers it the ARR service. X.Xx cloud to lift

our overall, focusing kind of occurring So, like GAAP of now year phase transformation. would at that or we're is the normally since with is plan the what in SaaS, look of that this companies right enterprise metrics, last kind for our are time, the you on normalization

Raimo Lenschow

Perfect. Thank Congrats. you.

Graham Smith

Thanks, Raimo.

Operator

Thank you.

Zelnick comes Brad Deutsche of from next go question Our Bank. ahead. Please

Brad Zelnick

we're hear plus Congrats so really the I being the about now good much. congrats that CEO you've out you question we to cash that it's able to into trajectory other side the flow transition? XXXX. the cash How of $XXX from for coming should flow million guys fiscal all and My for operating mentioned seat. of really think progress here Thank you, mean, Jason, on on attract Gary the Excellent. the hire. great

Jason Child

really, our was conform standard. And upfront XXXX. normalized And to -- XXXX. move collections year then, the of followed sorry, now. industry of in I to as million actually, flow from kind think, started cash for with course, years annual we seeing then, we FY you've, few as change upfront of the $XXX really to -- a -- of kind I'm story last so, you about Well, We or

to this And with -- $XXX and XXXX was so FY XXXX the million. and million. now really, XXXX, And in stock what year first partial year XXXX, $XXX is you're that in FY going a go new sorry, to of is, then next it I'm see [ph] year was normalization negative full

year, year the up first million, at it full go to normalization there. should of Next $XXX expect you from see

In terms that's of the magnitude of what is, timing more question. of kind a

to as is you I to to targets think I've get transformation. in past, we've before percentage we yield the to where the a that of time We'll the wait a XX% getting expect give told been back frame. transformation you of can revenue I and ARR kind or the need provide after before exact multi-year until

Brad Zelnick

That's do on We've you of disclosure calculation come their follow years. the I at really own numbers we it. seen to we business us, lead to question. we as indicators point? helpful, really you the look Raimo's going what one But given great is What Maybe leading with Jason. follow-up quick this the at on? -- should over Because don't up appreciate is all get. guys really if the focus for everybody should

Jason Child

growth, was which RPO bookings before which billings -- similar is I for revenue RPO basically to bookings, I think, and very Well, what is XXX.

of fully margin of is that And those normalize. I going kind still best margin. another measure would normalization cash then growth think to best measures. flow ultimately, back efficiency are That's operating is in the say in two business year I So line. operating for to starting to full or the until see you come two the take

Brad Zelnick

Thanks Awesome. guys. again

Jason Child

Thanks, Brad.

Graham Smith

Thank you.

Operator

you. Thank

Phil Our Winslow next Suisse. question from of Credit comes

Your line open. is

Phil Winslow

congrats And I wanted organic from for one just particularly of and points of to why and year. there hear then hear is I this you've Hey, focus observability. And winning quarter observability you then the side, in lot product When to close R&D customers, Shawn. terms a about is a you what your thanks cash forward guys for with sort for inorganic that the my But perspective, for Obviously, flow is from follow-up kind coming focus back? suite? just the guidance the acquisition. what strong feedback these investment question guess and taking just the also are on on the of Splunk of this in of had going a question Jason.

Shawn Bice

Yes. new say when cloud architecture. Typically, a they're in the a cloud. microservice cloud it's when And build customer They're usually a observability, application, usually looking is application. at building I

a stitching So an together there's no old would they're of And all being components monolith really, going app, whole make an to of bunch app. instead be as understand of single a and that, that's up able to that human built-in or architecture, need observability And app And they observability, in why cloud who's our tools. huge they observability, that's to the to particularly straight they run has component-based use a distributed distributed tracing. anyone then trying go that's microservice tracing.

all system, an every all into the the single draws the And then between relationship the ones basically see operator environment same. this create answer to people time. need when customers ease. roadmaps. with about what our it. road my event understand do. the We fidelity they partner components. can that in customers to us what means the the can which we measurement, be ahead, that think They're with have And literally will always manage full We It's That's

And so our any at time a it's together, backwards from look we working always roadmap customers.

Phil Winslow

the sort then, of Jason, for productivity just And capacity. at and you, it. a looking sales question Got

go-to-market in about I potential think In productivity of we XXXX, on just there. and should And think update time, Thanks. increased as wonder about sort just us terms capacity the of ramp if fiscal how just you you give can there? just investment

Jason Child

significant for is higher next is to And on because renewal expect see the we've productivity, guess, year, gains terms why Thanks, base last that sales we other in the seen in motions. renewal so growing Phil. significantly. much as I And efficiency pretty productivity and well. of is year a reason

from base to $XXX $XXX the $X.X It's going million, went so million year. renewal last And around be this year. billion

for one pretty I ever than really than one. next higher -- And provides, then had, our confidence significant does forecast for that in provide we've two, So think, year gains. efficiency it

that does question? answer your So

Phil Winslow

helpful. That's you. Thank

Graham Smith

Thanks, Phil.

Jason Child

Phil. Thanks,

Operator

Thank you.

question comes Bachman Keith Our next BMO. of from

Your question please.

Keith Bachman

about I to was was to sets the And half is thanks. -- about why is your had you be. run I two. Many was, Graham, about to to last that when really has skill what I Gary And it Splunk to answer about of in scaling time going going for size of and Splunk it. the or try Proofpoint the you my transition. appropriate was perhaps Doug put quarter, Hi. asked business. think guided what announced summary

scale like perhaps, give it on juncture. for the the I So Gary could Proofpoint you then just color if person seem a I'm just a wondering, but this please. to have Splunk follow-up lead you determinant is think And Jason, why at was right doesn't little

Graham Smith

-- think I highly it's No, question. a relevant I mean, great obviously and a Sure. question the

three with I about point values, et view, knows third to business talked then at then that. global think certainly companies what the culture, is I someone call experience were of talked thing ability the skills good time complex scale, culture. things the operational of technology about And into cetera, translate was how who strong performance from last to about and with along on I in value. I companies, the relatively fit drive sort building talked

And think as both in over both of San an sort great basically, a is are. -- to and that's important back think which tough the from a He internal builder. had external But take end company great amazing where certainly Proofpoint. priorities had it, and certainly candidates. decide the operational has candidates. at he's scale companies, in large-scale we we come Gary, to markets, And always I your it's think, $X a basically and in. -- operate in HP. resilience, I We at what to billion to really we worked zero He's shown I internal

So Splunk. understands for enterprises experience, But he ultimately things leader get the enterprise experience, think, cybersecurity the all provide of we blend experience, work. software domain just together, multibillion-dollar SaaS to right how we that enormous then

my Shawn, operator. view Gary. him. of Shawn Jason And Shawn you I So comments any strong -- add certainly him as talked and have know to to maybe if wanted assessment to a I

Shawn Bice

hired found I investment Gary. He But I'm of I Boards struck course he Gary, why careful was to by reason And going felt outstanding record leader, be and going up like who communities. judgment. working terms because and Doug. of of of met but to long that's Doug, I Yes. operator I'm me And I managing sleeves. rolling an had listener. the reason for definitely He then good a as somebody has seemed a like is here. an here the When seems is I with the thought and He I in very was reality, here track he, today working be I'm first customer-centric. the

Keith Bachman

thank Well, Okay. and am committed. you’ve you answer I for that glad

Graham Smith

ahead ask say was you go them. question. your Jason both Then going No, to of And just and can something. want Jason cover

Keith Bachman

of to want I enough. how the year. to manifest Okay. Fair try Jason, just in understand $X.X up renewals to revenues. transition that for this did billion are that wanted I

is cloud? and that written opportunity we years that And will to three how that is it so, how should ago? about thinking to of investors itself a, just in your that manifest And metrics the the be mind, terms perp -- that see? in is term And mostly going will was mostly that

Jason Child

Okay.

I thing The I add strong look, most would culture. Graham me thought, on only guess, to -- I What I on definitely the first, on values Gary on would is pile add Gary. So I operator, mean, alignment and -- they and or of strong answer Shawn's very let covered aspects.

has also one a through Board. of all really and you gone full that I kind it's transformation, is he that contacts a think -- helpful the was and as a thing unique know,

we're having that last still, think, well. helpful And as I phase, is the experience, so in while

Okay.

about renewals. your on second, the question So,

this made going billion I is last who while mix the be If may XX%, look those little renewals, and customers at were we cloud in we -- cloud of of mix to those kind predict conversion, really is. to at to renewal. perp way those to term for look customers the who a customers, for already year, are coming term higher back half. the best our their the $X.X the now And first -- So I would current are up what what

year, think expect XX% look it mid-XX%s, said the of -- be XX%. approaching at you we kind we If to I next

that of that is You base percentage cloud. renewal in with should assume moving going to line right be that, likely to

Keith Bachman

right. Okay. All Many thanks.

Jason Child

Thank you.

Operator

Thank you.

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

Matt Hedberg

for my him Thanks taking guys. well. working I'll again. And my with It question. add as great congrats for Gary Hey be to will

help on remarks. Graham, that's me. customer Maybe for wondering one the know if customer a huge really, that adds. in expansion success a of talked of just comment new I'm Just that of starting with I customer comment lot success the can that guess growing. opportunity. or you your -- just fast if you maybe how overall growth Shawn, is base your to Splunk there's And Cloud, about prepared on any accelerate base. obviously I

Graham Smith

that. Yes, take I'll

look, -- the clearly, think, similar we've think thousands number added, low of each I customers a in year. I

been not kind customer, have a machine. We of new logo

to we There straightforward. and in fully I we're much an And do gone in would of certainly might think I motion, go we there's after relatively Gary's but And mid-market list are opportunity really I the after. things focused opportunities. have that's think go-to-market enterprises. to think certainly I that, some that for on I something they're imagine Splunk larger haven't that think be our very on technical

opportunity there's there. think I So,

I'd So, I couple know of it then that. give then at him and you Gary, think leave a quarters ask And again. question of since him that sort

Matt Hedberg

Thanks a Graham. Great. lot

Matt Hedberg

Matt. Thanks

Operator

you. Thank

of KeyBanc. comes Our from next question Turits Michael

Your open. line is

Michael Turits

could RPO happened we we to do see fronts. the get impact bookings if from that's of simplify. not revenue of of it's guidance So, you, then would lack that eventually, mix we to is, congrats in what guess, impacted or visibility volatility and Jason, duration. -- Obviously, my lots is the get by do still about well, that to for quarter? Thanks what -- on -- this you equally guys of I duration question as relative ARR and terms issue. which and great in back as rid ARR

you those any when and discrepancies rectify us So, then to model get right the help how can things happen?

Jason Child

And Well, all I not right And now. you're get I going get still ARR. mean, you're to those still we're not metric. I that or non-GAAP even ARR anyhow, it metrics of as to other the heard away. you and providing a most to an reconcile -- guys it mean, Again, mean, is the lot you it's I've going from metrics a I or think GAAP performance pulling operating can't we're of metric

why it that's finally seeing with now of normalization think ARR. part So reason makes we that you're in sense revenue the

of we provide in So do RPO bookings, duration. terms

don't that. RPO duration we I can adjust provide You bookings. mean,

would this do quarter, a did actually increase. you example, for in have it, you slight If

you do. pretty think XX%. have you growth, numbers bookings the evaluate do would our RPO think, I I reconciliations the to as I measures best overall, we said earlier, software. of think, really But it been that provide instead and guys think to XX% most I whatever I consistent, want others to But with can, in so and revenue try are that's

Michael Turits

And then Shawn maybe and combined. for Jason

cloud that margins at It flatten exit do thought you here. You looks gross would like XX%.

that terms platform solving indicative scaling the had of some SAP rollout with some new elasticity? you challenges in So of is and the the success of with of

Shawn Bice

been go I'll good and make and week. ahead making trying team progress Jason, single we're on every Yes. iterate the Yes, to has -- progress start.

some they like, they customers And reason then the as seeing sure and we when charging And anything our that them there. really usually big these these so need our system. are they with reminder, is up. you important we don't have to just getting that workloads when a use. have make workloads and success they then complicated start for And big to the it are really we're start, need, exactly workloads, ones small fine-tune show So not what

about just work toward. that I'm steadily that and scaling think just that's fine. point making just behind view, So when doing, scenes of is type customer's we're a working of you we're But fine-tuning what imagine progress the the from the cloud

Jason Child

a you of an sure because, make to room overall, really is migrations. do and Yes. we more matter I than, to large-scale we need gross then really really I work cloud approaching said next expect whole done have get challenge and It's year. cloud have and migrations that optimize add, puts I'd can -- ourselves know other to do when just stabilized those I how then prepared those lot how and to No, mix, We execution in than a if quickly remarks. be on able giving QX challenge. how to to you tune a get that's we're the as generally, takes elasticity trying know this tuning there's innovation And and are can margin. don't large-scale And say, it. around to many the we're the do XX% migrations us an by of

Michael Turits

Thanks.

Shawn Bice

Thank Michael. you,

Jason Child

Thanks, Michael.

Operator

Thank you.

Our BTIG. of next Powell question comes from Gray

Your open. line is

Gray Powell

well. the We're fan on Gary Congratulations to Yes. see team. strong excited of joining Great. Proofpoint his the and a work big results at as

that's year. yes, I'm want I correctly. follow want about for on to on ACV touched make the And to this So, up I thinking $X.X renewal just it I just already, billion it but in sure up know you've

So of most it that on-prem like today. sounds is

cloud. your from to being You called form factor. it, And on-prem X.X cloud when bookings goes like times talked of a multiplier out you XX% about, call

moving or should ARR So about be up comes think parts more on-prem. it's form for is we the upsell And like of cross-sell that that should opportunity it are guess, we factor thinking products I then, of about sell the new on relatively those additional in this products I how then well, sort because, renewal? hear easy when cloud just also, to

ACV help the just yes, can renewal? you that on So anything that fine-tune up us for thinking

Jason Child

ago. would on-prem, roughly vast, all that from perp term these -- at almost but it's was of mix converted it's to on-prem, are it cloud because customers I first Yes. $X.X on of the not billion renewals, the very, vast very our entirely three say time it And years majority small. that is -- is

factor roughly right. probably this it thing really at think roughly it and be though percent some move is And factor Should in sense they Shawn customers as is workloads -- they in so at just as of That's lift? you X.Xx lift most to said, the in to the that, gradually, terms earlier, don't tend portion, on and everything they're just that right. depends one these getting The somewhere largely should them. whatever you said converting of one assume move over shift And time. makes more I and for most XX-ish the They range?

and what is the color tough factors for predict so confident what clear going And to next make identified exactly we're mix those growth the so that's trajectory it it cloud I provided year. and of part how have why But you -- think, hopefully be. the I makes to as in to

Graham Smith

with this to I from just add been customers of wanted on quarter. observations I've calls phone a couple

time, not to large you everything describing, you It's at been is banks simple the has minute, remarks, expect think they're on we I over -- cut as to as overall to with reality when it's obviously a leading just customers, large term not point one business still have are we higher percentage said we prepared and just like over. higher our Jason talk talk on and and cloud. cloud. absolutely then is And next are of enterprises, on But our we -- cloud. in when the a

bunch that some hybrid at we handle of perfectly. Splunk where will environment. there's they'll So hybrid quarters who maybe years, in our want a take Maybe equally, large can I cases, on here that's customers to they'll is the just those be for But in be environments progress to of in this hybrid long strengths time, cloud. be incredible and and that making in a big going emphasize we're one picture alone many

Gray Powell

Understood.

Okay. Thank much. you very

Graham Smith

Gray. Thanks,

Jason Child

Thank you.

Operator

you. Thank

Fatima of from comes question final Our Boolani Citi.

Your line is open.

Fatima Boolani

have you afternoon. Good renewal wanted you is resources and Enterprise? of taking ASPs how the in manifesting sort for earlier recalibrating about they're of repaying follow-up. of I drop to with renewals, to for of and off pricing you're I Splunk Jason, the a to using as customers question how maybe lower of Thank ask business. consideration pool that sort for wanted terms quick of that To And the impact workload you variables the in then I ACV my specifically. inputs respect Gray's that the question.

Jason Child

Yes.

what -- sorry. say repeat yes, would question? that the of you I Could So renewal the is

Fatima Boolani

Yes. Sure.

electing with to $X.X or for involved to consideration I'd ACV format sort of up a renewal, of of another move the structure. pricing variables the Just customers imagine pricing that's billion workload

and impacting dovetailing -- to thought we've that we think how positively how or that sort So growth profile? negatively about renewal should of

Jason Child

Okay. Great.

workload-based So as adopts adopting customer is said and what past would said We've all substantially, between they're into times I in that data more X.X workload-based of two the Splunk they our that, business think, also new remarks, any in pricing. putting is Graham before. prepared that cloud our if pricing, I say in were than

Customers customers. think what on basis, So per a for adjusted being for I effectively what's us it's are better and is, price means that terabyte paying but they're effectively a better maybe pretty lower on in. more

critical of to do alternative the we only to which whole most was the are the about us kind they were expensive, What the for find otherwise. price cheaper same, Splunk objective. try effect a they're folks and that just of to putting trying we're and is they're really some limit data because to or into being using of trying were sense perceived to So get not workloads restrict as --

sense? make lower a takes per of result, net or if bit They're terabytes But were does as little you was than slightly kind there really relative ASP before because overall price to if before. that. just on is a paying of will, a maybe it they math impact So terabyte workloads, that you do where no it the convert into to

Fatima Boolani

And Absolutely. then That's very I just the clear. Thank me, last you if for may. for one that.

sort kind to margin year in on to environment cash full Thank it baked as terms guidance should comp wanted targets? inflation. for operating get into cash operating become flow And of increasingly What's what environment stock-based hiring of fiscal flow or an specifically you. influence of I your me. competitive competitive. that's XXXX, have of respect backdrop? some perspective maybe of with a your these free that's Just much you're your of And wage hiring on the how result seeing for

Graham Smith

take is those. Fatima, Sure. Graham. this I'll

uptick can attrition Splunk of anywhere at I top consider every the over to that near in think, six that company last an seen quarters. I we've certainly list. four generally, I don't much the like other pretty name, being as

good retaining be employees a job the appointment the I we've are think for Gary's obviously, will done who for motivational joining I And people super news company. of our considering and, think employees.

I something on So don't -- percentage think That's dramatic, we've think annual focal, our to there. cash put I certainly a had I our into but we points forecast. few in baked more budgeted flow nothing

-- environment. year. think through the But find the as out learning or we've enough they very if we'll people developing appropriate the we ultimately, I steps, They of was believe They it's It's the and in feel think clearly like go like taken in it they their company. competitive hiring a all I mission work stay at companies boss with. they're and roles. because the team they

cash I compensation. think, far you ultimately, people with there's can so only chase

So I've stock anything to comp I'm illuminating describe sure basis. on really not got the

I have -- I'm to question was. want think Maybe exactly not stock you of side? another your what to it -- sure you want shot do on the comp

Fatima Boolani

we contributing any of Sure. over comments Yes, this should factor an how the cash just levels some operating the or expect driver the made stock-based it's pertaining flow. to to specifically way to important sort and influence and of you where trend just course of year, compensation just

Graham Smith

year stock of to Yes. on a so Splunk of plan. out plan, new it's actually its going be we'll of get in the evergreen terms shareholders this is in middle to approval at end the

over time, stock think that, trend any expect trend comp. to I our down I you comp not guidance would So, specifically But we probably really around think, beyond generally, haven't given up. stock-based

all So, could really that's I say. think I

Fatima Boolani

Fair detail. so Thank enough. that I you much. appreciate

Graham Smith

Fatima. Thanks

Operator

remarks. over At back Smith the Thank to Graham for time, to call turn Sir? I'd you. like this closing

Graham Smith

Well, right. you. thank All

It to biohazard you but to anything, He's do actually San I just with Jose. office in in trooper. guys, I suit Before has a apparent an down being not want be or may He not the is for us. thank Jason in COVID-XX. somewhere absolute Jason may

-- be push but call through on the today. to it absolutely just So,

appreciated. thank Much Jason. So, you,

be I next I'd this sure on I predicted disappointed said call, on be I I'd the think and I the last pretty if I'd call, was on one. be

a have been Gary here -- as on me think involved working see working in guidance blast a And last So, him I'm It's satisfied great the super with you'll you'll to Chair four for the of I for quarters my I the months. time going Board. obviously, come. with clearly that. to

and how the it operating I FY get well is about for XXXX. is well was the very Splunk to to on drive Splunk And capitalize plan, come. think the the of I talked incredibly growth I many up the know set company for really guidance that and well-positioned, think Gary for assets and up. company years as operating is important of all plan set leader assets the I who company, will a technological continue people to the the to the

So, maybe thanks talking forward call to the support your for you look to all in back. and

I the appreciate time. So, Thank you.

Operator

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

You may now disconnect.

Splunk (SPLK) 2 Mar 222022 Q4 Earnings call transcript