Splunk Inc.

Thank you for standing by, and welcome to the Splunk, Inc. First Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone. As a reminder, today's program may be recorded. And now I'd like to introduce your host for today's program, Ken Tinsley, Vice President of Investor Relations. Please go ahead, sir.

Great. Thank you, Jonathan, and good afternoon. With me on the call today are Doug Merritt and Jason Child. After market closed today, we issued a press release, which is posted on our website. Also note that we have posted supplemental material on the investor relations webpage as well. This conference call is being broadcast live via webcast, and following the call, an audio replay will be available on the website. On today's call, we will be making forward-looking statements, including financial guidance and expectations, such as our forecast for our second quarter, as well as future expectations of revenue mix, renewals, duration, RPO growth, cloud growth, and gross margin, as well as trends in our markets and our business, and our expectations regarding our acquisitions, products, technology, strategy, customers, and demand with markets. These statements are based on our assumptions as to the macroeconomic environment in which we will be operating and reflect our best judgment based on factors currently known to us and actual events or results may differ materially. Many of these assumptions relate to matters that are beyond our control and changing rapidly, including the impact of COVID-19 pandemic on our business and that of our customers and the overall economic environment. Related to this uncertainty, certain customers have and may in the future continue to decrease or delay spending commitments, particularly for certain high dollar and long-term contracts. Please refer to documents we file with the SEC, including the Form 8-K filed with today's release. Those documents contain risks and other factors that may cause our actual results to differ from those contained in our forward-looking statements. These forward-looking statements are being made as of today, and we disclaim any obligation to update or revise these statements. If this call is reviewed after today, the information presented during this call may not contain current or accurate information. We will also discuss non-GAAP financial measures which are not prepared in accordance with generally accepted accounting principles. A reconciliation of GAAP and non-GAAP results is provided in the press release and on the website. With that, let me turn it over to Doug.

Thank you, Ken, and thanks to everyone on the call for joining us. It was a great start to our new fiscal year, and our business fundamentals have proven strong as ever. We have now turned the corner into the second half of the journey we embarked on just over two years ago to become a cloud-first company. With more than 50% of software bookings now coming from cloud, our financial model is rapidly evolving into that of a true SaaS business. We are navigating our business through multiple and simultaneous transformations to deliver customer success while becoming the leading data platform in the cloud. We do that by being hyper-focused on our customers' needs. We are transforming our business and pricing models We are innovating our portfolio of products and cloud services, and we're optimizing how we engage, deliver, and measure value to our customers. Helping our customers make the transition to the cloud is our highest priority. In Q1, we ended with cloud ARR of more than $877 million, up 83% over last year. We're honored to see the high interest in our cloud offerings, and we will continue to focus on maintaining our high-growth cloud trajectory and accelerating the transition where possible. Also, for the first time, more than half of our net new cloud ARR utilized workload-based pricing. We rolled out this pricing structure to ensure that value is aligned to the cloud consumption model. Workload pricing delivers flexibility in data types, data volumes, and data value, all of which are critical for improved business outcomes as customers move to the cloud. Surpassing the 50% mark is a strong indicator that our new pricing mechanism is being embraced by our customers. As a cloud-first company, we are aggressively investing in the right people with the right leadership skills required to drive us through this important phase of growth. In the last year, we've attracted incredible talent while continuing to invest in leaders from within. We've welcomed over a dozen new executives from cloud companies like AWS, Salesforce, Google, Okta, Dropbox, and Autodesk, among others. Most notably, in April, we welcomed Theresa Carlson as President and Chief Growth Officer, and just last week, we welcomed Sean Weiss as our President of Products and Technology. Both Theresa and Sean have extensive experience scaling hyper-growth cloud businesses from their experiences at both AWS and Microsoft. Our ability to attract such high-caliber talent is a massive testament to where we are as a company today and to the opportunity that lies ahead. I'm excited to partner with Teresa and Sean to take our customers to the next level by scaling and driving both our company and our cloud growth. In the past year, data increasingly became an essential service, and cloud adoption accelerated rapidly. This occurred just as we entered a pivotal moment in our transformation to the cloud, and we were primed to help our customers through the unprecedented dynamics this past year. These macro market conditions play to the strengths of our platform, We continue to enhance our offerings to deliver engaging experience across the Splunk platform with cloud-native solutions purpose-built for IT, security, and observability teams. Beginning with our observability portfolio, which has the most extensive breadth and depth of any modern architecture in the market, this has enabled our cloud business to accelerate even further by expanding into previously untapped departments within the enterprise. In April, Gartner named us a visionary in their 2021 Magic Quadrant for Application Performance Monitoring, or APM. Paired with our strong placement in GigaOhms radar for cloud observability, in which we are a leader and the only outperformer, we're seeing growing market recognition for our vision in APM and our leadership in observability. At the beginning of May, we announced general availability for Splunk Observability Cloud, the only full-stack, analytics-powered, and enterprise-grade observability solution. At our launch event, we showcase that our observability cloud brings together the world's best-in-class solutions for infrastructure monitoring, APM, real user monitoring, synthetic monitoring, log investigation, and incident response. Developers and site reliability engineers, or SREs, can now get all of their answers in one elegant interface with unified metrics, traces, and logs, all collected in real time without sampling and at any scale. I'd like to take a moment to recognize our product design team for their dedication to delivering a completely reimagined end user experience for our customers in the Splunk Observability Cloud. We now offer one of the market's most integrated and easy to use observability platforms for developers, SREs, cloud ops, and their leadership. A number of customers, Blue Apron, Rappi, Quantum Metric, and Lenovo, just to name a few, are already finding success with the Splunk Observability Cloud. As one of many examples, Care.com relies on our solution to holistically understand their entire environment, allowing developers to quickly find and fix errors, improve application architecture, and accelerate future releases. But the Splunk Observability Cloud is a single platform to fulfill all of its observability needs, Care.com has accelerated their mean time to investigate and resolve incidents from more than an hour to less than 10 minutes, creating a much better customer experience. Our customer success with the Splunk Observability Cloud builds on our ongoing expertise in serving customers' IT-specific needs. For example, one of the largest not-for-profit medical care providers in the U.S., expanded their use of Splunk Enterprise to better monitor and scale critical applications across their hospitals and medical offices. They rely on our platform to streamline their operations through real-time analytics and AIOps capabilities, detecting and resolving issues before they impact their 12 million plus members and helping scale services keep up with the extraordinarily high demand brought on by COVID-19. Turning to security, now more than ever in a pandemic world rife with phishing attacks, malware, and attempted breaches, it's clear that security is a data problem. Our inaugural State of Security report, just released last week, zeroed in on the overall greatest challenge organizations face, rising cloud complexity, particularly as the shift to hybrid architectures continues to expand into a multi-cloud ecosystem. As I shared during my keynote at last month's RSA conference, Organizations need a unified, data-centric view across their cloud environments, paired with the right analytics and insight from across the ecosystem for intelligent detection and response. That's among the top reasons for our acquisition of TrueStar, which extends our leadership in security analytics through cloud-native intelligence. As a cloud-delivered solution designed to prioritize data within today's threat landscape, TrueStar is perfectly suited to enhance the level of cloud security that our platform offers today. TrueStar also shares our belief in heightened automation so that SOC teams can prioritize more critical work. In addition, its APIs enable customers to bring data-driven intelligence into all stages of incident response. Finally, TrueStar's relationships with technology partners across the security communities equip customers with immediate access to the latest threat information and security research. And please report that we closed our TrueStar acquisition late last week. We look forward to our customers seeing the powerful effects of having TrueStar within the Splunk family to further accelerate time to value and resolution for security teams. Many customers turned to us last quarter for security, including Deloitte Canada. One of Canada's largest professional services firms and cybersecurity service providers, Deloitte Canada uses Splunk Cloud and Splunk ES as its SIM platform to consistently detect and respond to the evolving threat landscape. In addition to their use of Splunk internally, they also maintain a longtime strategic partnership with us to develop a cyber intelligence center with full visibility across their security tools, including antivirus tools, onsite security operations, implementation services, and more, helping Deloitte safeguard their customers and their personal information from cyber threats. Splunk is also providing mission-critical services to the U.S. Department of Defense. Working in close partnership with Kerasoft Technology, We're providing the DoD with asset management and cybersecurity software as part of a core enterprise technology agreement. This designation, valued at $833 million over the next 10 years, is part of the DoD's well-respected enterprise software initiative. As always, we thank all of our customers and partners for their continued commitment to bring data securely to every question, every decision, and every action. In closing, As organizations continue to reinvent themselves in the cloud, we are providing our customers with end-to-end visibility across any environment and at any stage of their cloud journey. This is one of the many reasons why today, more than 90 of the Fortune 100 are our customers. As I mentioned at the start, we have rounded the corner on our business model transition. We now have a deep bench of tenured cloud leaders to operate at scale. We will continue to develop and recruit the best cloud talent to meet the high demands for our customers. We have an industry-leading portfolio of IT, security, and observability products and cloud services to capture the massive market opportunity in front of us. Our hard work over the past few years has set us up for the next phase of our growth, and we couldn't be more excited about where we are today and what lies ahead. I want to thank our Splunkers for their tenacity and resilience in helping us make these transitions and staying focused on the needs of our customers. I also want to once again thank our customers, who are the reason we exist. Their belief in the power of Splunk gives us absolute confidence and conviction in our value proposition and the massive potential that data has to help every organization thrive in the data age. With that, I'll hand it over to Jason.