Splunk Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Splunk Inc. Third Quarter 2023 Financial Results Conference Call. I would now like to turn the call over to Ken Tinsley, Corporate Treasurer and Vice President of Investor Relations. Please go ahead.

Great. Thank you, Mandeep, and good afternoon. With me on the call today is Gary Steele. After market closed today, we issued our earnings press release, which is also posted on our Investor Relations website, along with supplemental material. This conference call is being webcast live, and following the call, an audio replay will be available on our website. On today's call, we will be making forward-looking statements, including financial guidance and expectations, including our long-term growth and profitability and expense reduction efforts, forecasts of our fourth quarter and full year fiscal 2023, and our future expectations of revenues, total ARR, cloud ARR, operating margin, and free cash flow, as well as trends in our markets and our business, our strategies, our expectations regarding our business, acquisitions, products, technology, customers, and demand. These statements are subject to risks and uncertainties and based on our assumptions as to the macroeconomic environment and reflect our best judgment based on factors currently known to us. Actual events or results may differ materially. Please refer to documents we file with the SEC, including our Form 10-K and 10-Qs, as well as the form 8K filed with today's press release. These 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 the 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 our website. The format for today's call will be a little different. With the CFO position open and the search underway, Gary will provide our prepared remarks, including an overview of results, highlights in the quarter, and the outlook for the remainder of the year. We'll then move to a brief question and answer session. Just a reminder that most of our financial and operating metrics are provided in the supplemental slides, which are available on our IR website. And unless otherwise noted, financial comparisons made on this call are all year-over-year basis. So with that, let me turn it over to Gary.

Thanks, Ken. Good afternoon, everyone, and thank you for joining today's call. I'm pleased to report that we delivered solid third quarter results, demonstrating progress in our discipline approach to deliver long-term durable growth and profitability. We grew total revenues by 40% year-over-year to $930 million, and cloud revenues 54% to $374 million. Our top-line outperformance was driven by strong-term license demand from existing customers, underscoring the value our customers continue to gain from Splunk's mission-critical security and observability solutions, powered by our one-of-a-kind data platform. That said, as noted last quarter, we continue to see caution from customers on the timing of their cloud migrations and expansions, citing ongoing macro concerns. In addition to our top-line results, we made good progress on our expense controls, which I'll detail in a moment. Our revenue outperformance and expense reductions were key contributors to delivering a nearly $350 million improvement in free cash flow on a trailing 12-month over trailing 12-month basis. I'd like to thank the entire Splunk team for their commitment and execution throughout the quarter. Q3 results illustrate one of the core reasons I joined Splunk in the first place. Splunk is the leader within a massive and growing market opportunity. And in the current macro environment, we believe the prioritization of IT budgets is benefiting platforms like ours. Splunk helps the world's largest and most innovative organizations be more resilient so they can adapt to, respond to, and recover from threats, disruption, and attacks faster and more efficiently. Within today's economic environment, the evolving cybersecurity landscape and the ongoing demand for digital transformation, Splunk provides unparalleled capabilities at scale and the partnership that organizations need to keep their systems secure, reliable, and performing. Our differentiated technology is deeply appreciated by our customers who are continuing to invest in the Splunk solutions they need to drive faster insights and actions across security, IT, and DevOps. Only Splunk delivers the highly scalable and extensible platform organizations require to gain end-to-end visibility of all their data across on-prem, hybrid, and multi-cloud environments.