Ken Tinsley - Former Treasurer and Director of Investor Relations Godfrey R. Sullivan - Chairman, Chief Executive Officer and President David F. Conte - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

Brent Thill - UBS Investment Bank, Research Division Philip Winslow - Crédit Suisse AG, Research Division Keith Weiss - Morgan Stanley, Research Division John S. DiFucci - JP Morgan Chase & Co, Research Division Peter L. Goldmacher - Cowen and Company, LLC, Research Division Heather Bellini - Goldman Sachs Group Inc., Research Division Aaron Schwartz - Jefferies LLC, Research Division Brendan Barnicle - Pacific Crest Securities, Inc., Research Division

Good day, ladies and gentlemen, and welcome to the Splunk, Inc. Fourth Quarter 2014 Financial Results Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I would now like to turn the call over to Mr. Ken Tinsley, Splunk's Corporate Treasurer and Director of Investor Relations. Mr. Tinsley, you may begin.

Thank you, Bridget, and good afternoon, everyone. With me on the call today are Splunk's CEO, Godfrey Sullivan; and CFO, Dave Conte. This conference call is being broadcast live via webcast. And following the call, an audio replay will be available on our website. Hopefully, you have received a copy of our press release, if not, it is available on our website. On this call, we will be making forward-looking statements, including guidance for our first quarter and fiscal 2015, uses of our software, planned investments, increasing enterprise adoption of our products, market opportunities, expected benefits of our acquisitions, and the adoption of new products. These statements reflect our best judgment based on practice currently known to us, and actual events or results may differ materially. Please refer to documents we file with the SEC, including the Form 8-K filed with today's press 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 the GAAP and non-GAAP results is provided in the press release and our website. As a brief reminder, we will be holding SplunkLive! events on the East Coast in May. We'll be in D.C. on the 7th, and New York on the 15th. Registration for these events are available on our website. With that, let me turn it to Godfrey. Godfrey R. Sullivan: Thanks, Ken. Hello, everyone. Welcome to the call. Q4 was a strong finish to a memorable year at the company. We'll talk numbers in just a moment. But I have to tell you that in preparing for this call and assembling all the information, it was a reminder of how this business is built on one thing, and that's customer success. And we're so honored to have a passionate support of our customers, our employees and our partners. We're already going flat out in the FY '15 with kickoff meetings, marketing events, TVRs and all that. So this earnings call has been an opportunity to reflect on a really remarkable year because it's just so packed with customer success. So I'm really happy to have the opportunity to do this and read out. First and always first, we're delighted to welcome more than 500 new customers, and we now have more than 7,000 customers worldwide, including more than 2/3 of the Fortune 100. Revenue for Q4 was up 53% compared to last year. License revenue was up 47% compared to last Q4. And we finished with full year revenue at just over $302 million, up 52% from the prior year. Thanks again to our customers, we received a record number of 6 and 7-figure orders with a good mix of new and expansion business. One of the things I enjoy most and I know that our investors really appreciate is hearing all the innovative ways that our customers are using our products. A few examples from Q4. One of our large customers is analyzing the position and performance of fuel tankers on some of the world's most dangerous roads, proactively monitoring for speeding, illegal fuel transfers, breakdowns and hijackings. A large U.S. government contractor is using us to analyze its sensor data from industrial facilities to prevent dangerous accidents in handling hazardous materials. I wish I could tell you more about this but this use case just can't be discussed further. Volkswagen AG's big data lab has chosen us to demonstrate the value of the data that can be analyzed and visualized in real-time from their next generation of electric vehicles. Volkswagen will demo this solution at CeBIT 2014. In our core markets, we had multiple examples of enterprise adoption. Comcast, one of our long-time customers, expanded their use of Splunk to analyze more than 100 terabytes of data to support their X1 platform from XFINITY. If you're interested in seeing this use case, go check out their presentation, which is available on the STRATA website. General Electric, a long-time customer, agreed to a multiyear agreement in Q4 that makes Splunk their platform for operational intelligence. GE relies on us primarily for security, but now plans to expand to multiple use cases across a variety of departments. Etsy, a really cool marketplace for handmade goods, signed a multiyear agreement using Splunk to analyze shopping behavior and customer experience. And MLB Advanced Media, which is the interactive media arm of Major League Baseball, signed a multiyear enterprise agreement for IT systems monitoring and customer analytics. On to products. Our expansion from a single product to a multiproduct company is giving us new use case opportunities and increasing adoption by our customers. We launched Splunk Enterprise version 6 at our user conference in October, and it continues to be a key driver for customer expansions. Live Nation, a leading concert promoter, expanded their license in Q4 for digital analytics across their e-commerce properties, including ticketmaster.com. While Splunk Enterprise is well-known as a beta platform that scales to many terabytes, we also have a strong customer base at lower volume levels. To this day, quite a few of our new customers graduate from the free download to a small paid license. I'm very pleased to report that we have just announced new pricing for entry customers that doubles their data volumes at existing price points. As data volumes grow, we want to make it easier for customers to start with Splunk and grow with Splunk. In Q4, we released the ODBC Driver, which provides industry-standard connectivity between version 6 and third-party analytics tools, such as Excel and Tableau. Our ODBC Driver enables business users to easily combine machine data with structure data to support business analytics use cases. Since launching Splunk Cloud, we're seeing early success among customers who want the power of Splunk Enterprise delivered to the cloud service. In Q4, we signed agreements with both large and mid-size enterprises. Examples, a large financial services organization have committed to a multiyear agreement and sending a half terabyte of data per day to Splunk Cloud. We're the only operational intelligence vendor that enables customers to run on-prem in public or private clouds through MSPs or purely as a service. Hunk, which you know as Splunk analytics for Hadoop, was launched in the late Q3, and it receives strong market interest. We built a significant sales pipeline, mostly in the U.S., Northern Europe and Australia. In Q4, The Capital Group, one of the world's largest private investment management companies, selected Hunk, along with other Splunk products, for operational analytics. One of my favorite e-mails in the quarter came from our ASP sales forum, where a customer from you the U.K. said, and I quote, "I downloaded the Hunk free trial and installed it yesterday on top of Hadoop. Hortonworks put me on you guys, To be honest, I am truly stunned what I have seen already. When can I get on the phone with presales to find out more?" So this is a customer who downloaded it and had value out of it in 24 hours. We have a healthy pipeline of Hunk opportunities as a result of go-to-market activities with our partners, Hortonworks, Cloudera and MapR. Noteworthy is with the sales cycles for Hunk appear to be about the same as Splunk Enterprise. That is, anticipating something like a range of 6 to 9 months. On to our premium apps. Our continued investment in apps is driving more value for our customers and more use cases for us. This quarter, we announced the latest version of Enterprise Security 3.0. A leading hospital network selected Security 3.0 to help the hospital protect patient privacy and improve their overall security posture. The functionality in this app, including net flow analysis and swindling base threat visualization was key to their decision. At our user conference, we introduced version 3 of our Splunk App for VMware. And in Q4, we closed more than 30 opportunities, including customer wins at Erie Insurance Group, [indiscernible] and John Lewis. This app recently won the Editor's Choice Award in Virtualization Review magazine. We'll continue to invest heavily in our internal product roadmap, lots of stuff in the pipeline, and we'll also extend by acquiring technologies that accelerate our time-to-market. And this year, we made our first 2 acquisitions, BugSense in Q3, and Cloudmeter in Q4. Cloudmeter's technology enables customers to capture data directly from the network. This network data typically contains more fields than logs, and Cloudmeter has outstanding technology to integrate with Splunk, supporting even more use cases. Our integration with BugSense, which will enable direct access to data from mobile devices into Splunk is also going well. We're looking forward to providing more details on this over the course of the year. Now to developers. We're committed to supporting corporate developers who want to build apps in their languages of choice. In Q4, we launched our Eclipse plug-in for Java developers. We now have SDKs covering 6 major programming languages and a Web framework to accelerate development. Customers such as Apollo Group, Cobalt and Snap Interactive, as well as partners such as Cloud Passage, [indiscernible] and Function 1 are all using our developer tools to customize and extend the power of the Splunk platform. On to our partners. We're really proud of our partner ecosystem, including resellers, technology partners, GSIs, MSPs and OEMs. They're extending our reach across all markets. This quarter, we entered into an alliance with Internet2, also known as I2, a contortion of major universities. This subscription agreement sets up prenegotiated contract terms and pricing to make it simple and faster for hundreds of education customers around the U.S. to adopt Splunk. Within 24 hours of signing our agreement, I'm happy to tell you that Baylor became the first university to purchase the Splunk Enterprise subscription under the program. Go Bears. A few words about our OEM partners. They typically build solutions that invest Splunk into their own product offering. For example, CrowdStrike announced the availability of endpoint activity monitoring, an application built on their Falcon platform that imbeds Splunk for the search and analytics of CrowdStrike data sources. Global SIs, Accenture and Wipro, each helped us close multimillion dollar opportunities in Q4. Thanks to both companies for great teamwork. We recently launched the joint go-to-market initiative with Cisco, focused on simplifying and accelerating threat visibility with Splunk and the Cisco Identity Services Engine. We're supporting Cisco's application-centric infrastructure campaign. And earlier this month, demoed the Splunk App for ACI, at a packed booth at Cisco Live in Milan, with more cities to follow. We're working closely with other key partners, such as Palo Alto Networks, where we are conducting joint go-to-market activities, including an upcoming 20-city road show with Palo Alto and our top security channel partners. In Q4, we announced our partnership with Amazon Web Services, and we now have the free versions of Hunk and Splunk Enterprise available as an Amazon Machine Image, or AMI, on the AWS marketplace. And we plan to introduce paid versions later this year. Those will most likely be available as monthly or annual subscriptions. Finally, onto our markets. These include app management, IDOs and security. And also, our emerging markets, such as digital analytics and the Internet of Things. Orange France, the largest provider of e-mail services in France, will use Splunk for application management and track spammers and phishing for over 12 million active mailboxes. Chevron Australia is a new customer to Splunk, and will use us for IT operations to improve operational visibility. And as a part of this, they bought our app for VMware. Symantec selected Splunk as their platform for security investigations. Symantec will centralize, monitor and analyze all security-related data in Splunk Enterprise, so their security teams can better investigate incidents and detect advance and insider threats. They will also use Splunk to ensure compliance with SOCKS and PCI data. Finance Informatique, a German financial IT services provider, is also a new customer, and is standardized on Splunk as their platform for operational intelligence. FI supports more than half the banks in Germany and will centralize, monitor and analyze all security-related data. John Lewis is one of the biggest retailers in the United Kingdom, and significantly expanded their use of Splunk in Q4 for business analytics. Over the holidays, online sales at John Lewis increased 23%, and Splunk was a key factor in helping to make agile sales, promotion and marketing decisions. As our markets grow, we need to better organize the company to support them. For example, about 1/3 of our business and our customers use Splunk for security. Our Enterprise Security 3.0 app just had another record quarter and The 451 Group just named us as the top 4 global security vendors. Gartner just recognized us with another key security segment for fraud detection. And Government Security News just named Splunk Enterprise as the best big data analytics solution. So things are smoking in the security market. But to better support this growth, we're evolving from a purely functional work structure to one that includes market segment teams. We recently announced that Haiyan Song, former VP and General Manager at ArcSight HP, has joined Splunk as the VP of Security Markets. Haiyan will be responsible for all aspects of our security plan, including product direction and go-to-market activities and much more. This is an important change for us, and our next market group will be IT operations and then we'll keep moving. By forming these new teams, it enables us to accelerate value in our core markets and also gives us more bandwidth to pursue new and emerging markets. So as I look ahead towards FY '15, I believe it will be the year of enterprise adoption. We laid the groundwork for this over the last year by making customer expansion easier through enterprise adoption agreements, by evolving from a single product to a multiproduct company, by acquiring companies and their technologies to enhance the value our products deliver to our customers and by building an ecosystem of partners. So as always, I want to thank our customers, our partners and our employees for making Splunk such a fun place to work. Now over to Dave. David F. Conte: Thanks, Godfrey. Good afternoon, everyone. Thanks for joining us. As Godfrey mentioned, Q4 was another record quarter for Splunk. We're certainly pleased with all the progress on the products front, and our field organization's execution in the quarter led us to significantly exceed our own plan. Fourth quarter revenue was approximately $100 million, a 53% increase over Q4 of last year. License revenue grew 47% over last year, totaling approximately $69 million. For the full year, revenue grew 52% to more than $302 million in total, of which about $200 million was license revenue, a 46% increase over last year. On our past calls, I've talked about our focused investments in product development and field expansion to drive adoption of Splunk software, and I'm pleased with our progress so far. Specifically, on the products side, we entered the year with our core enterprise products and apps. During the year, we launched Enterprise 6.0, which makes analytics faster and easier for business users. We added DB Connect to deliver real-time integration between structured data from relational databases and Splunk. We added Splunk Cloud, Hunk and VMware premium app, more SDKs for developers, mobile with BugSense, network with Cloudmeter, all in the spirit of Splunk everywhere or anywhere you have your data. Our product investments are all about making the adoption of Splunk easier for our customers, allowing them to gain valuable insights from their machine data, irrespective of their environment, data sources or where they data lives. On the field side, we built our capacity globally. We grew our quota carriers from 163 to 220 over the year. And of the 220, approximately 60% were tenured, 12 months or more, as of January 31. Overall, we grew our headcount by over 300, and ended the year with more than 1,000 total employees. As pleased as I have with that progress, we're still in the early stages of this phase of innovation in the market. We have a unique opportunity to establish Splunk as a standard for our customers, and we will continue our focused investments in product and the field to accelerate adoption. I'm going to talk more about that in a minute. Splunk continues to deliver incremental value to our customers as they adjust more data in their enterprise. In Q4, once again, more than 70% of our license bookings came from existing customers, while we added a record 500 plus new customers. For the full year, we added about 1,800 new customers overall and ended with over 7,000 in total. In Q4, we reported 289 large orders, which we define as those greater than $100,000. This compares to 171 in Q4 last year. On a full year basis, we booked 791 large orders compared to 467 last year. While we did not have a $20 million order like last year, we did record 21 orders greater than $1 million in Q4 alone. This compares to 11 in Q4 of last year. For the full year, we had 41 greater than $1 million orders compared to 25 last year. Increased awareness and adoption of Splunk software are driving this significant large order momentum. Enterprise adoption agreements, or EAAs, have become an effective structure to enable customers to standardize on Splunk. Many of our large orders in Q4 were EAAs, which, as I've said, are typically deferred upfront and revenue recognized ratably over time. The mix between term and perpetual bookings impacts how bookings flow through the balance sheet and income statement, as you know. The total of all these ratable transactions accounted for 43% of our quarterly license bookings in Q4. Obviously, this is significantly above the 20% to 30% band we estimate in any quarter. Now as customers continue to adopt, we expect the variability and timing and size of these types of transactions will continue going forward. From a geographic perspective, I'm pleased with our execution. In Q4, international operations represented approximately 25% of total revenue. APAC and EMEA both posted their best quarters ever, each growing total bookings by more than 70% year-over-year. Transactions involving our channel partners accounted for 41% of license bookings in the quarter, reflecting our growing partner ecosystem. Our maintenance renewal rate was 94% for the quarter, up from 92% a year ago, reflecting the value our customers derive from our products, as well as our field coverage and capacity expansion in terms of customer reach. As a reminder, we calculate our maintenance renewal rate on a rolling 12-month basis. Our education and professional services represents 5% of revenue in Q4, in the range of past levels of 5% to 10%. Now remember, we recognize revenue on services when they're delivered, therefore, services bookings typically do not flow through the balance sheet as deferred revenue. Turning to margins. The detail I give for operating metrics are non-GAAP and exclude noncash stock-based compensation and payroll related to employee stock plans, impairment along with asset, amortization of acquired intangible assets and acquisition-related items. Our overall gross margin was 92% in Q4, in line with prior quarters. Gross margin on services, which includes support, maintenance and professional services, was about 75%. Q4 non-GAAP operating income was approximately $4 million, representing a positive margin of about 4%. Our overall op margin was lower than we'd expected due specifically to the field significant overachievement in Q4 and for the full year. Still, operating margin for the full year was consistent with our breakeven expectation at a negative 0.4%. Given our Q4 non-GAAP net income position of $3.4 million, EPS of $0.03 per share was based on a fully diluted weighted average share count of 118.7 million shares. Our full year non-GAAP net loss was $3.1 million, or a $0.03 loss per share, based on a weighted average share count of 105 million shares. Cash flow from operations in Q4 was $34.4 million. Free cash flow was $32.4 million, and we ended the quarter with almost $900 million in cash, which reflects the $538 million of proceeds from our follow-on offer in January. Full year cash flow from operations was about $74 million, or 24% of total revenues. Looking back over the year, our product and field investments are paying off, and I'm very pleased with these results. Now looking forward, we're going to continue to invest in these areas, likely at an accelerating pace as we scale the business for our next phase of growth. Crossing the 1,000 employee mark provides us the critical mass needed to add overall capacity faster. In absolute numbers, we'll add more field capacity in 2015, fiscal 2015, than we did in fiscal '14. Because our customers are utilizing Splunk in a broad and growing set of use cases, we're also planning on adding sales resources, which will be aligned with our core markets as we enhance our overall field capabilities. Our plan is to invest proportionately with our top line growth. So for the full year fiscal '15, we're targeting roughly non-GAAP breakeven operating margins. We remain committed to running the business on a positive operating cash flow basis and estimate full year operating cash flow will be approximately 20% of total revenues. We'll achieve these operating results on our expected full year revenue of about $400 million. We expect Q1 revenue to be between $78 million and $80 million, with subsequent quarterly revenues following the seasonal patterns we've seen historically. License revenue will likely account for about 60% of total revenue in Q1, growing to 2/3 by Q4. With the continued investments I described and overlaid with our revenue plan, we expect negative non-GAAP operating margin of 8% to 10% in Q1, accruing gradually in quarters 2 and 3, then turning positive in Q4, consistent with the seasonal nature of our model. Overall, I'm very pleased with our Q4 results and our full year performance. Our product investments are driving customer success and our field expansion is enhancing our execution capabilities. Our strategy is working well and we'll continue to invest and fuel the pace of adoption as we aim to make Splunk the standard for machine data analytics. Thanks much for your time and interest. With that, we'll open it up for questions.

[Operator Instructions] Our first question comes from Brent Thill with UBS. Brent Thill - UBS Investment Bank, Research Division: Godfrey, you mentioned that the change in the pricing at the low end, I'm curious if you could just update us on the pricing at the high end, if you made any changes? And I'm just curious if, just as a follow-up for Dave, I can ask him in a minute. Godfrey R. Sullivan: So yes, the price, we haven't made a formal change to the pricing list or anything like that on the high end. But of course, we tend to engage with customers on enterprise adoption agreements, which are generally custom agreements. So that's generally how we're getting to that. Brent Thill - UBS Investment Bank, Research Division: Okay. So no changes at the high end relative to what you announced, the lower end on the entry level? Godfrey R. Sullivan: The only pricing changes we've announced is what we saw at the entry-level. And that's basically the price points are about the same, but we doubled the data volumes. So hopefully, customers have an opportunity to experiment more, do more and the like. In some ways, that pattern matches what we do on the high end. There were a lot times we give customers extra capacity so that they can do sort of POCs at will or experiment with new data sources and use cases. So the intent was the same, which is to give customers more flexibility to do more things with more data. Brent Thill - UBS Investment Bank, Research Division: Okay. Great. And Dave, just a follow-up, a lot of questions were on the sales force capacity. The year before, you were growing at a faster rate, and I think you took a little bit of a pause, not that the growth rate was a big pause, but when you look at this re-acceleration. I guess, from a productivity standpoint, can you just help us understand, the 10-year, of what's giving you confidence now that -- to bring the growth rate back up. Maybe just a little more color on that would be helpful. David F. Conte: Sure, Brent. Thanks for the questions. As we've discussed, I think, pretty consistently, and I mentioned it at the prepared remarks around having enough critical mass to actually get folks into the company. And as we're looking forward and as we've crested 1,000 folks and we've got the capacity in the field, we see the opportunity to match our field capacity with the demand that we're seeing in the markets. So the markets themselves are maturing. The customer demand is there. We've got the resources to bring people on board. So that's the basis that we're looking out and saying, "Okay, we're in a good position to grow the field capacity in absolute numbers more than we did in fiscal '14."

Our next question is from Phil Winslow with Crédit Suisse. Philip Winslow - Crédit Suisse AG, Research Division: Just got a question on the enterprise adoption agreements that you guys mentioned, that's been a focus for you all this year. I wondered if you can give us some more color of just the feedback that you're getting out of, I know you've been doing it for a while, from customers. In terms of volume plus pricing and how those are sort of trending in these negotiations. Godfrey R. Sullivan: Just a couple of comments on that and then -- as customers have a few sort of what I would call favorite flavors that they like to approach an enterprise adoption agreement. Sometimes, they want to just buy x amount per year on a term basis, but be able to know that here's what we negotiate at pricing level and a capacity level so that they know how much it costs for them to expand over a series of years. Kind of a straight term, but with a predictable forward year pricing model. We see some of that. Some customers really like to do it that way. Other customers like to buy a certain amount of perpetual capacity, but they want to know what the price is to buy more and so we negotiate out and give them quantity discounts for bigger data volumes, and they either sign single or multiyear agreements around that. Others were ones where we give them a fixed capacity rate per but we give them the ability to burst above that for a period of time. So there's multiple ways that customers like to do these and they're not all the same. But there's 3 or 4 flavors that you see most frequently. And the important point is, as Dave mentioned, in Q4 alone, 43% of our bookings were customers who were buying, in some way, a ratable type term or similar contract because they wanted a multiyear look to their capacity model and they wanted room to grow. I think it just says a lot about how customers are really reacting positively and engaging with us to say, "Let's make it easier for us to put more data into Splunk and get more use cases built." Philip Winslow - Crédit Suisse AG, Research Division: Got it. And also, just given the timeline, you said at the RSA Conference, it was great to see you there, the continued growth and the traffic at your guys booth. But maybe just kind of elaborate on what you got out of RSA this week and the feedback? And then, also maybe a little more granularity on just the go-to-market strategy there that you mentioned? Godfrey R. Sullivan: Well, I'll tell you, the first thing I noticed at RSA this year, the word SIM is nowhere to be seen. You remember a couple of years ago where we started the sort of thing that was -- we weren't trashing SIMs, but we were basically pointing out that it's not about static rules engines on top of databases, it's always about security analytics, it's about the unknown threat, it's about APTs. It's about being able to do analytics on large volumes of data. And it was funny this year to walk around and look at all the signs on everybody's booth. Security analytics, security intelligence, security whatever, big data. The word SIM is nowhere to be found anywhere in that show. So I think the market this year is coming along where there's pretty concurrent views now that the old-fashioned way to do things, like a SIM, is pretty much dead and everybody's going to malware and analytics, and you name it. I mean, it was all about big data analytics. So I think we're in pretty good shape there to continue to drive that agenda. I think, we're sort of emerging as the, I won't say the thought leader, but certainly the technology approach that's more appropriate for today's environment of APTs and all that. And that was really, to me, the biggest change between any prior year of RSA and this year. You couldn't find the word SIM anywhere. In terms of the organizational structure, I had a chance to do a walk around with Haiyan yesterday, and she's just awesome. And her insight into what's going on in that market is just fantastic. And of course, she knows every customer and every partner and every other vendor pretty well. And I think that she's just a great example of the kind of talent we need here that she's so experienced in the security market that she will be very effective in helping us create a strategy, a business plan, a dedicated set of resources across the company that really, really know security deeply and much better customer results. And we had a large customer dinner last night, and a lot of them had a chance to meet and interact with Haiyan. And they were all coming up to me at the end of it saying, "This is a great move. She's a great talent. You guys are right on track." So I'm very encouraged about this sort of this market group approach to helping us expand.

And our next question is from Keith Weiss with Morgan Stanley. Keith Weiss - Morgan Stanley, Research Division: I have a question for Dave. And just in terms of the guidance looking into 2014. While the pricing change makes a ton of sense longer-term and so land and expand strategy has more than fully proved yourself out. Have you guys implied or have you put in any measure of conservatism in the guide for potential near-term impact from that pricing change? David F. Conte: No, not specifically, Keith. We look at our overall capacity in terms of field coverage and combine it with real-time pipeline analytics to come up with our estimates around revenue. I think, the pricing change, as you astutely point out, is really about enabling adoption. And we expect that as more customers put more data into Splunk, they're, of course, going to become larger customers for us. The things that we do look at, as you would well imagine, is mix. Like how much of our revenue is going to be the perpetual nature versus the ratable nature? And if you look at the composition in Q4, we obviously were very pleased with our overall revenue results. And you look at the change in deferred revenue, you can see the 43% of license bookings significantly ahead of our 20% to 30% estimate being reflected on the balance sheet. So when we look forward and we talked some about the early success we're seeing around Hunk, which is also a term type product, we contemplate those factors into the pipeline, and ultimately, what we provide as our revenue outlook. Keith Weiss - Morgan Stanley, Research Division: Got it. And then, that was actually going to be what my follow-on question is. Given the success you've been having with some of these ratable contracts, what should we be assuming for FY '15 in terms of that range? Are we sticking with the 20% to 30%? David F. Conte: Yes, recall, last year, midyear, I actually increased that to 20% to 30%, had previously been 10% to 20%. As you know, many of our largest transactions occur in the last half of the year. The larger ones will most likely have the adoption elements that make them ratable. Again, evidenced by the 43% in the fourth quarter. I think, what we need to do is get another couple of quarters under our belt in terms of what is the actual experience and trend line on an annual basis. And at that time, I'll update that guidance if it needs to be updated. Today, I'm still sticking with 20% to 30%. Keith Weiss - Morgan Stanley, Research Division: Got it. If I could sneak one last one in for Godfrey. You mentioned earlier in the call that you guys have now -- you're in 2/3 of the Fortune 100. Seeing -- so obviously, you are you seeing good success with large enterprises. So what does that or doesn't mean when you talk about becoming more of an enterprise company? Godfrey R. Sullivan: It really means more about our ability to expand from a departmental win or solution of some kind to becoming an enterprise standard for how they manage their machine data and all the analytics have come with it because if you look across our large customers, we may be in 2/3 of the Fortune 100, but in most cases, we enter in, in a single use case and we're there for a while and then we work our way across departments and all that. Where I want to be is just like where we are with Intuit where they have basically announced that they have standardized on us for all machine data analytics and they were using us everywhere throughout the company. That's our opportunity with every customer is for them to use us all across the board, not just in 1 department or 2 departments. So when I think about us becoming an enterprise vendor, it's our -- and successful at the enterprise scale, it's really about us being as ubiquitous in every one of our customers as an operating system is or as a database, as an enterprise data warehouse where we were -- where they're using us for as many use cases as we can give them value. So I just think we have such a long way to go there. I'll be on this enterprise kick for a few more years.

Our next line is from -- our next question is from John DiFucci with JPMorgan. John S. DiFucci - JP Morgan Chase & Co, Research Division: I have a question for Godfrey, and then a follow-up for Dave. Godfrey, could you talk a bit more about the rationale behind the doubling of the license capacity for entry to the customers? It seems preemptive on your side to see the market more. But was the decision influenced by competitors or was it more by customers or both? Godfrey R. Sullivan: Well, just by our experience with our own customers. So we are in pretty close contact with our customers, large and small. We have an inside sales team down in Plano that talks to hundreds of customers a day. We sort of know what's going on in that marketplace. And the thing that I observed, I go down there a lot, the thing I observed from talking a lot of our guys was that some of our customers get stuck, like they buy a small license and then they stay there for a while because they bought just enough to get the job done, and then they don't have enough capacity to put more data sources in and try some things, so they get stuck. And that's not where we want them. We want our customers to have enough capacity so that they can do the job they're trying to do. And also have the ability to flex up and put some more data sources in and try some new use cases and all that. So I like to tell you, as they call that marketing guy, I want to see customers have the opportunity to really create some of their own new use cases and not just get stuck with the fact that they're at a volume limit and didn't have budget and whatever else. So we'll look at all the innovative use cases that come from our customer base. And it's in our best interest and theirs for us to give them more capacity than they initially need so that they can grow and expand and experiment. So I couldn't be happier about it. John S. DiFucci - JP Morgan Chase & Co, Research Division: Okay. Great. So it's customer-driven. And Dave, I just wanted to make sure I'm thinking about this right. So you guys put up really strong top line. But EPS was a little bit below we and, I guess, The Street was looking for, not a lot, but just a bit. Now you also said that you had more license bookings that were deferred, and deferred revenue validates that. It's really strong. So I guess, I just want to make sure. So I'm taking more deferred revenue, less recognized rate upfront, which would actually flow down to the bottom line. And then, I guess, if there's going to be -- and you're not saying there's going to be, but if there's going to be more term going forward, we'd see a net negative effect on margin, on the income statement, all else equal. But what kind of effect would that have on cash flow, if any? David F. Conte: Thanks, John. You're thinking about the geographical differences between balance sheet and income statement correctly. If we have, say, 30% of our license bookings be ratable versus 43%, then deferred revenue would be less and revenue would be a lot more. And all of that affects margin, as you point out. At the same time, it has no effect on cash flow. So -- and you can see that in our results. 24% of revenue is positive operating cash flow, and we expect to continue to generate significant positive operating cash flows going forward, regardless of the geographical location of the bookings at the end of the day. Godfrey R. Sullivan: John, it's kind of one of the good news problems solved. We had a blowout quarter from a bookings perspective and 43% of it shows up as ratable. So have to pay commissions on it. You have selling expenses associated with it. And so -- and it's millions of dollars worth of extra commissions payments to the field organization for outstanding performance. And they -- I'll pay for that all day long. It's just that it's ratable in this quarter, it's going to cause us to be a little -- we have a little bit of exposure on the expense line. So there you go. But it's sure a nice problem to have. I'll take it all day long. David F. Conte: Yes, in fact, it's -- we're paying commissions for what's on the balance sheet, right? Godfrey R. Sullivan: There's a lot of company that capitalize all that. We don't capitalize it. But it's it exactly, we paid commissions for what's in the balance sheet. It's not a bad thing. David F. Conte: Yes.

And our next question is from Peter Goldmacher with Cowen. Peter L. Goldmacher - Cowen and Company, LLC, Research Division: Hey, Godfrey, can you talk a little bit more about what you're doing with the sales force? Conte says you guys are ramping up your expense, you're going to bring more guys on board. And it sounds like there's some sort of segmentation happening, but it wasn't clear to me what the segmenting is going to look like. Can you help me understand that, please? Godfrey R. Sullivan: Yes, good question, Peter. So -- and I didn't really address it in detail. We have to have a certain amount of geographic and territory coverage. So at the account manager level, I anticipate for a while that those folks will sell everything and they'll be masters of the universe, but not specialists at something. But in each geography, we have to start layering in more people who are highly specialized and knowledgeable about, in this case, the security market. It happens at the SE level. It happens at the professional services level. It happens in technical support. It happens in product marketing and management and the like. So you have to think about against the generic org chart, there's some amount of blue people out there to go along with all the rest of the vanilla people. And then, as segments grow, we'll put some red people out there and some yellow. You have to be able to blend in some. And you can call it an overlay, but we have to have some additional securities specialization all over the globe in each of the sales areas, whether it's presale, sales, PS, support, training, you name it, because it's a very specialized market. You either have the secret handshake in your domain, knowledgeable, or you're not. And one of the reasons why we've been so successful in the security market to date is because, A, we have great technology, and B, we have a lot of really smart security people sprinkled throughout the global organization. What this market group does is kind of put an overall framework on top of that. So you have a really sharp domain leader at the VP level and you build a, I don't want to call it virtual, because it's not virtual, it's very hard, you build a very clear team throughout the world that can help attack that market opportunity. And their job is to go help them, the generic field organization, the geographic field organization succeed in those types of opportunities. Peter L. Goldmacher - Cowen and Company, LLC, Research Division: So I'm still not -- totally trying to understand, but you -- security has been one of your primary use cases since you started the company. So are you saying you're putting quota-carrying reps only responsible for security or you still have sort of an account quarterback who can call on a security specialist? Godfrey R. Sullivan: It's the account quarterback that can call on a security specialist. I wouldn't be surprised that we'll put some people in the field who carry quota just for security at some geographic level. But certainly not down at the account manager level. Peter L. Goldmacher - Cowen and Company, LLC, Research Division: So -- but you've been organized this way forever. So what's different now? Do you have the security be you head [ph]? Godfrey R. Sullivan: Yes, but we -- if you look inside of our org chart, that would have been a pretty thin structure. I would hate to tell you how many -- how few people in the world had security on their batch. So this is a big boost in the investment in that market. Peter L. Goldmacher - Cowen and Company, LLC, Research Division: Okay. So let me ask you a longer-term question. So you guys have been around for -- I mean, it's almost a decade, and you're just now getting to specialists for a market that's been your bread-and-butter for -- since almost day 1. So how should we think about, as you branch out into these use cases, you talked about electric sensors on Volkswagen's electric vehicles, and sensors data from has hazmat sites. What -- can we expect to see any sort of vertical go-to-market in those use cases? Or how do you think about building out expertise in these -- in the use cases that are not 10 years old? Godfrey R. Sullivan: Well, you kind of hit right on the point of how I look at this, which is I need to be able to have teams that are so good at the core segments that it gives me more time and some of the staff more time to go look at some of these new opportunities. So I look at forming up with a VP in a market group and dedicated resources from product marketing, product management, development, all the way through the field organization around security as they model for how we would get other segments aligned. And once you have those, they run much more effectively than all of us trying to think about 10% this day and 10% that day. You get dedicated 24/7 focus around those segments. And it enables me and some of the rest of the team to get a look at the new segments, to go look at some of the new market opportunities, knowing that we have the machine that runs the core segments. So I view it as helping free up the company to examine some of these new markets, like business analytics, Internet of things and the like. It's a necessary move. Peter L. Goldmacher - Cowen and Company, LLC, Research Division: I'm sorry, let me ask one last philosophical question. So what -- when you think about a market developing, how aggressive do you want to be in helping that market develop and getting involved really early and getting evangelical use cases versus letting the market develop a little bit, get a little bit more form and then getting involved? What part of the market development life cycle do you feel like you really want to start putting specific domain knowledge in the market? Godfrey R. Sullivan: If it's big enough and it's consistent enough for... Peter L. Goldmacher - Cowen and Company, LLC, Research Division: What is big enough? Godfrey R. Sullivan: I beg your pardon? Peter L. Goldmacher - Cowen and Company, LLC, Research Division: What is big enough, I guess, is the shorter question? Godfrey R. Sullivan: Well, I don't know. Maybe we could take that off-line and have a more -- a deeper conversation about it. But it's -- you wouldn't form a market group around something that's so early, you don't know what it is. You have -- it has to be mature enough where it has a repeatable motion so that you can put a lot of resources against it and make it hum. So I think, the short answer is, emerging markets, you go find out and experiment and be agile and just keep learning. And once you sort of know what it is and it's more defined, you can put more defined resources against it.

Our next question is from Heather Bellini with Goldman Sachs. Heather Bellini - Goldman Sachs Group Inc., Research Division: In response to the past few questions on sales, I guess, I'm wondering, do you also need to see changes in terms of how the sales force is structured in order to get that solution sale that you were referencing to keep before? I mean, it seems as if you're talking about specialist sales, but also seems as if you're looking to start out initially with a broader footprint at the time of initial sale with a broader product footprint. And I'm just wondering, kind of how do you marry that strategy? And also, how important is the SI community in kind of helping you to drive that? Godfrey R. Sullivan: Heather, I lost the last couple of words. How important was what? Heather Bellini - Goldman Sachs Group Inc., Research Division: The SI community. Godfrey R. Sullivan: Oh. Okay. Thank you. So here's how I think about this. If you look at where we are in any given country, when we first go in, we're -- if we only have a few people in a geography, our customer wins there are lopsided. They look like they resonate of whoever came in. If they came out of a BMC or an Oracle somewhere, you'll see a lot of IT operations. But they don't know enough about security or they have the domain expertise or confidence to go sell it. If they came out of a security background, they'd probably go do that and are comfortable with it. And so until you get critical mass in a geography, oftentimes, our segment mix looks overweighted to the experience level of the few people that you have there. So you have to fill it out as you put additional critical mass in country in order to get there. So part of your question is, how do I think about the field organization? It depends on how far you are from the flagpole. So in the U.S., it's easier to have one answer because you have enough critical mass of people that you can start to deal with things like specialization, where when you get outside the U.S., we're often still dealing with this critical mass issues. So this whole segment approach is a way to get specialization to get help into geographies without having to hire a sales force for every solution area. I think, that's way too expensive for us to do. So we have a generalized geographic reach. And then, we put specialists in who could help them all go be better ahead at a given opportunity. So one of the earlier questions was, how do I think about enterprise? Well, to penetrate a customer and do the very best job we can for them, we can't just go in and be successful in IT operations and then call it a success. We need to go penetrate the security department. Well, you better have some security smart people who do that because it's hard to do. The competition you're up against is highly specialized so you better have the same mojo working for you. So it's kind of a mix between how far is it from the U.S., how many people do we have in a country, what's their background, and then how do we start to overlay some domain expertise. Now your question about SIs. I think, the SIs are helpful when we get into -- when a customer reaches pretty large scale. They have to -- a customer has to want to buy a significant amount of SI help. They book people and they book them in quantities and over time. And Splunk at the departmental level is not a very good match for that because it goes in so easily and quickly, there's not as big of an opportunity for them to sell their services. It's when you get up in the 7-figure orders and the like where there's a big enough footprint and a big enough project underway for the SIs to match up. So I think, part of the reason why we're just not coming on with SIs is because Splunk heretofore, the installations have gone in so quickly that there just simply wasn't much of an opportunity for them. As we get some of these larger, big scale enterprise customer opportunities, the match for them is better. David F. Conte: Heather, this is Dave. One other comment, just in terms of the composition of the field organization. One of our challenges that has been the result of the opportunity with 100 quota carries growing to 160, growing to 220, with such breadth of use cases, we had what I would consider to be an unusually long time to productivity for our field folks. A year is a long time for a trained, seasoned enterprise salesperson. And the reason, and trust me, I've spent a lot of time looking at productivity, is there's so many use cases in so many different markets that it's really challenging for those people. So now that we've gotten to a certain level of scale, adding in a layer of what we're calling the market specialist that can really dig deep, we think is an important enabler to get a broad adoption in our customers.

Our next question is from Aaron Schwartz with Jefferies. Aaron Schwartz - Jefferies LLC, Research Division: Just a follow-up on the EAAs, Dave, I know you mentioned seasonality seem to be a big part of this, and you're maintaining that 20% to 30% sort of outlook here. Given that dynamic here in the quarter, any sort of words of wisdom on the seasonality for deferred going into next year? David F. Conte: Yes, deferred is certainly an interesting one. A year ago, we had a $20 million transaction that came in right at the end of the quarter, which was reflected in deferred. And a lot of folks built that into their models. I think, if you just think about the seasonal nature of how our bookings are going to come in, like we're not going to guide to deferred, but you should certainly look at our historic trends around the mix of revenue and deferred together in terms of first half, second half. We expect this year will follow that seasonality. And that's probably the best way to look at it when you're updating your own model. Aaron Schwartz - Jefferies LLC, Research Division: Okay. And second one, if I could, quickly on the business unit structure you mentioned. If I just take a step back from the operational aspect of it, given sort of a business that you're at least in security maybe extending to others over time. How does that change the strategy for that unit? And is there any more sort of independence within those units to do acquisitions or at least in security, are there any other sort of technologies you'd book at, given your infrastructure that you may need to add going forward? Godfrey R. Sullivan: I like the second half of your question, which is would you think about the domain experts or the VPs running these markets as having an acquisition appetite. I would fully expect that the type of technology acquisition that we might want to do, for example, in the security area, would be very different, could be very different than the ones that we might want to do in the business analytics area or Internet of Things. And part of the benefit you get out of folks who worry about that 24/7 is they'll know what combination of things they need to put together a whole product offering for those customers and will either build it or buy it. But I think that they'll have an impact on our partner ecosystem, on our technology roadmap, on the way our organization is structured, our alliances, our competitive capabilities and everything about it, I'd expect we'll get better because we have focused resources around that. David F. Conte: Hey, Aaron, just to clarify, I don't want folks to take what we said too literally. We are not creating dedicated business units with general managers running those in the products today. We are still a functionally organized -- we're adding industry-specific specialization into the group to, again, help us serve our customers across this broad set of use cases. But don't expect us to start talking about results by business unit. We do talk about where we're strong in the segments and where we're headed. But I don't want folks to think that we're creating these structures in terms of dedicated standalone business units. Godfrey R. Sullivan: Well, in fact, I think, the sort of in-between ground between purely functional on a BU is effectively a market group because you have underneath that a functional structure. David F. Conte: Exactly.

And we have time for one more question, which will come from Brendan Barnicle with Pacific Crest. Brendan Barnicle - Pacific Crest Securities, Inc., Research Division: I wanted to follow up a little bit on Heather's earlier question and really kind of go back to the direct versus indirect breakdown. Dave, can you remind us of what the breakdown is between direct sales and indirect sales? David F. Conte: In the quarter, 41% of our license bookings came from or were associated with a partner. Brendan Barnicle - Pacific Crest Securities, Inc., Research Division: And then, as you think about kind of some of the changes that you talked about on the call today, any expectation that, that would change in any material way over the near-term? Godfrey R. Sullivan: If anything, it's likely to creep upwards. It has, over the last couple of years, continue to sort of move gradually upward as we get more and more partners involved in our business. So I would say that it's likely to continue to move upward. David F. Conte: As you expect, Brendan, it's regional, where in APAC, a vast majority of the business is associated with a partner. Less so in Europe, heavily weighted in the public sector, and then not so much in the Americas proper. So there's also a certain seasonal element to it because, as we know, public sectors got seasonal rotations, as does Europe. So annually, to Godfrey's point, we expect it will creep up, but it's going to bounce at these absolute levels based on each one of our regions and with how they're performing. Brendan Barnicle - Pacific Crest Securities, Inc., Research Division: Great. And then, just one overarching question on sales. Have you seen any change in attrition rate as you still got -- been had -- some of your folks have been there for a longer period of time now? Godfrey R. Sullivan: No, it's still pretty low. And that's something that we strive to achieve. So we're -- the whole notion of being very careful about who you hire, making sure that you give them the right kind of training and enable month and ramp activities and right level of support is all designed around having a much wider bell curve of success. And part of that success model is that when people are making quota and successful in their territories, you have less turnover. And so the impact of lower turnover is just critical in software. If you have -- if you're hiring 30% or 40% of your capacity every year, but you have a 20% turnover underneath it, you've got 50% -- you're hiring half of your sales force every year. So you never actually get to productivity nor you get them to a level where they're totally ramped and knowledgeable. So to us, a little turnover at our growth rate is actually a critical success factor to be able to do what we do. David F. Conte: Brendan, it's such a great question because we get a lot of question -- I get a lot of questions around why don't you hire faster? And we think we've got the ability to do that this year. But we certainly could have always hired more people sooner. But getting them on board and productive is reflected in the low attrition rates. We had -- if we had really jacked up the hiring, I believe we would have seen a significant uptick in attrition just because our capacity to onboard and getting productive would have been so constrained.

Okay. Bridget, I didn't hear your cue. But anyway, that concludes the call this afternoon. Thanks very much for joining us. We are around tonight, if you have any questions, by all means, reach out, and we look forward to updating you next quarter. Godfrey R. Sullivan: Thanks, everybody.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone, have a great day.