Ken Tinsley - Splunk, Inc. Douglas Merritt - Splunk, Inc. David F. Conte - Splunk, Inc.

Michael Turits - Raymond James & Associates, Inc. Ed Maguire - CLSA Americas LLC Kash Rangan - Bank of America Merrill Lynch Walter H. Pritchard - Citigroup Global Markets, Inc. Melissa A. Gorham - Morgan Stanley & Co. LLC John DiFucci - Jefferies LLC Philip Winslow - Wells Fargo Securities LLC Sarah Hindlian - Macquarie Capital (USA), Inc. Kirk Materne - Evercore Isi Matthew George Hedberg - RBC Capital Markets LLC Keith Frances Bachman - BMO Capital Markets (United States) Brian J. White - Drexel Hamilton LLC

Good day, ladies and gentlemen, and welcome to the Splunk Fourth Quarter 2017 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Ken Tinsley, Corporate Treasurer and Vice President of Investor Relations. Please begin. Ken Tinsley - Splunk, Inc.: Great. Thank you, Latoya, and good afternoon, everyone. With me on the call today are Doug Merritt and Dave Conte. We issued a press release after close of market today and it's posted on our website. Additionally, this conference call is being broadcast live via webcast, and following the call an audio replay will be available on our website as well. On today's call, we will be making forward-looking statements including financial guidance and expectations including our forecast for our first quarter and full year of fiscal 2018; transaction, products, services and revenue mix; planned investments and trends in our operating model results in our investments, trends and momentum in our business including international revenue. These statements reflect our best judgment based on factors currently known to us and actual events or results may differ materially. Please refer to our documents we file with the SEC from time to time, including the Form 8-K filed with today's press release. Those documents contain risks and uncertainties 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 to non-GAAP results is provided with the press release and on our website. With that, let me turn it over to Doug. Douglas Merritt - Splunk, Inc.: Thank you, Ken. Hello, everyone, and welcome to the call. Having just flown in from our annual sales kick-off, I'm excited to be talking to you all about the opportunity in front of us. As a company, we delivered on FY 2017 and our enthusiasm heading into FY 2018 couldn't be higher. Our energy comes from a great Q4, where we delivered $306.5 million in total revenue. It's up 39% over last year. For the full year, revenue totaled $950 million, up 42% year-over-year. Our growth continues to come from a combination of both new and existing customers expanding their deployments both on-prem and in the cloud. I am pleased to report that in Q4, we added nearly 700 new customers to the Splunk family, which is now more than 13,000 strong. We are well on our way to achieving the goal we shared with all of you at our Analyst Day in January of adding 20,000 customers in three years. I'd also like to say thank you to our partners from around the world who joined us in our kick-off. It was inspiring to see our collective teams driving the alignment that is so critical to ensure that we capitalize on our mutual opportunity. I can speak for every employee and for our partners in saying that we are fired up and our customers are our number one source of inspiration. As we discussed during the Analyst Day, we continue to believe that we have a tremendous market opportunity and that we are still in the early innings. With the move to digital, e-commerce, mobile and social, organizations are now increasingly using machine data to provide critical context to transactional data stored in ERP and CRM systems, relational databases and in data warehouses. Customers are looking for a solution that allows them to harness this data and use it to make real-time decisions. Splunk's platform is the best solution to enable customers to easily and cost-effectively collect, analyze and get maximum value from this largely unstructured and voluminous data. There is no other solution on the market today that does what we do, and our customers are leveraging orders of magnitude more data daily than ever before. Our goal has become the standard for machine data in every account – a ubiquitous machine-data platform solving our customers' big data challenges and IT operations, application delivery, security compliance and fraud, business analytics, and the Internet of Things. We are focused on these use cases and markets because each is going through a shift to an analytics-based approach, where Splunk is uniquely positioned to lead this change and deliver for our customers. You heard from each of the leaders from our market groups about their strategy and execution at Analyst Day. Haiyan and Rick for our core markets of Security and ITOA, and Snehal for emerging markets of business analytics and IoT. From a go-to-market perspective, we continue to be focused on investing and optimizing our demand-generation activities and field segmentation and coverage to accelerate customer acquisition and success. As we've said before, we believe that we are still early on the adoption journey even within our largest accounts. We want to vigorously pursue those opportunities. I'm excited about the changes that our CRO, Susan St. Ledger, is making to the go-to-market model, which she outlined during our Analyst Day to enable us to fully capitalize on the opportunity ahead. So moving on to the execution in Q4, which gives me the opportunity to share a small sampling of our customer successes. We continue to see strong traction in our core use case of IT operations, app delivery, and security. Enterprise Security or ES is now well-established, and we've been recognized as a leader in Gartner's Magic Quadrant for SIEM for four straight years. And while this is our first full year in the market with IT Service Intelligence or ITSI, the products are showing the same upside potential as ES. In fact, IDC has recently declared that Splunk is the global market share leader for the emerging area of IT Operations Analytics. Q4 notable wins include insurance giant, Aflac, who further extended their use of Splunk in Q4. They initially used Splunk in IT operations, then selected ES as their SIEM and added Splunk User Behavior Analytics or UBA to improve threat intelligence. I'm happy to report that we're now shipping Splunk to FedEx. As you know, all revenue flows through IT and this is why so many companies are focused on digital transformation. FedEx CIO Rob Carter is a visionary who drives our business strategy what he calls the Four Horsemen of Dominant Design: servers, networks, storage, and software. Rob and his team are going to use Splunk Enterprise and ITSI to monitor their critical applications, helping to ensure customers always get their packages on time. Thanks to our partners at Dell EMC who played a significant role in FedEx. Long-time customer (07:04) expanded their use of ES for security and fraud detection, and also bought ITSI to monitor their technology stacks. (07:13) see Splunk machine learning as critical to hunting threats in their network. I am proud to say that Splunk is now deployed across multiple agencies, counties and programs within the Commonwealth of Virginia, including the Supreme Court of Virginia, who selected Splunk Cloud and ES and the Virginia Department of Motor Vehicles, who have expanded Splunk to drive real-time security and compliance. Special thanks to our partners at Care-o-Soft (07:38) and SLAIT Consulting, who are instrumental in these opportunities. University of Minnesota made a multi-terabyte expansion as part of a strategic program to further improve their IT and security systems. The Australia and New Zealand Banking Group standardized on Splunk Enterprise and ITSI has a monitoring, reporting, business process and analytics platform for their application support teams. Splunk will enable the teams to build resiliency and automation to create their vision for self-healing and self-sustaining systems. And our existing customer Penske Truck Leasing expanded their use of Splunk in the business analytics by using the platform to gain broader visibility into the systems that manage all truck leasing logistics. Other notable customer wins this quarter include, Jiffy Lube, Papa John's, and the City and County of San Francisco. In Q4, we continue to see multiple customers standardize on Splunk and sign enterprise adoption agreements or EAAs, including Stamps.com who signed an EAA to standardize on Splunk across multiple use cases, including monitoring and analyzing 3 million customer transactions per day, helping the dev ops teams quickly identify and fix bugs in their platform and allowing the data center ops teams to stay ahead of any issues that may impact service. Other EAA customers in the quarter included Telstra and UK's National Health Service. We also saw our cloud business continue its growth momentum. A sampling of our cloud wins in the quarter include Randstad, one of the world's largest HR and recruiting firms who bought Splunk Cloud, ES and ITSI to support a massive cloud migration, moving 30 global data centers and more than 5,000 servers to AWS. Splunk will be used to monitor the new AWS environment from both an IT and a security perspective. University of San Francisco, which expanded their Splunk Cloud deployment, will continue to leverage hybrid search to enhance their vulnerability detection capabilities. Raymond James, one of the largest financial planning and services companies in the world, selected Splunk Cloud and ES. Thanks to the AWS solution architect team who partnered with us on this one. Moving on to ecosystem, where increasingly Splunk is being viewed as a critical component of the IT and security landscape. Let me give you some Q4 examples to illustrate what I mean. A major retailer in the UK specifically called out Splunk's integration with one of their existing security vendors, who is a partner, as a major reason for buying and deploying Splunk. Another large U.S. healthcare company chose Splunk in Q4 to be deployed alongside solutions from our partners Proofpoint and ForeScout. Similarly in ITOA, our customers are deploying Splunk alongside tools like Dynatrace, AppDynamics, New Relic and ServiceNow. Because of our ability to collect all data types and provide correlations across platforms, applications, infrastructure, mobile and wire data, partners have focused on any particular component stack end up being just another data source for Splunk. This model allows our customers to leverage the Splunk platform to enhance serviceability to entire environment on-prem and in the cloud. You also saw us demonstrate at the RSA Conference last week. We had the privilege meeting with dozens of customers and partners. The one theme that continue to stand out as it does every year is that we're clearly moving to a world of analytics-based security. We welcomed five new members to the growing Adaptive Response initiative, which is designed to help organizations better combat advanced attacks through a unified multi-vendor defense. It is great to see so many partners, including Symantec, Palo Alto, ForeScout and Proofpoint integrating their security solutions with Splunk through the Adaptive Response framework. This leverages Splunk's capabilities as the intelligent security data platform and is driving Splunk and ES to become the nerve center of our customers' security operation centers. To cap that week, Splunk was also honored with a 2017 SC Magazine Award for Best Enterprise Security Solution. Splunk was also named a finalist in the best SIEM solution and Best Behavior Analytics/Enterprise Threat Detection solution. Other highlights from our ecosystem include Infoblox, who expanded their OEM using Splunk as the core of their Infoblox reporting and analytics product. Embedding Splunk into their offering allows Infoblox to empower their non-technical users with advanced reporting needed to streamline internal operations and business-critical decision making. And CrowdStrike, a long-time Splunk OEM partner, has expanded their use of Splunk as the core of their Falcon endpoint protection product to create customizable reporting, dashboards and forensics for end users. In summary, it was a solid quarter and finish for our fiscal year 2017. I'm really proud of the entire Splunk team. We have a tremendous opportunity that's immediately in front of us. Splunk is uniquely positioned to capitalize on this opportunity and we're pursuing it aggressively. We are early in our journey and are investing for scale and growth. We're delivering high value to our customers who are expanding their adoption of Splunk as their platform for machine data analytics both on-prem and in the cloud. Again, thanks to all of our customers and partners and thanks to everyone who works at Splunk. I'm enthusiastic about FY 2018 and beyond. With that, let me turn it over to our CFO, Dave Conte. David F. Conte - Splunk, Inc.: Thanks, Doug. Good afternoon, everyone. Thanks for joining the call. I'm pleased to report strong Q4 results to cap a solid year for Splunk. Fourth quarter revenues were $306.5 million, a 39% increase over Q4 of last year. For the full year, total revenues were $950 million, a 42% increase over last year. Full year total billings were $1.126 billion, up 38% over last year. At our Analyst Meeting last month, we laid out milestones and targets as we transitioned to a predominantly subscription model. For the full fiscal year just ended, cloud revenues totaled $47.8 million on billings of about $95 million. As pleased as I am with our progress, we remain in the early stages of our addressable market. As Doug described, we have a unique opportunity to establish Splunk as the standard for our customers and their data analytics and will continue our focus investments in our product portfolio, our field groups, and the cloud to ensure customer reach and customer success. In that context, customer adoption is ramping. Historically, more than 70% of our quarterly license bookings have come from up-sells to existing customers. At our Analyst Day, we updated this to 80% on a full-year basis, reflecting the increasing adoption of Splunk by our customers. In Q4, we added almost 700 new customers, the highest in our history. For the full year, we added nearly 2,200 new customers overall and ended with more than 13,300 customers globally, tracking well to our target of 20,000 customers in fiscal 2020. Our continuing commitments to product innovations around our platform and solutions as well as our pricing programs are accelerating Splunk adoption. In Q4, we recorded 697 six-figure orders. For the full year, we recorded 1,942, so almost 2,000, Ken, six-figure orders in total, 166 seven-figure orders, and 3 eight-figure transactions. Overall, our growing product suite complemented by increased awareness and compelling ROI together are driving this type of large-scale adoption. At Analyst Day, we detailed our mission to maintain an unrelenting focus on customer success. This effort continues to drive higher ASPs overall. In fiscal 2017, license ASP was about $69,000, higher than our prior levels of $40,000 to $50,000. Remember that increasing ASPs to the $80,000 level is one of the three key drivers on our road to $2 billion in total revenues in fiscal 2020. All right. Turning to overall ratable mix, which includes term and cloud transactions, we realized 45% of software sales in Q4 and 46% for the full year, both in line with our expectations. Going forward and as I laid out in January, our plan is to transition our business model to 75% subscription by fiscal 2020. With the long-term nature of this objective and considering the highly variable quarterly mix, we'll be updating you annually as it relates to subscription mix targets and performance. Again, for next year or fiscal 2018, we expect 50% of the business to be subscription. Now back to Q4. International operations contributed 24% of total revenues for the quarter, slightly better performance than prior quarters as our international teams continued to develop their books of business. Longer term, we expect to see international teams contribute between 30% to 35% of total revenues. Our education and professional services represented 7% of revenues in Q4 consistent with prior periods. Turning to margins and other results, which are all non-GAAP, Q4 overall gross margin was 85% consistent with Q3 and 400 bps lower year-over-year, reflecting the expansion of our cloud business. As we've discussed in the past, we're in the early stages of our cloud offering and gross margin from cloud is low at these absolute levels. Specifically in fiscal 2017, cloud impacted gross margin by 5%. As we scale that business, the impact from cloud margin headwind will diminish over time as you'd expect. Q4 operating income was $36 million, representing a positive margin of 11.7%. Q4 net income was $34.8 million or $0.25 per share using a fully diluted weighted average share count of 139.1 million shares. For the full year, operating margin was 6.2%, slightly above our expectations due to the strength of our overall top-line performance. Net income was about $56 million or $0.41 per share based on a fully diluted weighted average share count of 137.4 million shares. Turning to cash flows. Cash flow from operations in Q4 was $103 million, and free cash flow was $84 million. Full-year cash flow from operations was $202 million in total, and we ended the year with about $1.1 billion in cash and investments. Full year free cash flow was $156 million for the year, reflecting total CapEx of $45 million, again, the bulk of which related to our South Bay campus build-out. Full year CapEx was actually lower than anticipated due to efficiencies realized from that project. Absent the South Bay build-out, our CapEx was approximately $19 million consistent with prior periods and highly correlated to our head count growth. We completed the two large Bay Area projects that support this head count growth as we continue to deliver for our customers, of course. But now that we've optimized for these buildings, we do have some legacy space that's still under lease that's no longer being utilized. As a result on the financials you'll notice a non-recurring charge related to phase-out of this idle space. Looking back over the past few years, our investments are clearly paying off. At the bookings and revenue scale we expect in fiscal 2018 and beyond, we're beginning to see leverage benefit from these investments in our operating model. For the full year 2018, we're targeting non-GAAP operating margin of about 8% consistent with our plan of 100 to 200 basis points of annual op margin expansion in the near term as we continue to invest at an aggressive but measured pace on our path to $2 billion in revenue. We expect full-year revenue of about $1.185 billion, a slight increase from our previous guidance last month and on billings of about $1.4 billion in total. For the full year, we expect cloud to contribute about $85 million of revenue on about $150 million of billings. We anticipate full-year gross margin will be consistent with fiscal 2017. We continue to focus our investments on delivering the best customer success. We'll be disciplined about how we expand our product lines and ensure our coverage model delivers top-line growth at these absolute levels. As we detailed last month, we're driving to 12% to 14% operating margin in fiscal 2020 with expansion beyond that to at least 25% as we reach higher scale. Now looking at the quarterization of fiscal 2018. We expect Q1 revenue to range between $231 million and $233 million. As in prior years, quarterly revenue will likely be weighted 42% first half to 58% second half. We expect revenues, billings, and cash flow will closely follow the quarterly patterns we've seen historically for each of those items. With the continued investments I've described and overlaid with our revenue plan, we expect non-GAAP operating margin of between a negative 2% to a negative 4% in Q1, turning slightly positive in Q2 and then ramping in Q3 and Q4, consistent with the seasonal nature of our model. For EPS calculations, since we expect to be in an operating-loss position in Q1, you should use a share count of about 138 million shares. For CapEx, with the two Bay Area projects now complete, I expect we'll return to a more normalized level of capital investment of $18 million to $20 million for the full year. Stepping back, it's important to highlight that our business continues to generate substantial cash flows just as we saw in fiscal 2017. In fiscal 2018, we expect operating cash flow of about $250 million, similar to prior years in terms of percentage, and sharply higher free cash flow of around $230 million. The cash flow generating capabilities of our business are strong, especially when you think about our growth trajectory on our path of $2 billion over the next three years. In closing, Q4 results and our full-year performance were solid. Our product investments are driving customer success and our field expansion is enhancing our execution capability. Our strategy is working well, and we plan to continue to fuel the pace of adoption as we drive to make Splunk a ubiquitous machine data platform. Thanks so much for your time and interest, and with that we'll take your questions.

Thank you. The first question is from Michael Turits of Raymond James. Your line is open. Michael Turits - Raymond James & Associates, Inc.: Hey, guys. One for Dave, one for Doug. First for Dave, obviously, very strong numbers this quarter, and like the higher guide versus the Street on margins for the year, but it still margins down year-over-year for the first quarter on that EBIT margin loss, so can you help understand – just give us some insight into that? David F. Conte - Splunk, Inc.: Hey, Michael, how are you? Michael Turits - Raymond James & Associates, Inc.: Hey, Dave, thanks. David F. Conte - Splunk, Inc.: Yes. So, obviously, what we communicated last month at A Day and today, we're thinking about our trajectory over the next three years, both from a customer-acquisition perspective, a revenue and billing perspective and, of course, margin expansion. When we then look back at this fiscal year, we think that the expansion of margin around 100 bps, 200 bps makes sense and is consistent with our historic level of investment as we look to increase our coverage, in particular in the field and, of course, drive for scale on the product and the cloud side. So, then when we break that down and we look at the seasonal nature of our business, I think it's important to note fiscal 2017 we had a strong finish. We're certainly proud of our results. And if you look at our large transactions, those over seven figures, you see half of our large transactions for the year came in the fourth quarter alone. So when we look forward for fiscal 2018, we're modeling in that same type of seasonality. When you pair that type of seasonality with our run rate of expenses both from our head count levels, our cloud operation and, of course, we have done our facility expansions in the South Bay, that translates to a seasonal mix of margin. I think that seasonal mix or that seasonality of margin is also pretty consistent if you look back over time. Michael Turits - Raymond James & Associates, Inc.: Thanks, Dave. And then for Doug, I think you alluded to it briefly, but can you talk a bit about investment going on currently for product sales outside of IT specifically let's call it business analytics or BI, but what are we doing there and also how does the mix of build versus these partners for applications in that area? Douglas Merritt - Splunk, Inc.: Thanks, Michael. Yeah, as we talked about at Analyst Day, we moved Snehal Antani into a dedicated role focused on the build-out of business analytics and IoT use cases on a more repetitive basis. We've seen, through the years, thousands of these use cases being developed, but really done by our champions within our current accounts and my feeling and Godfrey's I think before me (26:46) certain point in time you would get enough critical mass and guideposts that you could start to find the use case that can be deployed hundreds or ideally thousands of times and start to get a body of those. Snehal is focusing on a handful of personas and buying centers at first, and it's – the entire initiative is very tightly focused on partner coupling and interactions, given that we're getting into far more vertical specific as well as functional specific needs versus a much more broad-based horizontal occurrence of our SIEM instances or user behavior analytics or IT operations. So I'm excited to see the progress that we'll make this year. We've got a lot of early POC traction that's been developed tightly with customers and partners, and we'll keep you guys up-to-date on what we're seeing over the course of this year. Michael Turits - Raymond James & Associates, Inc.: Okay. Thanks, Doug. Ken Tinsley - Splunk, Inc.: You bet, Michael.

Thank you. The next question is from Raimo Lenschow of Barclays. Your line is open. Hi, please check to see if your line is on mute. Okay. We'll take the next question from Ed Maguire of CLSA. Your line is open. Ed Maguire - CLSA Americas LLC: Hi, good afternoon. I was wondering if you could talk about the dynamics behind the eight-figure deals that you guys are really focused on. I mean, to what extent are you focusing on really expansion of existing customers as well as investing in products like user behavior analytics as ways to really to drive up total value per customer? Douglas Merritt - Splunk, Inc.: Yeah. Thanks for the question. So the march to big transactions, whether it's seven- or eight-figure deals tends to typically be, as I've said before, an expansion of use cases beyond the initial set that was sold into the account. And so it's a combination of adoption within that initial use case where the security analytics platform for the security operations center, let's say, or where the core IT operation is backboned for the hundreds of heterogeneous apps that a typical datacenter manager has. So we both expand as we get more of those data – sorry – we get adoption as we get more of those data sources in, but then the real interesting traction that comes to Splunk is we start to hop from department to department because of the reuse capability, the scheme at read (29:31) capability of the data platform that Splunk provides. And as you get to a critical mass of use cases, it becomes more apparent that we're the data platform and it becomes easier and easier to justify the return on investment and total cost of ownership assumptions that would drive a seven- or eight-figure deal. Products like User Behavior Analytics and ITSI help us in that journey. But the sooner that we can collapse time to value for customers, the better for them to see the value of the data they have in their Splunk platform. But hand in hand with that, we have almost 1,300 applications up on Splunk base now, and the vast majority of those were built by partners and third parties. So whether it's a third-party app, Splunk app or it's just a packaging and bundling of the core Splunk platform for specific users, all of those motions help drive the adoption and virility of that platform given that customers really buy solutions to pain (30:33) and then eventually optimize the fact that they've got something that's more of a platform that they can use across the organization. Ed Maguire - CLSA Americas LLC: Great. And just to follow up on the competitive landscape. Could you comment – Cisco's acquisition of AppDynamics is certainly a validation of an app approach to IT performance challenges. How does that acquisition color or change in any way your conversations with customers? And have there been any notable changes in the competitive environment? Thanks. Douglas Merritt - Splunk, Inc.: Thanks for the question. So, no notable changes in competitive environment starting at the high level, going directly to Cisco and AppDynamics, both are partners of Splunk and have been partners of Splunk and actually both are customers of Splunk as well. At the end, the APM vendors in general are really important, but more narrow problem than what Splunk solves. They provide that visibility around application, performance and any issues or interruptions around applications on a much more deep interrogative basis. Why they've been partners, all of them, AppD and New Relic, Dynatrace, et cetera, is they're a great data source for the Splunk platform across the IT operations and dev op (32:01) management landscape. I don't anticipate any major changes in the partnership landscape with Cisco or AppD. And we're focused on helping that IT operations leader continue to solve that incredibly complex task of correlating trying to find – get ahead of a problem and/or investigate existing problems for really quick resolution when you've got, again, hundreds of heterogeneous software solutions and hardware solutions that don't have any uniformity in the data that they're splitting out and we're natively built to cooperate despite the fact you're trying to string them together as one modular service for your customers. Ed Maguire - CLSA Americas LLC: Great. Thank you. Ken Tinsley - Splunk, Inc.: Thank you.

Thank you. The next question is from Kash Rangan of Bank of America. Your line is open. Kash Rangan - Bank of America Merrill Lynch: Hey, thank you very much. I want to Rush a question for Dave. Dave, with Splunk's vital signs looking so good are the mystic rhythms going to open up the power windows for some big money in the future? That's not a serious question. Douglas Merritt - Splunk, Inc.: Anybody out there (33:10) Kash is saying? Kash Rangan - Bank of America Merrill Lynch: Okay. What I wanted to clarify was the stock is down in the afterhours, but it's important that you guys are actually raising your revenue guidance; you're actually raising the operating margin guidance for fiscal 2018 versus Street expectations. And you had a quarter where you beat the revenues, license, billings, operating margins, et cetera, so what seems to be the missing point here is the Q1 seasonality. So if you could just elaborate on the – any particular reason why you may be conservative with respect to your operating income guidance and revenue guidance as it relates to the Street for Q1? That will be great. And for you, Doug, unfortunately, I don't have a Rush kind of question for you. But can you elaborate a little bit on the 5,000 servers moving to the cloud and why that customer is actually using you guys as opposed to what people would have normally assumed it to be a lay-up win for (34:05) AWF and if you can at the end comment on sales capacity growth rate? Thank you so much. David F. Conte - Splunk, Inc.: And, Doug, when we're done with the call we can go through my Rush archives and pull out all the key songs that Kash just referenced. Douglas Merritt - Splunk, Inc.: I've only seen him in concert 10 times, Dave, versus your 50. So you definitely got a leg up on me. David F. Conte - Splunk, Inc.: (34:26) a number of times I have seen Rush live. Kash, I think the thing that's important, one, as I mentioned to Michael, we're looking at our plans over the next three years. The trajectory of going from effectively $1 billion business after 10-plus years since inception to getting to $2 billion in just three years, that's where we're focused our investments, all tied back to making sure that customers succeed. Now, big parts of that – and you guys know that I've been – we hadn't provided billing as a metric, but we thought that it was appropriate to do so at this level of scale when you start moving from what has been primarily a perpetual model to now our objective of getting to 75% subscription in the out-years. A big chunk of that, of course, is the cloud component. And for fiscal 2017, the year we just finished, we had almost $50 million of cloud revenue. I think we all know how cloud revenue and cloud costs are linear. They're not seasonal. So when we layer in our cloud costs, which I've articulated over the last few quarters and specifically again today, represents about a 5% hit on the gross margin line, when you layer that in on a linear basis against a seasonal top line, you get a different margin profile for Q1. If you compare that too with the large orders, again, what we think is an indicating metric on our path to $2 billion, when you look at those large adoption orders and you see the seasonality of them where 50% of all of our large orders are coming in the fourth quarter and the associated revenue dynamic to that, you get that type of picture from Q1 revenue and margin profile to full year. To me this is – it's really about fine-tuning. Again, in January we gave our initial outlook for revenue for fiscal 2018. We updated that today, which you pointed out, and this is about fine-tuning the models in terms of quarterization. Kash Rangan - Bank of America Merrill Lynch: And the second part, Doug, on the service part though (36:42)...? Douglas Merritt - Splunk, Inc.: Yeah. So, Kash, I think you're referring to... (36:44) Douglas Merritt - Splunk, Inc.: Yeah. Ron (36:47) said they'll move to AWS. So, one, the applications that we have that help provide visibility for AWS customers in the AWS landscape continue to be uniquely positioned and differentiated. It's an incredibly beautiful, thoughtful, thorough set of applications that help customers with everything from security posture of those apps within AWS to optimal usage of the hundreds of AWS services that they've rolled out and continue to roll out. And so you can get predictability on everything from performance to cost and continue to drive the business. So I think natively even for an AWS-only account, there's – we see a lot of traction with Splunk as a core platform in the Splunk App for AWS. And then somewhat like Ron said (37:42) what we have talked about over the past couple of years, this shift from on-prem to cloud, there are almost always applications that will remain on-prem just because the architecture and nature and often the age of those applications demand are going to be much more efficient if they continue to exist in the datacenter and architecture that they are built for. And so most of these organizations there's a hybrid approach that they will always have to manage or at least manage as they transition the core of their apps to the cloud. And why we work so effectively with AWS is we provide that assurance to our joint customers that as in the single pane of glass with our hybrid cloud and on-prem approach so that they are assured consistency, security, performance, mean time to resolution for apps whether they're in transition, have landed on one side or the other, or are going to be in transition. Ken Tinsley - Splunk, Inc.: And the last one, sales capacity. Kash Rangan - Bank of America Merrill Lynch: Great. On sales capacity, yeah. David F. Conte - Splunk, Inc.: Hey, Kash, the way that we're thinking about sales capacity is at a macro P&L level. So over the last few years sales and marketing expense, of course, non-GAAP, as a percentage of revenue has been call it in the 55% to 60% range. For fiscal 2017, it was about 52% and when we look forward building our capacity and the investments and coverage for fiscal 2018, we expect sales and marketing to still be above 50% of revenue for the year. So, of course, there are all types of components that underlie the moves that Susan is making, all focused on ensuring that we've got the right amount of coverage to go capture the TAM. Doug pointed out on our last call just in terms of our – what I'll call our lack of coverage in terms of the addressable market, we still didn't have physical presence in 18 of the states here in the U.S. So we've got a lot of work to do just in terms of getting to the appropriate coverage levels. So we're going to maintain that investment philosophy, again, plus 50% of revenue for fiscal 2018 in sales and marketing. And from that you can ultimately derive the type of capacity that we'll be deploying for the year.

Thank you. The next question is from Walter Pritchard of Citi. Your line is open. Hi, Walter, please check to see if your line is on mute. Walter H. Pritchard - Citigroup Global Markets, Inc.: Can you hear me now?

Yes, we can. Walter H. Pritchard - Citigroup Global Markets, Inc.: Okay. Great. Doug, I'm wondering if could give us some color on the security market and sort of growth there relative to the rest of the business and you've had some competitors – I think your largest competitor in that space, the assets trading hands again with a divesture. And I'm just wondering how you think about that as a potential driver in your fiscal 2018? Douglas Merritt - Splunk, Inc.: Thanks, Walter. Yeah, the RSA Conference, just being on the heels of RSA, it's a great tee-up to where we sit in security. I love going to that show and for Splunk every – one, that show just keeps getting bigger because security is such a hot topic and something I think we'll be living with for many years to come. And Splunk's presence there just keeps growing every year as we – it becomes more clear that this need for a security data platform and correlating all the different data streams, they're coming from the needed, more narrow or specific hardware or virtualized appliance solutions that are populating (41:35) landscape. So that just becomes more and more of a problem for CSOs to tie those – the data flows in those different devices together, so you actually get a fabric and a set of insight and true defense and reaction capability. It was a really nice momentum show for us. We walked in knowing that we're going to be featured in 12 vendors booths because of the integrations they had done. And as we talked around the show we saw over 30 different vendors that had built those integrations and we're showing Splunk in their booth, and we're honored and completely focused on continuing to drive both the immediate insights for our CSOs and their security teams, but continuing to double- and triple-down on machine learning and on applications and solutions whether ours or third parties. So our customers can continue to keep pace and ideally stay ahead of this very turbulent landscape.

Thank you. And the next question is from Melissa Gorham of Morgan Stanley. Your line is now open. Melissa A. Gorham - Morgan Stanley & Co. LLC: Great. Thanks for taking my question. Dave, at the Analyst Day you talked about FY 2018 being sort of a year of transition or maybe disruption as you're getting your salesforce to sell Splunk Cloud. I know that you've guided for FY 2018, but I guess from a qualitative perspective, can you maybe talk about what you're hearing from the salesforce and if there's any reason to believe that that view should change in terms of the level of transition in FY 2018? David F. Conte - Splunk, Inc.: Again, the benefit of having Analyst Day a few weeks ago is we get the view of how we finished the year, but our points of view in terms of our outlook are, obviously, relatively consistent given the short timeframe in between. We just came back late last night from our sales kickoff that Doug mentioned in his prepared remarks and there's so many adjectives to describe the energy, the excitement, and ultimately the opportunity I think it's infectious to be with our field organization, particularly when you pull them all together, and one of the big objectives for us was to try to insert as much simplicity for the field in terms of selling what is a very complicated product that's consumable in multiple ways. We want to enable customers to leverage our product wherever the data sits, so whether that's on-prem, behind the firewall, on a term basis, on a perpetual basis or cloud. So what's been the transition part is moving that sales DNA from a exclusively a perpetual business to one that now says, gee, data lives in the cloud. You need to be able to sell cloud and it has a different transaction composition to it. So I think we've made great progress in that regard. We've worked hard to ensure that there's neutrality across our field organization so that ultimately it's the customer's data requirements and analyzing their data wherever it lives that's the key driver. And I think that's really resonating well with the field organization. The other part in terms of that transition and that continuously moving the organization to address the overall TAM and position ourselves with the right level of scale as we try to effectively double the size of the company in three years, is ensuring the coverage was right. And in the Analyst Day Susan talked a bunch about it. Doug mentioned it in his prepared remarks. So one big area of focus, again, that we played out at the kick-off was evolving how our resources are deployed to go serve those existing customers but, of course, capture new ones as well, so that's all part and parcel of the whole exercise. A long answer, Melissa, to a short question. I think we're in great shape in terms of transitioning that selling motion to not only include all the on-prem business that we've done historically, but importantly add cloud. Melissa A. Gorham - Morgan Stanley & Co. LLC: Okay. Great. That's helpful. And then just one quick follow-up. Was there any change in duration in the quarter? So we did see a little bit of an uptick in long-term deferred. So I was just wondering if there's anything that we can attribute to that. David F. Conte - Splunk, Inc.: No, the large orders that we talked about – the largest orders, again, for the year we have three eight-figure adoption transactions were all fourth quarter transactions. So, overall, duration is consistent, I would say. Melissa A. Gorham - Morgan Stanley & Co. LLC: Okay, great. Thank you. Ken Tinsley - Splunk, Inc.: Thanks, Melissa. David F. Conte - Splunk, Inc.: Thanks, Melissa.

Thank you. The next question is from John DiFucci of Jefferies. Your line is open. John DiFucci - Jefferies LLC: Thank you. My question is for Dave. Dave, you guys put up a really strong quarter, but there's obviously some confusion in the market after hours. I'm just curious, why not give us more to be able to model you in more detail. I know you gave us a lot at the Analyst Day and really appreciate that, but can you give us the term license number, because pretty soon we're going to see it anyway because if 606 (47:13) comes out that's – you're going to have to sort of do a lot of different things, but because it just seems like every time you guys report that stock is so volatile afterwards. And you usually recover and I know you're not going to guide based on a day's volatility, but I mean could you give us that? Could you give us – you gave us the percentage of term bookings, but can you give us the term license revenue number going forward? I think it would allow us to model you and when you give guidance probably understand it better at least like – I think maybe next quarter's guidance is why the stock is down so much after hours. David F. Conte - Splunk, Inc.: Hey, John. I certainly won't comment on any particular trading dynamic. We're certainly quite proud of the finish to fiscal 2017 and in particular when we talk to our customers and I know you do as well that our focus is on their satisfaction and that will ultimately lead to our shareholders' satisfaction, so we stay focused on the customer, that's really what matters. When we think about guiding, thank you for acknowledging a lot of the info that we shared at A Day, but if I step back, extremely conscious of what has historically been a complicated model, and I share with all of you the challenge of trying to forecast mix and any particular transaction on any 90-day period can have an impact on geography between balance sheet and income statement, which makes it really hard. So to try to up-level the way to think about our execution and performance, we've now provided a three-year outlook for revenue, billings, and margin and that billings number, giving billings guide is a new thing for us, and consciously intending to give the macro view over not just this fiscal year but the next three fiscal years about how to think about the overall business and then the geography issue becomes a subset of that. Now, we are also consciously moving to a more heavily weighted subscription business and we talked about that at A Day. There's lots of reasons to do it. Of course, 606 (49:47) is going to affect that. One thing that you said, John, in your question is if 606 (49:51) comes along, do you know something that I don't about 606 (49:57), please do share it offline. That will be something that we're going to be mapping over the course of the year. We want to be in the same ride along with all of you and our peers out there in software that will be adopting that standard and then developing the appropriate metrics that give you the appropriate insight in terms of evaluating our performance and how to build your models in light of 606 (50:25). Might that include a call-out specifically for term license? It may. But today I think the best way to think about it is at that macro level, metric around revenue, which is our primary metric and then billings, which kind of cuts through all the complexity of mix between cloud and term and perpetual. And then we'll develop the additional metrics along the way that we think are instructive to how you build your model. John DiFucci - Jefferies LLC: Okay, Dave, well thanks. And by the way, I just think 606 (51:00) is – there's some things that don't make a lot of sense to me anyway, so I just – it's been delayed so many times that's why I say if it comes along, but thank you.

Thank you. The next question... David F. Conte - Splunk, Inc.: Thanks, John.

And the next question is from Philip Winslow of Wells Fargo Securities. Your line is open. Philip Winslow - Wells Fargo Securities LLC: Hey. Thanks guys for taking my question and congrats on a good close of the year. I really just have the two questions. The first one for Doug. Doug, Dave actually ran off a lot of positive, obviously, big deal metrics, million dollar deals, north of 100k so I guess (51:34), acceleration in Q4. But then also, thinking back to Analyst Day to even this call, you also mentioned just sort of net new customer wins and the goal of growing that, which you did do this quarter. But when you think about the upsell and also upsell to the bigger deals and while at the same time trying to grow the customer base, how are you balancing those two from just the go-to-market perspective? And then I just have one follow-up for Dave off of that. Douglas Merritt - Splunk, Inc.: Thanks, Phil. Yeah, we've got – again, it's great coming to this call right after a sales kick-off, because so much of what we're doing for this year was bundled up and packaged and delivered to the sales teams, and our partner teams over there also. And there's this duality that we're driving, which is what can we do to make it easier to land and a lot of what we're doing with those net new land also can make it easier for us to drive expansion when those are buying centers that we haven't touched yet within organization. And one of the key elements we rolled out at this SKO was a series of sales packages or bundles to make it easier to – both from a stocking unit – a SKU basis within our systems for partners and ourselves to see and on a communications and marketing basis to be able drive the Splunk Enterprise backbone with the right data source ingestion and the right structuring of that data and then the views and remediations around that data to specifically go after different buying centers and personas within those buying centers to help on both of those fronts. So we've got a really tight tie on our sales segmentation, our partner incentives, and our customer success teams to have consistent motions around net new and existing accounts so that we can see traction on both those fronts. Philip Winslow - Wells Fargo Securities LLC: Got it. And then, Dave, maybe I missed it, but could you give us a head count but also quota-carrying head count for where you exit the year? And then when you think about what Doug was just saying about sort of the mix of call it direct and indirect the partners, how do you kind of think about sort of the quota-carrying and sort of also the sort of overall head count growing relative to just call it the business maybe as partners become a bigger piece? David F. Conte - Splunk, Inc.: Hey, Phil, welcome back, by the way. Philip Winslow - Wells Fargo Securities LLC: Yes. Good to be back. David F. Conte - Splunk, Inc.: Good to have you. So overall head count for the company finish the year at just over 2,700 in total. Again, the – from a quota-carrying capacity we'd like to graduate away from specific quota carriers, because I don't think it really – at this stage of our development and how we're thinking about our scale going forward, I don't think it really reflects the way we're structuring our go-to-market and ultimately our capacity. And I think you rightly point out that from an indirect perspective as we look to gain leverage and ultimate reach that partner and indirect channel is going to be really important. In fact, it was great at our sales kick-off, again, we just got back – that we had not just our own direct employees, but the best of the best in terms of all of our partners and channel partners specifically part and parcel of the whole program, so we really look at those folks as a true extension of what we're doing so much so that we include them in all of the activities over the balance of the program. So when I look out over the next several quarters and years, we have been investing in our channel capabilities, and the associated leverage from that is something we fully expect to realize over the course of fiscal 2018 and as we go through 2020. Quantifying that is something that we're going to have to wait and see how it goes, but it's absolutely important that for us to go capture that TAM, we need to have a strong portfolio of partners that are helping us reach those accounts. So that's fundamental to our investment thesis in terms of coverage for sure. Philip Winslow - Wells Fargo Securities LLC: Got it. Thanks, guys. Ken Tinsley - Splunk, Inc.: Thanks, Phil. David F. Conte - Splunk, Inc.: Thanks, Phil.

Thank you. The next question is from Sarah Hindlian of Macquarie. Your line is open. Sarah Hindlian - Macquarie Capital (USA), Inc.: Hi. Thank you. I have a bunch of questions, Dave and Doug. I'll try to limit myself. You saw this really strong quarter and the step function hire (56:39) and customer ads and that's helped us in understanding or at least attempting to see the mix of revenues that are coming from new versus existing customers. And, Dave, you were good enough to share some of that data in January. I'm wondering – and maybe I'm being greedy, but can you give us some color on how that mix flows in Q4? And then also a couple others, Doug, when you were talking about the seasonality you're seeing in Q1 and yeah, do you think that's why the stock is a little bit softer in the aftermarket. I'm also just wondering how much of that you can also attribute in terms of your outlook to these important and necessary territory realignments that Susan outlined a few weeks ago. And then I'll cap myself there. I do have another if you have a moment. Douglas Merritt - Splunk, Inc.: All right. Thank you, Sarah. So, why don't I start with the Q1 piece on the territory piece. As, again, we've said over and over, the coverage is – the market opportunity is so enormous for Splunk given that we can play in almost any use case. Every company is a data company and we can play in almost any use. That coverage is our biggest issue. And what Susan is doing this year – I think is a really good continued progression on refining our predominantly geo-based model, which went back to – of that 18 states with Fortune 500 Companies where we didn't have the reps covering those companies in those states. For us our number one orientation has been how do we get local and close those accounts. And we've been augmenting with sales specialists and domain expertise around security, IT operations, op dev and increase them lots to do the same with BA (58:22) and IoT. And so that we can have the right domain expertise to complement those geo guys. And right up to that we'll be vertical and we've got one big vertical around public sector now, but there's always that triangle with any of our tech accounts of how do you manage the mix of geo, function, and vertical. And this year we are seeing in some of the territories a more aggressive account reassignment to make sure that we have people close their accounts, but also we've got the right ratio of accounts to reps, so that we can effectively prosecute the opportunities either in that new accounts, if you have less accounts you'll be more aggressive at doing the harder work of opening up those accounts and/or spending enough time at existing accounts, (59:14) we have less accounts and less distractions. They'll do more daily and weekly activities of educating people across multiple departments on the benefits front. And then you mix in the need to also include cloud and more subscription orientation of sales cycle that – it's a fun mix that Susan has at her disposal right now. David F. Conte - Splunk, Inc.: Yeah. Hey, Sarah, it's Dave. It's really interesting and... Sarah Hindlian - Macquarie Capital (USA), Inc.: Thank you, Dave. David F. Conte - Splunk, Inc.: The opportunity that we have inherently leads to challenges. And what I mean by that is because Splunk is so broadly applicable, the need for specialists around our prominent use cases, having Rick, Snehal and Haiyan as our subject matter experts in these core markets, but our core product is so flexible for our customers in terms of data extraction or value extraction from their data that puts, and I've talked about this for the last five years, that puts a lot of pressure on our direct field folks in terms of having that expertise to direct our selling motions around the prominent use cases to the personas inside the buying centers of our customers. So getting the account assignments right, which Doug mentioned in (01:00:34) his big focus for Susan is critical for us to continue to lead towards standardization and adoption in our core accounts. Now you asked, hey, thank you for the up-sell rate for the year, obviously, the fourth quarter, again, we did half of our seven-figure orders. We're in the fourth quarter. The majority of those – almost all of those transactions were to existing customers, so you can imagine that the up-sell rate in the fourth quarter is the highest of any of the quarters of the year and that's consistent with prior years as well. But back to our field and our coverage, new customer acquisition is, again, one of the key drivers that we provided on our journey towards $2 billion of revenue, and it matters a bunch. We are thrilled with our existing customers, and we're thrilled with their adoption behavior and characteristics that drive really solid results for fiscal 2017. And of course, the outlook going forward. But you might recall that the cohort that we talked about on the customer as well. So just to give you a couple of stats back again from A Day, we looked at a population of customers that had purchased five years ago, and the behavior over the subsequent five years was they would consume over 10x the amount of data from their initial purchase that translated to over 7x the amount of dollars back to Splunk. So you mentioned the word greedy and I will tell you that we would like nothing more than to continue to have that type of success in the installed base, but we want all those new customers as well. So the field alignment and again, the alignment around – and the transition around ensuring we sell cloud at an appropriate pace alongside on-prem is critical in terms of how Susan is now organizing in the field. Sarah Hindlian - Macquarie Capital (USA), Inc.: Thank you guys, that make a ton of sense and I really appreciate that. And I certainly understand those realignments. There's just one other thing I wanted to ask you about and it's just really a point of clarity because the license revenues you put up in Q4 were really tremendous and they were above what I was expecting. And the ratable mix was a little bit lower. And I just want to, as a point of clarity, I believe that's the result of a few very large cloud deals I recall you signing in – as a compare last year. Is that correct? David F. Conte - Splunk, Inc.: That is correct. In our largest transaction in last year's Q4, which also was an eight-figure transaction was 100% ratable. It wasn't necessarily 100% cloud, just to clarify everybody. Recall that we have three legs of this model: term, cloud and perpetual. So that's certainly an element of it. Again, from a revenue-yield perspective and a license-mix perspective, when you have 80 transactions that are over seven figures, a handful of those can significantly impact ratable mix percentages as well as revenue yields, and I think that's reflected in the results. I think it's also the reason that I'm saying, listen, we're giving you a three-year outlook in terms of percentage of our business that's going to (01:03:55) and one component of that is cloud, so that we can model beyond the 90-day fluctuations in mix to the annual and then 36-month horizon in terms of overall composition. Sarah Hindlian - Macquarie Capital (USA), Inc.: All right. Thank you, guys. Appreciate and congrats on the quarter. Ken Tinsley - Splunk, Inc.: Thanks, Sarah. David F. Conte - Splunk, Inc.: Thank you, Sarah.

Thank you. The next question is from Kirk Materne of Evercore ISI. Your line is open. Kirk Materne - Evercore Isi: Thanks very much guys and congrats on a good finish to the year. Dave, I guess sort of one point of clarification for you. It sort of follows up on Sarah's question. It would seem reasonable to me that, again, some of the tweaks Susan is making to the sales org, yeah, that you guys discussed at the Analyst Day would likely exacerbate some of the seasonality that you're referring to in terms of the 1Q guide. And if I was the CFO and you were going through some sales changes, you might want to take a little bit more conservative take on pipeline conversion, things like that. Is that a fair assumption? I know you guys have gone through this a bunch of times, and I know you guys feel good about those changes from a long-term perspective, but anytime you go through a sales org change, my guess would be that you're going to maybe take a little bit more conservative tact in terms of guidance, especially at the front end of that. Is that fair to assume? Is that a reasonable assumption? David F. Conte - Splunk, Inc.: Hey, Kirk, I think it is fair to not just assume, but I will declare that we explicitly and deliberately evaluate our pipeline, our pipeline conversion and our expectations for delivery when we build our outlook. I'm not going to characterize that as conservative or as aggressive, but just factual. What do we see in terms of opportunity and what's the impact in terms of sales cycle as we begin the new year? But from a model perspective – so, yes, we absolutely contemplate the organizational design and any organizational design changes when we give the outlook. But to me when I look at the balance of fiscal 2018, this is a tweak to the seasonality. I think I'm tuning the model based on how we see the composition of the pipe and how we're deploying the resources over the balance of the year and, of course, our favorite topic mix and how we think that plays out measured against the run rate of expenses and head count and cloud expenses and the like. So, again, I try not to use words like aggressive or conservative. Look, I just think it's appropriate the way we've looked at the quarter in the context of the full year. The seasonal nature of our business as we crest (01:06:50) $1 billion and we start driving towards $2 billion and this is about tweaking and tuning your models to reflect ours. Kirk Materne - Evercore Isi: Got it. That's helpful. And then if I could just one quick follow-up for Doug. Just, Doug, we've talked about sort of the verticalization of some of the products and obviously as you guys go deeper with enterprises being able to sort of talk the language of industries, I realize it's really early and there's so much (01:07:18) opportunity for you horizontally, but when you look at sort of vertical markets, are we 12 months, 24 months even farther away from starting to find sales specialists that can talk the language in terms of financial services or healthcare or whatever it might be, I'm just kind of curious where we are on that sort of evolution. Douglas Merritt - Splunk, Inc.: So we do have one massive vertical public sector, which is fed, state local, and education. And we actually – this year one of the strategic initiatives in both EMEA and APAC is to expand public sector to generate a public sector vertical carve-out in the right – the select countries in both those theaters. So I think we'd all agree that there is value in vertical focus as you can afford to carve out or dedicate people to it. And then from a clustering basis, we've had really strong traction as a lot of early tech – a lot of companies doing in their earlier days with financial services, telco, for us big – high-tech and web properties. And we do have cluster of expertise that understands the language and capabilities around those markets. Both the sales reps that tend to be either 100% focused on those, even though they're not in an industry vertical yet and/or have those as a majority, but then also the FCEs (01:08:39) and then we've got a handful of folks in marketing and proserve that are specifically from those backgrounds as well. Susan's orientation is over the course of this year to next to continue to get a little bit more pointed and aggressive in those areas. But they'll be at the right time for density in those sectors and making sure that we've got the geo coverage and the market segment coverage nailed down as well. Kirk Materne - Evercore Isi: Great. Thanks, guys. Really appreciate it. Ken Tinsley - Splunk, Inc.: Thanks, Kirk. Douglas Merritt - Splunk, Inc.: Thanks, Kirk.

Thank you. The next question is from Matt Hedberg of RBC Capital Markets. Your line is open. Matthew George Hedberg - RBC Capital Markets LLC: Hey, thanks for taking my questions guys and congrats on a strong end of the year. You guys have talked a lot about cloud mix increasing through time, and I guess your billings guidance is extremely helpful, Dave. But thinking about the mix between short and long-term deferred, is this a trend towards more long-term deferred that really should continue and really mirror this shift to ratable through fiscal 2020 (01:09:49)? I just want to make sure we understand kind of that mix on short- and long-term deferred. David F. Conte - Splunk, Inc.: Yeah, hey, Matt. What we've experienced historically is in the fourth quarter we do, again, our largest transactions, which tend to be – have a bigger impact in terms of long-term, short-term mix. So I think that that behavior will continue and potentially increase in terms of composition of short-term, long-term deferred as we move toward more and more subscription, because our expectation is that as subscription grows to 75% over the next three years that the duration will stay the same, but ultimately that will lead to more long-term deferred. Matthew George Hedberg - RBC Capital Markets LLC: That's helpful and then maybe just, Dave, one just point of clarification. Thinking about the quarterization of op margin as we move throughout the year, it seems like Q1 is the low watermark. Is it fair to assume though that the sequential improvements really throughout the year following Q1? David F. Conte - Splunk, Inc.: Yeah, Matt. I think there's been a lot of questions and it makes sense, because we're asking everyone to kind of align their models to ours. I mentioned this in prepared remarks. If you look at the quarterly seasonality of our key metrics like revenue, like cash flow, like billings and like margin, we're expecting the relationship and I specifically said revenue in the first half of the year has been 42%. The back half has been 58%. We think that's going to be consistent for fiscal 2018. And if you look back over the last number of years, the contribution first half, second half to total cash flow for the first half we think is going to be consistent for the most part. Same thing for billings. The amount that we bill in the first half as a percentage of total billings for fiscal 2018 is going to mirror what we've done for the last three years, and I think the same could be said for margins with a little tuning to where margin is going to be steeper Q1 to Q4 as our run rate, our exit rate of expenses around head count and cloud in particular are increasing as that cloud business grows. So the slope of margin expansion is going to be a little bit steeper than it has in the past, but those other key metrics in terms of quarterization are going to mirror very closely how the actual results have followed for first half, second half over the last three years. Matthew George Hedberg - RBC Capital Markets LLC: Helpful. Thanks, guys. Ken Tinsley - Splunk, Inc.: Appreciate that, Matt.

Thank you. The next question is from Keith Bachman of Bank of Montreal. Your line is open. Keith Frances Bachman - BMO Capital Markets (United States): Hi, thank you. Just a quick clarification to follow that and a question. Dave, on the clarification you've indicated, I think, the gross margin would be roughly flat for the year compared to the year that you just concluded, but could gross margin actually be down a little bit in Q1 given mix relative to last year? And then my question, my broader question is just something that came up at the Analyst Day was on stock-based compensation. You indicated that it likely is going to come down. I just wanted to see if you – as we look at this year's percent of revenue, I wanted to see if you could revisit on some of the thoughts there. Obviously, there's things that out of your control like stock price, but as you think about hiring plans, I would assume this is going to be a source of alleviation of at least the amount of new grants associated with the stock-based comp, but if you could just revisit on stock-based comp for FY 2018 that would be great. David F. Conte - Splunk, Inc.: Yeah. So thanks for the question. Stock-based comp, we do expect it will continue to decline as a percentage of revenue, and it's come down. In fiscal 2015 it was in the upper 40 percentile range. 2016 it was in the lower 40 percentile range. For 2017 it's just a sliver, just rounded up to 40% of revenue. We think that trend line continues, which we showed at the Analyst Day. Also, recall that of our deferred stock-based compensation expense, a large percentage of that came from a single quarter, and we expect that that's going to – the amortization of those expenses is going to fall off in the near term. What we really look at in terms of just what we think is important to look at is the annual dilution rate itself. Keith Frances Bachman - BMO Capital Markets (United States): Right. David F. Conte - Splunk, Inc.: That's gone from greater than 10% on the year that we went public and has continuously trended down to where we think – and what I said at the Analyst Day is think about it in the 4% to 5% range. And some folks may say, gee, Dave, that still feels, maybe, a 100 bps or 200 bps higher than we'd like it to be, but it really ties back to the head count growth. So if we see overall scale of the business or the growth of the business decline and therefore, the head count growth rates change, then maybe the actual dilution rate may get down to that 3% range. But over the next three years, like, we've been again steadily moving the gross dilution rate down, and it'll be half of what it was in the year that we went public. So that's how I think about the key driver around compensation and the use of equity is around overall dilution. And what follows without – again, to your point being able to predict stock price, what follows is FVC (01:15:31) is a percentage of revenue which has also been coming down and that will continue. Ken Tinsley - Splunk, Inc.: And, Keith, what was your first question, please? Keith Frances Bachman - BMO Capital Markets (United States): Just on gross margin, Dave, could gross margin be lower on a year-over-year basis in Q1? David F. Conte - Splunk, Inc.: Yeah, again, if you follow my last comment around looking at margin being steeper seasonally... (01:15:52) Keith Frances Bachman - BMO Capital Markets (United States): It sounds like yes would be the answer. David F. Conte - Splunk, Inc.: Gross margin will be steeper as well. Keith Frances Bachman - BMO Capital Markets (United States): Okay. All right, thanks for the clarification, Dave. David F. Conte - Splunk, Inc.: Okay. Thank you. Ken Tinsley - Splunk, Inc.: Thank you, Keith.

Thank you. And we have time for one more question from Brian White of Drexel. Your line is open. Brian J. White - Drexel Hamilton LLC: Yeah. I'm wondering if you could talk a little bit about the potential implications from the ramp of 5G networks. So, obviously, next week is Mobile World Congress, 5G is already being tested and there's some small commercial deployments out there, and I'm just wondering if you've thought about the impact this could have on Splunk. Douglas Merritt - Splunk, Inc.: Thanks, Brian. Interestingly enough, we had a couple of really nice transitions in the telco world this year and Q4 in particular. And across all three, one of the use cases that they got excited about was correlating cell (01:16:51) fidelity, customer interops or non-interops (01:16:55), and then the network itself, the backhaul network. Yeah. I haven't really saw through how that might apply to 5G other than maybe monitoring the health and success of the rollout of 5G infrastructure. But definitely within the telco community are – they're seeing more people start to bridge from the IT and/or security buying centers into the run the business buying centers, which I'm classified as Kevin (01:17:26), IoT-ish type move for Splunk. Brian J. White - Drexel Hamilton LLC: Yeah. I just think the implications for IoT will be very significant and I think there'll be a lot of machine data. That's why I'm wondering if you've thought about it yet. Just on the deals it seems like the enterprise customer additions in the fourth quarter here was the biggest sequential uptick we've seen ever. And so I'm wondering, where you surprised by the number of enterprise customers you added in the January quarter? David F. Conte - Splunk, Inc.: So, hey, Brian, it's Dave. Obviously, Q4 is always our seasonally strongest quarter. And with all things, the largest orders always happen to come in at that period of time as well. I do want to just clarify, I've said this many times over the years that – and you're not saying this, Brian, but just for the benefit of everybody listening, seven-figure transaction is not synonymous with enterprise adoption transactions. And I showed a chart at Analyst Day that actually showed the historic number of seven-figure orders that we've delivered. And that inception to date based on our definition through Q3, we've actually recorded just under 100 enterprise adoption transactions to date. So there are some folks that want to – that interchange the word million dollar order and enterprise adoption transaction. I just want to point out that those are not synonymous. Brian J. White - Drexel Hamilton LLC: Okay. (01:19:04) Douglas Merritt - Splunk, Inc.: But we definitely had been pushing all year on continued focus on enterprise-wide usage when appropriate and continued focus on driving into net new accounts. So it was nice to see in Q4 continued traction in those and send some good markers. The drum beat on both of those continues very strong into FY 2018. Brian J. White - Drexel Hamilton LLC: Yes. Great. Congrats. Thanks. Ken Tinsley - Splunk, Inc.: Thanks, Brian. Douglas Merritt - Splunk, Inc.: Thanks, Brian.

Thank you. And at this time I'll turn the call back over to Ken Tinsley for closing remarks. Ken Tinsley - Splunk, Inc.: Great. Thank you and thanks, Latoya, for your help today. We really appreciate it. And thanks everybody for participating. Look forward to updating you next quarter.

Thank you. Ladies and gentlemen, this concludes today's conference. You may now disconnect. Good day.