Ken Tinsley - Corporate Treasurer and VP, IR Doug Merritt - CEO Dave Conte - CFO

Raimo Lenschow - Barclays Kirk Materne - Evercore Kash Rangan - Merrill Lynch Keith Bachman - Bank of Montreal Abhey Lamba - Mizuho Securities Phil Winslow - Wells Fargo Michael Turits - Raymond James Brian White - Drexel Sarah Hindlian - Macquarie John DiFucci - Jefferies Jesse Hulsing - Goldman Sachs Fatima Boolani - UBS Matt Hedberg - RBC Capital Markets Alex Sukin - Piper Jaffray Nate Cunningham - Guggenheim Albert Chi - J.P. Morgan

Good day ladies and gentlemen. And welcome to the Splunk Incorporated First Quarter 2018 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. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host, Mr. Ken Tinsley, Corporate Treasurer and Vice President of Investor Relations. Sir, you may begin.

Great. Thank you, Brian and good afternoon, everyone. With me on the call today are Splunk CEO Doug Merritt; and CFO, Dave Conte. A press release was issued after close of market today and is posted on our website. 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 this call, we will be making forward-looking statements including financial guidance and expectations for our second quarter and fiscal year 2018; customer count goals, transaction, product and services mix as well as the mix between perpetual and ratable transactions, investments in international operations and expected growth in the international business, planned investments including product service sales and facilities, market and use case opportunities. These statements reflect our best judgment based on factors 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 uncertainties and other factors that may cause 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 in the press release and on our website. With that, let me turn it over to Doug.

Thank you, Ken. Hello, everyone, and welcome to the call. Q1 was a good start to the year. We delivered $242 million in total revenue, up 30% over last year. Our growth continues to come from a combination of new and existing customers expanding their deployments both on-prem and in the cloud. I am pleased to report that in Q1, we added nearly 500 new customers to the Splunk family. We are on our way to achieving the goal we shared with all of you at our Analyst Day in January of having 20,000 customers in fiscal 2020. We saw continued momentum in our cloud business, which more than doubled year-over-year. We also received more industry recognition, with Splunk Cloud wining the best hybrid cloud solution by Cloud Awards and the best cloud technology of the year at TechWorld's techie awards, congrats to the team. As you know, we're early in the market when you consider the significant growth and the amount of data being generated. Investing and optimizing field coverage, segmentation and demand generation activities will drive our continued penetration in our markets, accelerate customer acquisition and ultimately lead to all customers extracting more meaningful insights from their data. With that, the field transition we’ve shared with you is off to a good start. I’m encouraged by the early results of the changes that Susan has been driving. Interestingly, we had the most change in Americas where we also had our strongest performance this quarter, while within EMEA, we saw inconsistence performance and have initiated a leadership change there to accelerate growth in that region. Focus, process and alignment around customer success and acquisition are the key themes we're driving with our teams there and worldwide. Our macro demand environment continues to be strong and as we’ve said many times, we're still early on the adoption journey, even within our largest accounts. We want to vigorously pursue those opportunities. Stepping back with the move to digital, e-commerce, mobile and social, organizations are now increasingly using machine data to provide critical context to the transactional data they store in their data bases and data warehouses. Splunk’s platform is a best solution to enable customers to harness this largely unstructured data and use it to make real time decisions. There is no other solution on the market today that does what we do. And our customers are extracting orders of magnitude more insight from the sea of data than ever before. Our goal remains the same, which has become the standard for machine data in every account, the 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. These markets are going through a shift to an analytics and machine learning based approach where Splunk is uniquely positioned to lead this change and deliver for our customers. During the quarter, we continued to see strong traction in our core use cases of IT operations, app delivery and security. In addition to the Splunk platform, our premium apps of Enterprise Security or ES; User Behavior Analytics or UBA; and IT Service Intelligence or ITSI continue to show great momentum in the market. As privacy, Splunk positioned as a leader in Forrester’s Wave for Security Analytics Platforms. Our ES received the highest possible scores for real time monitoring, scalability and detection technologies. Notable wins in the quarter include Lloyds Banking Group who expanded their use of Splunk to monitor their mission critical trading platforms as well as to gain insights into the digital services they offer to 30 million customers. Cerner Corporation expanded their use of Splunk from IT to security. Splunk Enterprise and ES will replace a legacy solution and will be used to increase visibility into potential threats to the security of patient health data. The UK Ministry of Defense is a Splunk security customer that expanded by adding ES, ITSI and UBA. With Splunk, the Ministry of Defense gains real-time monitoring as part of their enterprise, security and service management program. Jefferson County Public Schools in Colorado already relies on Splunk to maintain a strong security posture and defend their 85,000 students from cyber threats. This quarter, they expanded to IT operations, where they'll be using Splunk to monitor and ensure uptime across the district. Special thanks to Palo Alto Networks for their partnership on this expansion. STARTEK is a customer engagement company that deployed Splunk to improve customer service and internal staff operations, they still have partner zones [ph] for their help in this win. Merck KGaA, the world's oldest chemical and pharmaceutical company had an existing Splunk customer selected ES to replace the legacy SIM. ES will be the data analytics platform underpinning Merck's security operation center. Tata Consultancy Services selected Splunk Enterprise for IT operations, moving from proactive service monitoring to predictive analytics of business critical applications. In addition to being a customer, TCS is a partner who uses Splunk to deliver IT ops and security use cases to their global customers. And the list would not be complete without mentioning an interesting business analytics use case. At SplunkLive Paris, the electric car sharing service known as Autolib shared how they use Splunk Enterprise to collect planetary data from their cars as well as their consumer apps to gain real time visibility and the business KPIs including health and status of the cars, geolocation of the fleet and service reservation levels across their sales channels. Other customers in the quarter include Experian Consumer Services, Airport Authority of Hong Kong, University of North Carolina at Chapel Hill, State of Kansas, New Zealand's Trustpower Limited, Australia's Ramsay Health Care, and the U.S. Navy. As we do each quarter, we highlight a handful of customers who went all in and standardize on Splunk as a machine data platform starting enterprise adoption agreements or EAAs. This quarter's collection includes one of the world's largest financial service firms, a leading provider of online travel and related services, Lockheed Martin, an a large non-profit U.S. healthcare system. Our cloud business continues momentum with customers leveraging our platform to analyze their data regardless of its location on-prem or in the cloud. A sampling of our cloud wins this quarter include Monash University over in Australia, who expanded their Splunk Cloud presence to 2 terabytes by implementing ITSI. They continue to use Splunk to provide visibility and insights into IT operations across campuses. ITSI helps map the overall student experience to understand where and how students are interacting with the university systems and services. Take-Two Interactive where we’ve broadened our relationship with the leading interactive entertainment software developer and publisher. They rely on Splunk Cloud to provide their fast pace launching of new video games to meet customer demand. Practice Fusion, a cloud based electronic health record provider, expanded its use of cloud, of Spunk cloud to help ensure service availability. And Black Box Corporation, a leading technology solutions provider and a new Splunk Cloud customer who will use Splunk to ensure they meet compliance requirements. Moving on to ecosystem, where increasingly Splunk is being viewed as a critical component of the IT and security landscape. Because of Splunk’s ability to collect all data types and provide correlations across applications, infrastructure, mobile, and wire data, we continue to see our ecosystems of partners grow. These partners who are focused on particular components of the IT or security stacks, end up being yet another source of data for Splunk. This model allows our customers to leverage the Splunk platform to enhance our visibility of the entire environment, both on-prem and the cloud. Along this theme and on the heels of RSA last quarter, where we announced multiple new integrations as part of our adaptive response initiative, we recently announced a new integration in the IT market with New Relic, unifying machine data analytics and app performance monitoring to help enterprises improve customer experiences and drive revenue. This builds on the integrations we currently have with other ATM vendors like Dynatrace and AppDynamics. I was also happy to be part of the keynote at AWBS summit and announced that by leveraging the AWBS contracts API, Splunk Cloud is now even more tightly integrated with the AWBS marketplace. Our joint customers can accelerate their time to value by taking advantage of seamless procurement and deployment of Splunk across our AWBS and hybrid environments. I also want to recognize winner of Splunk's fiscal year 2017 Global Partner+ Program awards, which honor partners who go beyond expectations to deliver outstanding customer success. You can see the list of winners globally and by region on our website. Partners are vital to Splunk and continue to push the envelope and innovate every day. I was very happy that Splunk was once again named one of the best places to work in the Bay Area by the San Francisco Business Times. This is our 10th consecutive year getting that honor and is a testament to our great people and culture. In summary, it’s a good quarter and start to our fiscal year 2018. I'm proud of the 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're early in our journey and are investing for scale and for growth. We're delivering high value to our customers who are expanding their adoption of Splunk as a platform for machine data analytics and machine learning, both on-prem and in the cloud. Again, thanks to all of our customers and partners, and thanks to all those awesome Splunkers around the world. Now, I’ll turn it over to our CFO, Dave Conte.

Thanks, Doug. Good afternoon, everyone. Thanks for joining the call. Q1 was a good start to fiscal 2018 with total revenues of $242 million, a 30% increase over Q1 of last year. Total billings were $243 million, also up 30% over last year, while cloud revenues totaled $17.7 million, up more than a 100% year-over-year. Overall services revenues grew 48% compared to Q1, reflecting the growth in that cloud business. As Doug described, we remain committed to customer success and adoption of our platform and solutions. Once again, in Q1, more than 80% of our software bookings came from existing customers. We added nearly 500 new customers in the quarter and we recorded 358 orders greater than $100,000. Fiscal 2018 remains a transition year, both in the field and in our model, and in Q1, we saw indicators of that continued transition to more subscription bookings over time. As we said, the ratable mix for software bookings, which we define as cloud plus term licenses, varies substantially period-to-period, and we're focused on a full year view to gauge our progress. We said that we expect mix to be about 50% this year, and so far we're tracking towards that level, ultimately reaching 75% subscription in 2020; I should clarify that’s fiscal 2020. In Q1, international operations represented 25% of total revenues, consistent with previous levels and comparable on a year-over-year basis. Our education and professional services represented 11% of total revenues in Q1. Now, turning to margin and other results, which are all non-GAAP. Q1 overall gross margin was 81%, seasonally lower as expected and reflecting a slightly higher contribution from services revenues, which as you all know, carry a lower gross margin comparatively. Operating loss was $2.8 million, representing a negative margin of about 1%. Q1 net loss was $1.3 million and EPS was a negative $0.01 per share based on a weighted average share count of 137.8 million shares. Cash flow from operations were $41 million and free cash flow was $36 million. We ended the period with about $1.1 billion in total cash and investments. Looking forward to the rest of the year, we expect Q2 total revenues of between $267 million and $269 million with a positive 4% non-GAAP operating margin. With our Q1 performance and Q2 outlook, we now expect total revenues for the year to be $1.195 billion, up from our prior guidance. Full year billings will be higher as well at $1.425 billion for the year. And full year cloud revenues will total about $85 million. Remember, we denominate revenue globally in U.S. dollars and therefore have no foreign exchange exposure to our revenue line. As we continue our investments in market groups, product teams, the field and Splunk Cloud, we maintain our full year non-GAAP operating margin estimate of 8%. As I’ve said and as we saw in Q1 results, operating margin targets include the impact of an increase in cost of services from our ramping cloud business. Additionally, along with our partners, we'll continue expanding our services capabilities tailored towards the use cases and solutions that align with our market group focus. We’re seeing clear evidence that customers who utilize our services have a higher likelihood of deploying more of our software over time. Due to these investments, we expect to see annual gross margin in the mid-80s while we grow op margins steadily on the way to our target of 12% to 14% positive op margin in fiscal 2020. For EPS, remember, since we expect to be profitable on a non-GAAP basis for the balance of the year, full year EPS calculations, you should use a fully diluted share count of approximately 143 million shares in Q2 and increasing that about 2 million shares per quarter thereafter. Also for modeling purposes, you should include a 27% effective tax rate. We continue to run the business on a positive operating cash flow basis and reiterate our full year operating cash flow expectation of $250 million with the quarterly levels following the trend we’ve seen over the past several years. In closing, our team continues to execute on our mission to deliver exceptional value to our customers. And we’re committed to improving the customer experience through continued investments in our products, solutions and global reach. We're off to a good start and enthusiastic about our outlook for the remainder of fiscal 2018. Thanks much for your time and interest. With that let's open it up for questions.

[Operator Instructions] Our first question comes from the line of Raimo Lenschow from Barclays. Sir, your line is now open.

Doug, can you talk little bit about the changes on the sales organization and impact? You mentioned in U.S., you had bigger changes and -- in Europe you had some changes. But then, I'm looking at the license growth number and that’s kind of much, much lower than we see in previous quarters, and I'm sure Dave will point out [indiscernible]. Can you just kind help just square what's going on there because that’s where I get most questions from investors. Thank you.

Sure, Raimo. I’ll start and Dave can come in for the license feedback as well. As we’ve talked at the analyst day, Susan is doing the appropriate thing by looking across the field to make sure that we’ve got the right coverage models; we've talked over and over about this TAM being absolutely enormous and our biggest issue is how do we cover all the interest and opportunity and generate that opportunity out there. U.S. actually being our biggest region and our most mature region and are as successful as you guess since we’re U.S. based company, had a bigger impact from those changes. And the positive that we saw is through Q1, they actually performed really well. So, that’s an early indicator that those changes were good changes. EMEA had some inconsistent performance. The TAM there is as large as U.S. We all know, GDP of EMEA in aggregate is similar to what we see here in the U.S. So, we remain really enthusiastic about that market. It's definitely is one of those incredible markets that we expect high growth from. The delta I’ve seen in the U.S. versus EMEA is the focus, the attention of process and operating with them and the tight alignment across the multitude of groups that have to work in region, marketing, pre-sales, pro serve, inside sales, outside sales, general and partners, and we're looking to that same degree focus alignment execution in EMEA with these moves in the coming quarters.

Thanks Doug. Hey Raimo, it’s Dave. I think if you look at the composition of revenue on a seasonal basis. Q1 from a license perspective isn’t just similar than what we've seen over the last several years. What is changing is if you go back to say the first three years, we were public, before we really had a cloud offering. The seasonal change or the annual change by quarter would probably be in the 200 bps perspective. Q1 in 2015 might have been 53% of revenues coming from licensee and in Q1 of 2016, it was 61%. But with the increasing size of our cloud business, which again doubled in Q1, those revenues are now hitting the services line. So, we’re seeing an expansion of the annual change in seasonal license revenues. So that has gone from 200 basis points before cloud; it moved 300 basis points once cloud started ramping and we expect to see that continue in terms of license composition as a percentage of revenue.

And our next question comes from the line of Kirk Materne from Evercore. Sir, your line is now open.

Thanks very much. Doug, I was wondering if you could just talk about the use cases in cloud, and how similar and/or different are they versus sort of the on-prem products, meaning, when you think about how people are using the cloud product versus on-prem, I assume that you're getting sort of different mix between say IT ops versus management. I’m just trying to get a flavor of how cloud sort of expanding these cases, versus how much of this is sort of taking some of the existing use cases and sort of just changing it up in terms of delivery mechanism.

Thanks, Kirk. I think the biggest thing that we're seeing in cloud and it probably goes back to the orientation that people have when they move to a SaaS mindset is the attach rate between the applications and the core aligned [ph] platform is higher. People go to cloud; they're largely still going for security and IT ops use cases. Although I think that we all would believe that as IoT and business analytics continues to gain momentum, being able to route all that data back to already baked and ready to go cloud would probably be a good thing to do. So, I expect to see increases there. But when they're coming -- and let’s say in security use case, they are looking for really even more rapid time to value than I think our on-prem customers are. And so, the attach rate seems like ES with Splunk Enterprise seems to be higher, so they can get that same up and running quickly instead of having it build themselves.

Okay. If I can ask one real quick follow-up for Dave. Dave, when we think about the ratable mix, obviously ratable incorporates both the cloud business as well as term licenses. Does -- I don't know how much you want to get into this, but as the mix within ratable sort of shifting more to cloud, I ask obviously because the gross margin characteristics of cloud versus term licenses a little bit different, even though they’re both ratable. So, I was just kind of curious, was the mix among the ratable business about what you'd expect? It sounds like cloud probably came in a little bit ahead of plan on that front. Thanks.

Yes. Kirk, you bet. So, obviously, cloud has been a growing contributor to our ratable mix. And if you go back to the three-year outlook that we gave in terms of our transition, our goal in fiscal 2020 is to have 75% of the business fee subscription. Of that 75%, we're expecting 25% to be cloud, that's up from fiscal 2017, it was about 16%, 17%. So continued growth in terms of customers utilizing term licenses for their on-prem data, but a growing component of subscription coming from cloud. So that trajectory is working backwards from 2020 is what we've been seeing and it continued for the quarter.

And our next question comes from the line of Kash Rangan from Merrill Lynch. Sir, your line is now open.

Hi, thanks a lot guys. I'm curious, when you look at the growth rate of the Company, 40% last year to 30% this quarter, I’m curious to get your thoughts on how the reorganization that you have put in place might have impacted the growth rate. Is it, in other words, too early to judge the growth potential of the Company sort of in this Q1 where you had this bit of reorg? And I have a follow-up question on the cloud business. Thank you.

Nice to have you, Kash. Thanks for the question. I agree with your ending piece, which is it’s too early to tell. The inconsistency in EMEA certainly had an impact but it was really a positive thing to see the traction with Americas and the effects of the changes that Susan made actually just smoothly feather in with the execution cadence that that team had. That’s the engine of this company. Those guys have done such a nice job across the Americas of continuing to leverage new accounts and grow footprint within existing accounts.

And sales capacity growth rate, Doug, how are you planning to grow that this fiscal year versus the growth rate last year?

Hey, Kash. It’s Dave. I think the absolute capacity growth will be similar as it has been in the prior year. And as you know, we’re extremely focused on when we bring folks, it’s certainly maturity of the patch that we -- or the task that we may ask them to fulfill. But it’s critically important that we enable them in the right way and that that’s a I would say a self imposed governor in terms of sales force expansion. Our overall critical mass in the field has got to increase, like the reach that we have relative to the addressable market is a fraction. So, we're committed to continuing to grow that overall reach, but it’s at a pace that enables that we do it in a successful way. So a long answer. I would expect the overall growth and capacity to be similar to prior year.

So, could we see an improvement in the growth rate as the field starts to execute more consistently as you get through the rest of the year?

Well, we certainly found that execution in our most mature region was quite strong in the Americas, and to Kirk’s question and Raimo’s question about the shift in resources, that was somewhat -- that puts a strain on the organization when you implement that kind of change. So, to see that kind of execution was really encouraging. Of course, we would like to see that globally and consistently across all our regions, and that’s how we're focusing for the balance of the year.

Got it. Finally, the cloud business, if I take that $70 million that you reported, let's say we don’t know what the sequential change in the cloud business was, but the value of cloud subscription is may be understated relative to the license by about a 3X factors; if I do some rough math going back to the old scores, you can never escape from me, I get license equivalent, the value of book business growth rate was substantially greater than 30% to 35%. How do you guys think about, how you explain the growth rate of the Company on the license that given this cloud business up a 100% year-over-year. Thank you. That’s it for me.

It’s certainly something that we look at in the context of the composition of revenue and how does it move between the services line, where cloud is embedded and the license line. And I’ve been articulating for couple of years that as cloud continues to grow, it’s going to be a drag on the license line. And that certainly is the case in the quarter when you look at the fact that cloud doubled to $17.7 million, so I want to around that’s 18, I could say it’s 18, but it’s doubled year-over-year. And there is certainly an equivalent drag that is greater than a dollar for dollar drag because the ratable nature of cloud says well that's different than how you might recognize the potential dollar upfront. In terms of quantifying it, I mean I leave that to you guys, but I'll just tell you thematically that yes, the shift to cloud is drag on license.

And our next question comes from the line of Keith Bachman from Bank of Montreal. Sir, your line is now open.

Hi, thank you. I wanted to follow on one of the six questions that Kash asked. The growth of deferred was a little bit different, and you'd indicated that cloud doubled year-over-year and yet the mix of long-term deferred revenue was up substantially, call it 25% of total deferred. And I'm trying to reconcile if cloud is a lower duration than other portions of your business, why is longer term deferred growing as a percent of total? And it's actually up pretty meaningfully; last year, it was call it 21% of deferred in the March quarter and then I have a follow-up related to that.

Yes. Keith, thanks for the question. Actually, you're spot on in terms of the composition of your business and how is that feather in to deferred except we see our cloud transactions having the longest durations. Those have been 2.25-year duration on a weighted basis, and we saw that same result in Q1. And when you look at the composition of deferred and the delta between short-term and long-term, the biggest impact is in fact the growth in cloud.

Okay. Well, my follow-up relates to that, Dave, and thanks for your patience on the question is, should investors see condition, because in fairness to you, if you look over the last two years, long-term deferred as a percent of total has been growing, consistently, almost every quarter by a percent or two on a year-over-year basis. So, as we exit FY18 January quarter, should we expect long-term deferred to again represent a greater portion of the total than it had say in the January quarter 2017?

I think that that would be an accurate assumption for your model. And again, driven by -- duration of cloud has the largest -- has a large impact on composition between long-term and short-term. And we expect to do $85 million of revenue this year. On our February call, we set an expectant for cloud billings of $150 million. So, when you look at those two components and then we’ve given you an update on Q1 results as it relates to revenue, like how are we tracking against that objective. So, build that in to your model and again, we updated our full year billings expectations for fiscal 23018 which of course is a key input for your deferreds from $1.4 billion to $1.425 million of which 150 is going to be cloud. So, I think you put those parameters and you’d see a continued trend that you've articulated where long-term growth as a percentage of total. Now, let me, just because it's always good fun -- when we get towards the end of the year, I'll be coming back to you guys with specifics around our adoption of 606 and what that implies in terms of balance sheet composition that our ending balance sheet on January 18 will be under current standards. So, all of the modeling that you’ve just -- that we've just talked about will reflect current accounting. And then we will have to take into account the implementation impact on deferred when we adopt 606. that’s for the second half of the year.

And our next question is from the line of Abhey Lamba from Mizuho Securities Your line is now open.

Just continuing on that theme, Dave, about deferreds. Your short-term deferreds usually have been kind of sequentially flat to up in the first quarter but there was a meaningful downtick; is that all related to cloud kind of doing better or is there any other metric also, any other dynamic also impacting that?

Well, thanks for the question. Yes, the short-term deferred sequentially from a Q1 perspective has been, even if zero change sequentially to plus 200 bps, I think it was 100 to 200 bps decline this quarter. So, I put that in the same range from a consistency perspective and directly impacted by one, the momentum in the could business and probably a little bit of drag from some of the inconsistent performance we saw in EMEA.

Got it. And the other question I had was on the new customer signings. Do you think you’re on track to hit the meaningful -- to hit about 3,000-customer target that we need to hit your 2020 target, given the performance we had in first quarter?

Absolutely. Again, when we look at our trajectory going from -- getting to $1 billion in 10 years, we were not adding roughly 2,000 customers a year. And as I’ve pointed out as a metric to watch as we go three years to 2 billion, we want to accelerate that customer acquisition to get from 2,000 to 3,000 a year. I think all of the activities that we’ve been implementing in terms of our go to market activities as well as our product portfolio are all geared towards, not only satisfying existing customers but providing a platform for us to accelerate customer acquisition from 2,000 to 3,000. We're one quarter in to that 12-quarter journey to 2 billion. And I think all of the activities that we've implemented are trending in the right direction.

And our next question comes from the line of Phil Winslow from Wells Fargo.

I just wanted to focus on deal sizes. Obviously Q1 is typically not a big deal quarter for you all, but you also sold a pretty healthy number of 100K plus deals. When you look at the pipeline in particular, I know this -- the large deals were a focus of last year and sort of building out some headcount there. How you're thinking about deal sizes, especially as you sort of contemplate that you have the guidance for this year and just one great follow-up to that?

As Dave just answered the last question and as we talk about most time still, we got this great duality; we want more net new customers and more transaction velocity with landing in accounts to continue to complement the EAA progress; the department-wide usage that tends to drive the six and definitely seven and eight-figure deals that we're doing. We were really excited about the big deal momentum for this quarter. And I think that continues to be a testament to two key things. One, people standardizing more and more data on Splunk and more of their use cases and business processes; and two, I think we're seeing a higher coupling of some of these applications, ESI, ITSI, UBA with the underlying platform and that jacks up the total deal value as well. And it's a healthy sign. We continue to make investments in capacity and product so that we remain as interesting to those net news is that complement that path to drive with the big deal of success that we're continuing to see.

Actually your comment that led to my follow-up which on ITSI and UBA. Obviously enterprise security has been hugely successful add-on or just upsell for you all. Wondering if you could give us some sense of ITSI, UBA sort of where they are in their lifecycle, either those two start to reflect to sort of how you're thinking about those?

Yes, we're really excited about the performance of both of those this quarter with ITSI having bigger numbers; it was -- it went production roughly year ago. So, we led guardrails off after I think a really thoughtful new product [ph] introduction process to make sure that gets scale, and it continues to grow at a really healthy and interesting rate and we're seeing in some of the customer use cases I cited during the prepared remarks. We're seeing people are dropping that on top of the IT systems they currently have to do a much better job of visualizing those end-to-end service chains across hundreds or thousands of disconnected software and hardware components. UBA, we've really tried to take the same approach last year as we did with ITSI the year before, which is we're excited about the acquisition of Caspida. We love how UBA utilizes months typically or quarters or years of data rest and more of a group architecture. We love to be on supervised machine learning that's part of it that really drives some of those unique aha moments that could indicate insider threat and unusual compromises. And we have started to let it loose. Q1 was the first quarter where we’ve broaden the aperture on the qualification criteria for accounts. We’ve seen some good scaling success and feature success from the last few quarters. And it was a nice contributor for the quarter. There were more than $1 million deal that UBA itself drove. So, it's nice to see that really sort of get traction and we're increasingly confident that that's going to be a very critical part of our portfolio.

And our next question comes from the line of Michael Turits from Raymond James. Sir, your line is now open.

Hey, guys, Michael Turits. So, two questions, one -- first on Europe. Can you drill down a little bit on what exactly happened there? It does sound as we talk about the license maybe not as much upside in the short-term billings; you said that that issue had to do with Europe. So, what exactly went wrong? Essentially, there is a leadership change and how long does it take to fix that, is that an ongoing impact?

Thanks, Michael. So starting maybe into high level positive. We're seeing the same dynamics in Europe they’re seeing in Americas where when I fly over there, at least twice a year, usually three to four times a year. And the conversions I have with the major and mid-tier accounts there are identical the conversation in America. They're dealing with the exact same issues; they're looking at Splunk in the same way’ the competitive landscape looks extraordinarily similar. So, my expectations for European performance are Splunk [ph] and the same as what I expect for Americas minus the fact that it's something that we only entered six plus years ago and doesn’t have that same critical master track records of America yet. And that goes back to the large accounts we have there. We do really want Americas and financially in multiple industries but we're well known in financial services, telco, federal government circle, state and local and others. And it looks very similar there with multimillion dollar deals in Europe, just hoping Americas. That said, it’s definitely more complex environment, one you're far away from corporate, so that has some impact, but to the cultural difference, the language differences, the much higher reliance on channel, the difference in cloud adoption, all the different factors that we see in the U.S. So, there is learnings that the team there has to have. And they are smaller, which means our critical mass effect that we get by having teams on East Coast, but a lot of teams on the East Coast for example on the reference selling that happens between those accounts, it just takes a little bit longer to build in Europe. All that aside, I expect the same adherence to focus, process, operating cadence, sales discipline, accountability in EMEA as I do over here, and Susan certainly does. And she is one in charge and she probably should be answering this but she is not on the call. And I feel that we’ve got very talented reps in EMEA. And I'm actually really pleased with a lot of hiring that’s been happening at the first and second line manager level, and I've seen some really significant upgrades as we’ve done that. We just have to make sure that as we go from 1 billion to 2 billion at ten years to get to 1 billion, three to two that’s a high bar, it requires a different set of skill sets and capabilities to make sure that that we jump over that bar. We added a new leader to Americas for instance a couple of quarters ago and I think that was part of the execution we saw in Q1 that we bring in the right talent and no one gets off the hook. If we're going to go pursue this $55 billion TAM as quickly as we want need too, that one’s got be playing at the top level.

Okay. And then, my follow-up, I just wanted to get a clarification Dave that you’ve guided to a 27% tax rate. I think is that the first time that you gave that guidance because based on the models out there are -- don’t have that kind of tax rate?

Hey, Michael. It is the first time we guided to it. We're incorporating and tax effecting our non-GAAP results, which you will see in our disclosures and that’s a common factor. So, I want to make sure everyone has that input for their models.

Our next question comes from the line of Brian White from Drexel. Sir, your line is now open.

Doug, I'm wondering if you could provide a little color on the security business in the quarter. And I'm wondering, prior ransomware attack, how does that impact conversations with customers around security, especially over the past couple of weeks?

Great set of questions. So, in that the content description at Splunk, it’s a digital world, people -- the business decisions people to make and the departments each of us manage are organic living things, they are staging all the time, data helps you keep track of that. And that’s why I think we've seen all departments and security I think has the lead go to a security analytics and machine learning driven approach versus a more static rule driven approach. A lot of those lot generation SIM replacements that we’ve grown into are really just a reflection of, I need a constant stream of data, I never know what question I'm going to have to ask of that data and I needed an architecture and a set of solutions that enables me to be that flexible. Ransomware is one of hundreds of constantly morphing advanced persistent attacks that we all have the joy of dealing with as we move to this online and constantly working world. We actually had a number of customers that have been using us for ransomware all along. We announced some assisted videos right after the WannaCry attack just to make sure that customers could share best practices that we’ve seen with other customer on how Splunk can be used to look at that endpoint breach and start to both see patterns of potential ransomware and then track and trace its path. And it's actually an app that we just put up on the app store on the Splunk base that specifically deals with ransomware. I think it's a sad thing that's happening around the world. I think I talked about on CNBC or Bloomberg a couple of days earlier that while lot of people are thinking that ransomware might be last year's issue, I think it's going to continue to be an issue going forward. And Splunk is there; we’ve customer successes; our number one corporate priority is to literally pass around our corporate walls and we're there to help in every way possible so that we can keep our corporations and customers safe and have they continue to grow and deliver the way that they need with their customers.

Okay, great. And just a follow-up. The public vertical, what trends did you see in the government customers in the quarter?

We had some strong wins in public sector this quarter. I called out the EAA with Lockheed Martin on the prepared remarks. Jefferson County Public Schools, University of North Carolina, State of Kansas, U.S. Navy. We're actually seeing that start to replicate around the world. In the UK, the Ministry of Defense signed a really interesting contract. So, I think we're learning the motions of state, local education and fed in different parts of the world. And when I look at the potential over the next few years, and Susan has that targeted as one of our highest growth theaters long-term that traction that we're getting within public sector is really interesting. It is overweight in security right now, and I think there is a good reason for that that the lot of the government agencies have a lot of difficult events over the past two, three, four years. And the team there is really leading forward to try and transition that security footprint, keep growing it. There is still a lot of opportunities; we're underpenetrated despite that footprint. But transition that to IT operations, application delivery and then the emerging IoT and business analytics use cases.

And our next question comes from the line of Sarah Hindlian from Macquarie. Your line is now open.

Hi, thank you for taking my questions. Hi, Dave and Doug, hope you guys are doing well. I had a couple of bigger picture questions beyond the quarter I wanted to talk about a little bit at a detail. So, I guess really the first one is, I wanted to drill down with you guys a little bit on how you're bifurcating and running your channel business versus direct sales today, and also hear a little bit about how those dynamics are working along with the AWS marketplaces opportunities you're starting to see unfold there. And then a follow-up question I think is worth talking about on this call would be, are you really seeing any changes in the competitive dynamics in the marketplace out there that are causing you to really drive some of your go-to-market changes or is this really just getting in front of the market opportunity in front of you that you see in particular in the international markets?

Thanks, Sarah. Let me -- I'll start with the last first just because that then backs into coverage which is really where a lot of channel sits. So, I honestly have not seen a meaningful change in the competitive landscape in last two years. I think customers advancing are getting little bit more clear on which technology should be used for which task. And the multitude of different items out there that would all fall into big data, analytics, EI, all really do have special purpose based on the architecture that each of the teams take when they’re developing those products. So, account after accounts that I go into, I think it's getting more obvious. Where Splunk has strengths and we keep talking about that flexible schema less architecture that allows us to quickly put data and ask multiple questions of that same data and get rid of financers, and that’s a got a whole different value prop than some of the more hardened data tools out there, that also have strong value prop here, sort of different use cases. So I haven’t seen a big change there. Our issue is how do we -- given how important machine learning analytics and big data is and how difficult -- how complex and confusing that landscape is and how a lot of customers are still trying to parse through it means for them, how do we reach them, how do we make sure they understand that Splunk exists, understand the strength of Splunk and the use cases that we’re best tuned for, which is why you'll hear Dave and I harp non-stop on how do we get more feet on the street, more feet on the street. There is only so much that we can do as far as our capacity to hire, our capacity to train and then the operating expense that we can actually bear around that. So starting really for years and with a hard emphasis about three years ago, we really started to rotate much more aggressively on channel. We’ve made I think some really strong shifts there. We’ve continued to add leadership around the world. There is a different set of executives all the way down to individuals to field level that drive our channel relationships to make sure they -- we find the right ones, we enable them the right way and they’re assisted net selling process. But we have neutralized the channel impact for our field as much as we possibly can. There should -- there is not a difference to them, on a commission or quota basis on whether a channel partner has originated deal or closing the deal whether they do. So, we’re trying to do the standard best practices and making sure that we get the leverage of channel while still dedicating resources directly to channel and it includes AWS marketplace as well.

Our next question comes from the line of John DiFucci from Jefferies. Sir, you line is now open.

Doug, my question is for you, and it comes back to Europe. Everything you said so far on this call leads us to believe that you think there is some issues that strong hazard rectify in the region. And I appreciate that; it makes sense. But I just want to make sure that you’re not seeing any signs of macro weakness in the region, especially since in years passed, this would have been the quarter we would have seen broad weakness, not for you in particular but just for across all the software. We’re not hearing that from anybody else but there is couples of things that make me ask this. I mean, is expectations -- and you talked about that or the same in Europe as they are in U.S. and it should be, you mentioned you’ve been there only little over six years. So, that’s a long time to try still get it right I think. And then, also you talked about the difference in cloud adoption, implying as less of that in Europe. But that could adoption, and that’s what we've heard, although it’s picking up just generally, but cloud adoption sort of suppresses the reported results relative to upfront license. So, if you can just -- I mean how confident are you that there is not something else going on there?

Thanks, John. What I viewed in Europe is not a macro issue. I view it more as a Splunk execution issue. And while we have been there for six years, if you look at the typical management shifts that occur as the company goes from zero to $10 million to 10 to 100, 100 to 200-300 and 300 and beyond. And Splunk is no exception at the sales leadership level. There usually are 2 or 3 or sometimes 4 or 5 depending on the company, senior sales leadership changes because of different skills needed when you're trying to really figure out the market in event to scale. And European business is getting to a decent size now and a lot of the profit -- they need to adhere to the America, to the processes that we've seen work in the U.S. and up level the game the way that we had to up over again in U.S. as we get into this sea level over and over within these organizations if they want to be successful. So, I really look at it as a focus, process, swagger and execution challenge within EMEA. And I think that changes Susan is in the middle of driving should be positive over the course of the coming quarters.

Okay, great. By the way, I like that word swagger, so hopefully we'll see in the future.

There are some -- many of the impressive brands that you’d expect, we talked about them in the past calls IKEA and BMW and Barclays and UBS and great, great companies that are top notch in their utilization of data and their IT practices, obviously in their competitive execution globally, love Splunk, use Splunk and multitude use cases, many of them as EAAs. So, we've got the credentials and the referncability within that region. We just have to continue to leverage that and up our game. And I think swagger is a piece of that, the ability to walk in with confidence, and we got that, we started to develop over 3-4 years in Americas we went from starting to a manager of IT to Director to VP to eventually the CIO. Everybody is going through that same process in EMEA.

Our next question comes from Jesse Hulsing from Goldman Sachs. Your line is now open.

Yes. Thank you. It sounds like based on your commentary that the Americas, the sales reorg fairly well and the cloud business is strong. And it sounds like most of the cloud business is still in the U.S. based on your geographic commentary. So, I'm wondering, it looks like you've maintained your guidance for cloud for the full year at $85 million. I think that's what you guided to on the fourth quarter call. I'm wondering why not raise that or what's the reason for not taking that number higher, if you're seeing the trend that you like to see in the cloud business?

Hey, Jesse, it's Dave. First, when we set our plan and shared that with you guys, we had built in the momentum we'd experienced exiting last year into our model and expectations for this year. Secondly, it’s one quarter; Q1 is in the can; and we are certainly happy with our performance and particularly our performance in the cloud for the quarter and we’ve got three quarters to go. And as we all know, the yield that you realize from a revenue prospective from cloud, diminishes with each subsequent quarter. So, our largest quarter has historically been the fourth. We expect that’s going to be the case this year as well. But the actual revenue yield in cloud from fourth quarter business is going to be nominal as a percentage of the total. So, we’ve built our model assuming a certain growth rate for cloud, a certain seasonal nature of those cloud transactions, and we're on track with that.

Got you, and that makes sense. And Doug, a question that I’ve gotten a few times over the last quarter from both -- the relative merit I guess of single tenant cloud versus multi tenant cloud offerings, which some of your competitors have. I am curiously to get your perspective on how customers are looking at it and whether that matters and then, I guess longer term does it make any difference on the gross margin side of that business when you start to get to scale.

So, my view from a customer basis is if they had their way and there is no difference in price, I can't imagine why anyone would not want single tenant. It provides isolation performance, isolation on data, a lot of the things that we're seeing, legislative movements around the world address I think are easier to manage in this to run single tenant. We the real issue I think has always come back to the SaaS provider and the economics of the SaaS providers trying to drive. We’ve got -- we're continuously investing and updating the core platform. So, we can drive the right margins, have the right scale and still deliver the right performance to our customers. And I think a lot of the wins that we've seen over the past few quarters in cloud are because they really see demonstrable proof of concept and others, the high, high scale that we can get with our cloud offering and the high availability of performance characteristics they are looking for. So, I think that continue to optimize our software to take advantage of the different services that AWS and other cloud architectures offer, the horizontal scalability, the containerization, the micro services, orientation, is a very important thing for our development team to continue to focus on and is a core driver and portion of roadmap for our cloud team. And that’s where we're focused on to keep service levels where they are and drive margins where we need them to be.

And our next question comes from the line of Fatima Boolani from UBS. Your line is now open.

I have a question for Doug, then a question for Dave. Doug, you have been adding customers at a pretty consistent clip of 500 and change every single quarter. I'm wondering if you can comment on if each successive quarter the shape and profile of the 500 cohort that you're adding is a little bit more sophisticated, a little bit larger. And then what I'm trying to get out is, the new customers that you're landing, are they showing an incidences or cadence such as buying bigger, buying more such that you can kind of hit that $301 million deal mark. So, just some commentary around the shape and contour of the customers that you're adding today relative to the kind of the same side of customers that you're adding a couple of years or so.

I don't think that they have dramatically changed. I think what is helping to speed time to value and speed adoption which ultimately is I think the core drivers that Dave and his team have been looking at on this cohort of revenue expansion is more and more solutions being available for our customers. Obviously our premium solutions, enterprise security, UBA ITSI help and I think are making an impact. But Splunk base over the past four years has grown from less than 500 different available solutions in Splunk base to over 1,400. And we've made a lot of progress within Splunk base as well. We certify growing number of the solutions that are there. There -- a growing number of supported and read effectively. We've delivered different technologies to help with more rapid generation of solutions. So, I think part of what is helping that big deal success, if you can drop a solution on top of Splunk, it's solves [ph] the problem more quickly and eventually to more data going into the...

That make sense. And then question for Dave. Dave that professional services mix, that 11% in the quarter is quite a bit higher than what we’ve seen consistently in the past couple of quarters, and maybe even a little bit higher than the historical guide posts you've provided in the 5 to 10 range. I’d surmise as customers are growing their environment and getting little bit of cloud, a little bit on-prem, things are getting a little bit more complex. But I'm wondering if you could just maybe put a finer point on why that mix really ticked up this quarter.

Sure. What we’ve actually seen in the back half of last year was professional services growing its percentage being at the top end of what had been our historic range of 5 to 10. We've been I think at 9% of revenue for both the Q3 and Q4, which candidly was hard to do given those are seasonally largest revenue quarters overall. It’s certainly an area of focus for us to deliver services, both with our own resources and together with our partners because we know that particularly when customers go from multi-department to larger standardization type departments that services are significant enabler. So, we're really interested in delivering the right kinds of services and having our partners enable to deliver the right kinds of services to our customers. So, the 11% wasn't significant outlier in my mind in light of it being Q1. I think for the balance of the year, we'll probably still be sub-10% but call it -- I'm not updating the outlook; it's been 5 to 10. We have services -- you can forecast when you're going to close the services contract, it's more challenging to time win the services when we delivered and that's when the rhetoric happens. But I do think they’ll be pushing towards the upper end of our historic range that 5% to 10% range for the year.

Our next question comes from the line of Matt Hedberg from RBC Capital Markets. Sir, your line is now open.

Just one for me. I guess thinking about European drivers, one of the things we're hearing from other security vendors is early customer conversations around GDPR that reached notification. And I'm curious maybe not as a driver this year but are you hearing customers ask about that when they think about getting a better understanding of the threat landscape and where they could be exposed? Could that be a driver for calendar 2018 for you guys?

We heard that European drivers -- the key part of your question, we missed. Could you just repeat that, please?

I was just curious, when you think about European drivers, our customers asking about GDPR in the context of Splunk and whether or not that could help them get a better understanding of the direct landscape?

Got it, yes. That was a key thing that you got on. Thank you. We actually -- our legal team issued a white paper, our GDPR recently and Splunk is uniquely positioned to address the huge chunk of the -- both monitoring and enforcement aspects that look like they are going to be hardened by that GDPR resolution. We're just starting to ramp up the communication around that within Europe. And if we do it properly, I think that it could be a good positive impact for our European business.

Our next question comes from the line of Alex Sukin from Piper Jaffray. Your line is now open.

I’ve got one maybe a strategic question and one more tactical one. So, first, it sounded like this was a pretty good EAA quarter for you guys. And I wanted to ask, when you move a long term customer to an EAA, can you quantify for us what's the average uptake or impact on the ACV for that customer? And thinking longer term, how many of your larger customers do you expect ultimately get EAA? And then I got a follow up around the sales question around Europe.

So, I'm not sure if we -- I don’t remember seeing, Dave. Do you guys do any analysis and quantification of what the average bump is on EAA?

Not specifically and it’s -- what we have articulated is a couple of things. One, our experience shows that it’s typically call it a four to five-year journey from a customer's initial buy to when they get to the maturity inside of their organization where they would move to an EAA. So, we look at some of our longer tenured customers that are under the EAA umbrella. And that’s been the most typical trend. Now, I’ve often pointed out that when we talk about seven and eight-figure orders, those are not synonymous with EAAs. So, last year, we did a 160 sum seven-figure transactions and a sub set of those with our criteria for adoption transactions. So, if you think about the total body of our customer base today, given Q1’s results, call it roughly 14,000 customer; we’re on a path to 20,000 and last year, we added 22,00 accounts, we ended the year with above 13,000 plus and we did a 165 large orders for the year, which is subset. So, you start doing the math, you say well the absolute number of EAAs that we have close to date is a small percentage of the customer base. So that's a second part of your question like how many are you going to do and I think it will continue to be a fractional component of the overall customer base based on maturity of those customers. To Doug's point we haven't gone and said well here is what the typical uptake is in dollars. What we have done and we shared at the analyst day is we’ve given an overall cohort in terms of buying behavior for customers. So, just quickly, we looked at 100% of our population, what was their buying behavior after four years with us and that was about 2,200 accounts. At that time they purchased eight times the capacity and five times the dollars. We updated that same population, it turned out to about 1,500 accounts because the other 700 haven't hit five years yet. And after five years the capacity purchase was like 10.5 times the capacity and 7 plus ex the dollars back to Splunk. Obviously, a subset of those were EAA customers, but that type of cohort we think is consistent in terms of our opportunity with the customer base.

Got it. Thanks. And then just another question around kind of the sales transition and disruption. And I think you guys talked at length about that and condition thus I think to think about that in both the fourth quarter call and on the analyst. So, I'm curious how much of these issues in Europe were you expecting versus how much of you've been surprised by them? And as you look at your guidance for the rest of the year, is it tempered more by the unknown of how many customers will adopt cloud solution versus not or it is more tempered by the issues, the potential sort of continued [indiscernible] issues?

Honestly, I was disappointed and I know Susan disappointed in the performance in EMEA. So, whatever -- we didn't factor, and we factor in some disruption. So, we didn't factor in performance that we want to see in that group. The hard to quantify piece and a lot of what you hear from Dave is how quickly our customers is going to move to cloud and/or not. And we’ve worked really hard over the past three years to try and create as mutual a comp plan as humanly possible, so that the customer gets to decide. Customer success is our number one priority, considering that, we want to put customer first in everything we do. And whether a customer’s on-prem in the cloud, whether the perpetual subscription, it’s got to be a customer’s voice and choice. And so, we've been working hard to not have comp be undue influencer, which means that there is a degree of variability every single quarter on how our customer is building, and that's why a bigger variable than anything else.

Our next question comes from the line of Nate Cunningham from Guggenheim. Sir, your line is now open.

Hi, guys. Doug, have you seen AppDynamics Log Analytics product in the market at all? And can you just talk about how the New Relic partnership fits into your broader application related strategy?

We know that AppD has been working on a lot of the analytics offering. We haven't seen any change in the competitive offering or situation with that. I think it will -- it has a different set of value props and a different capability of set from what we have. And that AppD integration is actually one of the -- is well downloaded and well used integration with Splunk, because we want to combine the integer to what's happening with specific set of applications, with all the surrounding information you can get from data bases and servers and network and endpoints and the other true service view pieces that you need to understand the health and characteristic of n app. We've had an AppD and Dynatrace integration for a while, we've been working on New Relic on as well and we see a growing number of our install base, continue to choose New Relic. So, there is really a market response as well as the partnership between two companies that drove the New Relic introduction. And we've seen some good initial uptake. And as we get some success stories, I'm sure I’ll share those with your guys in the coming quarters.

And now, we have time for one more question from the line of Mark Murphy from J.P. Morgan. Sir, your line is open.

Hi. Albert Chi on for Mark Murphy, most have been answered but just quick one of the larger deal metrics for orders over $100,000. It looks like there is little bit seasonality in that growth in entire years but can you talk about anything you're seeing with that? And maybe if is there anything we are missing in terms of how deals are accounted within cloud structures or any sort of dynamics about whether it's different purchasing through AWS for example?

No. I think we quantify deals the same way; AWS deal that’s six figures, it’s six figures. So, I think it’s a consistent count.

Yes. I don’t see -- it’s Q1; I don’t think there is anything indicative to what we see in the greater than 100,000. We had a really impressive quarter with some larger transactions that are embedded there. Doug mentioned four accounts that were EAAs in the quarter. And these are really important adoption standardization transactions where customers are really relaying on our technology and our solutions for some mission critical initiatives they have. So, I think when we look at certainly composition of the quarter and composition of our larger orders, it’s pretty consistent with what we’ve seen over time, outside of like real strength at the top end.

Meaning we saw real strength.

We saw real strength at the top end. Yes.

Got it, okay and you did talk about that, and maybe I'll just send on one more. A lot of the public clouds we’ve been hearing about, have been talking a lot about computing and IoT. And I know you recently started talking about that business. The public clouds have talked about how that’s been one of the faster growing parts of your business. Can you talk about how one might be tied to that in terms of growth?

I think that Autolib example that I shared during the call is a good example of mix between more economic our business analytics and IoT. All those sensors that exist and a lot of those [ph] need to communicate somewhere and there is the edge computing is how do I collect that information of sensors and then there is a secondary aspect of how do I combine, what’s now hundreds or in many cases thousands of different data sources that all have unique structures or are unstructured depending on how the source is formatted. And then IoT has got a tone of very loosely or unstructured data, especially from the last generation, the more data oriented systems and how can you intermix those with different data sources. At the edge, on the device itself, and back in more of a central location or across a multitude of different locations, so you can get that analytical insight and make real time decisions. And that Autolib example was, [indiscernible] data from the cars themselves, data from the apps, the consumer apps that they pushed, which is going to be much more of a log flow system to drive visibility on the health of the cars, understanding the location of cars, that can stay some of the appropriate places to serve customers and then make sure they've got the right couponing, discounting and pricing incentives to drive their business. So, that's a great combo of local processing, edge processing, core processing and then the analytical mix that's necessary to bring all those different things together so you can make business decisions.

And that concludes our Q&A session. And I would like to turn the call back to Mr. Ken Tinsley for any closing remarks.

Great. Brian, thank you, I appreciate your help today. And I know we went long, we wanted to try to get in as many questions as we could. So, thanks for everybody's patience. If there any follow up you need, don't hesitate to reach back into us tonight, we're happy to help. Thanks again.

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