Ken Tinsley - Vice President of Investor Relations and Corporate Treasurer Godfrey Sullivan - Chairman Doug Merritt - President and Chief Executive Officer, Splunk Inc. Dave Conte - Chief Financial Officer, Senior Vice President

Jim Suva - Citi Philip Winslow - Credit Suisse Brent Thill - UBS Melissa Gorham - Morgan Stanley Daniel Ives - FBR Michael Turtis - Raymond James Ed Maguire - CLSA Albert Chi - JPMorgan Jason Velkavrh - Robert Baird Andrew Kisch - Barclays Kirk Materne - Evercore ISI Matt Hedberg - RBC Capital Markets Kash Rangan - Bank of America Brian White - Drexel Steve Koenig - Wedbush Securities Tim Klasell - Northland Securities Greg McDowell - JMP Securities

Good day, ladies and gentlemen and welcome to the Splunk Incorporated third quarter 2016 financial results conference call. At this time, all participant lines are in a listen-only mode to reduce background noise, but later we will be conducting a question-and-answer session. Instructions will follow at that time. [Operator Instructions]. As a reminder, today's conference call is being recorded. I would now like to introduce your first speaker for today Ken Tinsley, Corporate Treasurer and Vice President of Investor Relations. You have the floor, sir.

Great. Thank you, Andrew and good afternoon, everyone. Thanks for joining. With me on the call today are Godfrey Sullivan, Doug Merritt and Dave Conte. We issued two press releases after the close of the market today and both are 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 fourth quarter and fiscal years 2016 and 2017, transaction, product and services mix, planned investments, trends and momentum in our business, including cloud business and impacts on our margins and expectations regarding our executive transition. 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 filed with the SEC including the forms 8-K filed with today's press releases. These 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 and non-GAAP results is provided in the press release and on our website. With that and for the last time, let me turn it over to Godfrey.

Thanks, Ken. Greetings, everyone and welcome to the call. We have several topics to cover today. First and best are the cool stories about our customers. We also have great results and outlook to report, also of course an outcome of our customers and we also have a great pleasure to introduce the new CEO of Splunk. So let's start where Splunk always began and I have been thanking our customers for their incredible and passionate support. I have the honorary position of acting as MC for CONF and this year was the best year ever. Customers including Target using Splunk to analyze data from automation equipment and robotics in their distribution centers to drive down supply-chain costs or BMW using Splunk to analyze manufacturing and energy data to resolve production issues and perform predictive maintenance, Sonic Drive-In using Splunk to analyze data from over 100,000 point-of-sale devices across 3,500 retail locations to deliver consistent customer experience and detect gift card fraud and RBC Capital who told the story of a 48-hour Splunk Hackathon and coming out with multiple new corporate apps that they immediately put into production. Thanks again to our customers for their innovative use cases and their passionate support. Splunk is an amazing place to work and I can speak for every employee in saying that our customers are our number one source of inspiration. We will get to the Q3 results in a moment, but the second order of business is to announce our new CEO, Doug Merritt. Before I turn it over to Doug, I want to express my gratitude to our employees, customers, partners and friends for your incredible friendship and support over the years. The last seven years have been the most fun and rewarding years of my professional career and so announcing that I am retiring feels pretty strange. In reality, I want to jump on airplane and go see some customers. But I have been doing that for four years and it's finally got to that phase of life where I would like to spend more time with the family. All of you who are my age know what I am talking about. We have all run hard, too many marathons, weekend warriors and a 24x7 job and now we have some accelerated depreciation on the chassis. Better to have some fun now before the wheels fall completely off. So I have been working on the Board on a succession plan for some time now and that's every CEOs responsibility. The Board's been involved and supportive but I consider this my responsibility to prepare the company for the next phase of growth. NFL history is littered with quarterbacks who stayed too long and somewhere along the line, they forgot that this is a team sport. When I recruited Doug to Splunk two years ago, it was with an eye to succession and I am delighted that we are all now ready for that successful transition. I will be working with Doug through Q4 to ensure a smooth transition and then moving on to non-exec chair. So now to your new CEO. Doug is a rare human. One who is smart, competitive and creative. And yet he is kind, he is compassionate and always thoughtful of everyone around him. He is also rare in having started his career as a programmer. I think it was Doug, C and COBOL?

Even more detrimental, RPG.

And a little RPG to throw in. Then he rotated into 10 plus years sales and marketing. Then spent 10 more years in development, product management and product marketing and six years as a CEO leading startup companies. He is uniquely qualified to lead a technical company like Splunk and I am so happy to be able to pass the torch to someone I respect and trust. At Splunk, he has done a great job of building our field organization and contributing to our success. I am confident that Doug will do a great job as the next CEO for Splunk and I look forward to being involved with the company as non-exec chair and to assist in any way possible. So Doug, congrats on your promotion and it's an honor to pass the torch to you.

Thank you very much, Godfrey. Getting the opportunity to be mentored by you and learn from you has left an indelible mark. Of all the remarkable leaders in high-tech that I have had the privilege of working with and getting to know, you are truly the absolute best in the industry. Thank you for being such an incredible role model and teacher in person for me. I couldn't be more grateful and I am truly thrilled that we will be able to continue our relationship together with you as non-exec chair. So, on to our results. We had a great Q3 and I want to thank our customers and partners for their enthusiastic support and our Splunk employees for their many contributions. Total revenues came in at $174.4 million, up 50% over last year. And I am thrilled that we added over 500 new customers to the Splunk family. Godfrey mentioned some great customer stories from .conf. At the same time, our product teams made an impressive set of announcements including Splunk Enterprise 6.3 with double the performance, lower TCO and advanced visualizations, Enterprise Security 4.0 and our new Splunk User Behavior Analytics or UBA to better detect and respond throughout the lifecycle of a security attack as well as updates to Splunk Light, which is now available through cloud service and Hunk, what might be more naturally described as Splunk Analytics for Hadoop and going back to our Splunk roots, which began by focusing on the IT Ops SNAP delivery markets. We are very happy to be launching our IT Service Intelligence solution or ITSI, which is focused specifically on those core markets. More than a dozen Splunk customers such as AdvancedMD and Vodafone have been running ITSI in production and are raving about how easy the solution is to install and configure and how quickly they are able to improve service levels and customer satisfaction. For example, AdvancedMD uses ITSI to monitor the health of their $30 billion claims flow process to ensure uptime and an improved customer experience. They reported seeing critical insights literally days after install. In Q3, we had great customer wins in IT Ops SNAP delivery, including Getty Images, Zillow, Cisco, INTERLINKS, Independent Health and NASDAQ. As you know, our Q3 also lines up with the federal year-end. So let me switch now to the highlights of our public sector performance. In October, we held our first GovSummit in DC where we had more than 1,000 attendees gathered to share great use cases in how Splunk is helping government and education organizations fulfill their missions. For example, the U.S. Citizenship and Immigration Services said that "Splunk is the cornerstone that glues a lot of our technologies together so we can get fast reaction time on our data." And to quote the White House Military Office, "we use Splunk to be proactive. Since enabling, it's been a total mindset shift." And finally, Arizona State Information Security Office relies on Splunk to keep the data of their 83,000 students secure, mitigate phishing and spam and proactively identify payroll fraud. It was a truly great event. And I want to thank our customers for their enthusiasm and congratulate the Splunk public sector team on a great event. We also had a really strong public sector quarter in terms of customer expansion. The U.S. Postal Service used Splunk originally to support IT operations, but rapidly expanded their security when they were breached. Today, in addition to security, they use Splunk for network management, big data analytics and email monitoring. And we had the Department of Energy who has signed an EAA with Splunk. We also saw a great momentum in state and local. Fairfax County, Virginia, a new Splunk customer chose Splunk Cloud and ES as their next-generation security analytics platform. The State of Arkansas IS Department signed an EAA choosing Splunk as their statewide SIEM to ensure regulatory compliance and improve their security posture. And the State of Maine purchased ES over legacy SIEM. We had an impressive Q3 in our commercial segments as well led once again by the Americas team that also drove EAAs with multiple customers, including Synchrony Financial, who signed an agreement for Splunk Enterprise, ES and IT Services Intelligence and Groupon, who expanded with an EAA to deliver improved user experience across channels through order monitoring, mobile usage and behavior analysis, merchant performance and point-of-sale analytics. We also had great customer wins by our international teams, including Lloyds Banking Group who adopted Splunk as their log analysis platform, based on superior functionality and a flexible license deployment model. And IKEA expanded this quarter and also spoke at our SplunkLive! .conf about why they replaced a legacy SIEM with Splunk Enterprise and ES. The legacy SIEM couldn't scale, could not serve thousands of users or ingest all types of data. IKEA also recognized the strength of Splunk as a platform to help with IT ops and business analytics by using Splunk to compare real-time sales to historical sales across regions. Other notable international wins this quarter include Dubai Smart Government and NTT DoCoMo in Japan. Moving on to security. Q3 was a record quarter where we sold more ES than any other quarter in our history. We continue to strengthen our role as the nerve center for security. Here are some of our customer wins. Jabil Circuit, which has been using Splunk for IT ops has expanded use to security and added ES to quickly identify and prevent threats and protect the intellectual property of their customers. Norfolk Southern Corporation expanded their Splunk Enterprise license and made their first purchase of ES for even deeper levels of threat detection. Norfolk Southern uses Splunk in their state-of-the-art security operations center as their SIEM to ensure their business and IT infrastructure are protected at all times. And a large medical institution and a longtime curator customer was targeted by sophisticated attackers who were in their environment longer than traditional SIEM model retention allows. Splunk was called in to reconstruct the data to identify the root cause of the breach. Other notable customers for security include Amazon, Creative Artists Agency, Yodlee and Northwestern Mutual. Our IoT customer use cases continue to grow as well. CenterPoint Energy, a Fortune 500 electric and natural gas utility, chose Splunk to monitor the applications and infrastructure underpinning their smart metering and smart grid. Similar to Target and BMW, which Godfrey mentioned earlier, Fruit of the Loom will be using Splunk to analyze data from manufacturing equipment and systems. Many customers are leveraging the Kepware Industrial Data Forwarder for Splunk for real-time monitoring and analytics of their industrial data. Last but not least, cloud. Our Q3 results show continued acceleration in our cloud business with orders growing in triple digits year-over-year. Our customers are excited with the speed and ease of Splunk Cloud. They are happy to focus their time and attention on analyzing the data to achieve their business results rather than procuring and deploying equipment. One particular win I am excited to call out is Progressive Insurance, a new customer that selected Splunk Cloud for IT ops and business analytics. Splunk will be used to improve customer experience and gain deeper insight into operational trends. Customers want to know that their workloads are as reliable and secure in the cloud as they are on-premise. Splunk is there to help customers move to the cloud with confidence. Transition to partners, I would like to call out a few key partner endorsements. Let me start with Amazon Web Services, who at their recent user conference re:Invent, Splunk was again heavily featured. Our app for AWS was presented in the opening partner keynote and Splunk was the only analytics partner in the AWS IoT announcement. At re:Invent, we also released a new version of the Splunk app for AWS, which integrates with services such as CloudTrail, Config and VPC Flow Logs. This enables customers to move to the cloud by giving them security and operational and economic visibility into their AWS environments. We also delivered new integrations with various AWS services to enable customers to gain analytics and visualization to services such as AWS Lambda, IoT and Kinesis. Finally, as we continue to invest in our joint engagements, Teresa Carlson, Vice President of AWS Worldwide Public Sector, spoke during the keynote at our recent GovSummit. In describing the value of Splunk, Teresa said "Splunk is helping customers have confidence to move and grow their business with AWS." Thank you, Teresa. We couldn't agree more and we forward to our continued successful partnership. We also announced our strategic alliance with Booz Allen Hamilton this past quarter to create joint solutions for cyber threat detection. In addition, Splunk will be utilized by Booz Allen's managed security service, Cyber4Sight, to make the data it collects more actionable through security analytics. We will also jointly develop and host events where leadership will be put in a simulated incident response exercise to help them understand how to prepare for and how to respond to cyber incidents and threats. Quickly I have personally sat through one of these exercises and I have got to tell you, it was an incredibly powerful experience. In summary, it was a fantastic quarter. I am really proud of the entire Splunk team. Our core development teams keep delivering impressive innovation and functionality that was full display at .conf2015. The market groups are defining strategy, product direction and building an enviable ecosystem for their solutions. Our cloud business is accelerating based on a clear strategy and great operational focus and our superb field organization just keeps getting stronger and better at delivering customer success. Again, thanks to all o four customers and partners and thanks to everybody who works at Splunk for a great, great quarter. Now let me turn the call over to our CFO, Dave Conte.

All right. Thanks much. First Doug, many congratulations to you. Very happy to see you stepping in as CEO. And many congrats to you, Godfrey, on your retirement. Of course, Chairman, I will still get to mesmerize you with the numbers. Maybe you won't be on the audit committee but regardless. Here we go.

I look forward to you most.

I know. So here come the numbers. Q3, as you have seen in the release, was our best ever, driven by increasing adoption of our products and platform. Third quarter revenues were $174.4 million, up 50% increase over Q3 of last year. License revenues grew 45% year-over-year totaling $104.2 million. In Q3, once again, more than 70% of our license bookings came from upsells to our customers. We recorded 371 orders greater than $100,000. We also saw license ASPs grow sharply to over $70,000 in the quarter compared to $40,000 to $50,000 historically. The jump in ASPs was attributed to the increased adoption by both existing and new customers who are deploying Splunk for a growing set of use cases. In our prior calls, I have mentioned that the ratable mix of bookings continues to vary substantially quarter-to-quarter. As a brief refresher, the key contributors to the ratable mix are term license contracts, Splunk Cloud and certain EAAs. In Q3, the ratable mix of bookings was 41% which is on the high-end of our guided range. As I said the ratable mix can swing substantially quarter-to-quarter, largely based on customer buying behavior and generally following seasonal patterns. We therefore take a longer range view of mix and previously had been expecting to be at the high-end of our full year range of 30% to 40%. Considering the year-to-date actual results plus current visibility for Q4, we now expect full-year mix to land between 40% and 45% and expect it will remain at these levels on an annual basis over the longer-term. As I mentioned, the mix can swing seasonally and fall outside this range for an individual core. All right. Back to the results. In Q3, international revenues represented approximately 23% of the total, consistent with previous levels and comparable on a year-over-year basis. Our education and professional services represented 8% of revenues in Q3. With respect to margins, which are all non-GAAP, Q3 overall gross margin was 88% consistent with last quarter and down slightly year-over-year, reflecting the expansion of our cloud business as well as services around our core market solutions. Our performance on our top line translated to better-than-expected bottom line as well. Operating income was $6.6 million, representing a positive operating margin of 3.8%. Q3 net income was $6 million and EPS was $0.05 per share based on a fully diluted share count of 132.7 million shares. Cash flow from operations was $36.4 million in the quarter and free cash flow was $21 million. Overall, we ended the quarter with $950 million in total cash and investments. Now looking forward to the remainder of fiscal 2016. We expect Q4 total revenues of between $200 million and $202 million, with a 5% to 6% positive non-GAAP operating margin for the quarter. With our year-to-date performance and our Q4 outlook, full year revenues will be approximately $650 million, up from our prior guidance of $628 million to $632 million. As we continue to increase our investments in market groups, product teams, the field and Splunk Cloud, we maintain our expectations to generate positive non-GAAP operating margin of about 3% for the full year, consistent with last year's level and prior guidance. Since we expect to be profitable on a non-GAAP basis for Q4 and the full year, for your EPS calculations you should use a fully diluted share count of approximately 135 million shares in Q4. I said that our future margin targets include the impact of a gradual 1% to 2% increase in cost of services from our growing cloud business as well as higher professional services delivered around our core market group solutions. We remain committed to running the business on a positive operating cash flow basis overall. With our strong year-to-date performance, we now expect that full-year operating cash flow will be approximately 22% of updated full year revenues. That compares our prior guidance of 20%. As I mentioned before, fiscal 2016 is higher than typical CapEx year as we expect the bulk of our San Francisco HQ buildout costs to be incurred this year. When combined with global facility expansions that match up with our growing employee base, we are on track to incur approximately $50 million in total CapEx this year, $25 million of which we have already recognized. Looking past Q4, I want to give you some insight in terms of how we are thinking about next year, which is our fiscal 2017. Currently we expect total revenues of approximately $850 million next year with the seasonal trends closely following those of fiscal 2015 and fiscal 2016. As you know, since our IPO in April 2012, industry analysts have increased the potential TAM for our products to about $45 billion, this is something that we shared at .conf during Analyst Day. Given the early stage of the market and given our overall levels of growth, we will remain in investment mode as we continue to expand the product portfolio and our global field reach. We will continue to run the business with these investments in mind and as a result, we expect the non-GAAP operating margin next year will be comparable with the current year levels. As I mentioned at that analyst meeting, we recently signed a lease for our new South Bay office at Santana Row. The building is currently under construction and we expect to take occupancy in late calendar 2016. Obviously, this is going to require significant amount of cash investments in terms of completing the building. As such, globally, we expect next year about $50 million to $60 million of total capital expenditures for the entire fiscal 2017. Again, the bulk of which will be for that Santana Row buildout. In closing, our team continues to execute on our mission to deliver exceptional value to our customers. Q3 was really solid and I am enthusiastic about our outlook for the rest of this year as well as fiscal 2017. Thanks much for your time, your interest and I am sure a lively Q&A session. So with that, operator back to you.

[Operator Instructions]. Our first question comes from the line of Walter Pritchard from Citi. Your line is open.

Hi guys. It's actually Jim, on for Walter. Great quarter and congrats to both Godfrey and Doug here.

Thank you.

Thank you, Walter.

Yes. So just on the CapEx here, how should we think about the normalized CapEx going forward beyond fiscal 2017?

For the normalized CapEx, sure. If you look back at CapEx prior to these HQ buildouts, we were running anywhere from $12 million to $15 million annually and those were specifically tied to headcount addition costs. So as we have gained some critical mass in terms of size of the company, we also have a greater capacity to hire. So we think that we can add more employees next fiscal year and the year after than we have in the prior years. So I would expect the CapEx to range in that, call it, $15 million to $17 million range on a normalized basis.

Got it. Thanks. And the I guess secondly, what partnerships are really driving business for you guys? It seems though you talked about the Amazon launch here. Any other interesting tidbits?

We are still in a heavy [indiscernible] mode with all of our partners. I think we made some good progress as we have invested more specifically across the partner channel. But when we get the sense that we are able to have partners drive more and us participate less then we will actually build it into our outlook for you guys.

Got that. Thanks guys.

Thank you.

[Operator Instructions]. Our next question here in the queue comes from the line of Philip Winslow from Credit Suisse. Your line is open.

Hi. Thank you. And I am just excited to be the first to say congratulations to Godfrey. I remember when we met at the first .conf over five years ago, when you guys were doing less than $40 million in revenue and how exciting the story was then just seeing what you guys have built this company into, you deserve a rest. And so congratulations.

Thank you, Phil. Totally a blast. So much fun and appreciate all your support over the years.

And of course, I know you weren't referring as a lifetime Bronco fan to Peyton Manning, when you were talking about the quarterback that stayed too long.

No, Phil.

If it was David making that comment, I know he would be talking about the Broncos, but actually I am going to break the operator's rules and I would ask two questions. The first one to Doug. Wondered if you could just talk about just sales productivity? How you are feeling about how that's strengthening? I know you made some changes in certain geos a few quarters ago. How those are playing out? When you look about just sort of headcount adds quote carrying reps, how is that this quarter? And then the question to Dave, you gave the CapEx cost of the new facilities. Are there any one-time or a duplicative cost from an OpEx perspective that are going to show up next year that are not ongoing when we start to roll into the following year? Thanks.

Thanks, Phil. So sales front wise, we have been talking for a few of these earnings calls about a focused strategy within different countries to build critical mass where we have effective critical mass, large numbers of people, referenceable accounts, good penetration within industries, U.S. commercial and I think increasingly public sector are great examples. We are seeing a continued drop in time to productivity. Those reps are coming up pretty quickly as you would guess because the environment helps them. The explicit focus over the past year changes them, let's get that same critical mass internationally and overall if I look globally, we are still about a year on average for a rep to really deploy at productive rates. But that's really representing the variance, thin countries versus medium countries versus thick. And our goal is just to keep piling investment into our top region so we can get those benefits.

Yes. And then, Phil, your question was, once we get through the atypical CapEx investments that we are making with other some corresponding OpEx amounts and we have built in to our forecast and our outlook certainly for this year that the range this quarter and next year's, we are thinking about initially what is it going to cost us in the operating side to get the buildings online. Once they are there and we have a better sense in terms of the occupancy cost, then we will roll that in, but most of that will get built into fiscal 2018.

Got it. Thanks guys. And congrats Doug and Godfrey.

Thanks.

Thanks, Phil.

Thank you. Our next question here comes from the line of Brent Thill from UBS. Your line is open.

Godfrey, you will be deeply missed, but we are in great hands with Doug. So I guess for Doug, just on the new role, can you just talk a little bit about what we should expect from your perspective going in? Obviously everything's working and going in the right direction, but maybe you could talk through one of your or just a couple top priorities that you have going into your new role, would be helpful?

Absolutely. Thank you, Brent. So one of the incredible thing about Splunk, as Dave mentioned in his remarks, is the TAM that we are going after is big and seems to continue to keep getting bigger. And even though we have been addressing that market effectively and just talked about a great quarter, we are still so incredibly early into that cycle. If we had a $45 billion or larger TAM and the guidance we are providing, we are still in the 0.5 percentage point, low single digit percentage points of penetration of TAM. So for my focus, the number one most important thing, as with any transition is to make sure that Q4 happens the way it is supposed to happen and we don't miss a beat with the field. We are going to continue to manage the field leaders directly. We have got a really strong team. And I am confident, we are all content that we will keep our eye on that important goal. Outside of that, ensuring that we keep the growth pedal down to exploit that TAM, keep driving our product portfolio the way we have into the difference adjacent markets and keep driving Splunk as a data fabric platform. Like one of the advantages that I have had is, I have been for a year-and-a-half and I have definitely had a lot of time with the rest of the executive team and the overcall Splunk team to make sure that the formula that Godfrey has led and will continue to lead as an executive Chairman, but his influence has been executed so effectively and I ma making sure we keep that in mind and keep guiding towards the growth, I think is going to be key.

Thank you.

Thank you. Our next question comes line of Keith Weiss from Morgan Stanley. Your line is open.

Great. Thank you, This is Melissa Gorham. I am calling in for Keith. Best of luck to you, Godfrey and I echo everyone else to say that you will be missed.

Thank you.

So just a question on Splunk Cloud. It seems like you are still continuing to see very good traction there. I am just wondering if you doing anything to incentivize your sales force to sell that solution? Or are they largely neutral to selling Splunk Cloud versus Splunk Enterprise? And then, in terms of where you seeing traction, is it largely garnering new users or does it allow you to further penetrate within your existing customer base?

Thanks, Melissa. This is Doug. I will take that. We are trying to keep it neutral right now. One of the strengths of Splunk, I think, is no matter what the infrastructure landscape is of a customer, heavily on-prem, heavily a cloud or any type of a hybrid, our product can follow that configuration. It is important to follow that configuration, because we are going to need to be close to that data source. So making sure that the reps approach the customer straight from the very beginning on how do we serve your needs best without pushing one way or the other, is where we are trying to keep that comp plain in their focus. With that said, I think the growth in cloud has been a very balanced growth. We see some new customers like Progressive Insurance I had talked about earlier in remarks, as well as expansion of existing customers who might be having some type of a hybrid model or even some customers that are moving their entire set of workloads over to cloud. And it's pretty much across the board also as far as smaller SMB accounts all the way to some of the larger accounts that we have announced in the past. So I guess it's following suit with what we are seeing with Splunk across the board.

And this is Dave. It's interesting as our cloud business gains momentum and a certain level of scale and maturity, the pattern that we have experienced with existing customers, again over 70% of license bookings coming in upsells, many of our cloud customers have followed that pattern as well and have increased their workloads in Splunk Cloud. So there is a replication, if you will, or a similar customer experience in terms of how they put more data into Splunk, get more value and then look for more opportunities for more data into Splunk. So that's exciting for sure.

And just I will take two more seconds of hybrid approach, because we talk about it a lot and some other companies can use that term and what's truly amazing about Splunk is, it doesn't matter where each component sits. Even if you are running searches on data, both on-prem and in cloud, private clouds, public clouds, the data can be indexed in any portion and sent anywhere else. So it really is a ubiquitous approach, which from what I can tell so far in the industry, makes us in a category of one.

Thank you. Our next question comes from the line of Daniel Ives from FBR. Your line is open.

Thanks. So Godfrey, a year from now, you are going to be a scratch golfer?

I am so far away from being a scratch golfer. That will not be one of my goals. Thank you.

Godfrey always shoots under 70, but he plays 9.

Exactly. And the ball from the woods magically end up in the fairway. So yes, you are going to be missed. It's been a great trip. My question is on the security, the intersection of security and big data. As big of a role you guys have played, what inning are we in terms of on that security data analytics market opportunity? It's obviously been a key part of your success, but how do you view that going to 2016?

There's multiple aspects that I keep looking at as far as where are we on the trajectory of going after our TAM. And one of them is, within a given customer that's using us for security analytics or for another use case, how many of these source types that should go in to Splunk to provide that comprehensive end-to-end visibility are actually mapped into Splunk. And even within some of our better customers, there still is more progress that we can make on giving them that true visibility and making sure that all firewall logs, all ITSI PS logs, end user security logs are fed in, OS and database logs. So I think that we are still relatively early. That whole term of security analytics is a relatively new term in this security landscape and many the customer accounts that I go and the reps go into, we are still kind of evolving that viewpoint of why are we different than a traditional SIEM, why do we get dragged in the SIEM market in the first place, because we are more this data fabric. So we have made really good progress there, but it's a long game still in front of us.

Our next question comes from the line of Michael Turtis from Raymond James. Your line is open.

Hi guys. Michael Turtis here. Thanks. So a follow-up on Daniel's question on security. You have given us a sense of what percentage security has been of total revenue in the quarter? Can you update us on that? And also just on both a competitive picture there, are you seeing competitively any changes, anybody new in security analytics? And of course, it's been the question of the quarter, is there any change in the overall strength of security spending?

Sure. Hi, Michael. It's Conte. Q3 security was about 40% of the business. So that's been pretty consistent in terms of, it had been 20% to 25% a couple of years ago. We advanced our offerings in terms of the ES solution. Of course we, I think, wisely created our market groups in high-end, joined the crew and adding that subject matter expertise really gave us a different position at the table. So over the last number of quarters, we have seen security go from, again what was a couple years ago 20%, 25% to consistently 40% of the business. And we saw that again in Q3.

On the competitive front, Michael, I would say that I haven't seen any major ships. If I go back to what is so unique about Splunk and why we have the emergence of such a successful security vendor, Godfrey has talked for in every earnings call I have ever listened to about schema on read, instead of schema on write. And why that's important in many use cases. And in security, in particular, it is absolutely critical. That schema on read allows us to ask any question to the data that we want to ask at the moment of asking without having gone through the pain of manicuring and massaging and cleansing that data like traditional solutions have driven. So our core differentiator still remains security is such a volatile, always progressing, always evolving marketplace and we have got a core architecture and then set of products with enterprise security and now with the user behavioral analytics product that takes advantage of that flexibility. But we are still generally competing with, partnering with/competing with the SIEM vendors, feeding data into, grabbing data from or in some cases where it is a brand-new by looking at us versus them.

Yes. And I will even pile on here. I think the nature of the question is, there has been a lot of chatter in the marketplace about whether security is sort of topped out or starting to decline in some way or that sort of thing. And we had a great quarter in security and I believe that we have an unusual opportunity going forward that's not just limited to SIEM or just limited to threat detection or just limited to some of point solution aspects for exactly the reasons that Doug pointed out, which is the ability to get lots of different types of data and analyzing it almost any way delivers both forensics, security, investigation, user behavior, insider fraud, the number of use cases we can get because of the number of data sources, I think, puts us in a little different position than some of the concern that was in the marketplace earlier this month around other earnings reports and the like. We are usually bullish about security opportunity.

Okay. Great. Guys, thank you.

Thanks, Michael.

Thank you. Our next question comes from line of Ed Maguire from CLSA. Your line is open.

Yes. Good afternoon. Godfrey, I know when you started at Splunk, you wanted to have fun and it's great to see you managing the transition so well on a high note. So best wished to you. I am sure you are going to continue to have a lot of fun.

Thanks very much. Appreciate that.

I had a question about the role that applications are playing in the growth of ASPs. And really the question here, you had alluded to a much broader range of use cases that your customers are using the technology for but also you are able to charge now for ITSI and Enterprise Security, which seem to be tracking well. How do you balance the breadth of how your customers are using the products with the focus that's involved with engineering and going to market with more specific solutions? And do you actually see this higher ASP level continuing at least for the near term?

Thanks, Ed. When I look at the apps, I think there is many benefits to them. One is we can charge for them but the core is, it helps illustrate the time to value of Splunk beautifully for customers. You can give them the platform and let them hunt around and figure out the value they are going to get where you can give them a platform with Enterprise Security on top or with ITSI or with UBA and they get immediate a-ha moments and then can still use the platform to hunt around. So I think a bit of a performance that we are seeing is faster time to value in some cases because of those apps and faster close cycles, but the core is you start with use case A and then you quickly see B and C, you jump in a different buying center, get additional use cases and the enterprise orientation of the platform comes out and that's really, I think, the predominant trend that I have been seeing as far as some of the ASP increases or some of these deeper customer relationships as they started with security and then move to IT ops and app delivery and then realize there is some business analytics and then IoT or they may have started ITOA and done different a different journey. But I think the EAA formats that we rolled out at the beginning of the year are starting to get a little bit more traction in the market and that in combination with some of these apps, I think a very nice beneficial piece.

Great. Thank you.

Thank you. Our next question comes from the line of Mark Murphy from JPMorgan. Your line is open.

Thank you. This is actually Albert Chi, on for Mark Murphy and congratulations on a great quarter. In the news, you mentioned several EAA, Enterprise Adoption Agreement, wins on the call. Could you comment on how many EAAs you closed during the quarter? And how does that compare with the prior quarters? And also, when do you think that could become a larger headwind or sorry a tailwind, if it hasn't been already?

Yes. This is Dave. Again, as Doug mentioned, we rolled the program out March 1 and while we are certainly happy with the EAA transactions that we recorded, they are still a fraction of the overall transaction velocity. And overall transaction volume continues to grow for us. It's that customers are looking at us in terms of a standard platform. And as a result, you are seeing it in those ASPs. In terms of it being a headwind or a tailwind, again the absolute number of them is so small that in terms of the overall size of the business, I think we are going to need to get some more miles in the rearview mirror before we can evaluate whether or not there is some type of contribution coming from those guys. But for those of you that were at Analyst Day, I had shown some examples of a customer lifecycle and it's really important to understand that just because we have an EAA program available, the customer in terms of their maturity with our product, how many disparate use cases have they deployed across how many different departments, ultimately the value of standardization across the platform is correlation of all your data sources. So I had a couple of customer examples in the PowerPoint and it's anywhere from four to six years of steady adoption in these individual use cases of the departments that leads to the maturity that you need to see in an account to where you would say, yes, they are right for an EAA type transactions. So I think that's really an important contributor in terms of well, how many do you think we are going to do over what period of time.

Thanks. And so can I say that's less than 5% to 10% of your license business at this point?

In terms of transaction volume, certainly.

Got it. All right. thank you.

Thanks, Albert.

Thank you. Our next question comes from Steve Ashley from Robert Baird. Your line is open.

Hi. This is Jason Velkavrh, sitting in for Steve. Thanks for taking my question. Just wanted to get an update on Splunk Light. I think it's been out for about what, six or seven months now. I am just curious about the early responses. And is it primarily attracting new users from mostly smaller companies, mostly SMBs?

So it's a very exciting product. I think Splunk again, like I was talking about earlier as far as on-prem, cloud, hybrid, we are trying to be present in as many different places as a customer could possibly look at to then advantage of Splunk. I think Light has definitely opened up more of that smaller departmental and SMB market that once, possibly a simpler product, different price points, et cetera. We are definitely seeing volumes increase. Interestingly, it's been pretty strong in the education sector, which makes sense, given the smaller IT staff, but still a lot of demand that educational institutions have. The whole point was, let's make sure that we continue to make Splunk available to multiple different types of customers and we are seeing that traction with Splunk Light.

Great. Thanks guys.

Thank you. Our next question comes from the line of Raimo Lenschow from Barclays. Your line is open.

Hi guys. This is Andrew Kisch, on for Raimo. My congrats again to both Godfrey and Doug and on the quarter. So Doug maybe could you update us on how many quota reps you have now and now that the head of sales is running the show, do you have any changes in store for how, either with pricing or with the structure of the sales org that you could share with us?

I am sure. So we finished the quarter at 392 as far as direct individual quota carriers. Obviously the overall sales org that supports them is larger with presales and overlay sales and the business value consulting group and the other contributors. As far as changes, I think that year-and-a-half of time with the team, Splunk is a unique company with some unique models and it's been really good learning experience to get the chance to be able to enhance that revenue and go to every corner of the globe and see every type of customer to really understand what makes Splunk special. I am absolutely thrilled about the TAM and the growth opportunities. I think we have been effective in driving investment into the fields that we can keep that lead as keep that expansion going at the rate that we need to hit our growth numbers. And I don't see any change in the approach that we have been taking as far as going after the growth of the market.

Thank you. And congrats again.

Thank you, Andrew.

Thank you. Our next question comes from the line of Kirk Materne from Evercore ISI. Your line is open.

Thanks very much and will add my congrats to both Godfrey and Doug. Doug, I want to ask you about the Booz Allen relationship and you mentioned earlier that you are still doing a lot of co-selling right now. You guys have such a unique business that offers so much value to your customers one they understand what to do with it. But one of the things that probably hasn't evolved as this quickly is a partner channel around that which could maybe open up the top of the funnel and bring more, take that 500 new customers per quarter up to a 1,000. Does the Booz relationship open that sort of partnering channel up to you guys a little bit? I guess, how do you see that evolving as we head into calendar 2016? Thanks.

Absolutely, Kirk. So I think I would divide that into two aspects of the answer. The Booz Allen relation or our relationship with Verizon or Accenture or AWS or Cisco or other key strategic partners, really helps on the opening handing introductions into accounts and pointed introductions. Booz Allen is going to be all around either drop-ins on some type of breach remediation or insight into cybersecurity threats. So I think that, that and other relationships in that security space will help us with better Chief Information Security Officer, CISO, type of purchase. And those are great and we have got some co-selling relationships with some of those organizations, AWS and our reps are hand-in-hand with many of these different accounts. But being able to hand over the end-to-end sale to any of those strategic alliance partners is, we will work on it, it would be nice to get there. The second piece is the channel. First here, distributors like Arrow and second tier ISPs and VARs. And that's really where we have been working to get them to be able to carry the ball intact. We have instances of that on the field right now. I need those instances to go up. Because when that happens, our reps can go focus on these six opportunities, the channel can go focus on these other X opportunities and we can divide and conquer and be successful within the market. And that was more of what I was talking about and meant with the co-sell is still the major motion with that channel and we are working hard to get to a levered sell where they are carrying the ball.

Thanks very much and congrats on a great quarter.

Thank you. Our next question comes from the line of Matt Hedberg from RBC Capital Markets. Your line is open.

Great. Thanks for taking my question, guys. Two quick ones. First one Doug, would you expect eventually hire a replacement for head of field ops maybe as we get into next year? And then for Dave, obviously to your comment on flat margins next year, is it safe to assume that cash flow as a percentage of revenue next year, should that be similar to what we have seen this year? Or could that in fact tick up a little bit? Thanks.

Thanks, Matt. Yes, absolutely looking at pulling in a replacement. We will open a search right away now that the news is out. We got a lot of very talented folks within our field organization. I am excited to see what the opportunities are as far as those folks as well as what's out there externally and my Q4 focus though is, that we have got people in seats, they are doing their job. Let's keep that motion going at the same time that we look for who the right long-term leader is for that field ops or for the field leadership roles. It may turn out to be more than one role.

Yes. And this is Dave. As it relates to margins, we have given our preliminary point of view about revenue and as you might expect, we are right in the midst of all of the heavy lifting around next year's plan. So some directional thoughts around the margin is what I intended in terms of the terms of what we have given. When we get to the end the year, of course, we will get more specific around what you can expect from us, not only in terms of margin expansion, but also cash flow as a percentage of revenue. So at that time, I will look to give you guys some guidance in terms of what fiscal 2017 looks like.

Got it. Thanks guys.

Thank you. Our next question comes from the line of Kash Rangan from Bank of America. Your line is open.

Hi guys. Godfrey, I hope to see you at Unicorn. Doug, you already have Unicorn. So congrats both you guys.

Thank you.

Unicorns are much better at golf.

Well, the thing is when I play golf, I get a view of the course that nobody else has ever seen.

Okay. Hopefully, it's a Bronco Unicorn on your [indiscernible]. So my question is, on the competitive landscape, I know Doug you mentioned at the Analyst Day that you actually sleep quite well. But I wanted to just understand, in this quarter, what were the major changes you saw with respect to Amazon as a competitor, Sumo Logic Elastic storage, that trend-wise any improvement, win rate, the competition falling off, would be useful? And secondly, Doug one for you, what would you attribute the license upside to? Was it one or two large transactions? And also when we look at your mix of this as coming from ratable, is it fair to say that, let me ask you this, if all your business had been just license, no subscription, what would your business have grown by this quarter? Thank you. I have to ask that mesmerizing question.

You do. I know you do. All right. So let me take the competitive and I will hand it over the ratable mix to Dave. So on the competitive front, I really have not seen any notable changes in the marketplace. First of all, AWS is not a competitor. We are not in competitive situations with AWS. Amazon is a customer of Splunk. One of the customers we talked about in the early remarks and I think the synergies between the two companies right now are strong. It's an evolving landscape. AWS has got to serve their constituency. You never know what's going to happen, but we are the only monitoring partner with a blueprint for Lambda at AWS re:Invent. After the re:Invent show, AWS posted their own blog on the benefits of Kinesis combined with Splunk, where they actually said this powerful combination let's you quickly capture, analyze, transform and visualize streams of data without needing to write complex code using Amazon Kinesis client libraries. So I think there is great synergies with us and AWS that we will continue to work aggressively to make sure stay as synergies. And then for the rest of the competitive front, Elastic remains something as popping up in our accounts. You can't stop freeware and open source from being downloaded. Where we had dropped into accounts and I had a discussion with the account. We have a whole build versus buy workshops that I was talking about at the Analyst Day. Our win rate is ridiculous. The overblown costs of something like Elastic become incredibly apparent. We just buildout one of their use cases and then look at the development time, the hardware cost, the operational costs and it literally is the 3X to 8X in some cases increase. So what looks like free is not free. And Godfrey has focused on this a bunch of different times. So I would say, the competitive landscape remains the same and we have got to fight every day to take that big TAM but we are up for the fight.

Hi Kash, it's Dave. As it relates to license, we had really nice execution globally in terms of all the sales teams closing transactions with Fortune 500 companies at meaningful amounts. And that's what you see in the ASPs. So the license performance, the ASP performance and of course the overall growth metrics are reflective of a collective effort. And as Doug mentioned in his prepared remarks, of course, with September being fed year-end, we had a very nice quarter in the public sector and the Americas were just terrific in terms of breadth and diversity across different industry verticals across all of the regions and similarly internationally. The quality and diversity of the customers who are looking to extract value from their data with Splunk is just the momentum is terrific. So your last and your favorite question of course is jeez, with the mix, what would growth be. Again, I have agreed with you philosophically that if mix was lower than growth rates would be higher but we have build in again assumptions around mix, although it is the most difficult component of our model to predict. And we built that into the outlook that we give. So I think we are certainly really pleased with the results and super strong quarter and we are going to do the best we can to keep updating you guys on how does mix stabilize over time. I would like to say we have got to a level of stability, annually 40%, 45%, but only experience will prove that to be true.

I will keep asking the mesmerizing question with you.

Fair enough. It's a good question, Kash.

Thank you. The next question comes from the line of Brian White from Drexel. Your line is open.

Yes. Congrats, Doug and Godfrey, I don't want to leave out Dave and Ken. So congrats on a new boss tonight.

Thank you. My wife won't agree with that.

So my question is around ASP here. This is a pretty substantial uptick sequentially. I think last quarter, you said $50,000, you said $70,000 this quarter. You have always kind of put it in the range of $40,000 to $50,000. So I just want to be clear, is this a trend we should expect to continue into fiscal 2017? Is there anomaly with ASP this quarter? That's my first question. Second question is just around cross-selling. You have got this expanding portfolio and I am just wondering if you are able to cross-sell a lot of these new products that you have been coming out with, any metrics around that would be great. Thank you.

Sure. I definitely would not characterize this as a trend. It's a single quarter where we hit a historically high, notably higher than any other quarter in terms of ASP. Importantly, as we look across the population of transactions, as I have mentioned to Kash, we just did so many high-quality transactions where customers were really looking to adopt a platform that is reflective in the ASPs. Now if that continues into the fourth quarter and then when we start looking at our outlook specifically for the first quarter and we believe that that the trend in ASP is an uptick, then we will give you that update at that time. But a single quarter isn't enough yet for me to declare that trend.

Okay. And then on the portfolio?

And then the cross-selling piece. Watching ITSI get launched was awesome, because that obviously was our core market, the whole IT ops and an app deployment marketplace. And I think it really has reinvigorated that market. You have put out an application that up levels the game on top of the platform and we saw last quarter as we released ITSI and people started focusing on that IT ops use cases, a little bit of an uptick in the use case purchasing at a platform within that buying center. And I am watching that happen. Fed obviously is pretty security heavy group right now. And I am watching a lot of security use cases start there and then as we show them something like ITSI or partner applications as well, they drag. They have only got 50% of data they need or 60% they need and they can get immediate value with small additions of data in one of these applications. So I do think it helps and it certainly helps with the Splunk as a data fabric platform message as well.

Okay. Again, congrats guys. Great job.

Thank you. Our next question comes from the line of Steve Koenig from Wedbush Securities. Your line is open.

Hi gentlemen. Thanks for squeezing me in.

Hi Steve.

So Godfrey, it's a little hard to believe I won't be calling you at [indiscernible] company. So I believe it when I see it. How is that?

All right. Well, thanks very much for your kind words. I appreciate that.

Yes. Well, thank you, Godfrey. And Doug, congrats to you as well.

Thank you, Steve.

So I wanted to ask you guys, a little similar to Kash's question. On bookings, you don't give bookings metrics. So we can only guess with the math, but you obviously are very rock solid on licenses. And that's despite the variability in the recurring mix of bookings. And so maybe Dave, if you could elaborate a little bit, what is it that allows you to see that consistency on licenses even though bookings is moving around? Is it conservatism in the guidance? Or do you have levers you can pull in terms of how you direct in terms of field or are there other factors I am not thinking about?

Well, I would like to say, it's been consistent, but in reality the guidance around the mix has been a metric I have updated now five times since we have gone public three plus years ago. And even with that guidance, we have fallen outside the range probably just as many times as we haven't. Ultimately the quality of the execution is in that the field continues to deliver and deliver in a meaningful way. So with a robust portfolio of transactions that flows through to the income statement. Now there have been quarters where the mix has been all over the board and there has been geography deltas between income statement and balance sheet and some folks in their models have had confusion there as, like, well, we like your revenue beat but where is the deferred? I am like, jeez, if we beat less on revenue, then we would have more deferred, right. Those go together. But again, I think the fundamental or the foundation for our ability to continue to deliver enviable results is grounded in unbelievable execution in the field. Of course that is coupled with great execution in the product groups, because I think it was probably two years ago, Godfrey and I, we started talking about from single product to multiproduct and focused on adoption. So the product teams and the market groups providing the solutions to customers coupled with terrific execution is that's how we are succeeding. Customers love the product and that's why, from an investment perspective and we have talked about a couple times, when you look at the TAM, we know how early it is. It's all about ensuring that we have the appropriate amount of coverage so that we can go reach the customers and that we deliver the appropriate amount technology that continues to lead them down the value prop. So that's where we are focused. Now if you think back to Analyst Day, we tried to give some color in terms of the relationship between what you can calculate from the face of the financial statements, which is a billings number and what revenue we recognize. And that's a pretty consistent relationship over the last three years. So we are staring at that to say, boy, is that something, is that coincidental? Or is that something that, we would build our model around to help us solve the ratable mix question. But I think it's a decent proxy to look at with some variability, as you would expect in terms of how do I try to fit in the geography question between income statement and balance sheet. So check out that relationship and we are doing the same thing on our side. We get to the end of the year, if we think it's meaningful, then we will give some more color on it.

All right. Sounds good. Congrats you guys. Thanks again.

Thank you. Our next question comes from the line of Tim Klasell from Northland Securities. Your line is open.

Hi. I will throw my congratulations all around to you guys as well. I have sort of a little different question. With the talking a lot about the apps, the security apps and the IP ops, but you have a pretty active developer community. Are you beginning to see some of the apps, I would say, leak out of the think IT department where maybe business analysts or what have you, who aren't core developers, beginning to use the product fairly consistently, probably developed by their IT department but again moving out?

Yes, for sure. And that's something, I think every earnings call, Godfrey has always told two or three fun stories that are more business analytics oriented or in some cases, IoT. And Tim, I agree with you, a bulk of those are apps or frameworks delivered by IT for a line of business. But there are cases, there is the massive semi conductor organization where their engineering teams actually uses Splunk natively, because they are parsing through massive amounts of CAD/CAM data, floor machine data, trying to figure out, are there anomalies or discrepancies wither in the design of future thread chips or the current chips. So I think when you have got a more technical end user base, then we have still got a really good UI for them. And we recently brought on Snehal Antani as our CTO and the guy that's helping to drive the strategy for business analytics and IoT to do what we have done in security and ITOA there. Let's watch our customers, let's spend lots of time with those customers. They have been really good at leading us to the next set of repetitive high-value use cases and figure out what wrappers can we put around the products so that third-party developers, internal IT shops or even better individual end users can start to get value of Splunk as well.

Okay. And is that meaningful revenues right now? Or are they just interesting use cases and it's going to take a few years to grow?

I think that non-ITOA, non-security segment has kind of always been between 10%-ish to 20%.

It's been 10% or less, in aggregate across analytics, IoT, industrial. I think that's as much a factor of the high level of growth that we have experienced in security and our core markets as it is those folks not growing. But as Doug mentioned in terms of having a tailored solution that we put into the field that is specific to a highly repeatable use case in those markets, we haven't identified that at this point. Our customers are using the platform in thousands of different use cases that fit into those categories and the work that Snehal of the rest of us are doing is to say, okay, like how do we help customers with a tailored solution on top, similar to ITSI that is a repeatable data extraction and value prop that we would then put into GTM team.

My only reservation about those numbers that we have been giving out is that those are the initial buy designations when the deal is first done. But the expectations, I feel like we are failing if that initial buy doesn't quickly transform into additional use cases and new data sources. So that's a squishy number. And as Dave said, there are thousands of apps and uses and customers. In this call, we talked about Lloyds, Progressive, CenterPoint, Fruit of the Loom, BMW, Target, there is a handful of those who are using us for everything from robotics instrumentation to customer intimacy and understanding on mobile apps and websites.

Thank you. We have one other question available at this time from the line of Greg McDowell from JMP. Your line is open.

Great. Thank you very much. And I am honored to ask the last question. Godfrey, I think history is going to judge you as one of the truly iconic Silicon Valley CEOs and to that end, I was hoping we could maybe spend a minute bringing it to a higher level and maybe asking you to maybe reflect on your journey at Splunk and even to this day what you think investors most misunderstand about the Splunk story? And I guess the second part of my question is, as you are parting advice to Doug and the management team maintaining the culture over at Splunk, a culture of innovation and execution and how the team can maintain what you started over there? Thanks.

Well, thanks for that question. I could go a while on these topics. First of all, I enjoy the complement because our younger daughter still thinks I am dork. But I would be remembered some other way is actually quite encouraging. When I think back on the journey of Splunk, the thing that's been consistent throughout all those years has been a culture that's sort of disruptive, innovation and irreverent, nonconformist culture built around trying to do things the new way. It showed up in the product to begin with but now it shows up in every part of the way we maintain our relationship with our customers and the way we try to deliver value. I still look at Splunk as, from the early days and say we are one of the rarer companies that just gave customers software and said use it and prove value to yourself and when you are happy, let us know and we will be happy to participate with you. And I think to a great degree, customers still appreciate the fact that Splunk has one of the most customer oriented and customer friendly approaches to the market of any software company that's ever lived and I think we will have that as a highlight for years to come. So it's been a true honor to be a part of this place. I don't know that you lead Splunk as much as you party with it. You have to be able to hand with Splunk. It's not quite the normal leader lead company as much as it is the tribe that leads it and everybody else is a part of it. But anyway, that's awesome and my advice to Doug, well, I have been giving him advice for two years now, I don't think he needs any more of my advice. I think he pre-mission ready for the job. Best part about internal succession is you already learned all products, you have learned the customers, you know the culture. He has been out on the road nonstop for the last couple of years. I don't how many customers he met with so far and how many engineering meetings he has been in and how many QVRs. But I think he is eminently ready for the job. And the nicest part about it, I don't have to actually do much in terms of coaching because we have been working together effectively for a long time now. So I am just thrilled to see the company where it is. I think the future is brighter than the past. Our use case is continually expanding. Our customers continue to be advocates for us. It's a wonderful and remarkable place to be. And I just think that now is a great time for a transition while business is great and velocity is good and I think Doug is exactly the right person to take us to the next chapter. So thank you for that question.

Thank you. That is all the time that we have for questions today. So I would like to turn the call back over to management for closing remarks.

Great. Thanks.

Well, I will take that just last opportunity to do one more wrap up, which is just to say, I am so, so proud of the team and I am proud of everybody in the company. All of the employees here have done a remarkable job of building software and delivering customer success and it is still what we do. So thank you for all your support. Doug, congratulations on the promotion. Dave, Ken, the whole gang, congratulations to all of you. And let's rock. This party has just getting started. Thank you.

Thank you. Yes, sir, Mr. Chairman.

Thanks very much.

Ladies and gentlemen, thank you again for your participation in today's conference. This now concludes the program and you may all disconnect your telephone lines at this time. Everyone have a great day.