Splunk [SPLK] Conference call transcript for 2021 q1
2021-06-02 22:50:03
Fiscal: 2022 q1
Operator: Thank you for standing by, and welcome to the Splunk Inc. First Quarter 2022 financial results conference call. As a reminder today’s program may be recorded. And now I would like to introduce your host for today program today Ken Tinsley, Vice President, Investor Relations. Please go ahead, sir.
Ken Tinsley: Great. Thank you, Jonathan and good afternoon. With me on the call today are Doug Merritt and Jason Child. After market closed today, we issued a press release, which is posted on our website. Also note that we have posted supplemental material on the Investor Relations web page as well. This conference call is being broadcast live via webcast and following the call, an audio replay will be available on the website.
Doug Merritt: Thank you, Ken, and thanks to everyone on the call for joining us. It was a great start to our new fiscal year and our business fundamentals have proven strong as ever. We have now turned the corner into the second half of the journey we embarked on just over two years ago to become a cloud-first company. With more than 50% of software bookings now coming from cloud, our financial model is rapidly evolving into that of a true SaaS business. We are navigating our business through multiple and simultaneous transformations to deliver customer success, while becoming the leading data platform in the cloud. We do that by being hyper-focused on our customer's needs. We are transforming our business and pricing models. We are innovating our portfolio of products and cloud services. And we're optimizing how we engage, deliver and measure value to our customers. Helping our customers make the transition to the cloud is our highest priority.
Jason Child: Thanks, Doug, and good afternoon, everyone. Thanks for joining us. Q1 was an excellent start to the year with total ARR of $2.47 billion, up 39% year-over-year. Cloud ARR was $877 million, up 83% over last year, and we ended the quarter with 537 customers with ARR greater than $1 million, up 46%. Off these 203 had Cloud ARR over $1 million nearly twice as many as the year ago period. Our cloud business momentum remained strong as our Cloud ARR growth has exceeded 70% in each of our last six quarters, and we expect strong growth to continue. As we outlined in our last Analyst Day, cloud growth is driven by three primary components. First, our existing cloud customers expanding their data volumes, which you can see in our consistently high DBNRR. Second, our new customers opting for initial deployments in cloud; and third, our existing on-prem customers moving to cloud. Contributions from these sources field $67 million in net new Cloud ARR in Q1 of 74% of our last year. For your reference we've added a Slide in the supplemental deck to depict the strength of net new Cloud ARR generation. We believe these trends are highly durable and will continue to drive sustainable long-term cloud growth. Back to the quarter, we ended the period with total RPO of $1.86 billion, up 8% over Q1 of last year and the portion of RPO, which we expect to recognize as revenue over the next 12 months was $1.2 billion, up 21% from last year. With the substantial base of perp-to-term conversions coming up for renewal this year, we expect total RPO growth rates to return to double-digits in the second half of the year. On the P&L Q1 cloud revenue was $194 million, up 73% over last year, reflecting continued acceleration of customer adoption of our cloud platform. Total revenues were $502 million in Q1, up 16% and beginning to reflect more comparable average year-over-year term contract durations as we lap the first anniversary of the pandemic. On margins, which are all non-GAAP? Cloud gross margin was 60% in Q1, up slightly from last year with continued progress towards our long-term target of at least 75% as we realized the benefit from scale and plasticity of the platform. Total gross margin was 72% down on a year-over-year basis due to the greater proportion of revenue contribution coming from the cloud. Operating margin was negative 35% in Q1, slightly below plan due to higher infrastructure costs and performance-based compensation expenses from bookings outperformance. As I have said, operating margin is impacted by lower revenue recognized from shorter average term contract duration and growing cloud mix.
Operator: Our first question comes from the line of Kash Rangan from Goldman Sachs. Your question, please.
Kash Rangan: Hi, thank you very much. Doug and team, congratulations on the ARR number that looks quite solid, particularly the cloud number. Doug, if you could talk about the things that are not going to change for Splunk going forward and things that will change, because you're bringing these executives of AWS for a reason, arguably. So what should we expect in terms of their expected contributions? What is your mandate for these two executives? And one for you Jason, it looks like the cloud mix is improving, but we're still seeing some volatility with the RPO, CRPO, billings and free cash flow. At what point do those metrics start to settle in and produce the cadence that investors would like? Thank you so much and congrats.
Doug Merritt: Thank you very much for the question. Yeah, the consistency that Teresa and Shawn get to add to, is a maniacal focus on customers and customer success. We've made that our number one corporate priority years ago. We made cloud-first transition, our number one corporate initiative three plus years ago. They get to come in after years of focused execution on transitioning our portfolio to be cloud-first and then expanding in key and critical areas like all the great work on our Observability Cloud that just went GA a month ago or a few weeks ago. What I'm excited about is, we have two unbelievably well-proven leaders that have sat on top of 10 billion plus portfolios that have been growing fast – as fast or faster than any of the incredible growth numbers that AWS overall is posting. And the scale that they've witnessed, the operating rhythm and cadence that they've become part of and driven the partner focus that they have leveraged and executed on within their AWS fold and then lies prior to AWS, compliments who they are as people, very down to earth, humble, hardworking, they can go deep as well as stay high and the relationships that they bring from AWS, from Microsoft and from the many, many people they interact with outside I think will be a long paying set of dividends for Splunk, our partners, our customers, our employees as well. I'm really, really thrilled to have both of them join our ranks. But they're complimented, as I talked about by over 15 senior executives that are coming, not just made at AWS, but from Salesforce, Google, Octa, Adobe, key organizations that are cloud-first in their orientation. And these are people much like Teresa and Shawn that have infinite choice somewhere to land. So they understand the company, they understand our opportunity and how well positioned we are. And I'm excited to both, feel the continued benefits that we've seen from the people have landed and the impact and jolt that Teresa and Shawn will have. Jason over to you.
Jason Child: Yeah. thanks for the question, Kash. On CRPO and RPO. So CRPO I think it was a 21% growth in Q1, it was 23% back in Q4. I expect the CRPO numbers to stay in that range because, you have a cloud CRPO that's growing much faster, you have a non-cloud that's going much slower and so the combination I think, will stay somewhere in the range that you've seen for the past couple of quarters. Total RPO has been down very much because of the lower duration that we saw last year. We have seen term duration continue to come down a little bit. I do expect to see total RPO accelerate pretty significantly well into the double digits by the end of this year. But it's going to take awhile as we're lapping a lot of these duration changes which did decrease throughout the year last year.
Kash Rangan: Wonderful. Look forward to the cloud journey. Thank you so much. Great numbers.
Doug Merritt: Thanks Kash.
Jason Child: Thanks Kash.
Operator: Thank you. Our next question comes from the line of Brent Thill from Jefferies. Your question please.
Brent Thill: Doug, I have a lot of questions about the go-to market this year and how you've optimized the sales team now on what seems to be a cleaner model. Can you just walk through the changes you made in Q1 and how you think the rest of the year unfold? And for Jason, I know you had guided to negative 30% Op margins, I think you came in a little worse. So I think investors are asking, what was the delta between your plan and what happened on the operating margin side? Thanks.
Doug Merritt: Thanks Brent. I will kick it off. And as we talked about in the last call, we have moved the sales force a couple of years ago from total contract value to last year annual contract value, and this year we're separating out incremental expansion versus renewal. Ultimately we want to get to is a consumption-based metric. So as we talked about these transformations getting to a portfolio that is cloud-native, serverless and really represents what we want and expect to deliver our customers key and then align the rest of the organization as critical as well. I'm excited about the experience that Teresa brings as well as other key additions that we've had to ensure that we not just have the right metrics and focus areas for our sales teams, but that we have the right processes, scale, support, and complimentary teams to make sure that our sales teams are successful and that they engage most effectively with net new customers and the many, many customers are on-prem that still need to convert to our cloud offering. As we focus on the value-add, the high return on investment that customers get when they move to cloud, when they move to workload or entity based pricing, which is a resounding success within our customer base right now. Jason, on the Op margin?
Jason Child: Yeah. So there's three factors on why the operating margin came in a little lower than what we were expecting. Let's say first we did outperform on our Q1 targets specifically on ARR, which did lead to our quota-carrying reps earning higher commissions. Second we are – I think it's good, but we are a little higher than where we expected in some of the critical areas of quota-carrying reps and software developers. And then lastly, we did have higher OpEx related to cloud deployment costs for a bunch of the new products and services that were launched in Q1. And so those were, I think largely mostly kind of one-time impacts. I don't expect to see the increased cost flow through for the rest of the year.
Brent Thill: Great. Thanks for the color.
Doug Merritt: Thanks Brent.
Jason Child: Thanks Brent.
Operator: Thank you. Our next question comes from the line of Raimo Lenschow from Barclays. Your question, please.
Raimo Lenschow: Thank you. Doug, you've mentioned the launch of the Observability Cloud a couple of weeks ago, going into GA. Can you talk a little bit about, first feedback here? How are customers using it? Like, is it a broad-based adoption, is it more on logs, et cetera or like, how do I see that there? And then a follow up for Jason is, on the duration, like where are we on that journey of Northern region. So we are kind of close to the level that we are seeing now or is there more to come? Thank you.
Doug Merritt: Thanks Raimo. Yeah, the focus, the Observablity Cloud was to drive clear and effective integration across the many different components that in collection make up the observability suite from APM to digital experience management monitoring, to synthetic monitoring, et cetera. I think the team has done an incredible job of driving really rapid and effective integration. And then just as importantly renewed and revitalized an unified user experience for our customers. I think I gave Care.com is one of the deeper dives on my prepared remarks, where they're really focused on the totality of the different capabilities that we've brought to bear with this observability suite. Customers can pick and choose, but ultimately as you are driving high volume of net new application capabilities on a cloud-first basis, developing an AWS for other clouds, you really need the entire Observability Cloud to get that job done effectively which is why we've been so focused on making sure that we've got the breadth and depth of features that drive that effective performance. The application development teams, the DevOps teams, let's say reliability engineering teams and cloud ops teams, that organizations are so dependent on as a transition to be a digital-first set of companies.
Jason Child: On the contract duration piece, I’d say first for cloud, our multi-year agreements is continually – is remaining our primary motion. And our compensation plan does include incentives to drive this outcome where possible. I would say that the Q1 impact was impacted because we did have some shorter duration deals that were related to expansion. And we wanted to co-term those with the existing contracts. So I do expect to see the term, sorry – the cloud duration go back up into the kind of mid-to-high twenties. For term we do continue to work with customers on the right time of their eventual migration to cloud. In many cases, customers are choosing to extend their term contracts over a shorter period than they've done historically, as they anticipate moving to cloud. So as a result, I do expect to see some downward pressure throughout the year on term durations.
Raimo Lenschow: Good. Thank you. Well done.
Doug Merritt: Thanks Raimo.
Jason Child: Thanks, Raimo.
Operator: Thank you. Our next question comes from the line of Matt Hedberg from RBC Capital Markets. Your question, please.
Matt Hedberg: Hey guys. Thanks for the questions and well done as well on the ARR side. Kind of a two point question, I guess for Doug, obviously with all of these breaches, it strikes me that you guys are in a really good position to help both the public and private sector with your SIEM and broader security solutions. It feels like the ability to sift through the noise, is more important than ever. So I guess, could you talk to – could we be in front of a bit of a SIEM cycle and secondarily obviously the DoD contract is great. Is there even further opportunity from the U.S. government?
Doug Merritt: Great questions, Matt. So I'll start with the end and then work back which was, yeah, it was great to see that DoD contract, obviously multiple years of focusing on success with that total contract to realize all the benefits there. The latest cyber several initiatives that President Biden pushed out, I think for a thoughtful and definitely I think are going to continue to drive not just the right behavior and opportunity for public sector organizations, but I think dramatically benefit the commercial as well. But we're really excited about our public sector business. We've had a long tenure there, not just in the U.S., but in other major countries around the world. And obviously Teresa's general go-to-market skills are fantastic, but the leverage that she is able to exert on a public sector business should be a big boost to them as well. Yeah, none of us are happy other than maybe the hackers and people that are on the other end about the cyber – the negative cyber activity we're seeing. It is something that is obviously extremely important for every organization around the world to get their arms around. And I agree with you completely that we have taken a data as a security problem, approach as a very unique stance, seven, eight years ago, that the world is slowly starting to swing toward the dilemma for anyone that wants to do that is you must be able to be the heterogeneous collection service. The average CSO is dealing with well over 50 often a 100 or more different vendors specific solutions that make up their landscape. And while cloud has the ability to enhance the security posture, it also creates even more divergent data sources and more surface area you've got to pay attention to. So being the data driven agnostic collection vehicle for customers I think is a very important position. Our SIEM products are key, but as we all know SIEM keeps expanding and we've dramatically re-factored our security suite to not just include SIEM, but insider threat capability, orchestration automation, hopefully you just saw we GA-ed our mission-control framework a very open approach to integrating all tooling that exists out there for SOX. We GA-ed our SOAR capability as a cloud-oriented offering. So we're focusing very aggressively on continuing to keep pace with the breadth and depth that SOX and cyber teams need. Including the addition to the TruSTAR set of capabilities and that awesome company that actually closed late last week. And while we don't want the ambulance chasing in any way, this environment is definitely making security front and center for CEOs and Boards of Directors.
Matt Hedberg: Super helpful color. Thanks a lot guys.
Doug Merritt: Thanks, Matt.
Jason Child: Thanks, Matt.
Operator: Thank you. Our next question comes from the line of Keith Bachman from Bank of Montreal. Your question, please.
Keith Bachman: Yes. Thank you. I have one for Doug and one for Jason if I could. Doug, I want to start with you in terms of trying to understand better your deployment capabilities and what I mean by that is, you obviously going to a business transition where you're offering both on-cloud and on-premise and migrating customers to use your cloud capabilities, but I wanted to reverse that lens and ask you where you're actually are deployed. Is it more on for on-premise situations like at Bank of Montreal versus where interacting with, say cloud deployments at the customer level? And the reason I'm asking it is just, some concern is more and more workloads shift to the cloud that has those on-premise deployment shift to the cloud that you might lose a little bit of share in that process. So again, not asking how your customers are subscribing you, but where your – where Splunk is attaching to, if you will? And then have a follow-up for Jason.
Doug Merritt: Sure. So one, when we talk about our cloud solutions, I mean, the way that the language would probably need to shift to is we are a SaaS organization. We are providing Splunk as a service to our customers. And that SaaS deployment is truly best-in-class at this point in time, it is cloud native, serverless very, very effective in the job that it performs as you can see from our growth rates. So the number one value prop that we are focused on with customers is why would you do low value, very difficult work in an area that it could be managed for you. And not only you get a better TCO, but you're going to get much higher quality delivery because of the many, many people that we deploy around our automation frameworks, our cyber liability and cloud ops capability, et cetera. The data sources just continuing to grow. Cloud it's nice to talk about, the AWS cloud, the GCP cloud, or the Azure cloud, but there are hundreds of services within those cloud environments. The services are continuously changing as they need to, to be competitive. That means that the API, the data flows, the turbulence within that environment are high. All those are additional sources of streaming data or data at rest for Splunk, as well as the multitude of tools that are third-party that live in those clouds, as well as all different tooling and hardware components that are self-managed by organizations. So that goes kind of back to that sweet spot of data volumes continue to grow and our DBNRR, but, again, there's very clear and consistent within our cloud framework shows that the additional products that we're releasing, things like the observability cloud, in addition to the growth around data and complexity within our customers is a good positive trend. And we're trying to counteract that with customers, that being much more efficient with how we deploy our solutions so they can do more at the same cost, knowing that there's other factors are going to increase the envelope that they have to deal with.
Keith Weiss: Okay. So, Doug, just – you consider Splunk indifferent to the data sources, whether it would be on-prem or cloud?
Doug Merritt: Absolutely. Yes. It doesn't matter to us at all.
Keith Weiss: Okay. Great. Jason, one for you though, the cloud gross margins, your ARR and dollars are going up, but sequentially your cloud gross margins have declined again modestly, but from Q3 2021. And so I just want to try to understand, what are the reasons that the cloud gross margins have declined for the last couple of quarters and how should we be thinking about those cloud gross margins specifically as we think about the next couple quarters? Thank you.
Jason Child: Thanks, Keith. I would just – I guess the short answer to your question is in Q4 as well as Q1, there's been new products that we've released specifically in Splunk observability cloud that have led to some movement in gross margin, unfortunately down, but we don't see that is long-term. And so I would expect that we are certainly on track to hit our long-term drug at 75% Cloud GM, our expectation and we said last quarter was we hoped to end this year at 70% exiting the year, and that's currently what we still plan for.
Keith Weiss: Okay. Great. Thank you.
Jason Child: Thank you.
Operator: Thank you. Our next question comes from the line of Kirk Materne from Evercore ISI. Your question please.
Kirk Materne: Yes. Thanks very much, and congrats on a solid quarter. I guess Doug; the first question would be for you. Six months ago, we sort of got more aware of the fact that as customers are moving over from term to cloud, that there might be some shrinkage of the deal, did deal terms, things like that. Do you guys feel like you have your hands around that? You have a big base of renewals coming up? Have you been able to sort of get in front of those so that the kind of discussions that customers want to have, you're better prepared for at this point in time, it seems like that's happening, but I just want to get your view on that. And if anything's changed maybe over the last six months you know, in that regard?
Doug Merritt: Good question, Kirk. So, yes, we are part of what the heavens we're seeing within the term business is as we've seen across the Splunk turmeric cloud, the current customer expansion rate, there's always been a very positive factor for our ARR and revenue, but if you're sitting in term and you're unsure when you're going to go to cloud and what that looks like? The expansion rate for a term customer is probably muted while they are trying to establish what their cloud footprint looks like. The positive tailwind is the move to cloud by itself, even on a flat basis, I am X-size on term on the exact same size on cloud, the ARR goes up because of the overall billing of cloud to include the infrastructure that we're passing to the customer. And the majority of customers I'd say probably the vast, vast, vast, vast majority have a step up when they move to cloud, because of that nature of expansion of data and expansion of used cases with Splunk. The number one focus area that Teresa immediately has dug into that she's building on from what the team was doing. But I think we can get better at is being super crystal clear on what a blocker is for a on-prem customer to get to cloud and making sure that we have not just right sales motions, but we've got the right technical support, the right pro-serve, the right partners and any appropriate incentives to assure them that their journey to cloud is going to be as smooth as we've seen it be for thousands of customers now. So they can get on the same value basis that we see with those native cloud customers. Get them to workload based pricing, much more friendly metric; and c, the number of users go up. The number of use cases go up in the overall ROI continue to tilt positively for that customer. So when we're looking out Q2, Q3, Q4, that number one vector is how many of those customers that are currently on-prem are going to move to cloud? We have to compliment that with the, roughly – we said, last call a roughly one-third of Cloud ARR is driven from new customers. And then as Jason said in his prepared remarks, you've clearly got a DBNRR that's positive as well. So we're not wholly dependent on that cloud. The on-prem to cloud transition, that's a benefit of our install base, but it's definitely a factor that's really important for us.
Kirk Materne: Okay. And then Jason, one for you, I realize the income statement, profitability measures are kind of masked by the transition, but when we think about you all coming out of this and normalizing a little bit, I mean, every sort of other enterprise software company has seen some benefits from remote work, whether it's real estate savings, whether it's less travel. I mean, is there any reason that sort of overall efficiency of the business model should be higher? As we normalize on sort of just the revenue transition versus where you were, say a year or two ago. I mean, have you seen some of those same benefits, I guess we're seeing in companies that frankly are already, sort of fully cloud in the cloud revenue model
Jason Child: I'm hopeful but I think it's early since really hardly anyone's returned to work and therefore and therefore hasn’t really returned to travel. It's hard to know exactly how the market will actually react. I do think it's certainly reasonable to think that with the productivity gains we've seen, that we should be able to flow that through. That said, we also have one of the bigger cloud transformations in recent history going on. And so I don't know, any benefits we get on OpEx is probably going to be dwarfed unfortunately by whatever the revenue recognition impacts of the transformation.
Kirk Materne: Okay. Thanks guys.
Doug Merritt: Thanks Kirk.
Jason Child: Thanks Kirk.
Operator: Thank you. Our next question comes from the line of Brad Sills from BofA Securities. Your question please.
Brad Sills: Great. Hey guys. Thanks for taking my question. Wanted to ask about a comment you made Jason earlier that part of the reason for the duration move is that you're seeing a higher mix of co-term deals. What's driving that, is this simply customers coming back more kind of mid-term and expanding at a greater rate than in the past. And if so, where is that incremental demand coming from?
Jason Child: So it's – we had a couple of big deals this last quarter that were co-term deals in cloud. And so that was why we saw such a, kind of a pronounced reduction in cloud duration. It certainly the Observability Suite is one of the key drivers for that. That said I don't know that this is expected to continue, we'll see. It's just with the large deals they happen pretty infrequently. Our expectation is that you will see cloud duration get back up to the kind of mid- to high-20s through the balance of this year.
Brad Sills: Got it. Great. Thanks. And one more, if I may please, just with this latest release and observability, it sounds exciting. How far along are you with the integration of some of the recent acquisitions, Plumbr, Rigor, Omnition and there's a lot in there that you guys have acquired, and I know there's been a lot of work on integrating that? Thank you so much.
Doug Merritt: Yes. Absolutely. That release was the integration of all those acquisitions release with the unified UI. Now the task continues, there are still additional features across Infrastructure Monitoring, APM, Synthetic Monitoring, et cetera, that we are intent on adding. We got to make sure the Observability Suite is lit up in all the key regions of the world and available locally within those different bands. I've got to make sure that it is fits into compliance frameworks, that different entities, federal government is a good example are bound by and we've got to continue to focus on driving, ease of use on try find by. So it's – we're really, really excited. We're way ahead of where we thought would be with the help of some key acquisitions, but also really focused execution from our engineering teams to drive that unified footprint. It is really clear from the analysts at this point in time that we are way ahead of everybody else on breadth and depth of functionality. And now it's about driving awareness, getting more OpEx and continuing on those key focus areas that I just walk through.
Brad Sills: That's great. Thanks Doug. Thanks, Jason.
Doug Merritt: Thank you, Brad.
Jason Child: Thank you.
Operator: Thank you. And our final question for today comes from the line of Gregg Moskowitz from Mizuho. Your question, please.
Gregg Moskowitz: All right. Thanks for taking the question. So Doug, it's actually a good segue to my question on Observability Cloud. Do you expect that this is going to help you land a lot more net new logos going forward? And then for Jason, naturally this is a very different pricing model for you in that at all host based, what impact do you anticipate this having on the model going forward? Thanks.
Doug Merritt: Awesome. Thanks Gregg. So I'll feel a little bit of Jason’s under on. We are really focusing with our solutions; observability, security, IT on a simple single metric around entities. So that if all you're focusing on is that suite, you know, how to license it and its value tied, and it's clear for the end user. And then we are continued to focus on a single metric to the platform, which is that work-load base pricing metrics. So I listened very, very intently to our customers. Customer success isn't one priority. We don't like your data volume metric. So we've focused on that, we've delivered, and we're excited to see the momentum we're getting with entity based pricing on our solutions, workload with the underlying platform. And then I'm just totally blinked in the beginning of your question bank, which was…
Jason Child: Net new logos.
Doug Merritt: New logos, yes. We had said last call that, that roughly a third of how they are is from new customers. We are seeing some positive trends with new customers. I have said for a couple of the key lever, beginning to see a more dramatic increase in net new accounts was going to be having a easy button around cloud. So we are beginning to see that, there's more work too. The Observability Suite certainly is a new buyer within existing customers. We have not had a strong set of initiatives around that DevOps team and all the people that run a DevOps team. So we're excited to leverage our position within security and IT to traverse over to DevOps. Ultimately, all three of these entities; SecOps, ITOps, DevOps have to work together. The end customer doesn't care about the individual jobs of those tech leaders. They care about the solution they're getting. So tying those together is really important. We think that were unique as the only vendor that can effectively serve all three independently or on a combined basis. And we are absolutely internally measuring and very, very focused on net new customer count increases as our whole cloud portfolio continues to perform.
Gregg Moskowitz: All right. Makes sense. Very helpful. Thanks Doug.
Doug Merritt: Thanks Gregg.
Operator: Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Doug Merritt for any further remarks.
Doug Merritt: Great. Thank you. We really appreciate all you tuning in today. We are really proud of the progress we've made on every front. We have turned the corner on our journey to become a cloud-first company, really clear corporate initiative for multiple years and are proud of that execution. We take a cloud-first approach in everything we do from delivering high value to our customers, to working with our partners and really ensuring that there is high value opportunities for our partners as we move to cloud, as well as which features and capabilities we're delivering from a cloud-first basis. I believe that we've never been better aligned with our market opportunity than we are right now. On top of that, our businesses now led by cloud executives with proven track records of scaling cloud businesses of $10-plus billion, which we obviously are very focused on becoming over the coming years. And we're poised to work closely with our customers as they continued their transitions to the cloud. Our position is exceptionally strong. I've never been more bullish on our growth outlook. And thank you again. Have a great evening.
Operator: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
