Splunk Inc. (NASDAQ:SPLK) Morgan Stanley Technology, Media & Telecom Conference Call March 6, 2023 3:55 PM ET
Company Participants
Gary Steele – President & Chief Executive Officer
Brian Roberts – Senior Vice President & Chief Financial Officer
Conference Call Participants
Keith Weiss – Morgan Stanley
Keith Weiss
Excellent. Thank you, everyone, for joining. My name is Keith Weiss. I run the U.S. software research team here at Morgan Stanley. And very pleased to have with us this afternoon both Gary Steele, CEO; and Brian Roberts, the newly minted CFO over at Splunk, a total of 6 weeks on the job.
Brian Roberts
Thank you.
Keith Weiss
You’re getting thrown right into the fire. Before we get started, I do have a brief research disclosure. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any s, please reach out to your Morgan Stanley sales representative.
And Brian, do you want to do a quick safe harbor?
Brian Roberts
Sure. Safe harbor. Please — we will make forward-looking statements today. Please look at our SEC documents, and actual results may vary.
Keith Weiss
Excellent. So with that out of the way, Gary, I want to start with you. Thank you for coming back to the Morgan Stanley TMT Conference.
Gary Steele
Great to be here.
Keith Weiss
I think this is the — just about your 1-year anniversary. April is kind of when you started at Splunk. So what have we learned about Splunk over the past year? Like last year, you’re excited about the opportunity. You’re excited about sort of the enterprise customer base and the ability to drive higher cash flows. What’s evolved in terms of your thinking on Splunk over the past year?
Gary Steele
Yes. I think a number of things. I think, one, obviously, I spent a lot of time with customers over the course of last year. And the mission-critical nature that we play for our customers is second to none. Our customers want to do more with us. And I think we can be a very good partner as they continue to evolve their drive for resilience, both on the cyber side as well as on the durability side.
The one thing, when I joined, that I made clear is I believe in balanced growth and profitability. While the company had done a great job of being very growth-centered, it was clear to me there was an opportunity to balance continued long-term durable growth with increasing cash flow and profitability. And we’ve been on that journey basically since the day I joined, and I’m really proud of the progress we’ve made over the course of last year.
And then finally, I feel like we’re well positioned drive long durable growth in this business. We — one of my observations early on was that we weren’t close enough to our buyers. Specifically, there’s more that we could do in security. We could get closer to CSOs, get closer to practitioners.
And we are very early in our journey, from an observability standpoint, and we’ve made some very good progress over the course of the last year. So I think we have a really good setup coming into this new fiscal year, and I’m super excited about the prospects.
Keith Weiss
Got it. I want to dig into that for a second. When you started out at Splunk, the balance in growth and profitability was very evident from kind of day 1. And I think investors have seen the yields on that focus. The outlook that you guys gave for the fourth fiscal year in terms of free cash flow definitely surprised guys to the upside.
The investments in go to market, the investments in product strategy take longer to sort of play out, so it’s a little harder for us to get visibility. Can you talk us about what are some of the key strategic investments that you’ve made over the past year in the product, in the go-to-market strategy that we should be looking to yield over the next couple of years?
Gary Steele
Yes. So I think one of the most important changes we made from a go-to-market perspective, we moved to a single-seller model. So historically — and we made that change at the beginning of our Q4. And effectively, what we had in the past was there were multiple salespeople with different product specialties calling on a single customer. We move to having a single seller, owning that customer, supported by technical strategists, technical people that could then help that sales rep navigate the various deals.
This is a big move forward. It’s great for customers. And frankly, it improved our cost effectiveness with respect to go to market. And from an innovation standpoint, one of the things that’s really clear to me coming in is that we needed to increase the pace of innovation, that there has been criticism of Splunk that we have been — that we had slowed down.
And through new leadership, we hired a gentleman by the name of Tom Casey. Tom has really reinvigorated the growth potential. And we’ve got some exciting things coming out this year, and we’re — we feel like we’re really well positioned to go continue to drive additional use cases for Splunk, both on the security side as well, more broadly across IT and observability. And we think those platform enhancements, the security capabilities we think will be relatively received by our buyers.
Keith Weiss
Got it. Got it. Brian, [ tipping ] you into the conversation. I think it’s always interesting talking to a new CFO at the company. CFOs definitely see the business most similarly to investors. And you’re making an investment decision when you decide to join Splunk. What was it that you liked about this investment, that this is sort of the next stop for Brian Roberts?
Brian Roberts
Yes, absolutely. So the Splunk story is one that I’ve followed for a number of years. And so when you look at this company, it’s an iconic company with like perfect product market fit. And then when I started to — I’m going to interview for this job. I put myself in your shoes. I tried to analyze this company from the outside, and I have a ton of empathy. It is really hard to model.
And so I spent a lot of time — and so coming in, one of my key priorities is just how do we simplify it in terms of the story? Because, I mean, if there’s anyone who looks at term licenses in terms of ASC under 606, it’s just very challenging to look at the story. So you’ll hear Gary and I talk a lot today about ARR and free cash flow. We think those are absolutely the right metrics to track.
Keith Weiss
Got it. Got it. Yes, I definitely agree with you on the difficulty of the model side of the equation, and we call Splunk, our associate killer. If you could get this Splunk model down because it clear up the promotion on key software. So if we’re thinking about, Brian — if you’re thinking about the underlying growth rate, it’s ARR. So how do you think about the underlying growth rate of the business today? And where do you guys think you could get it to in the medium term?
Brian Roberts
Sure. So in terms of long term, stay tuned for Analyst Day coming later this year. But I think when you look at this year, last year, we put up 18% ARR growth. If you look at this year, we took the month of January. That’s how we built our outlook today, right?
So what we guided to this year was a range of [ 4.17 ] or sorry, $4.125 billion to $4.175 billion, so net new ARR of roughly $450 million to $500 million, and that’s based on what we saw in January. What we did say as part of the earnings call is, assuming an economic recovery, which I hope we all agree, is coming at some point, all along with some of the new product innovation, the resumption of cloud migration, we can see an acceleration in that growth rate next year.
Keith Weiss
Got it. And that next year being like a calendar…
Brian Roberts
Fiscal ’25.
Keith Weiss
Okay. Perfect. I want to dig in to the product side of the equation, starting on security. Security has now grown to be the majority of the business. How should we think about the penetration of kind of the core SIEM use case for Splunk within your large enterprises? And is there a potential to sort of broaden that more fully in the marketplace?
Gary Steele
One of the really interesting things about Splunk is there’s a lot of security departments that buy the Splunk platform for their security use cases, but they haven’t necessarily bought into our premium maps, like our SIEM solution, our SOAR solution. And so one of the opportunities that we have this fiscal year is going back to those very loyal security customers and selling them our premium solutions.
And so at a very simple level, by getting, again, closer connected to our security buyers and practitioners, being able to go back and sell those premium apps is a pretty straightforward process for us. And so we’re enthusiastic about that and the opportunity that exist there.
Keith Weiss
Got it. One of the industry debates that we’ve been talking about a lot, we definitely hear a lot is SIEM versus XDR, extensible detection and response. Do you look at XDR as an adjacent sort of complementary capability of what you could do with sort of the data in the SIEM? Or is it going to prove to be more competitive, and you guys have to evolve the SIEM to be more of an XDR?
Gary Steele
I think if you look at what do people want to do, they wanted to be able to detect and respond, but they also want to be able to understand what’s happening more broadly across their attack surface. And where — I think where people get confused is XDR is not a replacement for SIEM because you still have to understand broadly what happened.
So what time did Keith log on? Was Keith compromised? And did he log on to Office 365 at the same time Keith is logged on to Salesforce? Like all of those s you can answer on XDR. XDR gives you the ability to detect and respond. So I fundamentally believe that you’re going to continue to see both of those capabilities be aligned and supportive of one another.
Keith Weiss
Got it. So almost similar to the premium services, XDR becomes an extension of what you’re doing on that underlying data set. And maybe just to dig in there a little bit more. Because you mentioned SOAR, that’s something that you guys had acquired into several years ago.
And not to be too flippant, but like it was a leading SOAR vendor that you acquired in. We haven’t heard a lot about it within the Splunk portfolio. And was it a product issue? Was it just a sort of a sales motion issue? And does that need to be solved first before you could extend into stuff like XDR?
Gary Steele
Well, I think automation is a key theme for all security buyers because they’re trying to do more or less. So that’s what store accomplishes for the buyer. And I think at the time we bought the test product in the market, and I don’t think their execution was as good as it could have been, frankly, with that. Having said that now, we’re starting to see through some of the short-term innovation that we’ve had and then extending it with these capabilities, like we just acquired with TwinWave, which is really threat analysis.
So combining automation with threat analysis is a natural thing. And so I think we can reinvigorate the growth in that, going back to this opportunity of going back to our buyers and selling them premium apps. I think we’re really well positioned. And frankly, I just think we slowed down. I think there’s an opportunity to reaccelerate that.
Keith Weiss
Got it. So it sounds like it’s more on the execution side of equation more than the go-to-market side of the equation?
Gary Steele
I believe so, yes.
Keith Weiss
And it seems like — just taking a couple of the data points from the discussion thus far, part of sort of the initiatives you’re putting into place is cleaning up some of the M&A that has been done historically, good sort of assets brought on board, perhaps not particularly, will put into the go-to-market motion?
Gary Steele
Yes. I think there’s opportunity just to streamline how we bring products to market and put them in the hands of our customers. And there’s a lot of very simple straightforward things that I feel like we can do to, frankly, accelerate the pace at which we’re delivering premium capabilities to our customers that they need, that they demand and that they want to buy from Splunk.
Keith Weiss
Got it. Got it. Just to round up the SIEM discussion, we’ve definitely been hearing a lot more from nontraditional kind of SIEM competitors in this marketplace. Datadog and Dynatrace been talking about it from the observability space. Some of the traditional network security has even — some of the endpoint security guys are coming more into that space. What have you seen in your kind of day-to-day operations? Like are these new competitors emerging to the level of where you’re competing? Or is it more sort of background noise from your perspective?
Gary Steele
Yes. We really don’t see those emerging companies as playing a significant competitive role. And I think the reality of where we play in the market, let’s just remind folks where we are, we’re really at the Global 2000 level and some of the most significantly large organizations with really complex requirements. And it’s very difficult to come in the market with an entry-level solution and displace something like a Splunk, which customers have grown dependent upon those broad-scale capabilities.
Keith Weiss
Got it. Got it. Switching gears to the universe, the observability market where you guys are looking to sort of make more of a push into that space. SignalFx, again, another really well-regarded asset and really interesting technology, particularly on what they’re able to do in serverless. You guys brought that on board. Can you talk to us about where you are in integrating that asset into the broader Splunk platform and the go-to-market behind it?
Gary Steele
You bet. We’re super excited about the opportunity that observability brings to the company. And if you’re not familiar with what had transpired in the past, we bought SignalFx and we bought 5 other companies all broadly in the observability market. The engineering team has done a phenomenal job of bringing together those 5 companies, taking the sharp edges off and delivering something that’s very compelling.
The one thing we realize in the middle part of last year is we needed to be closer to the core so that loyal Splunk customer can then extend their reach and leverage their Observability Cloud. We made tremendous progress in that core integration over the course of the last 6 months. I would say we have more work to do.
But what I’m very encouraged by is, and we noted this in our most recent earnings call, the number of very strategic marquee Splunk customers that are adopting Observability Cloud, and they did that by looking at everything in the market and doing hardcore bake-offs against us and all the competitors and choosing Splunk. And so I feel like we’re on a very good path, and we’re much improved from where we were today a year ago.
Keith Weiss
Got it. Got it. And just to double-click on that to make sure I understand. So you guys acquired SignalFx, but then there was Flowmill and Plumbr and Omnition and let you get into all the different areas that have been converged into the observability space. So it’s network monitoring and real user monitoring and now you have all of those capabilities, they’re integrated with SignalFx. What does it mean to be [ kosher ] to the quarter? Does that mean it has to sort of better leverage the core like log data that you’re [ bringing ]?
Gary Steele
It’s simple things like being able to leverage the same way in which you get data in. And so making it just that much easier for that customer that had embraced Splunk in a very significant way to be able to extend that reach, to get to metrics and synthetics and everything that a customer would want.
Keith Weiss
Okay. Got it. Got it. Shifting gears to cloud migrations. I would say, prior to you joining, cloud migration was the big initiative of Splunk. And I’ll just lay it out there, candidly. It seems to me that perhaps Splunk pushed a little too hard on their customers to sort of migrate to the cloud. And it may have off-put some of the larger enterprises that weren’t ready to move to the cloud.
It seems like you’ve taken off some of that onus and reinforce the idea for your large customers that say, listen, we’re going to be developing on both sides of the equation. This is this going to be a hybrid story on a go-forward basis. So can you talk to us, one, how you changed sort of the approach to cloud migration? And two, what should investors be expecting on a go-forward basis in terms of the progression of cloud growing within the overall Splunk business?
Gary Steele
Yes. I think one of the observations I had after my first 90 days in the company is that we had not been clear with our very loyal on-prem customers. And because we’ve been so focused on pushing them to the cloud, I felt like we were pushing them away from the company, and customers were looking for alternatives.
And so one of the things that I’ve been doing is reinforcing our long-term commitment to on-premise, our ability to help our customers manage a complex multi-cloud hybrid environment and delivering a set of capabilities that truly differentiate us in this world where customers still have applications running in their data centers. They have applications in the cloud, and they need a single way to do that. And I think there’s no better company than Splunk to help our customers do it.
And I think we are frankly just twisting our customers’ arms when we didn’t need to. And so we’ve recommitted from a product development standpoint. We’ll continue to have really interesting features coming out in on-prem. And if you look across our large customers, this is a very common theme. So we feel like resetting that was a very important move for us. And I’ll let Brian comment on how we think about cloud ARR growing and its percentage of pull.
Brian Roberts
Yes. So if you look at Q4, we had cloud grow at 33% year-over-year. For this coming year, what we said was in terms of new software bookings, we thought it would vary each quarter between 55% and 65%. And then in terms of just the overall ARR breakdown, that cloud will begin to generate more than 50% in the second half of this year.
Keith Weiss
Got it. So just to be clear, the 55% to 65%, that was the percentage of cloud bookings?
Brian Roberts
Of new bookings, software bookings.
Keith Weiss
Of new bookings going into cloud, right?
Brian Roberts
Yes.
Keith Weiss
And that compares to — I think you ended Q4 at 58%.
Brian Roberts
We said in the second half of the year, we’d be north of 50%. So I would encourage investors not to though take January 31 of 2024 and do 50% of what our guidance range and assume that’s cloud, that would be ultra conservative.
Keith Weiss
Got it. Got it. And to be clear, Gary, the change in focus doesn’t mean Splunk cloud is no longer critical by enterprises.
Gary Steele
No, not at all.
Keith Weiss
You’re not trying to sort of bifurcate enterprises by enterprise and cloud to different market environment.
Gary Steele
No. We see customers having this blend. And a really common occurrence is that customers can leverage Splunk in a really interesting way. I’ll give you a simple example. I was with a CSO who was dealing with data privacy rules around the globe. And they have a very big instance of Splunk cloud. They’re going to be setting up application stacks in some of these countries that require data residency, for example, India.
And the cool thing about Splunk is you can run Splunk to Splunk. So you can basically run searches globally across cloud and on-prem and do it all from a single Splunk search bar. So it’s actually really cool in the way in which we can help customers deal with complexity around data privacy, complexity around how their environment has evolved from on-prem to cloud.
Keith Weiss
Got it. So it wasn’t an issue that Splunk cloud isn’t applicable to the enterprise customers. It’s more of a go-to-market that you’re pushing too aggressively on customers that weren’t ready to go to the cloud.
Gary Steele
And I think it’s where customers are. We want to make sure that we’re not getting the heavy customers and forcing them somewhere where they’re not ready to be, and we allow them to leverage the power of the product in a way that does support their current environment, which is hybrid.
Keith Weiss
Got it. Now if we take that 1 more step. One of the really interesting dynamics that Blanca had talked about historically with the move to cloud was the ability to really jump-start the net dollar expansion. Splunk customers going to the cloud tended to expand faster. But it sounds like you’re trying to have that motion be better on both sort of the on-premise side equation and, hence, Splunk Cloud. So can you remind us where we are today in terms of net expansion in the cloud? Has that held up as well? And can you get on-premise to look something like that on the go-forward basis.
Gary Steele
Yes. I’ll let Brian comment on the numbers, and I’ll talk a little bit about the use cases.
Brian Roberts
Sure. So in terms of some of the numbers, I think when you look at DBNRR back in the Q4, we were at 123%, which is still quite strong. I think when you look at overall, what we’ve been trying to share in terms of on enterprise, the cloud migration is just a matter of when, not if. And so a lot of these projects have been just slowed right now in the current economic environment. CIOs are going to the CFOs and the CFOs are saying, not this year.
And so when you look at that type of metric, which is a trailing 12-month metric, it will — you need expansions, obviously, to grow that number. And so when projects are put on hold, customers will continue then to lean in on hybrid, and we’re just not seeing it yet in cloud. But again, we believe we’re set up in terms of when we talk about fiscal ’25, that you can see this acceleration as the economy rebounds and cloud migrations come back.
Gary Steele
And the thing we’re focused on from a go-to-market standpoint this year is continuing to drive additional use case adoption. So a very specific example, and we referenced this in our prepared remarks for the quarter, is we’ll be announcing capabilities that give us access to data that lives in an OT environment to a manufacturing floor. So capabilities that can give visibility to security leaders of what’s happening with respect to those systems in that environment as well as taking broad operational data that then could be combined broadly with their IT data. And this is an example that could be used on-prem. It could be used in the cloud. We don’t care as long as you can get that information in Splunk and then drive better decisions from it.
Keith Weiss
Understand. So I got 2 guidance-related s I’m going to ask to Brian, but then I’m going to open it up to s for the audience. So if you have your s, get them prepared now, and we’ll have some mic runners running around.
So Brian, I wanted to talk about the FY ’24 guide. And the I get after every earnings call for the past, I would say, year is the forward guide derisk. Can you talk to us about some of the underlying assumptions and the methodology used in setting that FY ’24 guide? And how do we garner confidence that, that’s a de-risk guide, if you will, is a conservative enough guide given the environment?
Brian Roberts
Yes. So when I made the guidance, I think I was 5 weeks into the job. So I would say we took what we saw in January and extended it for the full year. And so in terms of ARR growth, $4.125 billion to $4.175 billion, that’s $450 million to $500 million of net new ARR. That’s what we thought, again, based on the environment in January. Could the second half be faster? Yes, if there’s an economic recovery.
But we think, for this year, we’re planning for the current economic cycle to persist through this year. What we shared on the call in terms of the free cash flow, because I think this is a place where investors were very surprised, we guided well above consensus to $775 million to $795 million of free cash flow. And we said we’re very confident in that number. Regardless of operating scenario, we feel we can hit that number.
Keith Weiss
Got it. And then, Gary, maybe if you could help us sort of put January into context. It’s unfair to ask Brian to do this since he wasn’t here. But how did January feel from a macro and spending environment perspective versus sort of earlier in the year, maybe if you went back a quarter or 2 before?
Gary Steele
Yes. So we first saw signs of economic change in July. And we saw cloud migrations and expansions slow down in that period. We saw that continue through our final 2 quarters. What was different in Q4 for us, and specifically in January, is we saw more financial deal scrutiny, CFOs looking harder at deals.
And that was new as we got to Q4. And we obviously closed our fiscal year at the end of January. Most of our quarters very back-end weighted. So we don’t know whether that was a January effect or that was more broadly across the quarter, but it was definitely apparent that it was — there was more deal scrutiny.
Keith Weiss
Got it. Got it. And then one for Brian on the sort of margin side of the equation. Like we were talking about earlier, this is a hard model because of ASC 606 in revenue recognition. And I think that makes operating margins a tough metric to look at because it depends on sort of what comes through as term licenses.
So when you think about the overall efficiency of the business, what are you looking to in terms of the key metric? And then more holistically, what are the sort of dials you still have left to turn to sort of increase the leverage of the overall business?
Brian Roberts
Yes. So I think — so when you look at Splunk, we — again, these term licenses, we recognize upfront. And so you can have a quarter like Q4, where term license revenue increased over 50%, right? So you have this huge jump in top line. Your expenses are relatively fixed, so it just drops to operating margins.
So I think some investors got confused looking at last year’s operating margins versus this guide. Operating margins are going to be very subject to top line. And it’s all back to rev rec as opposed to like the fundamentals of the business. I would look at OpEx growth, but I think the best metric to look at is free cash flow margin.
Like you will hear it over and over from us, we’re focused on free cash flow. And you can then measure, in terms of free cash flow, margin and growth. And so if you look at last year, we were 11.6% — sorry, 11.8% in terms of free cash flow margin. And then we guided this year to 18.8% to 19%.
Keith Weiss
Got it. That’s the material expense?
Brian Roberts
That’s where you’re going to watch this improvement. And we believe we’re set up for multiple years of free cash flow margin improvement. It’s not just a 1-year move.
Keith Weiss
And can you point to a couple of particular levers that’s sort of driving that expansion in free cash flow margin?
Brian Roberts
So when Gary came in last year, he started this motion in terms of really looking at operating efficiency, and there’s lots of different ways to drive that. You can look at the workforce structure and spends and controls, where you can try to remove some spend so you can, quite frankly, increase decision-making and just execution velocity.
We started to look at tapping — if you look at the Splunk population base in terms of employee population, we were very heavy in the Bay Area. We’re looking at tapping some of the — just the emerging talent pools around the world. And so RD is a good example this year, where we think we can hold in terms of non-GAAP OpEx, like the dollar amount fixed while we increase headcount as we tap some of these new regions.
Keith Weiss
Got it. Now some classic sell-side inflation. My 2 s expanded into 5, but some s from the audience.
Unknown Analyst (Analysts)
You talked a little bit about competition from a different angle. So you talked about observability, and you kind of thought it was less critical. And you also talked about XDR competition from the other side of security [ cloud ]. I was curious if you thought about like the Snowflakes of the world and kind of like a data [ security ] solution.
What we’re hearing out there when we talk to customers and most likely, “Hey, I got like a $10 million, $20 million Splunk bill. Maybe if possible I can do this. I don’t know what security [indiscernible] X-linked dollar. You need to have more overhead.” Have you been seeing that? Did you [indiscernible] that?
Gary Steele
Yes. We haven’t. And the thing that has always been unique about Splunk is that we are — what has always differentiated us is our ability to take unstructured data, be able to read it in and drive decisions from it. And that is if you think about Snowflake and the other kinds of products like that, they work really well on structured data. And so this is why we always excel. And so we have customers doing insane volumes of data that you just can’t do in other environments because it is machine data that’s truly unstructured.
So I was with a customer last week. They ingest 3 petabytes a day in Splunk, and they can do real-time decision making on that. And so those are really hard problems that are just technically oriented towards what we have built. And so we don’t see like the classic use of structured data with Snowflake or other capabilities like that as moving into our world.
Keith Weiss
Any additional s from the audience? Here’s a mic upfront. So while we’re waiting for the mic, I’m just going to interject one . The I have is like it talks to a persistent sort of expectation in the marketplace that we continue to earn it, almost surprising me how persistent around pricing, around the idea that Splunk is expensive.
And there’s been various efforts by the company over the years to sort of counter that [ execution ] and change in pricing. Can you talk to us about sort of where do you think we are in the market in terms of convincing the market that there’s good value here, there’s good price performance behind Splunk?
Gary Steele
Yes. Yes, so just quickly to catch people up, traditionally, Splunk had an ingest-based pricing model, meaning that you pay the toll to Splunk for all the data you brought into Splunk. Fast forward, when we launched cloud, we launched workload-based price, meaning only if you’re getting value from that data, you’re doing queries, you’re getting value, do you pay Splunk a toll?
And we were probably — but we were probably slow in getting that workload-based pricing out. We’ve made tremendous progress in customers that are on workload-based pricing, I think, feel very much like their value is driven to price. I think there’s a good match there. we still have some customers on ingest, and we have work to do to get those people over. But I think the model is right, the direction is right, and we’ve made great progress. We just have some more work to do.
Keith Weiss
Perfect. Sorry, any up front?
Unknown Analyst (Analysts)
I guess you’ve talked a bit about the puts and takes on what’s been driving the cloud migration, slowdown in cloud migration. It seems that you’ve taken the approach to be a little bit more accommodating, but that’s not necessarily the case of cost support. Can you talk about — not a few, but with other cloud service providers?
Is there sort of a dynamic where you have 1 potential cloud service provider actually [indiscernible] retiring on-prem service [indiscernible] that’s benefiting cloud migration overall on your end? Or is cloud migration typically disaggregated [indiscernible] you might adopt these cloud services from other companies elsewhere in the stack, but might see them build those customers [indiscernible] to use on-prem service?
Gary Steele
Yes. I think our customers — we have to go back to who our customers are, which is really Global 2000. Most of those customers have some on-prem footprint. They’re going to have for a long time. There will be applications that live in their data centers for a long time. And as a result of that, they’re going to want to be able to bring all that information together either on-prem or in cloud.
And I think what you will see is, as the economy begins to improve, you’ll see customers move more aggressively to, again, as Brian described, make those cloud migrations happen. And for us, our target environment has to be multi-cloud hybrid. It has to be because that’s where our customers are.
Keith Weiss
Outstanding. Unfortunately, that takes us to the end of our allotted time slot. But Gary and Brian, thank you so much for taking part in this great conversation.
Gary Steele
Thank you.
Brian Roberts
Appreciate it.
Question-and-Answer Session
End of Q&A
