© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good afternoon ladies and gentlemen. Thank you for standing by. Welcome to the SWI Q3 2019 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers' presentation there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. [Operator Instructions].
I will now turn the call to our host for today, Mr. Dave Hafner, VP of Investor Relations.
Thank you Emily. Good afternoon, everyone, and welcome to SolarWinds' third quarter 2019 earnings call. With me today are Kevin Thompson, our President and CEO; and Bart Kalsu, our Executive Vice President and CFO. Following prepared remarks from Kevin and Bart, we'll have a brief question-and-answer session.
Please note that this call is being simultaneously webcast on our Investor Relations website at investors.solarwinds.com. Please remember that certain statements made during this call, including those concerning our financial outlook, our expectations regarding growth and profitability, our expectations regarding growth and profitability, our plan for investments and our expectations regarding the impact of those investments, our market opportunities include the opportunities with our existing customer base and our market share, our growth map, key growth initiative and forward-looking statements. These statements are subject to a number of risks, uncertainties, and assumptions described in our SEC filings including the risk factors discussed in our Form 10-K that was filed on February 25, 2019 and the Form 10-Q that we plan to file by November 14, 2019.
Should any of these risks or uncertainties materialize or should any of our assumptions prove to be incorrect, actual company results could differ materially and adversely from those anticipated in these forward-looking statements. These statements are also based on currently available information and we undertake no duty to update this information except as required by law. The cautionary statements regarding these forward-looking statements are further described in today's press release.
Unless otherwise noted all 2019 results that will be discussed on today's call will include adjustments for the adoption of ASC 606 and all 2018 financial measures discussed today will be presented on an ASC 605 basis. All year-over-year comparisons will be impacted by these adjustments in 2019 unless otherwise noted. The tables accompanying today's press release include a presentation of our 2019 results on an ASC 606 basis and an ASC 605 basis.
We will also provide our results and our outlook for revenue growth rates on a constant currency basis to provide a framework for assessing our performance and how we expect our business to perform excluding the effect of foreign currency fluctuations. Our use and calculation of these non-GAAP financial measures are further explained in today's press release and a full reconciliation between each non-GAAP measure and its corresponding GAAP measure is provided in the tables accompanying the press release including adjustments for the impact of ASC 606.
However, each non-GAAP item in our forward-looking financial outlook that we will provide today has not been reconciled to the comparable GAAP outlook item because providing projections of changes in individual balance sheet and income statement amounts is not possible without unreasonable effort and release of such reconciliations would imply an inappropriate degree of precision. Unless otherwise indicated, references to profitability and comparable measures refer to such measures on a non-GAAP basis.
With that, I'll now turn the call over to Kevin.
Thanks Dave and thanks to everyone for joining us on today's call. Stepping back and looking at our performance in the first nine months, 2019. I am pleased with the same momentum with we entered the year. This has allowed us to drive 14% constant currency non-GAAP total revenue growth to the first nine months of the year. And adjusted EBITDA of over $330 million. Also pleased to report that we delivered solid results for the third quarter. Non-GAAP total revenue was approximately $243 million per quarter reflecting year-over-year growth of 15% on a constant currency basis and adjusted EBITDA of $115 million which was above the high end of our outlook.
We're quickly approaching and expect to reach one of our goals as a business in the fourth quarter of this year which is delivering our first quarter in which total revenues for the company exceeds $250 million. When we ultimately reach this milestone it will put us in an elite class of enterprise software companies which have reached $1 billion dollars in annual revenue run rate and we will done that while delivering a level of profitability and cash flows rarely seen in software.
Third quarter license and maintenance revenue totaled of $158 million on constant currency basis reflecting growth of 8% versus the prior year. Our license and maintenance revenue growth has remained at a consistent level for the first three quarters of the year illustrating the consistent high single digit growth we have stated that we believe we can drive in this part of our business.
This consistent growth has resulted from the strength of our competitive positioning in the network and systems management markets where we have continued to build market share using our extremely broad monitoring and management coverage of all key aspects of IT infrastructure and the compelling value proposition of our products which are priced immediately lower than most of our competitions.
In fact according to [indiscernible] June 2019 market share analysis report on the IT operations management performance analysis software markets we now hold the number three rank as measured by 2018 software revenue. We are pleased with this progress and are focused on driving our business to the number one ranked over the next several years.
Turning into components for license and maintenance revenues. Our maintenance revenues continue to show consistent and durable growth in the third quarter driven by strong maintenance renewal rates. These renewal rates have been at or above 95% on a trailing 12 month basis for the last four quarters in a row which contributed to constant currency maintenance revenue growth of 12% for the third quarter.
While our license revenue growth in the quarter was slightly lower than the average level that we have delivered the last six quarters we feel good overall about our license sales performance in the quarter. We have continued to drive growth and international including EMEA despite an uncertain environment in the UK specifically for small businesses and we feel tend to be more conservative than large companies whether it's political or economic volatility.
We also had a strong quarter of sales report performance in the Americas with a number of positive trends to the business including a record number $100,000 plus transaction.
However, as we were going up against the largest single quarter of U.S. federal license sales we have ever delivered which was in the third quarter of 2019 it was a difficult to [indiscernible] compared.
With that being said we delivered the second strongest quarter of U.S. federal license sales in our history in the third quarter 2019 and good Americas commercial growth. We entered Q4 feeling positive about the momentum in our core IT business and our ability to continue to drive high single digit license and maintenance revenue growth on a year-over-year basis.
Transitioning to our subscription businesses third quarter subscription revenue grew 28% on a constant currency basis reflecting strong MSP billings growth as well as solid growth contributions from both our cloud infrastructure and application management products as well as SolarWinds Service Desk.
Overall, I'm pleased with the momentum we are seeing in our subscription products including those we acquired this year. This momentum has resulted in an acceleration in non-GAAP subscription revenue growth each quarter through the first three quarters of the year. This road has a large part been driven by our MSC products where we have seen strong core growth, rapid adoption of our new and advanced endpoint protection offering, momentum gain to bill, our new password management IT documentation management offering.
However, [indiscernible] growth I do not believe we have taken full advantage of the cloud infrastructure and application management market opportunity in front of us. We have invested a small fraction of what our competitors in this market are spending a go to market activities as a result while revenue grows from these products is accelerated as we've moved through the year. The acceleration has been slower than we had planned.
This has reflected in a smaller contribution to subscription revenue growth from these products as compared to what was contemplated to the high end of our subscription revenue outlook for the year.
The cloud infrastructure and application management market is still in its early stages. The competitors in this market are relatively young companies with modern products and they haven't approached a digital demand creation that is comparable to our own approach.
While we continue to believe we have created a very broad, strong and differentiated portfolio of cloud natives and cloud economic products and we have taken a disruptive approach to pricing in feel that we were better at digital marketing their competitors we have not been investing at a level that has allowed us to rise above the noise of this early-stage market.
We are planning to begin to address this in the fourth quarter by taking advantage of the fact that we're well ahead of the pace in delivering our adjusted EBITDA outlook for year.
We will accelerate investments go to market activity including incremental expansion of our sales efforts and higher levels of marketing spending which we believe will increase our momentum in the cloud infrastructure and application management market heading into 2020. Bart will discuss financial in detail impact of these incremental investments on our results for the year in his remarks related to our fourth quarter outlook.
We have continued to build strong and growing customer relationships across each of our product lines. As our customers rely on our products to monitor and manage larger and larger portions of their hybrid IT infrastructure environments.
For the trailing 12-month period ended September 30, 2019 we had 857 customers spent over $100,000 with us which is an increase from 780 customers at the end of the second quarter.
As you can see we delivered a very strong third quarter of customer growth as the number of customers reaching to $100,000 on annual spent threshold grew meaningfully on the sequential basis. In addition, while we're building larger customer relationships at an accelerating rate we also continue to add a very high volume of new customers averaging almost 7,000 per quarter for the last 12 months.
With that I will now turn the call over to Bart to walk you through the additional details of our third quarter financial results to provide you with our outlook for the fourth quarter.
Thanks Kevin and thanks again to everyone joining us on today's call. Before I begin my remarks I want to provide a little context. First our GAAP results for the third quarter are presented in detail in our third quarter press release. I also want to provide a quick reminder that we will discuss on each information on this call on a non-GAAP basis and now we're presenting results as calculated under ASC 606 which aligns with the third quarter outlook we provided on our second quarter earnings call in August.
The adjustments to revenue and expenses required by ASC 606 manage to immaterial difference as a reminder our operating results for the third quarter and the year-to-date period ended September 30, 2019 include the results of Samanage from May 2019 forward. We have included the revenues of Samanage in our results on a non-GAAP basis which is consistent with the second quarter and with our previously provided outlook.
As Kevin indicated in his comments the third quarter with another core quarter of solid execution. We were within the range of our outlook for this quarter related to non-GAAP total revenue and finished with $242.7 million representing year-over-year growth of 15% on constant currency basis. Non-GAAP recurring revenue was 82% of non-GAAP total revenue for the third quarter.
I'll now walk you through the financial details of our third quarter results and then provide you with our outlook for the fourth quarter and full year before turning it over to Kevin for some final thoughts.
Third quarter revenue growth was led by non-GAAP subscription revenue of $85.3 million which grew 26% year-over-year on a reported basis and 28% on a constant currency basis.
We've continued to add products organically and through acquisitions that expand our subscription revenue stream. New customer acquisition has been solid and customer expansion activities have delivered strong recent cohort growth. The growth of dollar was led by our MSP product line and we got a solid contribution from our cloud infrastructure and application management products where we saw accelerated sequential growth in the third quarter and also saw solid performance from our new IT product that came from the Samanage acquisition.
Diving a bit more into the details of our subscription revenue we saw strong early contribution from our new advanced endpoint protection offering by our MSP customers in the third quarter.
We are excited about the opportunity we see to be a leader in delivering the security solutions that MSPs need to protect the IT environments of their small business customers and plan to make that they continued area of product expansion focus.
As we indicated in our second quarter call we also kicked off a new sales team to focus on selling our cloud infrastructure and application management products into our core IT customer base and this team had already had some success which we plan to build on in the fourth quarter.
And finally our subscription net retention rate remain consistent at 105% for the trailing 12 months. Total non-GAAP license and maintenance revenue was $157.4 million for the third quarter which was an increase of 8% year-over-year on a reported and constant currency basis. Looking at the components of license and maintenance revenue for the third quarter non-GAAP maintenance revenue was a $113.8 million which was an increase of 11% year-over-year on a reported basis and an increase of 12% on constant currency basis.
Our maintenance renewal rates continue to be strong at 95% on a trailing 12-month basis through the end of the third quarter of 2019. License revenue for the third quarter of 2019 total $43.6 million which is consistent with license revenue in the third quarter of 2018 which as Kevin indicated in his comments we believe is a solid result given the fact that it's a year ago quarter with a very strong license sales quarter for us.
As Kevin mentioned earlier we exceeded our outlook for non-GAAP profitability in the third quarter of 2019 delivering $115 million in adjusted EBITDA for year-over-year growth of 8%.
We are pleased with our ability to drive such high adjusted EBITDA in the first full quarter happily completed a diluted acquisition. Non-GAAP expenses were approximately $131.7 million in the third quarter of 2019 which includes $20.2 million of non-GAAP cost of revenue and $111.6 million non-GAAP operating expenses which reflects an 18% year-over-year increase for the quarter which is slightly lower than what we included in our outlook for the quarter as a result of slower than anticipated hiring and lower than expected variable marketing expenses.
Telemarketing expense as a percentage of revenue remain consistent as compared to the second quarter. Even at subscription revenue became a bigger percentage of our total revenue. The total number of new customers that we have added across our business continues to be at a very high level and we have driven this result with a very consistent level of sales and marketing spend.
With that said in the fourth quarter as Kevin indicated we plan to make incremental investments in our marketing efforts around our brand and product awareness of our cloud infrastructure and application management products. This will total approximately $2 million of incremental go-to-market spending in the fourth quarter.
Finally, we ended the quarter with $221 million of cash. The increase since the end of the second quarter is reflective of our ability to convert earnings to cash flow. Cash collections were strong the third quarter and [indiscernible] September 30, 2019 were 39 days.
As of September 30, our net leverage was 3.9x trailing 12 months adjusted EBITDA compared to 4.2x at June 30. Our outlook for net leverage is for the ratio to be approximately 3.5 to 3.6 times by the end of 2019 assuming no additional acquisition activity or other activities outside the ordinary course.
I will now walk you to our updated outlook for the full year and outlook for the fourth quarter of 2019 before turning it over to Kevin for some final thoughts.
Please note that the revenue adjusted EBITDA of EPS outlook we are providing today will be based on the ASC 606. Okay, I'll first walk you through our updated outlook for full year.
Foreign currency exchange rates are a bit of a moving target these days our updated outlook for the fourth quarter assumes a Euro to USD exchange rate at 1.11 versus our initial 2019 assumption of 1.14. We assuming a pound to dollar exchange rate at 1.26 versus our initial 2019 assumption of 1.30. As a reminder the strengthening of the U.S. dollar against these two key currencies is a rout at most of our foreign currency headwinds so far in 2019.
Our assumptions for other foreign currency exchange rates that we are exposed to are also lower against the U.S. dollar than they were in February. But these rates are have a smaller impact on our outlooks. Also keep in mind that foreign currency fluctuations have a larger relative impact on our subscription revenue than on our license and maintenance revenue streams.
Based on our results for the first nine months of 2019, we are updating our 2019 revenue outlets for full year as follows. We now expect our full year 2019 non-GAAP total revenue to be in the range of 938 million to 943.5 million representing growth of 12% to 13% over total non-GAAP revenue in 2018.
Adjusting our full year 2019 outlook using the same foreign currency rate that we experienced in 2018 results in constant currency growth at 14% or 951 million to 956.5 million in total revenue for the year.
We expect total license and maintenance revenue to be in the range of 613 million to 617 million representing growth of approximately 8% on a reported basis and approximately 9% on a constant currency basis. Non-GAAP subscription revenue is expected to be approximately 325.5 million to 326.5 million representing growth of approximately 22% on a reported basis and approximately 25% on a constant currency basis.
Adjusted EBITDA is expected to be in the range of 451 million to 453 million representing an estimated adjusted EBITDA margin for the full year of approximately 48%. Non-GAAP fully diluted earnings per share is expected to be in the range of $0.82 to $0.83 per share assuming an estimated $311.5 million diluted shares outstanding for 2019. Our full year 2019 EPS outlook reflects on assumed 21% non-GAAP tax rate in our current outlook assumes that we will make approximately 45 million in cash tax payments in 2019 as compared to only $9 million in 2018.
Now turning to our outlets with the fourth quarter of 2019. For fourth quarter we expect total non-GAAP revenue to be in the range of $249 million to $254.5 million representing year-over-year growth of 12% to 15% on a reported basis and [13% to 18%] growth on constant currency basis.
Total license and maintenance revenue for the fourth quarter is expected to be in the range of $161 million to $165.5 million representing growth of 6% to 9% on a reported basis and 7% to 10% on a constant currency basis.
Subscription revenue is expected to be in the range of $88 million to $89 million representing growth of 26% to 28% on a reported basis and 28% to 29% on a constant currency basis.
We expect adjusted EBITDA to be in the range of $120 million to $122 million for the fourth quarter representing an adjusted EBITDA margin of approximately 48%. Non-GAAP fully diluted earnings per share is expected to be between $0.22 and $0.23 per share assuming an estimated $312.2 million diluted shares outstanding for the full quarter.
Our outlook for the fourth quarter assumes in non-GAAP tax rate of 22% and that we will make $9 million in cash tax payments in this fourth quarter. At last we plan to provide our initial outlook for 2020 at our Investor and Analyst Day on December 11 in New York. We hope to see all of you there.
With that I will now turn the call back over to Kevin.
Thanks Bart. A quick summary of our comments for the third quarter and first nine months of this year we built positive about our third quarter results and our performance for the first nine months of 2019. We have consistently delivered total constant currency license and maintenance revenue growth to the high single digits to low double digits in addition we have driven constant currency license revenue growth in each quarter 2019 within or above the range of year-over-year growth of flat to 2% which we said previously we consider a strong level performance.
In the quarters in which we deliver great license and sales performance and we believe that the opportunity continues to exist for us to deliver great license and sales orders we think that we will be above 2% year-over-year growth.
We have also seen our subscription revenue stream show another in a series of quarters of consistent constant currency revenue growth in the high teens a low 20% range and this growth rate is accelerated as we have moved through the year.
In addition, we've accelerated the rate in which we are building large customer relationships while maintaining the velocity of our business. And finally our customer retention rate is measured by maintenance renewal rate and subscription net retention rates have remained high.
As we ramp up I want to provide a glimpse into some of the exciting product work we are doing right now which we believe will further differentiate our ability provide a deeper and broader level of visibility into the performance of hybrid IT infrastructures and any of our competitors will be able to provide. And in true fashion we intend to provide this capability and a price point that cannot be matched.
As I said this only be a glimpse into some of the cool new stuff we're working on as we will go into much more detail at our analyst an investor day on December 11 which we will be holding at the New York Stock Exchange.
In the fourth quarter we are launching a new campaign focused on all of the capabilities we have developed to help customers manage, monitor and secure their Microsoft Azure environment. Over the course of 2019 we have developed capabilities across our network management, systems management, security application management and IBM product portfolios which will help our customers create a bridge for the journey to Azure into IT operations management across hybrid and multi cloud environments.
For product releases we have already done this year and the product releases that are plans for the fourth quarter early 2020 we have plan to add a depth of capabilities and we believe no other performance management vendor has today.
To the key [indiscernible] we're providing or to provide our improved tons of value for our customers with the ability to deploy our entire Orion base suite of products into Azure from the Microsoft Azure marketplace.
In addition we will provide deep monitoring of commercial and custom applications hosted on Azure with insights across Azure structure and platform services through silhouette server & application monitor and Solarwind net optics.
In our cloud infrastructure and application management product line we're driving towards delivering and deeply integrated cloud infrastructure management in [indiscernible] suite which will include common dashboards across our optics paper trail that provides that provides users with a single pane of glass connecting metrics, traces, logs and user experience together to provide full visibility into all aspects of application departments.
In our MSP product portfolio we're focused on continuing delivers the knowledge and deep technology coverage we have in our core IT operations management business to allow us to be more successful in serving their customers and in running their businesses.
We're working to bring more and more of the power of our Orion based network management products to MSP platform. We've already migrated the capability of silhouette network topology mapping on product platform and are now focused on bringing the capabilities of silhouette network configuration monitor through MSP market in the first half of 2020.
And lastly, during the third quarter we’ve released a new asset management capabilities for SolarWinds service Desk to make it incredibly easy for IT pros to discover in point connected to the network, [indiscernible] changes to those endpoints and identify new ones in real time and the fourth quarter we plan to release a set of deeper integration between SolarWinds service desk and our Orion products it will help us more effectively attract the large opportunity to cross sell service desk into our core IT customer base.
These are just a few of the exciting things that we have planned for late 2019 and early 2020 and we believe will continue to increase the relevance of our product portfolio across all areas of the IT operations market we serve. We plan to share much more about our product roadmap and technology direction at our Analyst and Investor day.
With that we'll open up the call for questions.
[Operator Instructions] Your first question comes from the line of Brad Zelnick.
Thank you very much. Clearly a lot of great things happening at SolarWinds and I personally get excited by a number of the innovations that you talked about at the end of your prior remarks Kevin but Kevin as we think about your license results and I appreciate everything you already shared about a tough federal comp and a lot of things that went really well in the quarter in North America and in EMEA but you still come a little bit shy of expectations. Just wondering how much of this you would attribute to pricing versus perhaps deals not closing the time that you would expect? And are there any changes in competitive dynamics that we should be thinking about?
Yes. So in terms of competitive dynamics no real changes over the course of this year. I think we've got a set of competitors they're really pretty broad rather you got the old competitor from this space many of which are getting smaller going away or take a market share from them which is why we're now number three in the IT management market admitted by [indiscernible]. We're number four measured by agency. We're number one in network management. So [indiscernible] we've had that part of the competitive environment actually getting weaker. They are already taking shares. We also have a little bit of competition from the cloud management vendors but really that's more on the cloud infrastructure an application management part of our business and there they are very strong competitors.
So really not having any impact on the license side of our business. When you kind of look at how the quarter played out there we have doing good international growth. We're definitely seeing just a little bit of noise in Europe particularly in the UK so the growth there was not as strong as has been in the past.
We had good America's growth and what really the only place where we didn't grow being in federal and we had a really great quarter and great volume quarter actually much stronger volume-based quarter this year than we did in the year ago quarter. We didn't have as many large federal transactions close this year as we did last year.
So I'll feel really good about the overall performance. I feel actually very good about our federal team performed second largest quarter we've ever delivered and we delivered it at a very high volume of transactions which is the way I like to see business coming in. So the overall we still very good about that just where we worked the quarter was a good quarter wouldn't call a great quarter it was a good quarter but I feel like we've got good momentum.
We're well positioned as we move into the fourth quarter and we are well positioned we moving to next year in that license and maintenance part of our business to continue to take a share and as [indiscernible] we've got some work to do on the cloud infrastructure and application management part of our business to deliver the kind of growth that I believe we can deliver because that's where we're really behind a little bit but it's not great product it's just we are, we have been running the true SolarWinds model which a very small part of our business I run at a very high level of profitability while we're trying to drive growth. I think when you really, we kind of step back and look at our performance and we're going to have to be willing to spin just a little bit more money in that part of our business. We want to drive the level of growth that we believe that we can because we do have a little better set of competitors there.
That's very helpful commentary and I actually just wanted to follow up on that last point for both you and Bart spoke about the success you're having participating in the cloud and market opportunity while spending less than competitors and you've got some strong competitors as you say that are willing to lose money. So to what extent should we think about increased investments being necessary to maintain current growth levels versus accelerating the business in light of such a robust market opportunity?
So well we talked about the fact that we were going to increase our go to market spending that in our cloud infrastructure and application management business in the fourth quarter. We are going to increase by that $2 billion on the marketing side and we're hoping that will drive new growth for us.
Yes, I think as we w think about how we move forward rather we're still working through what that's going to look like in 2020. We will talk about 2020 plan at analyst day but what I want to make sure we're doing is we are disrupting that market, then we are taking more than a fair share.
Then we are doing what we do really well, just sort of an entire market in a very small very large to the reality that cause them certain application management market today is most of the growth you're being that has been driven by the other vendors in the marketplace is the improvement is very high end-market, we've all had it.
But the sales side, they're trying to close every time the order plus transaction because the market is still real whirling. And I think in our goal, always then with any product we bring to market and any parts of market we start competing and we want to be competitive across the entire market.
Make sure the price point allow every retail then needs the technology and be able to afford to buy it and we think it'll make the product really easy to use. But we got to do a better job that we do right now and spreading awareness of all the capabilities we have.
We've gone to several SolarWinds user groups or you think European and one in the past. And even our customer don’t know well the things we can do though. We do for them in cloud and we certainly have application management. And we have to make sure we solve that problem in retail people. These are the capabilities we have.
And by the way, you know we're half the customer data dog, we're sitting obviously lesser than an FD. We are meaningfully less expensive than in the real light. Because we really are disruptive in the way we're approaching that market, just not enough people knowing.
That makes a lot of sense. As always, thanks so much and we look forward to seeing you soon, thank you.
Nothing much, Brad.
Brad.
Next question?
Okay. Your next question comes from the line of Sterling Auty.
Yes thanks, hi guys. And so, I just wanted to go back and clarify what's on a 100% clear. The softness in specifically the license, you had the fed quarter but some like that was good against the tough compare was all of the sluggishness isolated to EMEA and was that all macro or something else?
Yes. I'll tell you two things, Sterling. So one, we actually moved down a little bit year-over-year in federal because last year was a record quarter. We had a very strong quarter in the third in this year's third quarter but it wasn’t quite the level of what we saw last year.
So, second thing is or you never had and that was a really great quarter but definitely down year-over-year. And then we saw a reduction in growth rate in Europe. We didn’t decline year-over-year in Europe but the growth rate in Europe was not as robust that it has been over the last two years.
So, we definitely are seeing a little bit annoyed but I don’t think it's really in the small, you know we believed that it's small business in really in the U.K. market where that became a remark small business that we can just real tension knows changing and buy me a little earlier than companies that just sell at the CI level of holding very large transaction.
Because those companies said we're getting their budget and they'll resent budgets when I get to the next year. Whereas small businesses tend to be a little more reactive, is a feeling uncertain. So, still growing but not at the level we have been drawing really the only year to decline was in U.S. federal.
And like the great quarter, we just had a really itself compared we'll go up again.
Okay. And then, one follow-up. The investment that you're planning at the end of the year, it sounds like it's both on R&D and sales and marketing but I just want to make sure I understand, you feel like there's still some disparity if you will on feature functionality relative to the data dogs, new relics etcetera that you need to accomplish as well as increasing the awareness of your products.
Or just help me understand this split in the investment.
Yes. So, the incremental to me now is that Bart talked about it really going to go on go-to market. It'll be sales and marketing activity. And it's a really great high level awareness of the said probable result, how strong our products are and rate the pricing is for our product compared to anybody else in that market place.
It has any traction anyway. Right now, I don’t know every little player in that market, at least from larger players, we have a meaningful price advantage as compared to get some. In terms of technology capability and functionality what we'd say is we had a broader clean technology we believe that any of the other players.
But some of them have a little more depth in certain areas than we did. We do everything from custom metric to a long sort of trivia tracing to end-user experience monitoring. We do that across some types are fully efficient and same platform and some products are integrated to UI level but not integrated at the platform level.
So, is there certain user whereas our it depends in that deeper functionality and we do, yes. That has always been truth forming. We're never getting a deepest provider on any individual day in the market place determine the technology capability but we will catch up over time.
So, I don’t think it's a technology capability perspective. We can go and win a lot of business and we are winning business against those companies. They just out spin it by a very wide margin. And I don’t it tell me listen what they said by the way.
They are spending at a level where they've hit declining that cannot return but every goal on this one. But itself and we try not to do. But I think we have been more cautious than we should be. If we want to create a really aggressive rapidly growing disruptive business in a space which's growing very fast.
Got it, thank you.
Uh-huh. Next question, please.
Your next question comes from the line of Sanjit Singh.
Hi, thank you for taking the questions. And an early congrats on paying that $1 billion run rate on a hell of accomplishment. I think I mean two questions on different side is the on the product portfolio.
First maybe on the MSP business. Kevin, why don’t you give us any additional metrics or color on what multi-product adoption looks like. Particularly outside remote management monitoring. I know your step you mentioned advanced step protection seems to be one we're seeing a lot of uptake.
But just in terms of like kind of the other parts of the portfolio and multi-product adoption where generally what sort of the progress there?
Yes. So, when you look at the MSP market, there is a bunch of technologies the MSP's are buying and then providing as a service, heard there are just more different customers that I think serve a better or other world.
We have a pre drawn portfolio, we added three offerings in the second and third quarters and then we are now selling into that customer base and more in ways and more protection. We had a transfer management, we had IT documentation management.
So, we got so you know how you cancel 13 to 16 products that we can sell through to our face and then can turn me on a self-registering customers. The majority of fees for particularly [indiscernible]. On the majority of them are not or buying foremost less than half of the solutions that we sell to them.
We are adding to that, we're doing a good job of cross selling and outselling, it's happened in a pretty consistent pace. We're actually seeing better cohort road, this year and then in last year which means we're getting a higher rate of adoption of new products and additional products buyer MSPs.
But we still got a long runway to get those MSPs to do two things. One, buy all the capabilities we have, keep in mind that even to that market is their buying capability from us and they got to turning on in sales that capability through to their end customer.
So what we help them do is we brought them knowledge in working collateral, it'll allow then the administering customers, they want that additional service. So, kind of two set sales process, reading process, we could then will and then they commit their end customer and that's something we're doing as part of our margin activities really every day.
And you know we're doing a kind of better and better job of that over the last 18 months. So, we're seeing good traction, we're seeing the acceleration to pick up. I mentioned the -- and more protection more offering is doing really well. I think you'll don’t if our customer very quickly lot of runway could only had it since early this quarter or early in the third quarter.
And we pick up very quickly. And now, the hybrid management momentum is beginning to build and we're seeing a number of customer pick that up the long runway for us to continue to drive just growth in the customers by getting them to adopt more of our technology.
The other kind of interesting thing about C market is that MSPs will use, don’t you mean one use one remote monitoring provider but they may use multiple backup providers. They may use multiple security offerings and why they do that because when they add an end customer, the end customer man had a piece of technology they were already using.
Or that someone else was using to manage a part of their environment, whether it's part of the security environment, whether it's backup, and whatever it might happen to be. And so, they must be have to do is over a period of time, what's been the people have to do is just that end customer to stop using those this very piece of the technology and consolidating down on the technology they must be what to offer.
But that actually takes a little bit of time. So, there is a really great growth opportunity and just that both of those aspects of growth, in addition we want to help the MSP gain new customers which together leg of the stool. So, really three vectors of growth and we're trying to leverage every day and talking about our MSP customer base.
That makes it kind of sense. And from my thought push I wanted to go back to the core, actually the sort of first major product is around network monitoring. And I guess, the question is as the network seems to be changing and it's sort of becoming a policy fabrics connect to other clouds.
As kind of the more of the networks changing, how it's becoming more software defined. In terms of that core network management business, to what extent that that have to evolve with somehow the broader network is being deployed within your customer base.
Is there more, is there another class of capabilities that you need to build, are you sort of ahead of those trends. I just wanted to hear an update on that core network management here.
Yes. So, really your point look, the network has absolutely changing. The great thing about that is that network infrastructure and just much you think about is connectivity for a minute between user and application, wherever the application haven’t does it and whatever the user happens to be.
That connectivity has become more critical today than it's ever been because applications are so widely distributed today compared to our users hit that performance can get impacted negatively in a lot of different ways. And when that performance did have to you have to very quickly and in the IT operation pro of DevOps pro, be able to ascertain where is the problem.
What's causing the problem from and you very quickly can solve that problem either prevent users from being impacted or users are being impacted, you can you make an impact go away and make the infrastructure and the network run as fast as it possibly can.
So, network management we're just great for us to becoming more critical or then less critical. There are more and it a word for a minute, now I'll explain it. There are more network nodes today than it need to be managed than ever before and the number of network nodes is going to continue to grow now.
That node is changing in its form factor. That node is always a piece of hardware today and some case it's a piece of hardware. In some cases it is not a piece of hardware, it's not something you can see touch and feel, it's something that is much more software defined.
So, you think about computing at the end of the network here. Think about the WAN and how you got to update or more across the LAN, traffic moves across the LAN and get to those employees and get to those users. We're going to have to able to provide a level of visibility, tomorrow it is much deeper the level of visibility we arrive today.
Then I can provide you some level of visibility across all of those environments. I can write you some level of visibility in terms of the connection between the user and the application even if the user behind the firewall and the application seen in AWS, the application sitting at salesforce or wherever that was to sit, we can rewrite some level of visibility into all of that.
However, what we believe is that there is any level of visibility that we don’t provide, yet in by the way no one else done either of any real size and even no one really struggle or where we need to be able to provide. And we're going to have to create in one of these rigs we got to either got to build it.
Or when we find some small company that traded and we buy it and the management into our offering. But there is another opportunity as far as the way to play it, on growth in the network management market that is coming is not that far along. Here we believe we can participate in.
It'll be more cloud-based and real more software defined. We think it'll be a little bit harder and because there won't be as much standardization or on protocol as there are as there is with hardware. But that's something that we already know how to deal with.
We just have sold all the proms yet, why because they're not all the fun you get when you're on the base. Don’t forget that one of the thing that key is our success in bid, we're running our prompts are well understood and well-defined and the user can tell us. This is exactly how we want the problem to be solved.
That were when we build the product for them and so the knowledge that we use a lot lately are like a that you are a marvel that anyway it's like a fire vintage, somehow it sits everywhere. Well, that's how we build products.
We build products that really fits, everyone is that everyone in the customer line without selling the customer as a product. Then we may have to drill and be able to understand the problem. Which is why you haven’t seen it, start talking about yet when that's coming but you know by the way we're going to talk about much cool stuff in MSA.
And this area of computing is something we'll talk about.
Looking forward to that, thanks Kevin.
Yes.
Your next question comes from the line with Brent Thill.
Hi, this is Love on for Brent.
How are you?
Thank you again for all the commentary. I was wondering if I could ask a couple of questions. One was I know you guys have released a bunch of new features on the SolarWinds service test side.
Yes.
I was wondering if you could have for some more insight into how you view this product going forward especially as it competes with service now or other vendors and what kind of growth can it drive in the future.
Yes. So like, I think the key feature we released over the last really just is remain the acquisition, it's early in the second quarter is a discovery. And assent management and really expanded management capability.
We've already released some amount of incremental integration and we thought there was sort of that in our core IT set of products. But we got a lot more so like deeper integration coming in this core. What you'll we should make our product lot more compelling to our SolarWinds customer base.
In terms of growth rate, what we sit back on in future call is that we believe that the ITs and product could grow at a rate of 35% in 2020 over kind of when we set the referring of that product was. It has '19 and we then believe in 2021, 22, 23 delivered growth rate in the 30% plus range. So big market big opportunity now what I would say from a competitive perspective is don't expect in the next 24 months that we're going to be going head-to-head in service now that's not how we get market.
When we enter a market we're in a market with a product is really good, is really easy to use it's priced competitively. We're going to be disrupted from a pricing point of view.
We're going to be disruptive from a go-to market perspective. But we're not going to solve every problem right off the bat that very large enterprise customer wants to solve, only focus on maybe the top thousand companies in the world and they're really focused on the top 500 companies in the world and with their new CEO maybe we'll focus on top 100 companies in the world even though [indiscernible] CEO was so you're not going to see us we going to go ahead and head with service now.
You'll see us really focus into the mid market. You'll focus on the small to medium size business. We'll focus on those on me the mid-size enterprise not the global 2000 and I think people will see some success in departments of large enterprises where they don't want to use a service now because they're looking for something there's a lot more lightweight as a lot of your [indiscernible].
Now fast-forward four or five years from now and we will be competing with the largest vendors so that service now anywhere else is still in that marketplace we will be competing with them just like we did the network management market I got here in 2006 we were not competing when the HP and the CAs to be able to takes in that market. So we will get there but we get there over time we don't build to the large enterprise as a destination. We just make our product get better every time we release it. It'll solve a greater set of problems it will be more scalable ultimately we'll be good enough, strong enough, compelling enough the largest companies in the world will use it to manage their entire infrastructure from an IT sort of management perspective but that's not where we'll be focused right off the bat.
Got it. And a quick follow up I know the last quarter you provided some commentary on the M&A strategy specifically SolarWinds and you guys have done a bunch of deals. Is that still a core focus of the strategy and what kind of space or sectors are you sort of looking at to disrupt?
So we've always believed that having a core capability and competence around M&A has the ability to do deals, bring companies into our portfolio, put the products in the go to market notion, make them begin to sell at a faster rate at a much higher level profitability is an important part of how we can grow. It's how we've gotten a very broad our product portfolio very quickly and so we continue to believe that they part of the growth strategy as we move forward.
And that being said we all build M&A activity into our outlooks until the deals are done because you never know what transaction you're going to be able to close and which one you are we're very selective about the products we buy and that's number one priority is the product really good, is employed quickly, is it still a value to me, is it easier for users and intuitive, can we price it at a really competitive rate and be disruptive in the market; if all that's true them and maybe will make an acquisition instead of buying technology. So we'll continue to aggressively look. It doesn't mean we will aggressively buy because we've got to find buy something to meet our criteria. We haven't bought anything since last time we talked. So meet that in the last 90 days but we'll see what we find over the next you know 12, 18, 24 months but we'll continue to look at aggressively but we're going to be very selective about what we acquire if we make acquisitions.
Got it. Thank you.
Thank you.
Your next question comes from the line of [indiscernible].
Great and thanks for taking my question guys. I just wanted to follow up a little bit on trying to get the tax rates up on the cloud products and Kevin, I know you have talked a little bit in the past but in our experience attending some of the SolarWinds user groups we've always been positively impressed by that user experience team that you have down there in Austin and I'm wondering as you charge that new internal sales force to go out and sell cloud if there's a for them to cross pollinate with that team or if they're already doing it because certainly those guys seem to have a great rapport with your current installed base on the core side. Thanks.
Yes. So look I think Rob we have not done that at the level we should but we are beginning to do that at the level we should now it's probably the way to put it. You will see us be much more comprehensive to maybe it could work when we're talking to our user community about all the product we have and all the problems we've solved. I think one of the things that we did for the reason but now we're at the point that it needs to change is because our cloud product portfolio came through a series of acquisitions we spent a bunch of time making sure we've got those acquisitions integrated.
Then we took those products we integrated them into a single platform. As a result we ran that group of products relatively separately over the last couple of years. What you will see us doing even now if you look at our website you look it's we're marketing messaging even if you listen to my script we will begin to talk about those products in a very, very connected way. We'll share a bunch of that thinking on analyst day in terms of how they're thinking is now has evolved and what it's going to look like as we move it in 2020/2021 because you are right we've got a great loyal to the customers.
We've got a great team that has phenomenal relationships with those customers and we've not done a great job making sure those customers understand all the problems that we can solve for them. It's always a challenge we have a lot of products we have a lot of products but the challenge that we have been good at solving in the past and we've not been as good and with this particular portfolio of technologies but we absolutely will be better at it looks like it great at it as we move into the future but it's a really good point and one that we actually step back as a hey we have these great relationships they've got once these products from us we didn't tell them we have them and we've got to start telling and I call it ed one story because we are one company one set of technology solution that we sell to a [indiscernible] buyer to solve a very similar set of problems that may solve them a little bit differently and the problem may exist in different locations we got to make sure we're doing a great job telling that one [indiscernible] story and we are very focused on doing that in the fourth quarter as we move in the next year.
Great. I appreciate it. That's great color. Thanks Kevin. Thanks Bart. See you guys in New York.
Thanks, see you in New York.
Your next question comes from the line of [indiscernible].
Thanks. This is actually Matt [indiscernible] on for Matt. So Kevin you released a survey during the quarter kind of highlighting the skills or training gap in tech right now. Could you just talk about how prevalent this topic is with like your customers and partners in terms of driving buying decisions and this maybe how that varies between SMB mid-market and enterprise?
Yes. So like I think the last part of your question was a really good part of the question which is how's that varies between small business, mid market and enterprise and when you look at what's happening in kind of connected back to our business in the managed service provider market the reason the managed service provider market has grown so quickly over the last six years and why we think that market is going to continue to grow is because there is really dire shortage of skill sets on the account side, and on the develop side for companies all around the world and small businesses just cannot be competitive.
They can't be competitive in terms of pay. They can't be in competitive in terms of business. In that matter they really came in competitive in terms of breadth and scope of the role and so they are really struggling be able to hire people who have the skills they need them to have, be able to manage it today is very, very complex IT infrastructure world.
So they see market is going to continue to grow because more and more small businesses are going to turn the MSA and say hey I cannot hire enough people. I can't hire them skill sets. I can't afford to have the breadth of skills that I need. I need you to be able to solve that problem for me. So it's one of the drivers of grow up in the MSP market it also called it drives growth not just because you can't get IT pros and other technology pros but also because there's a lot of technology challenges today and even if you can hire them you can't hire enough of those to have the breadth of knowledge you need to have to address all the issue you have.
So that's definitely driving growth in the MSP market, we're absolutely seeing that is becoming more important that products simply work because they're not as many sophisticated technology pros out there to hire in a lot of the technology pros. There are in roles where they're still learning. Maybe they knew network really well, maybe they were consistent really well. Now they are trying to learn database and security and cloud and they're trying to learn multiple public clouds almost everybody is in a multi cloud environment and those technology pros need us to make the product solve the problems in a simple way because they simply can't keep up with a rate of change.
And so we're hearing a lot from our users that you need to be able provide a technology solution that tell us where to go, that tell us where to look, that tell us what the problem is we don't have the time in many cases we don't have the knowledge yet and we want to build it we don't have it yet. We needed you to kind of we just spoon feed it to us a little bit so that we can keep up and if you're the vendors they're able to do that I think are going to be really, really successful as we move into the next kind of three to five years in technology. The vendors who are not good at thinking about what is the like how does the product work? Does the product make it [Indiscernible] easy for the user to understand what I need to do right now to solve the problem for – identify the problems that are really rapid and into the way. You can’t do that. I think they are really going to struggle. And I think you may have seen that what some of the platforms out there and you’re listening to the [Indiscernible] around their old platform and in the new platform you are [Indiscernible] I don’t know how good the really wind [ph] was, but the problem is it’s the only real platform, it wasn’t meaning that far.
And as a result, they had to do something about it. So there’s not that many vendors or physicians to do something about it. Right, there was a handful or something in the market that are in a position over technology perspective we provide all of that, saying those were winners and the rest will be the losers, getting it to be critically important.
That’s really helpful. And then I know it’s early days, but one product we got excited about last quarter was the security event manager. Is there any update around that?
So we are doing better in that, it would be great. We don’t talk about the products from a [Indiscernible] perspective, but we have begun to track, and which is in the inner sense key market. Any other key market that we mentioned in the comment that we want to be the leading provider of security solutions to the MSP. Not using that test fee, because inner fees will provide a lot of those security solutions, so they don’t lose revenue to the revisit fee [Indiscernible]. And so they need us to provide really simple security solutions, because they don’t run a shop [ph] they don’t have security experts on their team. Security Wind Monitor is a product that can be that. And so we’ve done kind of dual purchase in that market. One, we’ve gone out and signed some SSDs. They provide service using our products, so we have SP, so they can provide a service to their customers, again the fees still want to be in a loop.
So it helps us allow the MSPs to be able to provide a higher set of security services to their customers are now having to hire dual staff or security experts and without having to build the stock, because all that’s excessive and hard to do.
All of the return [Indiscernible] use that MSP could use other. We are not quite variant on the use of that product, but that we are still working on the technology perspective.
All right. Thanks for the time.
Your next question comes from the line of Matthew Wells.
Hi, thanks for taking my question. I just wanted to dig into the incremental $2 million in spend that you highlighted. And can you just talk about how that’s going to be allocated between maybe your existing product was in the subscription revenue base versus the acquired specifically that’s Samanage?
Yes, so that you’ve already talked about is really focused on from a cloud, product and application management with the product skills we’ve had they are managing so far with the public cloud and products for that matter. You were clouding now to [Indiscernible] all the clouds that’s probably going to be there and they will be some incremental spending in our kind of all-premise application management products to connect to their cloud and research on application management. Product offering but really familiar marketing, little bit of sales, really nothing, no material incremental milestones we believe when you said right now, all our service desk offering. We’ve already had a good budget there. I think it was fitting into the level. We need to stand alone to drive the level of growth in overdrive. So no real incremental spending there right now.
Got it. That’s helpful. And any softness in the subscription base, if you are just sizing that, you think it came from kind of the organic drivers or the recently acquired managed asset?
It came [Indiscernible] of my comment. There’s really cloud restructuring application management. But we saw acceleration in growth in the third quarter and we think we’ll see a surging growth in the fourth. But the level of acceleration is not where we had planned for it to be. So that’s really where we’re seeing a little bit of softness, still growth just not really accelerating – acceleration. There’s not acceleration at the level we had built into our plan and that acceleration by the way the level that is acceptable to me. We should be accelerating at a higher level, than we are. In -- we have great products. We just have to do a much better job of execution. We have reached and we are investing at a right level.
So really working in growth. The IT team is [Indiscernible] the surface product before this with our execution, so that is where we thought it would be and we are seeing any strong quarters, so it’s really the cloud infrastructure the application management and part of subscription revenue team where we got to see a higher level of acceleration that we are going to see. The good thing is we saw acceleration.
Bad thing is that was a result that we already we had built in our plan.
Emily, we have time for few more questions.
Allright. Thanks for the color, Kevin. Appreciate it.
Thank you.
Let’s move to the next one, please.
Question from the line of Kirk Materne.
Hi, yes, thanks guys, appreciate squeezing me in. Kevin, I was just wondering about the MSP business. Where is that geographically, is that very much all the U.S. right now and what’s the opportunity for maybe seeing some expansion internationally with that part of the business in particular. I know it’s been doing well, but I was just wondering if you could kind of refresh me on sort of the opportunity for that business, more broadly? Thanks.
Yes, so what I’d say is the global business whether it’s primarily a North American, European or Australian business. So we have a very little filtration outside Australian and Asia Pac. We got good coverage across much of Europe. And some markets were shorter than others, some markets are more mature and as the countries relate to the MSP market than others, but it’s a pretty much again European business is a very strong American business and its’ Australian business in Asia Pac.
So where are the growth opportunities. As for the big growth opportunity I think are outside of Australia in Asia Pacific. One of the things we’ll focus on is 2020, we’ll talk about that more at Analyst Day and also I think there we can penetrate Europe more aggressively than we have. We are really [Indiscernible] there’s a channel partner between us and the MSC. You know a lot of Europe, so that’s okay. But I think we are a little more reacted with all that proactive than I like it to be. It’s like there is an opportunity to grow more aggressively in Europe, in countries where we are not as direct presence and we really rely kind of want to be partner to be us. In those markets there was a good reason to do that and we feel leverage to those partners, and great relationships with those partners. I think we can help them grow faster, we can help ourselves grow faster, by I think more of a direct presence. It is still not easy to grow in the Americas. And two things are going to happen, one, I think the number is going to see a continued growth, that market is really somewhere in that. You’ll get a 15% plus rate at whichever data you look at. But we’ve been taking share, we should be able to continue to take share and I [Indiscernible] to accelerate the rate in which we are taking share. I mean all those things are possible if we execute well. But we have a Greenfield, Asia is a really the bigger Greenfield, I would tell you it really is an Australian business for us today.
That’s helpful. Thanks see you in December.
See you. We have one more question.
The question comes from the line of Eric [Indiscernible].
Yes, thanks for fitting me in. Hey coming back to the cloud infrastructure, do you co-exist in accounts with the likes of data doc and new relig. I mean, do you think that market is going to consolidate, converge around single vendor solutions. There’s a lot of discussions from those vendors about expanding into each other’s markets and trying to be --. So I want to know how you fit into that?
Yes, so like we are [Indiscernible] the company is seeking a single vendor. No, and why is the answer no. It never really has and in the area of technology for a lot of different reasons. One, has been the lock-in, cause why would you lock your single vendor. Two, the reality is no one does everything incredibly well, when you get to the solution that has got a lot of pieces and parts to it. And so as a result, you can still optimize if you think yourself a single vendor, things are not getting into a level of visibility you need across all the areas of various structure. The other reality is you know different vendors have different price points where they are able to solve problems for you at. And certain problems you should only be wanting to pay a certain price in order to sell those problems.
So I don’t think we are going to end up in a world where we are becoming to – single vendor to do the cloud and restructuring application management. I think there will be multi vendors, just like they made a cross, every other technology across the industry of time. So I believe it’s important to have an integrated solution where integrated message traces are long, end users I believe it’s important as you can offer integration between the solutions of those problems, but I don’t think it’s really important that you’ll allow a customer to just buy those individual capabilities, that’s what they want to buy, even get super [Indiscernible] and you make those capabilities across vendors, which – will always earn across all the products we bring to market, it will do the same in the cloud and restructuring application there as in market.
Because I’m already here, for example I can’t talk to you. I’m talking [Indiscernible] I’m not looking for a board member and I want to add [Indiscernible] had a lot of calls the CIO lately and one of the things they tell me is but we love blog in certain areas of our infrastructure and we want to, but we want to log across our entire infrastructure but we can’t afford to use them across our entire infrastructure, we got one use across our entire infrastructure. Giving something that’s really cheap and easy to use and other example to disappoint, to make so kind of support the point, we are not getting up in a single vendor world. I know the stories are telling, but you’ve heard that story before, from CA, from HB, from REO, from class from [Indiscernible] and the list goes on and where are they? They are not really here anymore.
And so it’s going to be a really important to solve problems well in price of excess. It’s going to be hard to iterate those solutions; together we got [Indiscernible] which is what we do a great job of. And it’s going to be important to be, to allow customers to use higher products with the products from somewhere else, which is what we are more than willing to do if we know those customer, I’m happy to go alongside and solve the product, really solve really well -- and let them use somebody else to solve the problem also. So that’s why I think we’ll end up, but you know like I said I want to tell him that story, it is a good story.
Do you co-exist with likes of a Spunk or data dog and the majority of your accounts right now?
The [Indiscernible] of the cloud portfolio of the day, we got all of our Fortune 500, we almost have all of the global without them. We have almost all the global 2000. And as customers we have over 300,000 customers around the world in most large companies, they are going to use us somewhere in their [Indiscernible]. So we ask them, look we co-exist today with all of those companies and in fact you know most of them we are going to have me. In other cases, well the [Indiscernible] than they had in those customers. So we are closing it today and it will continue to co-exist. The advantage we have is that we have an ability to sell the [Indiscernible] in a way that we can. They can’t solve the problems even close to the level as best as we can. They are never going to have a level of neither the level of all product capabilities we have, that we say 20-year billing. And, but we do have much of the capability they have in the cloud. They don’t even build those capabilities, for the sake of seven years, and we built them for four or five years.
So they don’t have the kind of lee and the cloud that we have on premise. And we really can’t – those problems which we talked about, what does that really mean, because that’s a really easy thing to say and which we think we don’t understand. I will talk more about that at Analyst Day. But however, we connect those calls, we think are the key differentiator that will give us a competitive advantage.
Okay. And last one, you had mentioned the splunk in the data dock, are you those the two that you see the most or who do you think you see the most?
So look I think if you look at your sheer volume of customers, your data will be [Indiscernible] 8000 customers which is a big amount of customers, a number that we have, but still a lot of customers from the software company and so we are going to see the more [Indiscernible] the number of customers they have. But we don’t see a lot in [Indiscernible] in the right, because we own small business than they are and we are in a lot of the customers that are in, but we are very very small vendors in those environments, so they can tell you we feel much more competitive on the cloud side right now. And we all got more cloud customers than they have. They are right. We don’t really compete with those in the part of the business they are selling into. It’s not too much, [Indiscernible] sell any midsize businesses, it’s all a very very big size enterprises. We don’t feel we are out, but we deploy a lot of size – with our management products because it’s really new and allows people to solve the problems. I really think they want to solve this as it makes sense to use them before.
So with that, I think we’re going to wrap it up. We got a little bit overtime, but I appreciate you to ask the questions, they were great. And hopefully, we’ll see everyone on the call at our Investor Day coming up on February 11. Good bye.
This does conclude today’s presentation. You may now disconnect.