Dynatrace (DT) 12 May 202020 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Dynatrace Fiscal Fourth Quarter 2020 Earnings Conference Call. [Operator instructions]. Thank you.

I would now like to hand the conference over to your moderator today, Michael with Investor Relations. Please go ahead.

operator. you, Thank thank Dynatrace's and results. joining today us Good quarter you and review fourth financial fiscal to morning for year XXXX With Burns, today Executive me call Van on Chief Siclen, are Officer; Financial Chief John Kevin Officer. and the up After call question-and-answer for the prepared will a we remarks, open session.

the release. Before I'd to draw included statement your to start, Harbor in we attention like Safe today's press

Securities considered Section statements Exchange call, to amended. our of the be we'll XXA may of meaning make XX-E related Act as forward-looking this Act XXXX, the During that within Section as of amended, Exchange of business of and XXXX, Securities the

statements All year growth XXXX. outlook, fiscal including of statements expectations future, fiscal are fact financial for quarter our and and financial and forward-looking business guidance and historical the expected statements, other operational first statements expenditures; management's than including regarding performance of operational

revise we by our obligation to Forward-looking as except statements as or required forward-looking and, reflect of undertake no today these views statements. law, only update

Please actual Form XX-Q, materially language refer discussion risks that latest on filed for the with our SEC to was expectations. January cause differ filings and in release SEC and the other to could a today's XXXX, which results our and press to of the XX, from uncertainties cautionary

discussed During measures comparable section at release directly to in the found the XXXX press to fiscal as our Investor and GAAP a the refer The course Relations fourth year financial each differences of financial measure measure between financial within of of measure reconciliation measure can dynatrace.com. be financial comparable most non-GAAP each or today's website and earnings our the certain defined used quarter G. non-GAAP and call, we'll financial GAAP by Regulation non-GAAP

Siclen. turn With the to Van Chief like that, to Executive Officer, John call John? our I'd over

has COVID-XX 'XX possible. healthy Dynatrace everyone. is call. hope a we call, the year-end in thought hearts around the become broadcasted of tragic thank on and have communities, and late a last QX impacted joining never of earnings you families, staying ill our January, dramatically Since us those businesses we for Good pandemic fiscal that world everyone our earnings way loved morning, is And when And to a one. that the out recovery. who safe our that course, speedy It loss suffered go those who have have and and

to work has clouds remote to and engage they an applications become customers, revenue, drive shift the among to collaborate Sudden way run and provide caused even more on services, essential teams.

a faster with their customers us business I continue times, changing continue growth model, strong to We workloads rapidly our Despite motion. to and and provide differentiation, platform team greater our believe respond help without requirements collaboration, work closely to and challenging to them these class business. with efficiency enabling innovation, wasted world balanced easier durable

three to morning. like this reinforce I'd points

First, what are with across responded and Dynatrace seeing the large. success which our we has to market COVID-XX base and at customer

conversion an the like and emerging for and update automation as multi-clouds on our as increasingly marks platform like be products. some progress for made an observability, earnings become we've customer on cross area the you we've dynamic of factors model critical look both third, we important AI selling I'd This in the success Second, And across of us recently our of call made the as growth will tremendous update and all success modules our to subscription our advances of this ahead. you I'd fiscal and XXXX, end our robust to business platform transitions. fourth motion becomes

Not made a not challenges to modern team we and sure Dynatrace our home did work customers beat. overnight running for continuity of healthcare With not world, we ensure customers from of and could keep proud and successful workloads home only rapid companies, I for responded was kept the business transitioned situational the logistics almost to assuring COVID-XX. from banks, government awareness of work We agile be could the running services, essential to and we we more the portals First, around platform business the SaaS to also applications, so our shift how were to miss running. provided essential companies, workforce, a more.

health as two-week pause of employees hold their our was were what many despite on of and and global So of shock essentially pandemic focused the a during took mid-March the customers the and programs, ARR rates QXs. XX% QX line Linearity up close we up and were prior XX% revenue and and generally solid in work-from-home establishing with closed year-on-year. with services their year-on-year a subscription safety

year-on-year up eighth was our expansion consecutive quarter. were XXX% logos net the above rate New and for

our is strength critical platform. results this a intelligence our of We believe nature largely mission of reflection of the software

Software and and applications has that more underlying important with performance online move of the rapid same these points, to been innings near scale of uptime the We made eating and trend multi-year work the IT powerful the software strategic the the still home infrastructure from customers fast priority time value. to our in world that and platform deploy sentiment, than Dynatrace initiatives just a the and the is believe, share early this that top ever. and list. to Dynatrace addresses rapid commerce places

markets we of roughly in our government. and And strong to more also The strength healthcare, as by ARR of COVID-XX. XX% industries, XX% e-learning, outside surging such have is communications, challenged majority

that on in Our estimate the due facing do largest top automotive. are to pandemic health world. we is customer headwinds said, to as focus ARR This that is hospitality, and retail consider enterprises XX% and the base we to enterprise such of XX,XXX our approximately industries around travel, XX% that be diversified the highly customers we with

that new from in demand somewhat prudent will industries near-term. to is expect impacted It be these the

are companies projects over top eight applications However, move the continue headwinds. largest the healthy is our list. time, typically at financially and weeks priority within these What has we seen that forward transformation have experiencing we industries working us of to solution some even the near past essential with industries same and within and of the their shown

company This the arose energy was to service in before addressed For expansion example, country occurred In and disrupted already high a sizable proactively was in them issues service throughout continuous March. wanted we the not a if deal and impacted. past after failure service did assure late quality reacting Italy was unusual.

time and to can high approach with made shelter quality rapid You at service-impacting Dynatrace's service with of for expansion imperative. the imagine straightforward. an unified issues remediation home, degradation COVID and mandatory decision rapid Dynatrace precise rollout was actionable AIOps automatic answers identifying at energy

oil business company in to the and maybe its modernize on was determined essential of to automation disruption oil to history to logo a Another to rapid a greatest cloud commodity customer a Dynatrace. it midst of new this was the technology company, for an example trading In simplicity, the Dynatrace set efficiency revenue revamp and applications to driving chose for and was and time stack value. agility advanced applications They running because and of shift it the services.

encouraged with operate challenging than with impact It's macro April our backdrop. But tell that COVID-XX and the bit customer our to stronger growth specific economic to continue overall across close a be we solid fast quarter an net too to will start of a early that and QX June market. bookings even can ago, we solid are with within we year what base generate a target will a assumption

our model converting was our progress our to fantastic customer a FYXX base year. now and business transitioning Shifting

with customers schedule. added we the are of have the now We customers Dynatrace on to over majority set. where the our new X% new X,XXX hoped platform We ARR to on Dynatrace now X,XXX ahead left We our of only continuing this XX% year, be product logos. platform past with classic over

workloads business record teams where As be reside. scale. techniques before, and we More more hybrid many still workloads. the be clouds and or observing and applications all multiple may often at with run cloud systems critical back for they latest said deploy utilizing hybrid multi-cloud, Dynatrace and cloud public, These build, multi they DevOps what used we the customers and often these than of is look Kubernetes more And nearly now, may manage more to for public are use optimizing see container not to and orchestration. native more rapidly applications ends

of and current hybrid pleased exciting handle our will us transformation are the change, and and customers complex environments very that AI-assisted combination modernize have digital chosen platform it's automatic complexity, to public frequency that of most we dynamism I'm can this work. initiatives. their observability with of an only know part and With to now future

of Regarding model QX, revenue was more predictable our in services. XX% subscription or to business transition a subscription

extremely Our transition XX% we've overall XX% And efficient done adoption across us base. of no business business for old a XX% while margin to release from to is subscription gross our our and and days time operations over support Dynatrace are than more virtually and a to this customers XX teams complete. a increasing With drive classic more success the subscription. on license giving

conversion will customer durable. subscription SaaS focused, we'll resilient the behind more to more we us, business transitions the look With and driving even remain years now more and in platform We'll one a drive streamlined forward be ahead. value business we and

platform. Now Simply in been a stronger to position. our we put, have never

business times need may high to shift, run applications continuity applications optimal and Applications the must to meets and change, all productivity, business on. may are Work perfectly customer to interaction, It's As workloads guarantee IT. is locations the where at drive COVID-XX response so employee work highlighted, ground. transactional but ensure flawlessly.

the and month, critical leading firm, APM past Gartner, APM Over capabilities Quadrant the analyst simultaneously annual released industry's guide. Magic their

a we the consecutive among Dynatrace year, the For tenth is marks again highest once were provision. and given all competition leader considered

our achieve platform challenges radically clear to leading approach the with In separation made module. competition the differentiation QX, of different puzzle. both requires bold a observability. six is In even the experience of digital modern and to of announced To for APM our compared Reinventing categories. guide cloud capabilities capabilities in piece just critical expanded Dynatrace our infrastructure-only the five the decisions. module a we We've more was

gone on over have the a rapidly three growing year, or approximately we customers XX%, base. to that's us and Over from buying modules XX% of from more customer past our

getting Our stronger. cross-selling muscles are

services, a a than for have services for assure native stack us value the popular Recently, a applications. to a cloud And of a Part to mobile end seen experience expected. believe ever Digital the for processes this that complex to has that of is of that monitoring. mobile instrument full in have of it deliver layering and been now. user actually surge extension part we made for we the years easier virtual we is needing renewed few this demand is appreciation module

surge One customers mobile to of as shelter recently customer base cover added saw in quickly went place. traffic our to licenses in They a surge. banking their the

train ran. to see not on told post-COVID. more any, in to campaign me the likely and banking did they their to digital outcome in traffic mobile of They ever us. With new of pay the base mobile home outstanding should and our their to expect any customer be has they ease said investments power Another COVID online if much, normal of surge higher functionality use reduce continue than for bank especially done early mobile, for off experience, major degrees a

up own are or stack infrastructure their they It's early now of alternatives used on our very mode and only the of broader And Our and cost. encouraged in for infrastructure-only for customer module of newer by platform adoption love toggle base. this AI-assistance and by Azure, coverage is expand unique Platform strengthen we mode maturing ramp, deep at though significantly. XX% only full APM us. lower and Google of lighter place scale we our flexibility metrics the Though coverage our AWS, infrastructure-only Unlike now Cloud down dashboards, capabilities module between the on the to like Automation as a uptake services.

efficiency, our includes those module includes our and I out module who holistic log network fully case differently and and use And value offering going and problem than should competition. a for story, infrastructure we APM our greater than list drive our monitoring fully package solve new point monitoring, by monitoring, AIOPs both a full our AIOPs, to also unified. customers. stack set for are after to We unified. Rather infrastructure-only take into approach our more simplicity, larger fragment a of tools,

summarize. me know covered a I I've lot. Let

we is have growth in environment to the leadership unprecedented by very we've of We business in-markets well-positioned position that First, a uncertain believe our the IT of is the few near-term that the economic encouraged Dynatrace an strong April. face challenges. greater our business has performed top headwinds, Though considered face very well trends to differentiated generating overall near of a been in during may category priority macro fact continue due list. a strategic in

we builds to addition, durable and We streamlines the our from This term. new a Dynatrace this business made away platform past our and license completing predictable go-to-market classic now business. more are converting the a In base tremendous one transition platform long progress year focus for subscription our our growth renewed and business.

With it over the and Kevin our financials that, our a XXXX. QX let me to and into full year look turn fiscal guide for deeper Kevin. into

you, And everyone. John. Thank good morning

start, to impacted this all crisis lines. I crisis been my been health all to by sympathy would especially to express the with working the thank world Before have who deal on huge tirelessly and I who like the amazing front people everyone have a you help the to those

we change are adaptation and requires exception. pandemic and The no

our as Our employees main as customers well their applications. mission and to objective been during critical our this time support has

standpoint, employees adapted are and rate were quarter, of robust remains but remotely the working half modestly customer remain very to nicely. the that fundamentals retention pleased moved new environment. net bookings the fourth side our seamlessly In we a we indicated, solid. of business in during we impacted March, on second our John our the From As have this overall

We pleased the very made been with guidance. end exceeding a strong public a four and company and quarterly annual over high quarters as including in had last we the the our have of had QX performance progress

and the addressable on we operate of for profitability, the operate of of a expanding platform strength the combination market growth and cloud to to increasing given we the some trend the importance time in. continue believe business we We and can Dynatrace quite healthy software with continue deliver a

establishing a profitability flow. As a meaningful comfortable for with some year we headwinds that growth the calls result, and strong current are despite full subscription and of associated guidance cash coupled environment, combination with revenue

me a and with highlights quick then XX. the let to So review fiscal move fiscal fourth of and year start quarter

business on focus is metric financial recurring key annual revenue. Our momentum

of points end increase the growth to million, relates points currency said, to of was and period. the in constant throughout $XXX total $XXX The Dynatrace approximately our basis at as was increase the ARR percent basis and ARR This grew to offering. million X% ARR. our compared an XXX on XXX quarter. of John over ARR of to year continues March ARR The total As faced XX% of headwinds million range per classic a of XX% platform to remaining ago XX% $XXX.X year or year our basis the our year a currency

our We pleased of no the ARR conversion a is program classic total components. these with now are we break extremely down need quarter, and base that shrinking out of success longer there the to is percentage feel single a to each digit and

will longer we be forward, so. Moving doing no

moving a as classic healthy the customers to customers. ending the the XXX the as our quickly quarter two we customers added were break growth new Dynatrace to net adding these of The down platform. new quarter, we expansion Dynatrace logos Dynatrace growth franchise logo X,XXX recent ARR customers with new in rate. balance If Consistent drivers, well during quarters, drivers net with two customers of Dynatrace new are

about Over the XX% count the new growth result been customer our company. months last Dynatrace to of logos XX of the has

As volume new winds our new the adds is increase. decline a of program logos quarterly Dynatrace the basis customer to to conversion platform of the while on likely ratio will obviously down,

the XXX% expansion of new threshold above remained or eighth at consecutive In steady flow the addition logos net our rate to quarter. Dynatrace a for

from to Dynatrace net we Dynatrace our the expansion the time total have over growing. was focus not platform expect expansion now expansion of rate continue of exclude we is that but 'XX, conversion of business to no year-end, impact as longer As rate, and do XX% it significant Dynatrace the the a will at fiscal on In net XXX%. we'll the impact

per Dynatrace up continues Our over trend ARR customer to is and $XXX,XXX.

our We enterprise expand proposition portfolio cloud-based there continue cases in of existing we majority a large customers value their lack businesses. The believe in of base. customers is these continue for as our applications our at applications to opportunity that transform digitally to continue their to our expand customer and they further expansion still instrumentation,

the quarter was revenue basis quarter, driven million services currency. XX% end XX% subscription year-over-year Moving $X.X to revenue, of the constant increase increase total of on above and fourth which million, and is of $XXX.X guidance, The our XX% a an total the for was in revenue revenue, the in high acceleration growth in in an $XXX.X million growth by strong XX% and being fourth currency. year-over-year constant in

X% declined less license quarterly revenue For represented the revenue. than million our and classic quarter, $X.X of to

an 'XX. said, John non-GAAP the of the in As fourth from quarter, our XX% was for fiscal margin gross XX% fourth quarter increase

subscription healthy product autonomous gross is benefits winding us. result realize a a at unique in see down platform percentage on reliable and as are XX% SaaS increase Dynatrace of to margins margin stack. we Dynatrace classic our using advantage world-class the continue operation, the of highly We now a These a for

for above a non-GAAP quarter guidance due This above fourth income operating 'XX. and $X.XX was of upside. is revenue $X.XX Non-GAAP $XX non-GAAP net guidance operating primarily associate so in to Our combination per $XX.X was XX%, million, up million led of the of share income share. gross per of the end from the our and $XX.X margin fourth our XX% of of high or the million quarter to margin

virtually was in constant quick now a driven subscription currency. the being to the is for believe growth revenue which up revenue, by to business $XX.X results model of fiscal summary, up we revenue Total and Turning and $XXX.X transition by the XX% two-year in year-over-year in currency. million financial increase was in subscription year, full growth million, total to declined XX% year-over-year XX% XX% 'XX. complete. a million is million, our Overall, Classic $XXX.X constant $XX.X an license revenue

non-GAAP 'XX, fiscal million in XX%, with line improvement operating for up of XX% the year-over-year year from a internal in operating Non-GAAP was margin income very healthy with expectations. our $XXX

balance of our LIBOR was debt to $XX the million of XX, million the repriced and our XXX quarter, basis we as debt long-term March plus $XXX after million long-term Turning principal down sheet, had to points. In points, in cash January. into fourth account payment $XXX we basis taking XX

anticipating we financial think prudent and cash the market to principal payments We want We in grow to are additional so given current not maintain this conditions. is balance term flexibility. our near any debt

year down fiscal XX-month IPO EBITDA. ended eight $XXX fiscal This leverage trailing ratio our in we X.Xx turn one over our EBITDA is ratio, months 'XX, During from X.Xx million. decreased of consistently our the which about at of leverage adjusted post

Unlevered free bookings and DSO cash We was or to from to million and due XX.X% flow experienced percentage two fiscal two this lower higher classic for for due $XX.X about one it perpetual uncertainty. million headwinds QX number. QX There was was point to 'XX. points macro-environment a percentage in about of $XXX.X revenue resulting

not have We evaluate any AR and continue collectability provisions our additional outside to made of position parameters. normal for

like XX% financial portion that year. over obligation, next discuss of which the $XXX was approximately of the last quarter our QX recognize would increase to million, an I year-over-year. of last measure million, was The is The of twelve an at RPO, $XXX of over current XX% we performance the to increase revenue end months, expect remaining as which

combined of from fiscal subscription the course benefited duration the RPO Our of move our increase in business 'XX. new has agreements with to over subscription an healthy expansion a the

you Embedded in our that opportunity our in underlying few are 'XX. view we of noteworthy environment to assumptions can move move Now think are the fiscal and let so our understand guidance. forward as guidance me I

a economic year. be full that going assumption we the difficult our is for fiscal to environment First, in operating are

of greatest over due the bookings year. We QX with course economic in headwinds declining fiscal global on renewals to the COVID a the gradually expect the headwinds and shutdown,

to two a Second, points of continue throughout headwinds little the we expect currency year. over

of From a customer to our XX% as automotive, and mentioned, represent our John such verticals exposure as standpoint, highly hospitality travel, XX% ARR. affected to

customer as the of on enterprise within rates these However, a with modest platform base. and the this expect and, our customers, on as our of we renewal a base they only Dynatrace portion of critical our view based negative conversations impact a many platform mission result, size

As we which far in is modest impact. expectation the customers our an of with some new a business so have negative aside, for these closed verticals first quarter, in further of support

cash few From and a to are flow profitability also key points there highlight. a perspective,

we on to expect modestly timing grow in First, business. initially health impact investments moderated we crisis the of evaluated as we headcount QX the of our as the

increased demand to our We of out plan reaccelerate playing fiscal later pace have expect environment and innovation investments the commercial is the as we in or the hiring better. and if year

expect As back half. then normalizing part of a a income see operating out first we into from should the go P&L the higher you result, to in year the standpoint and as

working first does expect Finally, With year-over-year flow revenue total representing we modified headwind with revenue serve expect terms, to the not respect a cash unlevered is as XX% prudent our backdrop XX%. and to quarter, impact million may the some year. range capital, throughout $XXX the we cash it million to adjusted believe the that as currency request customers for to to of free $XXX of but which would growth that be in to billing

quarter per XX% in income $XX to or range expect the $X.XX of XX% We non-GAAP $XX non-GAAP million share. first operating of and of $X.XX to to revenue million, be

$XXX XX% million, guidance year, full XX% For is million growth. the to to $XXX ARR

be XX% XX% growth to XX% and million currency. $XXX revenue the to growth to of in total expect adjusted $XXX We representing range million XX% of for to year-over-year

in Looking the to 'XX we expect revenue, Based fiscal $X from at we services million components in is product that on partners in SI $XX current the services customers and basis range work. declines platform revenue our have where revenue combined be on fiscal we of all million given a of with classic the about doing that license more to the XX% under moved less almost needs down assume 'XX. services automated to Dynatrace our the year-over-year guidance,

$XXX revenue highlight to to like rate. also a would with XX% our growth guidance believe subscription is fiscal million XX quickly currency-adjusted to million, XX% will expansion basis. to our respect which expectations on As I and $XXX Dynatrace net the we to one-time a be XX% disclosure, in growth XX% of range

above we eight As It today, strong we earlier to of earnings at quarters a release John and our in our part XXX%. or highlighted noted be have continues achieved business.

on would above modest resulting in new both our we current great anticipate net between throughout fundamentals revenue about rates good decline logo net the customer experience for a the a business based guidance, rate the XXX% year. feel in have expansion expansion 'XX and We net However, a expansion confident and we of fiscal feel we balance the growth.

of we resulting year of to a unlevered is Moving to the XX% rest $XXX million the of XX% increase on of can capital non-GAAP from $X.XX XX% X% cash a $X headwinds, go I free range $XXX the to Based the believe unlevered midpoint to to AR range is million. from $XXX million in a for of $XXX which From non-GAAP increase of free of year-over-year we expected P&L XX% revenue income fiscal share. cash XX% effective the approximately non-GAAP Despite XX% to XX% cash of cash operating rate cash 'XX flow million income to be last tax in to is this which EPS revenue, expected per of AR range, basis. working in perspective, to addition tax flow our about $X.XX flow on expenses percent and would pre-tax the is to incremental million. tax cash discussed, as a headwind to

Most show with remain well-positioned that strong with and position, growth, are including is and is profitability we meaningful performance our leading important and market we our durable continue quarter unique Dynatrace confident a flow. full for fourth financial summary, for very the cash to that we year is shareholders healthy profile believe pleased we scale, our long In and term.

the open will we call for questions. that, With

[Operator is Instructions]. Capital Certainly. RBC Markets, your line Hedberg Matt with open.

commentary even Well, your well Do the even as customers good cloud-based hi, COVID. everybody think perhaps than TAM glad to my faster thoughts you cloud this go of CILs you post-COVID in a for to you're relates it help out before. on how this guys. a world John, and accelerates faster embrace could really where navigate ultimately than it monitoring helping before? taking lot look situation address importance and to you're difficult Thanks And questions. of

Matt, appreciate the question. We do.

also this will for cloud, and lens not We focus only as believe business highlight lens also normal that new of meets ground applications it themselves really the on sort focus will where the on the IT. high

we in really we've And in ahead my feel existing resources our strong as a I of -- team, I effectively? do innovate built essential limited get I think ground currently be I take be hope How our be I that position also additional IT to characteristics these more going my from customers the applications? that standpoint. and do customers do the faster? about forward up do for AI from that How because enjoying of they more will also enjoying, our sort and move automation many with future. the do will more really that? to How platform it's that we're move into platform care-abouts So I customers the are how

let's are then which noted now that stood wondering a the products think buying trend more new though, is new talk new other than year or out can products customers other say, And That's landing of that higher great. to XX you within say, I'm me customers ago? cadence with you I now a customers? three In about great. words, thing really are

along their laying extend I and for from a experience quant environment because digital because stack to the first view cloud add stack They with APM thinking look the Others they're it look all infrastructure piece they outside in. are, the infrastructure of It's platform. application the don't with about but but want that full down of some the piece and yes. broader a anecdotally, to the APM have extend complete the

layers either is cetera. make cloud the device, need and capability in or to to sure they on performance that from virtual to device, all they're deliver expecting the mobile et that the So IoT edge delivered through actually that

to quick of on are together keep go those going the there. the primary pretty from that of will add the So there depending view was and go point two customer

your JPMorgan, is with Auty open. Sterling line

Hi, is for for Sterling. the Thanks taking guys. questions. on Matt This

just uptake was to curious more more in front. you of to see see color that the guys question I was I'm more wanted shifting? first get The guessing just focused But terms of did cloud the needs some on-prem. on versus the activity customers' on

Whether of still it on or host our platform focused behind whether us have cloud customers every the workloads. our or SaaS first, firewall, they code. one So deploy and it same is host platform, their nearly them of same all cloud exactly they the

we this that standpoint, Dynatrace hosted seen point to of a more shift although see So a much we little bit environment. from to a do haven't leaning really expect that at

post-COVID Zoom, back actually productive. that advertised a they depended these third-party for transformation the digital assure we here we're to they beyond seeing That we have customers sort performed home are bit characterize and doing -- leaning are more toward that faster they're and workforce still to on shifted focus from four back that here XXX, but shifting to enter Salesforce, Actually for there, -- clouds their think little said, weeks. as keep we future what probably What we're employee of was into of year. work the those of to some like in are hybrid cloud so could some focused is they third-party on of all of some our things that as Microsoft that other making leaned our investments extensions monitoring Citrix their where will seen QX and sort the the sure monitoring, productivity optimized capability now of sort

Kevin. then helpful. just That's follow-up Great. one very maybe And for

are something or declined be of? deferred understand long-term Was aware customers should that there trying we was -- from that sequentially. So that if contracts doing have was that if just shorter else there to

fiscal So terms are mind please of necessarily -- with customers generally payment in that keep over does in signing are agreements so that us, half three-year our our but does annual advance, that not impact last sold deferred. down What two years our ago licenses not actually perpetual the bit seeing that burn of long-term little year. primarily a is of and you're sort the we've

unlevered also year of XX puts on cash we as fiscal over and thereafter recall, free and to an in imagine will As put can for continuing then -- pressure going that's bringing it licenses flow alleviate long-term down, 'XX it deferred and little years pressure have you we're those that fiscal as bit 'XX, on you primarily. may some impact a that will pressure this recognized our and three

two years pretty perpetual essentially long-term and but and ago. gone so zero point license at at working sold So was licenses deferred. has three this that we perpetual at It just that down to healthy, it's

Bellini line with Heather open. Sachs, Goldman is your

for Thank the John, remarks. helpful you taking guys so Great. and, really question much opening

so you they questions. how were. for them A couple thank So and detailed much of

just be going was wondering noticed what's is and mentioned you And maybe the that the for of Just given about difference? logos gave from lands then a XXX% you even impacted, then actually could in color quarter? at the And the on? XXX% NER, you have first those you even prior a I if of I the there's commentary how I if more this helpful was follow-up. up. year. anything the of be saw given being are you just exact wondering size what mention QX, know new the tick particular size -- in terms might may all that down And the new have number, you've and time in thank what the any on was the next just you But

you. Thank Sorry.

Yes.

Let logos. me start new with the

consistent seen $XXX,XXX end, in -- at the land new now range or actually in have we that -- $XX,XXX logo in on so it's quarters for range. So very

actually then customers modules. but but add up ever it's second they not ticking their out now as a additional or anything, organization three a note of more And that and sort with nothing modules land our we really XXXk module if expand we're more to the effective if footprint company material, they land in deal. least of think we We're part as volume land as higher selling at not was So I it's focus place really land. not at of new plus a everything's than at like add a applications We has -- more that's the when there. big some Where result and it transaction know I sales a expand. may folks where think and we If to the much expand being dropped gradually they really were multi-million and on once minus they deal I question. slightly, a a not there but it's customer actually think healthy dollar company

-- where the company on enterprise-focused XX,XXX. we we an where be to are, at right global we like So place think it's the enterprise as an focused --

the we're I so next years. And that going Kevin? several and throughout think we to going where I maintain like are

quarter, relatively on prior the it more guidance that in net view from and X% a decline is expansion XXX%. of we XXX% the modest will the bar think rate, Heather, in terms think Dynatrace, less little based they QX. on logos, we put to down than be dropped quarter, prior top-line where what future, going from QX so a expansion the Yes. helping down prudent to where what flat that the was new color combination obviously of a To net bit as it's on rate from mathematically

optimistic. we're point customer the at of said, the that healthier throughout lot low we rate. our base expansion a John net much With a hopefully maintain and of the and will opportunities course expansion year about

again rate a conversion. carve-outs than out expansion couple final I time our expansion rate higher rate is company backing the are you of if last the net it. quarters, over net of one Dynatrace four at total that think And Dynatrace been at in thing we because some the looked expansion expansion had it's

earlier, was very overall, more well. pleased their we're our customers with as footprint, use very with case talking as about pleased event So modules over time we're retention, an John the expanding

quick was one follow-up the question to then just to long-term that related last deferred. And

from should much think you be expect but where ended? off to comments, on head, we over of your million out number -- XX the we So continue, my $XX to when just look it months so XX $XX expect than I smaller based million top a should that phase to went should that we

right. That's

quarters. and quarters wrapping but of six six most and next quarters think to eight wind then it, long-term up maybe just in that of want deferred to in down Heather, You terms eight that in wrapped, -- and the that'll be

So deferred, timeframe. level always but some the long-term of will have we that's

Company, with open. is line your William & Blair Suri Bhavan

the of Thanks Congrats well. of everyone's the thing as I on the on to feels for One, well guys. experience to taking picking the funnel. that doing some be hiring up. top seen you've the funnel. the ramp, sales, of pieces. Hi, related me is should of exposure question. and quick expectations understand but know some AI affected some digital like interesting questions glad of the my this around really your In piece the love top Couple of just to quarter. industries you've from really I'm feels me. environment multi-cloud on like talked about but the infrastructure, what It interesting, seems

good understand those out logically to of coming COVID of You and start, love how driving the think think there what's Do in said just for business? driven an plays post-COVID? think terms that of some say, of April's understand might forward, you you to off is to do COVID today? the but you too. love time going you're trying next three quarters, that of out be deals seeing acceleration which Just a sort top funnel coming in about at of And how two,

the Bhavan. for Yes, question. you. Thank Thanks

combination the and bulk productivity. really for work and back and different more they are huge how these on of kind understand product So that aspects that employee orchestrated people really People large I the modern our is run our run sort environment shift to getting focused four But how line to challenging complex a in -- didn't for public seeing that environments, the multi-cloud continues from we're prevalent of sort difficult in on and the that business of multiple accelerating. cloud Kubernetes unmanage characteristics, and with environment of home of applications to are. they we hang that not business cloud we shift of of see into articulated, more hybrid ends, be environments, more before leaning weeks

or a extend of more solution the bag do-it-yourself AI tools we We built-in without the help than environments quickly unique that that's out automatic highly often the manage alternative them sort to spots of them see with kind of and have most these sort blind approach, of there. with very associated ever

of sales of cycles that rather So the might really we've way to certain will this and characteristics normal, and that interesting sort of situation in new sort past. they coming kinds into of for our a automation COVID-XX become than of I drivers be had differentiation AI do the believe sort out nice primary in have

a we're we our like I new limited faster sit, differentiation, think where I a for well-positioned like with So and and I cloud normal resources. very to

you. Got Got you.

one then the on of quick really And around competitive environment Okay. and one sort pricing.

say and premium any changes to the about land environment? present pressure credit a Did any weeks challenge what, when cetera, sale, you are the Relic. So or in And grand. that any all well talk first from or you Love not have impact was -- at premium others. obviously New price viral Datadog you that New if about you they it's environment, price Relic understand card, all? think the et seen four competitive using point, at have the above not of a or at that sort in XXX But there it's offering guess was it to offering compared I

the all sales from familiar you sort you Yes. do first remotely. and for Well, work need offices, platform platform part all, can Zoom organization works home. SaaS of anyway. to do They is most can They're a you in so our remotely sit on-site, understand with that anything that don't of very our they

done adopt helping of demonstrations, remotely. of latest manage So techniques, whether the that sort all concepts, environments, they customers its sure making proof

beat So no from home. a in office on to work the there's shift miss from

first that's So the key thing. I think

enterprise rather more of or at a And second is, cases value The more as slices a use little level. support that thing cases of It's the than effective, around higher much product to that's differently, customers efficient, believe I package Bhavan. more we use mentioned, our tools. series way we

thing the with or Same So we what you monitoring things. platform, multiple we to do one. do AIOps. infrastructure-only, about you infrastructure network includes sell include products we we're full don't to includes monitoring, need including including it Other APM that's log When three products. in self-buy we're solve companies challenge, monitoring, four what to because infrastructure three talk have

already appreciate and all that you the that works with throw it's our think have together as fact we're for So that to I offering, become you gluing and the over unified it that then maintain than really pieces all customers done up time. familiar rather how at bodies a

us we're why we we know on for even well pay of our a do understand more little combination unified of our and sort that who So get expand the provide. software as they customers, base, bit to leader we as the value if

Bank with Rangan is Kash line of America, open. your Instructions]. [Operator

trends. quarter. you looking very on your looking I'm Thank much. at forward the Congrats Hi.

extreme, on month April pretty the has Your very with standpoint also it like actually your very extreme prudent been although Looks -- conservatism have the month with of demand pipeline Zoom is year a is execution is continues stronger than that -- virtual to extreme, that, settings. also it when just done all also reconcile expansion end front the solid solid. the what I very struggled field to through Net I guidance, there RPO be is reconcile conservatism, generation extreme. and and to work enabled that And earlier. we've the from rate the all strong. Yet way, your of by is sales

is you've I if so you the XX% that what expansion assumed to guidance? much. critically just to, add guiding Thank with business of take up XX%, your you're fact have the it you trying to conservative even doesn't wondering and Draconian if rate net just how because your I'm within probably understand Just verticals, been quite so healthy

the highlighted Yes. guide important, XX% of I subscription the as -- and we course we coverage had and about throughout And certainly things first indicators There a standpoint our fiscal that of of quarter the into 'XX 'XX from that as that plus 'XX. when leading are seen RPO. a positives well, on number lot we've think some of backlog are

optimistic we program in doing as well. We're the prudent, business, look, comfortable bar mind, hopefully, overall thinking of beat to that have about action, and they're be strategy want spent we is time our raise I some we Sales the and year to approach set very and our in So, with. throughout the the we about is with good the evolves. a course want organization John very extremely opportunity. that And feel

Our But renewal are we rates thought to just it'd little Kash. be bit very uncertainty, foundation, the very prudent set healthy. of solid really

line is with open. Barclays, Lenschow your Raimo

stuff. Hey, just lot like that the Question you the Yes. needs kind can Like, you. monitoring. infrastructure just the cloud, on moment adoption, comprehensive of asked to do at thank But of to there. you and more there more people early mentioned a lot solution the a you quick -- you're if an look at go

out, first be kind is do as actually So like how playing people they guy What people of realize understanding already of phase the momentum do so you out how like you see in you the kind there? playing see adopted out, you. secondary a that Thank will that, more of playing just that kind you can that deliver more? understand to need lot

dynamically off, across of customer really that dynamic of workloads that we see Sure. many a opportunities these application they through provides and infrastructure Good the is value start they gives environment see orchestrated the dynamics. more from when come we don't lens landing capability an is application of have in understands what's APM the layer, a and tracing have view talk visibility that. expanding hitting cloud question. Even distributed and you them there. need and traces about nothing both volume in sort have teams view, really if entering able our some don't realize an why you in sort to that you're which pull that then with workloads We when all the Well, application in and we happening the

full they actually go cloud monitoring do see the and have the platform. decision been more workloads than that time stack to infrastructure We look on cloud And that placed environment. enter their earlier they the then and customers of we to expand volume they their -- need then just only out observability investments make for they at understand the even before

So with need one effectively. expanding customers primary, on more I it to familiar have a the heavily of good get more this, this grow both, of of comprehensive, -- as tools, approach right that's say workloads we of now a up something but off our but combination the starting spots, the is can't need often to I more the I cloud the cloud, hygiene expand have lots bunch leans I'm I more fix coming I'd to the other with right models of and blind do do to more sort

Makes sense. Okay.

makes sense to that Hopefully you?

sense. Yeah. That makes

open. your Canaccord, is with Hynes line

of results. us Hi. the Congrats expansion monitored best in the John, terms you being where are? your Thanks the staff in some percent opportunity, just customers or then can where that's remind apps is terms customer on guys. maybe Hey, of and of just average of

XX% range. they much to hey, Sure. Well, workloads their than XX% applications business Gartner run that to customers XX% are so associated old receiving driving of XX% around the many stats in to companies and where that range The higher still X% application need in it. some of the the said, cloud adopt is the XX%,

as a that's just which room much in minority. range. XX% up the said The let really up, We in continue XX% I the but There's that alone are of go stronger want in. the percent getting range XX% X% majority to that vast customers to cross-sell we're in to lot sell, who have to

to per zone of business billion-dollar be company that $XXX,XXX, ARR over company When ARR customer and a the then now the you believe average continue time. you range would at our global room which take is applications XX,XXX applications $XX,XXX any little there's to we million-dollar a growing ARR per that that $XXX,XXX or our average customer, a is their all which run which at in per invest assure flawlessly to toward customer to look look landing run a lot that willing any

I Okay. think. One more question,

line from of comes Walter final Our Pritchard question a with Citi.

open. is line Your

Hi. Thanks.

hiring. a clarification the on Just

and should order and in in impacting in Sounds capacity like of it. is re-accelerate think the any how's 'XX, 'XX you hiring? Can about to did sales hiring slowing growth talk you're looking you hiring rate fiscal what in build for sales the about Thanks. specifically and how looking slow then you're it, sales we that, sort resumed in for you

Yes.

little it bit but a in down So we uncertainty And is year slow and been hiring it the focus we've and the little haven't and current of gas. as confidence more a re-accelerating stopped -- that's becomes building they still the We did folks. sort on bit more the less this we're sales uncertain.

also So R&D, expect where the all sales you us for were back expansion. we're key should into were currently. the us are innovation and investments healthy to three bring Those ago leaning vectors customer expansion to our investments and success which in they those year expansion,

the Thank We're future. we're and QX. to you scale, the profit and forward I very much morning. know and this a which Appreciate everyone. right. healthy. and excited we're talking Good Good days All QX. about XX business. how about tell balanced going to QX. look catching up in I stay did fiscal which on you Stay bullish hope to Kevin to I run and grow on And this time We again can everyone. start focused to we continue our year Cheers, business the in

quarter fourth your you call. the This concludes Dynatrace fiscal earnings participation. thank XXXX conference for We

may disconnect. now You