Dynatrace (DT) 2 Feb 222022 Q3 Earnings call transcript

Greetings. Welcome to Dynatrace's Fiscal Third Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. will President, the Investor I Noelle over time, Vice Faris, Relations. this now conference turn to At Noelle, you may now begin.

With 'XX Thanks, thank operator. Chief Officer. conference Executive FY Chief Kevin Rick you and the call. earnings Financial for joining Officer; today Good Dynatrace's third McConnell, morning, are me on everyone Burns, call and quarter

and earnings to include statements. uncertainties, cause subject as statements such we started, get statements are number a please Before on from by actual statements revenue depending note expressed guidance. and of forward-looking to could such forward-looking that implied or risks differ today's comments that those These regarding factors materially results

Additional The the company's filings disclaims update and in Form information contained XX-K any represent and SEC, forward-looking is this reports to to call report factors in or with reflect Form on XXXX. statements on concerning quarterly Dynatrace's X, Dynatrace circumstances. obligation included future statements events XX-Q. these including uncertainties views risk the our February on these annual

a referring turn And to today's Rick will of measures Chief Investor website. non-GAAP section be of let reconciliation that, Rick? found McConnell. some be over and can GAAP Relations to we A detailed during on call. our measures the the Officer, financial call with me As reminder, our non-GAAP Executive

be very good CEO. of Thanks, first Dynatrace's am kicking on to excited us calls anticipate the I Noelle earnings morning, call. be will and what everyone. Thank joining you many today's for as off positive I

ARR. a seamless I'm I'm leadership the for ground grateful. Siclen which going First, billion CEO contributions nearly in of set I'd his very to growing stage for in as Van and to for transition today. cover like smooth thank Dynatrace lot $X a in John to He

hoping at from take away discussion. highest there I'm messages you level, are today's the key three So

fire continuing cylinders. First, foundation we on established to Dynatrace a solid are and all has

for raising investments as and third, FY our operating and to Second, well expectations intention beating across key further the all growth. into are QX was accelerated we R&D we're a leaning with very guidance metrics sales 'XX. as drive strong quarter, marketing And

talking share for about the Before to my I I our future primary with helpful thought how of Dynatrace. business, would you and it be reasons performance about the joining think financial

enormous, First, accelerating billion the we've addressable market and surface. $XX all scratched industries and is the over across only

perspective. analysts Second, is with have powerful and since Dynatrace's role strength highly validation my Dynatrace conversations this the customer Customers third-party and of provided technology differentiated. it's and taking and world-class of products the recent reinforced further me

and I enthusiasm passion only enjoyed have with us position group performance In and of a to exceptional in we this of And joined the expertise positions Third, excellent company ever-increasing up strong growth innovation, I'm profitability, I'm continue mid-December. have in is this growth. fired phase talent front to my customer and short, elite Dynatrace's financial part of celebrating forward very with in in market-leading multibillion-dollar and of. finally, of admire Dynatrace since a thrilled of this grown our the a are I and be customers. is in next and collaboration building And to companies starting similar culture, people. vibrancy and looking the deliver of our precisely Dynatrace excess value orientation. the of Dynatrace. because results, to investing opportunity to we I at us is businesses XX%

performance. our Moving QX on to

XX% currency. growth metrics. remains and been $XXX this the Rule flow our Subscription pleased XX% as often key constant team's am margins FY operating guidance. the up of operating revenue of ARR successful guidance highly million, how me in start ARR combination across XX case year-over-year all once $XXX growth On the being speak of trailing Let execution, XX% a 'XX currency. basis, by than million, ARR in was up XX%. again year-over-year very at finished greater performance rule strong sharing beating a XX I free XX% in People nearly strong extremely with flow business a a for and we've and cash exemplifying our cash at of free the with SaaS XX-month with unlevered constant

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strength both see areas. in to continue We

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'XX, on strength are and we I increasing provide guidance of FY our outlook more results for as ahead our which will QX shortly. With Kevin mentioned positive the detail

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our can engine even that continue and views fuel You module also comprehensive expect our customer new innovation to platform more to of module ecosystems. innovation existing expansion, we'll creation with enable

as us alternative to of vulnerability element and it." restarting positive And and it's us, vulnerability, once where to LogXj us security tells how Application other vulnerability application to differentiated the focus Dynatrace customers, over the platform. of our our Dynatrace a is upgrading example highly clear And application published. highlighting. largely but their go through products." about helped it." detect no another LogXShell. our LogXj early we told mitigate approach in process our only what, Not we application to our on understanding manual updates engine applications the mitigation raced did Back our signs strategies. painful across security Security of exposure. this saw spent their level understand have but prioritize Our before was tell had to to using continued to POCs how our "Other We're module during we as understood multi-cloud patterns, "It's security hundreds AppSec value in yet agents our tools an the is One module vulnerability and said, the With everything enabled, and from traction that as of customer of produce this numerous Another was topology and trying we mind-blowing a it world customer as fix value-add within immediately environments hours XXx of we of said, associated great Dynatrace and through surprise any "We've a customers seeing substantial customer time. jump of systems able to transaction AppSec found December, of protect detect our minutes well all being innovation cloud of distributed worth instances fundamental intelligence software Customers AI tools

also offering unique hope this and vulnerabilities, an in proof in over in area unfortunate AppSec delighted engagement for our plan early worth more I this common our have ARR to our background they well offers given as drive noting the enthusiasm our of response. and module my a It in opportunity we strong beyond. become with reality. of It 'XX FY to security is While customers' the in for decade. growth personal and my point as journey It don't application the was past but still area, leads Dynatrace's is and performance

and very Ambika to addition welcome Kapur it pleased to VMware, experience Kevin, at first knowledge from QX extensive Ambika Board. Bracket Cisco I in already to turn her of fiscal a the this and I year. in Before with performance has continued this the this marketing Dynatrace our am her delighted group. of In knowledge the over and experience I Computing work product and breadth to for area three valuable am strong and represents quarters strong summary, across expertise

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Now, I'll outlook the over Kevin? our our for call the turn Kevin QX more quarter. financials on for to and fourth

good and everyone. morning, Thank you, Rick

solid bottom up us of blocks quarter the Rick building top on 'XX ARR for we finish with delivered mentioned, fiscal outstanding to As in another place the both XX% and sustained setting line, for a growth plus.

to million sequentially of roughly a XX% million. includes year-over-year, points. revenue exceeding basis million $XX representing year-over-year $XX That's Our increase strong ARR, investments million in sales top with and increase ARR commercial expansion headwind third resulting performance an subscription revenue quarter guidance. $XXX in XXX annual a the Sequentially, $XX On our and our for this result another a of in $XXX was and year-over-year continued or guidance this growth. headwind. line is basis, FX in FX million

half other that that our conducted fact financial and to are we dollar. in needs U.S. than currency our is focus foreign on approximately business of global enterprises, This the currencies ARR of fluctuation. subject means the the Given results

Given the U.S. creating headwind reported growth. strengthening is this of to an dollar, the ongoing our

was As rates XX% rates have a strength our a XXX growth constant increased as to basis, $XXX the with last growth license currency year. believe should basis XX% fourth these ARR represents year-over-year. was rate above increase up of total rate $XX sustained the result, ARR reflective representing is XX% true points, adjusted of the in an of million growth growth the currency perpetual currency in on the impacted reflect million, by we making our constant This of Backing focus $XXX On year-over-year the and a business. investors over constant investments ARR been headwind row quarter we negatively our about commercial growth million, which organization.

million adjusted believe constant license the headwind, this we perpetual down over an As business. the of wind growth in months, our of of impacts perpetual ARR new the revenue excluding included to a at Expanding normalized ARR, and months are included last looking rate ARR, investor reflects when the new we sustained our $XXX added a of the further, ARR We growth and prior nearly currency on website. million deck for and ARR on we perpetual expansion, $XXX data runoff the XX%. XX for the durability license compared of quarterly historical XX increase currency in trends that table chart available

the As addition net blocks combined measured Rick ability our as relationships expansion the logos, ARR to the same. building existing of for by growth expand with sustained mentioned, customer new rate. remain The

continues to same in increase logos year-to-date, new the over X% the quarter, growth logo compared up XXX We added year. XX% we new to New and XXX last added of period year healthy. logos, be an last

where our stronger back the as half the fluctuations. the additions these changes way of headwinds for at seasonality to view Given a is logo half, in we much year, first best due year-to-date we business normalizes COVID last believe the quarterly look in to had it new a

the for basis, becomes or a three with positive more modules. sales, customers a number continue of same driver On year. observability or to new the As was with more of XX% a we to higher landing landing primary compared three logos period modules new see percentage year-to-date momentum last XX% with for

a on addition, level continued a healthy In have to initial $XXX,XXX last XX-month lands trailing very with basis. the ARR logos land over year, at of new

land at of X/X last part about than healthy healthy or when now that's XXX ARR module a use their modules. Dynatrace our platform open year. $XXX,XXX, an of ARR twice of plus At nearly or increase module customers size for the platform, nearly demonstrating from X,XXX the of is Average Underlying starting three increased on module With are over is customers zone, more has customers and ARR plus ago, ecosystem. of more three the to landing average year this the for QX three more indispensable that increase customers over of an XX% Dynatrace's average unified which customers modules, increased our Given $XXX,XXX. a customer three this infrastructure the contribution per from average point, half to using ARR customers see we're from our almost observability in size. our

million, constant million. for $X XX% revenue by Moving a in up on $XXX the year-over-year end beat and our to third Total currency, was versus Subscription guidance quarter of high exceeding $XXX up the $X range our guidance. quarter XX% end revenue revenue. third of for million, the high the was million in currency constant

prepared the I using As was respect of third QX for in I margins, last in XX%, quarter with will otherwise and remarks, move gross unless non-GAAP line noted. margin measures, With last forward be to year. quarter

the of line, we have healthy continue and to margin performance. associated reflecting Overall, we value further this As ARR before, a efficiency platform. accelerate the that our grow to extremely are Dynatrace validates investments strength as the both strategy of believe top revenue said pleased the with and our to very We growth Rick discussed.

continue opportunity and of and on us. will large innovation You growing in ahead market expansion to commercial capture see technology us lean to both the

up we XX% in invested third $XX the For R&D, quarter, last from million year.

attract talent in successfully and expectations. to retain organization, our R&D consistent with continue our We

and our up investment $XX zone XX% current over and of of On year in revenue. the sales last target we XX% XX% within marketing, go-to-market million to side, invested

shutdown was million, that operating through resulted This due third range, of the $XX $X Again, QX to our third investments year. savings in began an in upside mind XX% bottom COVID last of to in the flowed above year reaccelerate starting keep high we line. the compared the margin for to the million primarily significant we XX% and of that year. revenue the quarter of income to last in operating last related Our to guidance saw end quarter

net income or $X.XX million per On share. bottom line, the was $XX

sheet. Turning to the balance

$XXX million compared to the As an of million increase cash, of we $XXX last same of December period XX, had year.

selected healthy where same continued generation consider accelerate strategic cash flow with us million, pleased business Year-to-date, puts our cash to strong investments last there's free to areas. our are opportunity $XXX a believe unlevered and was position year. in consistent We in growth the with it period

best quarter, basis, XX% I unlevered time. an on we billion XX% basis measure due revenue. As of the recognize discuss changes million flow billing of $X.X we expect portion at a XX% free QX to on a performance XX-month cash last million, a revenue obligation, trailing that current patterns, to view unlevered our increase four year. constant it's The a in increase like cash is an financial constant On was RPO approximately the believe RPO would as to which free was last was quarters, flow year-over-year or over over the our to basis. reminder, currency of remaining of end next of The over of $XXX $XXX currency

We the are very with in RPO. growth pleased

the to understand However, we continue and metric to the is billings believe removes variability contracting. best ARR it as with associated business' performance

Moving guidance. on to

the maintain building we to ARR currency expansion that FY further enable will investors growth With that over in XX% rates. To innovation growth constant reminder, new investments time. into prior the resulting the of rate deliver our the up to I'll year-over-year a a to basis when commercial measures. investors As has from points again non-GAAP guidance. XXX and growth the XX% raising are headwind. of end guidance plus our These XX% of growth basis, better once our sustained be mind, and about fundamental to will ARR strength blocks we on midterm. again, expansion recommend XXX% QX and XX% constant that to a net core over XX% our business, currency in logo us on are 'XX growing Since product share strengthened, dollar I FX believe provide we in talk focus U.S. margins Once and visibility profitability, QX, referring

$XXX between We expect be to XX% ARR and year-over-year. as-reported XX% $XXX million to million, up

that to we basis 'XX guidance. XX% down. growth constant the license be from rates will wind currency assumes guidance basis of headwind roughly fiscal ARR our of an our due ARR associated expect points to growth to again, Therefore, addition, in ARR increase XX%, XXX XXX adjusted In perpetual points prior

currency are revenue year-over-year million $XXX by growth year. currency be representing on or to year-over-year constant We million, XX% basis. we our that, also XXX guidance to as also the raising We reported Underlying million, points our by raising We the be guidance now expect between total year-over-year between growth $XXX.X million points XX% revenue a revenue basis XX% subscription XX% $XXX currency. year expect are $XXX currency. now both constant in subscription for revenue to and up to constant basis for XXX and in constant

to be to the We of growth. driven and subscription revenue XX% continue revenue, expect ARR subscription strength revenue and associated of total size by

Moving down P&L. the

year full operating be and million expect to between million. $XXX $XXX We income

As year, over goals lean we expansion Rick and and on last with top investments the to to stated fuel earlier consistent additional growth. our ARR plan in mentioned line

the However, on ARR ramp expansion. we investments it move will take before further additional time needle to

R&D be range and revenue. a sales be expect to XX% of margin XX% resulting of an of to revenue to in in and of operating nearly XX% we XX% year, around marketing of the For revenue,

plan to fiscal 'XX throughout XXX 'XX. between our to layer R&D continue sales fiscal and another in and and As we to investments, we basis on points XXX expect in beyond lean marketing

on to the share, For expect the EPS end full up per our previous year, $X.XX $X.XX guidance. $X.XX high of of we

guidance. prior income margins. we free strong an flow unlevered to delivering assume Our calculations are EPS with effective At tax investment cash levels, and these consistent XX%, continue rate able net cash of

summarize, million balance cash revenue of slightly flow business free XX% our guiding of to to flow free durable unlevered to growth ARR growth cash guidance raising full to is To and $XXX combining of approximately are Rule XX% continuation or our a unlevered profitability, when year. a We $XXX XX of the for and be margin. million year

Looking to at currency. $XXX XX% we million, be and XX% $XXX expect to year-over-year XX% XX% million up to QX, in or total between revenue constant

profit operating expected is to year-over-year be incremental to From $XX.X conference revenue constant $XX.X week. standpoint, between be investment XX% as million and to up Perform XX% currency. our we between income XX% to with in XX% revenue margin $XXX next is subscription a our expected or resulting on of and addition, to $XXX.X In million million, the an XX% XX% execute in combined million, strategy, to related continue operating to of spend

EPS to summary, $X.XX quarter be top healthy pleased Finally, In margins. overall ARR with we and again with expect with between third our line are strong we growth $X.XX performance the momentum share. to once combined very per of

have we a line we with And open will have the for As for outlined, foundation we Operator? solid growth. that, sustained questions.

Thank first with proceed of line Instructions] you. RBC with our your [Operator question is Capital Please Hedberg Matt Markets. from question. And the

morning. to good with forward guys, you basis. ongoing on welcome Hey we Rick, And Dynatrace. certainly look to an working

runoff, net this constant seems And growth if exclude way that, So the ARR look on focused first slight in was I patterns the quarter. stack for on it, transformation currency-adjusted super think can characterize are maybe post it quarter. and spending Is at think about perpetual a overall, that congrats worry ARR the ARR growth. deceleration I the those to the year and this? to a digital foremost. the slowdown And people Guys, new currency it guess, that on accelerate helpful you basis, two like like you on looks COVID? way this continue right But I spending you your disclosures new about

Matt, Sure, it's Kevin.

you're absolutely right. think I So

on the also track this And $XXX that in about trailing up new and did that's bookings. on our expansion our in ARR basis, a basis. supplement is what business. was I in highlighted, in year-over-year And our a growth this by million grew we XX-month think top is our what disclosure year, the ARR our a website the we is, XX% which X-K filed as we on provide we

important of it's that the the is north bookings over been XX%. on expansion a we look currency the headwind, ARR, great think perp say a business. will our growth rate So license last I really also health indicator basis underlying to growth our that's of our constant at the of of and has excluding quarters, the four

environment we demand the to above dropped super slightly is This we're very business, continuing to extremely and quarter, plan. reps sales but the remains well. And company healthy. continues hiring business XX% it's think the robust. perform The Underlying do

bookings, combination and excited the ARR XX% expansion QX. XX% So with of super the the we're ARR-adjusted between the growth results and in pleased

very to And Appreciate you. Look front excited welcome, future. net on it. both rate, very the logo strong the thanks expansion and the as as for both new much Very very good well about feel look forward meeting Matt.

lot, a Thanks guys.

question Our proceed with the question. Please from Sterling JPMorgan. of is your line next with Auty

let to and guys me Matt's Hi thanks. Yes, Dynatrace. echo Rick, comments, welcome

line most yes, Matt's because, inbound what we're getting interest of that's from further investors. questions to Just the

On slight you or sense X% quarter-over-quarter, point your have the quarter a done the pricing that any market in else contributed share slowdown? might what two give that the have or ARR that deceleration also to have trends anything thoughts or side, -- of around may us that you might can

significant No changes, in Sterling, market share.

win the We healthy continue across rates very board. to have

I say that think continues. slight So seasonality. there change in a I'd is

look QX 'XX. by first our of half certainly, of year impacted 'XX which COVID year-to-date an compared expansion ARR the you at on of it in first If to a easier QX in a and comp the bit made basis, half of last little was in

digital I across So board. their future. are and win that rates and think remains continuing the as bodes people the environment the demand fundamentally, very initiatives well accelerate robust remain And to for mentioned healthy earlier, transformation we

Got you. it. Thank

we're a to with hodgepodge category of tools continue just and digital the initiatives, DIY. Global as transformation what an integrated and delivering over a is on what being to And that platform is It just of companies to is of biggest move companies. they the replacement need have software we focused opportunity biggest replace -- I as would And XX,XXX intelligence customers they that greenfield. that see say, that to that's Sterling,

Company. Cikos question of Mike comes Our with from the next your line proceed Needham question. with & Please

into Hey guys guys, you the layer layer are how functions marketing remarks investments here. us, R&D. thanks you about Could I that takes want fiscal typical two that circle on thought to in are well we to the guess, ramp it comment and make the specifically sure to those additional in sales I properly of as questions when the back prepared a think on sales you to but for where some that -- was 'XX, taking long did I rep heard to and how investments Dynatrace? as I those remind expected looking

Sure.

take that. me of part first Let the

seeing market is what and opportunity investing is that's we're be going what we're in there Our growth the to expectation that for and upside in.

generation So to overall during sales at in marketing one modules a with expansion in product point we're to new and logo partners. penetration two and drive of point new looking additional R&D deployment innovation module and to and drive expansion FY increase two in and to one 'XX awareness, terms

driving are those to we're be in incremental that areas growth going to on order So that the focused generate opportunity.

become of from sales to It's continue, Mike, over reps our time a couple clip sales productive. from mentioned anywhere productivity, our for four to of it's the last And quarters. healthy fairly five consistent reps. a I growing we earlier, to And quarters very as solid,

going is increase money goal the as that put XX%. and sales as more As and board. XX%; sales And we're number year, goals well the you This to the well grew did mentioned, here. in one we sales know, probably quota capacity than reps last is into we to our Rick direct of QX year, of marketing better organization as our some direct across

you. Great, thank

with next Raimo question Please question. the comes from your line The proceed of Lenschow Barclays. with

from all as well. Rick, Yes, best thanks. the me Hey

how to about as idea about we you like think for the do think you doing bit the you guys. about think we growth the that there a if is like you're and is here, do fundamentally if growth here investments quarters question just little Just well. five how an cannot math of But I the four get

that been Like growing growing picture company for of the can a growth the you been several said the market. this in a in the in now like how market the see mid-XXs do or upside in growth think just against -- more evolve quarters. bigger in -- that opportunity? will you've Kevin it You opportunity in upside you Like of you more kind slightly a frame solidly has future

as we Let is driver our and primary that really remarks, question. that. articulated prepared starting is me Thanks really digital point cloud, market the take multi-cloud XX,XXX, this complexity the for in around The are the untenable. market transformation. in is hybrid in the enormous and here, Global to fundamental from because creating environments the growing the on-prem especially everything that is of that opportunity That growing

where observability then we're these of the generating that's we so beginning. and provide an going percentage substantial to just need one to reactively proactively linkage so areas not now they're hyperscalers software we monitoring an And managing us; our customers start. do of opportunity enormous for answers those And integrated platform the that's automatic forward resolution. situational asking provides opportunity is need we why digital into partnerships, are infrastructure, awareness what for through to allow that the is the projects And the is and transformation new questions which that of a leaning about to infrastructures others is but into logo entire intelligence and to because essentially provide

areas in of kinds our the we're are these opportunity to drive future. investing which into So the

you. Thank

of comes question your Jonathan question. line from Ruykhaver proceed next The Please the with with Baird.

Good Yes. morning, everyone.

bottoms-up When think this to a of your success are being on more for on you. versus approach. the is given curious with more hear at I sales targeting Rick, some view engagement particularly you showing So look I'm competitors C-level your suite, motion, developer focused the

Great question.

shifting absolutely as cycle. terminology into in goes development are the earlier We the less

at announcements into doing be and So level. code as code APIs integrating integrated of Not bases metrics directly code which going and directly aspect see are to elements future. -- or key only look come to through to the marketing is capabilities validation for to we we opportunities allowance our observability this a our that development provide of you'll but like an to opportunities and sales providing be the

and future the where is consistent the headed is development it -- terms is shift the into a this great of So in in directly question motion we're it with left process. back

that's you. Okay, Thank helpful.

is with line Tindle Raymond the Adam with of James. Please your question from next proceed question. The

good and notion. the wanted on increased Okay, a morning. and just take I back investment to step thanks click double Rick,

marketing maybe in I through determining investment? efficient fairly healthy just us just you need the through understand for take a for levels the could spend. First, already organization you the very process and R&D but sales that run further you went

you in it's framework for went thinking about that So I earning that that? investments. specific related to that the process on for a helpful. thought you of the if those about could determining a return the areas click you secondly, And would lot double payoff, be maybe growth, on through you're imagine that of growth

question. Great

So to incredible deliver. is primarily organization as for modules market new further as a they both in Europe. on It we opportunities. our the much we efficient But well R&D the terms is that very how believe expansion R&D out take that run existing one, deployment of front, ripe of and

a analytics we've nerve what at we've vulnerability been that the AppSec look example, about We module. We're huge growth target capability very the and that, early latent need of AppSec that think for opportunity yet stages at dramatic has year. that next provides to hit immense with us with talking in believe a into has very, only ARR begun. just For that we

is awareness growth in have of module So also deployment about things obviously, terms deployments. customer like in that's side. in opportunity logging this per investments, in sales for we're infrastructure seeing one grow of and multi-module customers terms that customer infrastructure, the and side grow through market opportunity ARR Those those multi-module the another our in marketing in our opportunity. to happen grow with manifests we're that we of in the associated the and and to brand investing our see substantial growth development, AppSec in itself investment the and of area, And R&D in It that corollary need where overall. example infrastructure the spend

evaluate able the modules that's after go that that through wallet the went additional for is the we this that fuel be So provide the to now time -- share. is to analysis and new us to

you. Thank helpful. Very

Next from Rangan with Please line question question. Kash proceed of the your Sachs. Goldman with comes

environment Thank the your useful. much product Curious in in you be also the to level, Secondly, changes position. And the update more tactical on any on very contribution get any at you to company? level, silos? for a on and discern competitive direction different would were able changes any high congratulations very strategic the from a

Sure.

that this is, So in times, direction, company believe, strategic terms cylinders. firing is a of we've on we overall said all as several

nothing job -- the amazing we're to building So is that of in, at an today. in company john coming did the point

operating so am And That is well. foundation. joining company exceptionally a great performing of that great a in and fortune I is

and indicated believe seven further in to lean say six new well call, I the capabilities example. with we as infrastructure have no changes that first here for in we in there's new in weeks So strategy, major an opportunity me. certainly of or What we've some the in as as for that would modules especially the and AppSec,

the our into. that development on the on side both side are those So sales marketing areas, and we'll lean and

partner The aspect front. on that indicate other I just would is the

of done include number level completely. canvass the the expanding market expansion XX% so create to As to have to 'XX, opportunities in past in but substantial. not the at we've heard then It market reps many the extent, also opportunity past times. same to way the the it of to, to be And be, partner is power of I've and, over of partners the are in that alluded we in after and FY going the course my I've as that the just to the the more view, acceleration has some able

So those Akamai we that the that the tool obviously, years we'll areas are I in some a comment for any extensively. look But XX can't other used M&A at I pretty on at. of last One detail. was area that, and that owned

at we in analytics growth. further did arsenal the that elements can that that as directly are going to where tool but focus it appropriate and in buyers, we're SpectX another our be that's to continuous acquisition at integrate like on So scale well, into drive enormous These scale. to things platform disciplined have we that we see very our begin and to only look active we'll shoppers leaning we

just and and sales fruit, marketing bear see growth, research the initiatives could side? as for partnership the if pointing in said, are And making we up. business we definitely you that If because the fruit, the bear development everybody reacceleration the and quick were a great. And to are much That's is sequential out? investing initiatives too of deceleration follow these all these you

Yes. it's Kash, Kevin.

obviously ARR As longer top on firing take that us. term. of line. over few Rick is focused and And these into growth midterm to market are quarters kick ahead It cylinders. opportunity tremendous are all we accelerating ARR investments incremental that the said, all the a for But on will

amazing. is Our platform

XX We line top have modules in term. over the some next market here combined months bringing we're growth ARR about great that I number those gets that the well. excited think us And all longer to pretty as accelerating

and much so Thank Wonderful. you congratulations.

you. Thank

from with is your proceed question the next line Our with William Mielczarek Please question. of Kamil Blair.

Good Thanks taking for question. my morning, everyone.

M&A. drive comment decision versus Rick now made Dynatrace a acquire So, the would about I build transformative? framework secular seeing more just your new bit just talk think that to given I want on maybe little more on you Can is you a behind likely something the net products? consider follow-up And we're digitization in the position for multi-years, tailwind and to cash

And evaluating say will commit my comment disciplined look at M&A was to I our but all we in strategy look it's is What the accelerant I and that be really question, or the not we're -- an I'm to But to in market really opportunities. anything of the and I look, at going Well, a to question. out on it shapes nature. looking M&A across earlier a figured acquisition to -- was And I that's and a grow. certainly, comment it. be question very sizes We're acquisitions transformational not going going we'll and do at would it be as we're specific to great I M&A for follow-up say going looking opportunistic, gamut. going as and and of to that of at set very, we'll appreciate scanning prompt that remarks

think Can next single product we customer And count customer you churn Kevin. And growth the Great. up came the how to your quick for maybe us update how just should follow about relative quarters? over in a few on expectations?

Yes.

it's anticipated call. we QX So as we had out as and our playing on communicated

churn do four to that the quarters. think, or the them over three next about the churn so we to single the about so customers quarters-ish over the XXX of half were probably balance that far. we'll of And We've legacy I folks, of next of had module next XXX for we over non-platform -- quarters, going sort to six we churned reminder, I those customers another believe think [ph]. see as were three had to four a four

Thanks, That's again. great.

next Please question. Our line is with Citi. Fatima your question the proceed from of Boolani with

out and set security of much and in think you've taking time a for welcome you. opportunities security Maybe morning. questions. be talking you I'll in to Rick, with buyer and should for how could posture? you to franchise fiscal Good security a you marketing have team. in about Thank sales big how expenses challenges quick in And with Kevin. set you bit lot your the for application the then we And that for my to the 'XX, us and look you, of I'm start that a forward with in the spent sort envelope selling I different curious tremendous working about about I can talk realm the manifesting a to follow-up Dynatrace. more reinvestment maybe a pedigree arena the little

Okay, sure.

the news ton leverage there's have of the a is terms buyers, In I the of good today. in we think that buyer

module AppSec And In situation evolved, order in deployed with rapidly. occurred fact, back new of the who process. obviously, LogXj to our in rapidly a POCs. buying resolve strong existing to discussions need through December had -- That those our course, that very LogXj we're situation very buyers the happen was that, a wasn't very get into

a news So there's lot overlap. is of good the

move deeply, morph there. as bit we but there the Now little enormous buyer leverage a we into more I as will say, even clearly, is, think AppSec that

In for broader opportunity think enormous I is question that AppSec, terms growth of this the company. yes, an on the

and and simultaneously natural very managing sure that logical looking is be protected. ecosystems it environments their to think at make it's overall I and wanting to customers for

customers very to consistent proposition this And our think is so And value expand in I is a sector. for the story it extraordinary.

momentum you vertical had look where just of conversations we historically quarters, pipeline at and as economically in sensitive procurement of from called activity? some you've of last to some curious, historically? sensitive industries certainly Any Kevin, that and are I'm certainly of terms business are buying the updates behavior we've couple levels there in posture back of in of out purchasing helpful. buying be perspective, frankly, pre-pandemic a "economically engagement these your sort industries." or would very we about in the And

of verticals. I the what strength different across think are punchline Fatima, seeing we is the Sure. all

or anything It's industries. the company verticals. COVID embarked So forward, during getting certainly, in add every we're so we're to initiatives. going COVID-related strength critical transformation obviously, But their on some embarking on board headwinds that? success new the is have all to era, Rick, now across seeing different in

avenues and to others enormous think those to isn't of that one It's resigned obviously in certainly or some and be areas verticals just I Digital in of going are evolution. be two areas like transformation where protected verticals. have important see banking and we an opportunity foremost. care, light driven health for all manufacturing, areas commerce, is occurring But which we it for in digital transformation which are growth. the in federal government, example, in of

comes question. question Thank with Hynes next Please your line DJ proceed from Canaccord. you. The of from the

I Hey, high-level ask you. Rick, morning good a to question want guys. of

the gotten what and you KPI of out is to lot better? So Dynatrace of out more as conversely where the do okay thought, you get was can to know we crowd, then leverage better and the really can diligence over KPI business man, to that have said, months interestingly a probably And best-in-class, where this what but this your X.X on we you was probably you is last so, did stood the this or this.

nearly the great I a started at question. That's phenomenal. financial because XX with is Rule of actually, financial performance performance, a

a got and consider a was was opportunity it had to looked to XX, at I was for of excited the continue further Rule a acceleration, all had be of that CEO now. that to company and and when in for time so a very, future in operating the of bit like call And into being I very a going seat

was that. me the of the thrilled selection that So so our go it, Board give opportunity drive to with to

sales, have say we the are be question intelligence KPIs I say, lean areas lean that for where our where would the pivot probably and to been the discussing where can And is we downside, you none modules even bigger areas customers the think, answer multi-module for do software of on me of in terms when like, Dynatrace to deployment surprised the I I In we've in? really the new can can entire think that I really. instead shines platform. full example, would

going And to these base continue deployment. so our we've as well got discussing. to capabilities for new from we've everywhere to been an further opportunity infrastructure multi-module penetration and AppSec modules, add customers both into installed new new as sales as with We're

discussing. areas marketing as So on we sales the have those been opportunity we're also that an I in to in. think leaning and are side lean we've

it accelerate. to opportunity belabor world substantial I say So won't other integrators other order further with to and system the think partners around that expansion, I there's than that hyperscaler global in

opportunity and lots of downside the on execute to surprises upside. us on for no good; all it's as it view I against the So

Yes.

Okay, good hear. great. That's to Thanks.

line Our next Please with question from of with your Gray Powell proceed BTIG. is the question.

that. thanks. appreciate really Great, I

had So the yes, I okay. operating but a questions just if of couple follow-ups, on that's side know of I you've received lot a margin

growth always of and just has really So delivered yes, Dynatrace a compelling balance strong margins. high

to just join You the XX was -- Dynatrace. talked one you the really how why of thought reasons was compelling of Rule about

is what I'd curious, potential be don't on opportunities? any just forward you such growth the miss do going right out Rick, you think margin that So level

question. great great, Well,

other initial tune is you line areas. profitable headcount itself much And two top in to obviously profitable But growing marketing to very think opportunity, incremental for least given growth. I R&D correct one initial the go sales and over assessment, this the committed spend tune in of two north that points in in after XX%. it of at heard That approach. opportunity on a around as sort fuels we'll the at this one growing said, you're time. believe in and of lot the maintaining leaning to side, OpEx points our the land I to of growth we're in and business growth We as of, to the focus

growth. power believe we're reassess be So We'll of the in successful this needed factors it's continue incremental go into. investments those But that we leaning really certainly through that that to the the as combination gives time. us make we this driving to

Thanks. it. Got

Please of Our next Keith with proceed question the is question. of Bachman Montreal. line with from your Bank

you. thank Hi,

you that is to Day, fiscal the is anything could comment offering of For that we on the FY working there retention changed impact clarification is be that year the of comment you, concern, had, we about you that adds. off be in, how clarify, to think XXX about the think in is When logo offsets I to also could the similar over you FY on new because FY to for new on free I Analyst is run you. think as And I new year on retention our The Is investments, terms algorithm. about is rate? rates 'XX algorithm net coming what you capital? And customer is security Kevin, in if you and/or algorithm? And plus should 'XX some think rate just question. particularly also just the an wanted you flow first. your there approach thinking clarification anything a that and you a about I the specific there win wanted or kind The we a of as like about growth hear may rate growth ask review if cash And the there and Or when to have margins? also contributing we question Kevin, -- you. net QX investor for talk fiscal on FY? kind that XX I'd think right a incremental still XX broad

Okay. Keith. questions Yes, different a there, couple of

we and of an outlined we step one sales the we're that OpEx something quarters. Rick over points into investments just to and not two So turn basis of on couple hiring and marketing. can in increase standpoint, both or And It's next these from sort R&D overnight. spigot going the

point. couple bringing But the by see this of fiscal cash reduce not free call throughout guidance So down points. basis that hundred trying of again, a over certainly, to couple flow, quarters this will 'XX. you that on cash margin And will to next at the to impact flow provide

been However, impacted over the our license cash by negatively also years. last runoff perpetual has couple the of

So that offset well. can be as an

you're flow not the of you on adds compared if net numbers, base income XX% absolutely as do about on was and then math logo new that XX% growth. that, on million free to of cash side And helpful. as sort right, blocks those next to ARR operating of And XXX% the expansion an the expansion unlevered side. Hopefully, for big about XXX% 'XX, impact when thinking I building year. $XXX the just net So we're think FY

new growth and do XX% $XXX,XXX, your logo you $XX grow million-ish average $XXX,XXX, you another and is If land that's of ARR.

of you guidance to those we're $XXX So Obviously, to by if license as growing net the started I between numbers. of base well. has building blocks, wind not trying the down rate, sort as on right those call. business now, Again, two think the impacted our will and And headwind sort look million. expansion that perpetual of start core provide at by the it's --

we XXX% have healthy nicely net rate. So a above rate, pretty that expansion

I terms other So year. we think think core boost programs how about can business hopefully of blocks as that They we accelerate as the it haven't I'll well. some business that outlined Rick we're putting changed. place wrap was in And building and of helpful, in Keith, up. the the think next just basic

comments question the on comments apologize one know if of I so any ask end on the I at I lineup, but security? I'm security? specific more Any

that be as we're aggressively it would The I said in We'll how the now and that we area good analytics that you'll our Security, as to really December And in and I customers, going are January, market. an vulnerability it we driving is but leaning through say, in LogXj from to which POCs evaluating of one our example hear by critical said month, we're we've prepared into. process. increased great number and the is more. very driving evaluating early, is there, is news are of remarks, XXx a

AppSec leadership over So the to time. for about early very committed excited and opportunity days growth but

Thank you.

Thank you.

Please the from coming your is line question of proceed last with Our Koji of Ikeda Bank America. question. with

squeezing Great me for here. in guys. Thanks

for So a Rick. question

of or think about commentary all deal for up is, such XXX% months expansion. there on in sales maybe goes potential legacy The up important organizations you It been a technology, from big a runoff, time of APM even a too. for You've the plus thinking been so the is the long do business some company couple then question now; the out observability XXX% for TAM. saw with and super Business mean, big consistently I to is investing about there how is the in has delivering operating NRR? sizes better, you now. the plus and

spend, leaning Well, XXX%, metric north the the fact to a of huge demonstrable the they our customers the just increased infrastructure now aggressively is XX that modules. see for NER And new power of for delivered I and quarters like are is things and full us. multi-module deployments, think, it at units, platform of straight stack fact that host in we've that

are elements the those piece likely modules that as customers. of deploy in NER we multiple installed news to these of that once new customers of And base other existing then good of terms is northward All the customers, are deploy driving increasingly new well.

in of power as even the going really we're of my seeing the platform as further further certainly modules more that we're to board. across It AppSec increases new add such module expansion capabilities existing the and in is plus spend. multi-module the see expectation So deployment modules we

at that to in we look there's that regard. still NER in operate in meantime, In some early But in opportunity to So north we I the the forward. NER as look we believe have look continue as an accretion XXX% it. business to of

Thank you.

with summary here are that's as my firing is all about the and To in of we're cylinders. which here of and very why I more remarks there growth thanks Q&A all, company marketing. it. and accelerating some leave the follows: excited the that message, it. why in one, really opportunity for CEO. as number even would first session, why questions So The the sales appreciate some R&D much that and areas I on guess, I'm I like leaning a is for we call do through I'm out coming call for came think that's aggressively I is joining you an of

expansion fiscal to why so look and we for the we for the the those as And are guide that's year. opportunities further future increased

So we're XX,XXX Perform leaned week over to where conference super excited expected our we've come in. next registrants. got about Also

forward area another that some you where that's session so as on seeing we of look And to well.

all for the outset, call. I our you to much the future. at very said participating I much. very many thank as meeting So, you in look in And Thanks forward of

today's conference. concludes This

You may participation. time. you disconnect your lines your at for this Thank