Dynatrace (DT) 18 May 222022 Q4 Earnings call transcript

Greetings. Welcome to Dynatrace's Fourth Quarter and Fiscal Year 2022 Earnings Conference 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 that today's conference is being recorded. turn Investor over Relations. I'll Vice Noelle time, of President this the to conference Faris, At Noelle, may you begin.

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

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

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

website. Rick press our see Chief Executive and of QX our between growth. measures, under McConnell. the of noted, As with be these earnings we reflecting found today's GAAP website. Events call reconciliation today Rick? to referring me the during non-GAAP measures reconciliation financial detailed turn Relations section today's release A to currency please constant financial To otherwise non-GAAP rates are call. non-GAAP will reminder, Investor that, Officer, section the measures Unless and can and refer over GAAP the we on the to be growth some a non-GAAP, let presentation our discuss of And

full immense like thanking fiscal we you of for for good continue straight second fourth call. contributions morning, year, milestones in very us to begin the year In to of XX% several us their marking of strong notable mid-XXs everyone. XXXX. the the by adjusted quarter Noelle, in in to joining achieve Dynatrace ARR the today's for and deliver for people and helping Thanks, Thank on fiscal X,XXX-plus growth I'd particular, growth Dynatrace.

a the at combining Additionally, billion testament This to operating model, of cash of $X business our quarter, free threshold enable durability XX a which, while us is we is in ARR with revenue. our rule and profitability significant flow market, the a the growth to growth and achievement when in annualized It in adjusted combination, strength margin. business free a and platform, fourth cash our run delivers flow. of surpassed high strong that the

new the few was fiscal Let in operating income by financial devote leverage. our million, fourth quarter. annual me and million. share and remarks a we was the for ARR rate of continued to and was highlights our for above $XXX rest Subscription $XXX at drive revenue or net XX% of year-over-year. the increase from an fiscal like to additions above for year, I'd quarter. success leadership go-to-market of covering at XX% expansion full the logo to XX% year-over-year end XX% growth. XX% XXX% high And QX straight specifically XXth the product opportunity, beyond, my market the XXXX Non-GAAP $XX how year combination ended solid million grew logo new of by results to strong in revenue. Dynatrace of or XX% to the addition were of platform driven customers. the our We expansion additions the These existing

market. Let with me start the

We petabytes to of multiple end end-to-end of their an of organizations the often essential extend they are transformation to of But leveraging ubiquitous opportunity Digital the execute platform. technology platform looking delivers assembled What more correlation the This to in AIOps to depth want want and why significant element is just larger platform simplify significantly realizing process. what have driving strength our engine market more result cloud market more They multiple ecosystem, for and from capabilities are of and handle these the containers. operate sufficient We yields modern They aspects expand data companies data which than our an and and efficiently. we in our true CEOs observability we Dynatrace is interdependencies. automation teams just overwhelmed dashboards. But their Dynatrace. The to observability, customers cloud tools at their with visibility intelligent leverage of the level investing non-cohesive frequently the comprehensive data is application to ill-equipped observability, According for forms Global don't Worldwide security our of generating and answers deliver disparate solutions applications, Companies more dynamic complex ecosystem. our causation and our complexity, hybrid transformations. transformation that ecosystems. billion has enable uniquely often versus these digital pulling incredible of choose that observability with files complex all me situational is many tens second and X/X IDC's number modules. And along provide to enterprise differentiation the my and the Nearly accelerating and to $XX issue, even as awareness are introduces enable are microservices R&D when Dynatrace there innovation into across of to digital gain their solutions of running many the is Companies Survey, engine workforce value millions data complexity has rapid XX,XXX is clarity their become of of nature ensure environments to sized and driving thousands differentiation. invoke stack. in our breadth business, cloud. customer multi-cloud to platform successful XXXX transformation Overall, priority movement growing. in resolution. them to To multiple ecosystems. incorporating deployed deliver this with brings initiatives, remediation across of a to across for topic, complexity. one this This the have tools business companies become of and scale been are majority complicated are XXXX. internally, the CEO

is across industry-leading module including to business and digital our best-in-class management channels DEM the full for which apps platform optimizes or Closely owners. our our which First is stack and and observability value to digital stack, microservices, full delivers experience applications. infrastructure user extends solution across aligned our experience module,

server, observability. our customers. ARR deployed million $XXX It XX% and is monitor, which Next now excess more than network of infrastructure in container log, of in provides module and fastest-growing our is by

interest than security significant by helping our Our companies quarter, has in LogXShell. the of module sparked more fourth as number market vulnerabilities manage AppSec doubled. using module the customers such application In

code into capabilities half a Automation shift dramatically of answers there Cloud more to accessing security One and much this left our enables easily applications. so perform intelligence is enhanced to by year logging the second as customers Our deployments. delivered array our Also we release quality platform. announced of of automated with for their incorporate software capabilities. module and in we in the come to validation is by during ability customers huge expect safer that the QX, And to platform particular

disruption. logs automation businesses. a but the to as highly fully data context and not is intelligent that Dynatrace security, do is siloed, We we ripe tools, and this rather for source view of a key of full current full analyzing observability to leveraging capabilities block. solution provide log Unlike market cost-effective automated, the performance believe scales monitoring a logging vision largest Our with

of number expand customers response modules making to volumes of takes usage as ensure workloads the facilitates and their Our more dimensions, run. data reducing of in with average A time using both analytics the ARR data the Dynatrace, two scale a and data, our or learning to to XX more The provide Both get three is multinational to increase. dimensions and while sophisticated $XXX,XXX multi-module. disparate and number half are for of by answers as customers that customers had antenna. level and processing British over well-functioning company to nearly deployed an entire more of for But to Today, an visibility the to well deployed precise with more the leads breadth continues our manual observability, it power they systems sources testament including and modules agreed telecommunication software. of more improved Dynatrace. nearly all AI existing that deal those immense their from platform, complexity, data enormous competitors. transaction the relationship covering expand Dynatrace the nearly eight-figure QX, In

our had and of collecting wide of array example by Dynatrace platform. data consolidated that leveraging software intelligence disparate the consumer a over value of is retailer XX was electronics visibility just tools. light value of patterns the go-to-market a Dynatrace updates. their the selected later came provide Security, to quickly POC answers. In in before instances weeks to transaction This large converted multinational provide our Another technologies tools, across the arose vulnerability, user due They a was strategy. me gaming to and all were any for just expand three platform need The the undetectable the of a ecosystem, when understanding entire has unify data that could brings an company solution existing days causing started U.K. their that ecosystem. Application and the detecting of evident and to application LogXShell one end disruptions by precise issue intelligence prioritizing

level energizing our by sales our with with three top annual market touched on providing force sales in-person for respective offerings you already GCP, through our force, heavily to bolstering our earlier, and market fiscal sales In expansion our first build for and team. same expansion and our the relationships, we late 'XX. can us. to reps growth global was We've brand. priority the event progress to offer to was on partnerships since the last three greater increased the and and April, for sales is marketplaces. start, we engaging made focused trends momentum. our powerful all a coverage sales us. Azure of had of our across With increased our leverage areas, in of we over the their force, the so successful how XX,XXX momentum, the months, efficient strategic sales I XXXX, These commercial Global the force, upon our in of kickoff educate target. goal Given This sales And imagine AWS, drive we hyperscalers, integrations, are great entire go-to-market kickoff be Adding and engagement, direct in opportunity nearly XX% foster that the ecosystem. successfully deeper are partner including go-to-market and events amplifying direct To quota-carrying continues reps our this XX us expansion

as modern for I'll natively wrap efforts. be the observability multi-cloud global industry-specific more year. hyperscalers, with available, GCP, transacted system for last our running our developing companies. up our with again, another their solution go-to-market already focus strategy awareness through last go-to-market Their excited tripled Azure Today, and advanced general XX,XXX platform and with Deloitte New availability and I'm catalyst powerful than AWS especially is their observability ARR deep delivery our The offering with chosen our year. Market integrators. this brand. Dynatrace on Global relationships have represents of announced a to for continue knowledge optimizing combination as during they SaaS with coupled quarter expertise, of significant quarter will that about The versus capabilities, us components cloud important ecosystems. practice. combined brand and AIOps cloud

ecosystems we seen, efforts of midst As deployment with to branding or in observability. initial world-class between have the optimization. right. cloud combined we search to ready beginning with companies migration are and they of and you to ecosystem think deployment We to begun as out targeting decision, engine shrinking done of may awareness cloud the workloads, transformation want marketing in the digital increase campaign thereby increased When an part want have cloud Dynatrace our be efforts gap build of

Finally, of year. of decided as calendar to end you most the as of have this depart Dynatrace has seen, Kevin

thank believe close, transition. to highly our dedication past contribution to high-growth period, be searching will CFO one the fastest over successor the Company. recurring for to six from of equally immense Dynatrace overseeing this revenue years Kevin's an to our has been business During moves and strong for differentiated I'd strong and the we in Dynatrace, successful Kevin market. we a well is seamless appreciate his in positioned and his rapidly commitment a large IPO to I for that observability To to like platform XXXX. growing a

of Company We Kevin with passionate cover With rate ARR and record strong the we and excellent opportunity go-to-market ongoing detailed I as as are extraordinary are up building sales over to We the operating margins and capacity drove levels Fiscal turn we remain innovating about committed XXXX for through deeply the it and cash and leverage that, will at a year performance ahead. to as guidance. flow. increased revenue are was rapid an partners. financials financial Kevin? to well

everyone, Rick. Good I and thank appreciate morning, you, kind words. the

financials, break for is in we and and team want get I of thank that I giving look to with Together, be new still team my a time ensuring organization enjoy then to incredible successful have trajectory. early with to growth opportunity me entire to this onboard working forward a world-class into the I taking Before company. its Dynatrace amazing a transition built the this a to Rick family. CFO, CFO

for the key would ARR of up $XXX normalizes performance quarter, business, can fantastic we reconciliation a off of be a a to delivered currency and found year-over-year, the 'XX. strong year and Total overall you ending mind, range license two Please a row, by was end point, Reported XX% highlighting down the in of ARR growth IR at fiscal ARR growth our a and perpetual our the million keep in percentage when higher items. take the website. account ARR, fiscal ARR of the for wind year our of well on finish adjusted into capping second $XXX guidance model. high of and range our adjusted million was the million. resiliency strength been have is exceeding $XX metric above QX ARR guidance end mentioned, Rick As one the business high predictability

dollar nearly First, business in had a yet we in again suspended reduction U.S. resulting strengthened And of we secondly, million months. $X million Russia, incremental currency in $X in as ARR. recent another headwinds the

new As our growth last of blocks ARR continue building combination we have to and communicated rate for of few expansion the be the logos. the for years, net the addition

years net quarter for above a in rate expansion fourth four Our row. the XXX% which was is now

total, in new We added continue new to over our above XXX In up see We added XX% new communicated of That's logos XXX year, we fourth XX% and XX%. XX% momentum to the in logo previously this that's year. additions. expectations quarter. logos growth last

of This with or cohort half $XXX,XXX. nearly three modules These nearly in Our customers customer have average ARR ARR fourth per represented average increase. the of more quarter. continues to customers our an

per opportunities expansion the that the continue more. customer $X significant Given customer million our believe be could base, and or we cross-sell in to average ARR

both non-GAAP revenue, to respect quarter for on margins, fourth and million, year. above subscription was total one revenue guidance. over the increased last Moving our customer $XXX change a XX%, the With slight was Total revenue quarter revenue million the success. driven XX% to $X percentage point, mix in by revenue high end in of grew total down gross for fourth margin investments and

We remain expect 'XX. to gross consistent in margins roughly fiscal

the million by points. upside above This in quarter. income a quarter range, operating revenue million, $X or guidance end above net our non-GAAP of XX%, our $XX our income non-GAAP end share, driven $X.XX Our for the in high exceeding $X.XX roughly $XX the the per was by basis fourth high resulted XXX million was of guidance Non-GAAP of operating guidance. range margin the

margin was Turning operating summary for the $XXX $XXX year was the the $X.XX million was both year. net Non-GAAP Total or per in to income revenue quick for operating XX% of share. resulting grew results a of which revenue and Non-GAAP the non-GAAP full year-over-year. of million subscription for income was a $XXX financial million, $XXX year million, XX%.

proves in be parent. line both performance line. as in business delivers rapidly mentioned and top we the business, past, the that evolving environment, more balanced our macro and the on the the operating navigate bottom a to the to This where even important and of strong model believe As approach we've approach durable one predictability we resiliency is

Turning cash, March cash of million to position of had balance the our XX, $XXX as million. sheet, and we $XXX was net

at $XX QX for very was cash free flow unlevered solid Our million.

the but revenue. fiscal until XX% our tax or due in free was of fiscal was to For cash received our This unlevered 'XX, not below came guidance year, start due of that in refund the million 'XX. range flow $XXX full a

and the quarter flow expense cash debt unlevered next consistently, of free moving was financial are morning provide I cash XX% the to recognize strength QX at to an interest and quarter is an free $X.X which long-term billion, quarter that quarters, our was of like would as four which we we've increase as flow will the the a the remaining million, performance we this year-over-year. XX% Given cash reduced as this the be end of of approximately increase of current declining last flow of to year. our last metric. revenue over last expect The our over obligation, portion The measure RPO, $XXX discuss approximately

Now turn let to me guidance.

pleased in We and strong performance 'XX. net to another performed how few years, in believe has higher 'XX. sustain place the XXX% growth right keep with respect business our expansion XX% delivering are logos for a the in to foundation rate fiscal very of XX% with We in recent and to in have guidance. we mind new are things fiscal we to a There or anticipate

predictability macro evolving to First, any we are we mindful our material business, have the be To of impact and not of we in confident are our seen durability environment. and growth. clear, the

we guidance. believe with it sense However, prudent makes to be

$XX roughly million $XX and to QX, headwind FX to FX million to business currency, of be on conducted creates with almost And we for 'XX. foreign with to anticipate a the to half as currency expect we rates respect Second, dollar FX fiscal be sizable of headwind. revenue U.S. roughly strength ARR headwind Based continued our in of the the the ARR. XX, April

in about year, every the to in that currency non-USD X% As equates roughly models $X of movement course movement keep your over in of million think the mind ARR. you

representing which ARR fiscal Third, revenue annual in be XX be $X a announced on again, license ARR for ARR guidance business 'XX. with billion for QX suspended in have significant fiscal the three the $X percentage point constant where of XX% ARR down rates. tapering growth an billion a will $X.XX we with currency, And This adjusted between overall be impact assumes to guidance, high impact the a the end offset $XXX year. and ARR that expect growth and XX%. in points. 'XX then headwind net in fiscal mentioned. notable perpetual we of approximately at and year, most in results of $X.XXX is impact that throughout we will will just I Russia, off headwind The or new million million on to growth final our wind $XX The basis by million full the the of growth headwind rates year 'XX approximately million Starting with finally,

QX, net in Given net Historically, FX more the to closed which impact of new constant ARR imply bit we a annual currency with color in provide million is QX. roughly on new of $XX little you ARR in XX% our wanted would seasonality. QX, QX in

expected year-over-year. billion the a be into $X.XXX As our expected I to be and $X.XXX billion 'XX fiscal is subscription needs between billion. Total revenue also said, $X.XXX full billion, for taken to to to QX. headwind account in just to both that number up million currency that, XX% there be is Underlying on XX% year $X.XXX is revenue $XX year

be XX.X% year. income margin operating non-GAAP $XXX $XXX of the non-GAAP resulting in million, a XX% between for to and million expect to We operating

XXX of outstanding rate of EPS share expect non-GAAP We million shares to tax a to on XX%. diluted per non-GAAP based and million $X.XX XXX $X.XX cash

approximately This which of timing to free XX% at the margin to XX% tax incorporates I million from midpoint flow XX% to $XXX expect the We revenue, equates million. is and of year-over-year $XXX be growth refund impact cash to the mentioned earlier. the

revenue million income million, XX% million expect non-GAAP we to Subscription is From between a be based fourth per be margins. and XX% $XXX $XXX.X $XX to XX% we In million, strong and growth $X.XX million to count summary, operating XXX expected expected revenue are diluted share $XX performance pleased between cash of be EPS very million 'XX total top to the with combined non-GAAP XX.X% up $X.XX quarter to is and our XXX at saw year-over-year. Looking growth. million to to shares. XX% line where and of QX, with profit share on revenue standpoint, to fiscal ARR or between we and XX% $XXX healthy of and million $XXX.X

We our billion of milestone at the line growth annualized operate for offerings the product breadth Rule questions. Dynatrace's believe geographic that, positioned 'XX profitability continue in reach we multiple for important in of provides future. to Overall, of resilient growth we'll revenue with and XX. beyond. cash and and us have Operator? achieved in flow And $X and fiscal are open well predictable opportunities we and with the

conducting Citi. session. Thank Instructions] [Operator your you. with of question question. we be question-and-answer this line At comes time, Fatima will Boolani a now our the Please from proceed first And with

to consumption a trends. rather Rick, and around some models just with around and are observability been the respect opportunity business those with usage I a you investor underpenetrated state and in the comments than vastly community solutions prepared what hanging there's know based. given lot of broader But remarks I in still wanted secular is pricing, for your these, to of the start broader

that please. you sort of some perhaps your if trends agent I curious model cloud of I'm Kevin, way? on might usage with overview impacting and give follow-up how are just And a one of quick necessarily for and consumption us sort your -- have So quick not differentiated; can a is come

Thanks for question. very much the

and We it's as that mentioned opportunity So in the remarks, trends I in and first insurability. believe, my quite substantial. all, agree of completely you terms of secular with the

support over market increases do think We we typical the have And consumption-based more at contracts in overall as is environment. price pricing amidst In that time consumption, of see accretion I built-in terms opportunity we'll renewal. time. in there ahead do of the pricing do look our think I that just

we see we it. accretion look as opportunity at So,

performance the by of And meaningful more the And XX-month respect expanding for to visible logo the for that's or it me. a and going trailing I'm Rick sort the know you, logo the or talked Kevin, wondering just on I in where when to new But acceleration with about XX% elevating quarter, front? period. in sales new we're see capacity

That be Will in it's zone or see where, us to blocks think new acceleration further years. we we're yes, logo we the about when model to the with the XX% and doing is building in we've we for 'XX think XXX-plus some sales super year, of I sustainable into XX% to bit SI. expansion been do materialize investments that which have that ARR some and base new further fiscal that the you we're gives is in the next in So can fiscal time the 'XX, that agree and with of now on last making logo direct growth, tailwinds. probably percent side. XX% start the couple growth. XX% accelerating or giving how logo of what in new starting right the growth consistent that partners a little force, could rate. we're happy today, the investments I in percent timeline But terms that a making of we're a net XX-plus hyperscalers There the

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

guys and with Is -- some currently, to some those factors this Can help next that business think environment know guidance. I as maybe you over on weigh we're the in I guidance your of But macro back guidance or takes external to being that headwinds about First And how coming question XX did want months? and guys us the come course the the year? how you was comments are, this puts you're prudent you about of think was comment there more call. thought tailwinds of to you about during into guidance. to the I the

Mike, it's Kevin.

that So, environment today. of headwinds uncertainty and the macro obviously some evaluate. the aware We're we that some there certainly is out and there's tailwinds

So that's one we've considered. that thing

mentioned think the organization, those And direct announced and The tailwinds, other we exciting. the is that pay thing hyperscalers sales in considering I when to growing uncertainty all can making are the actual world. there think be those that some the morning, going the just I that were this we investments Deloitte very as to but begin is They're partnership some Fatima. are which off, we're to we

uncertainty I that though, think and operate our need delivers offset ROI. I transform to more by guidance, help think when the digital transformation. and the the think efficiently Rick I companies about that's in higher drive and that software Companies trend value

We and are that are we ago, in appreciate days So, sort XX than those of the [indiscernible]. together things put consider. were certainly we things do six ago, we different we're environment operating a that months those

when that's But we environment maybe about again, for got through, in where we that a organizations were we how to bit thinking when for more Maybe year there with seen macro extent. current right? the maybe thinking certain today comparison first a did is when all just and kind we've that building respond put it our guidance that year environment, think it There out were takes And just the on still post-COVID. to these accordingly? that kind of how were the is follow-up. I fair last we last we're the puts And conservatism environment of -- finished, played I'm and normalizing year in demand to trying some to a

Mike. I fair, think that's

and we as that are. in to said world remarks, today. But I also want of are excited here get top think I The prepared establish is the of lot macro bullish guidance don't very in given out the and in Company over year. set the us certainly, we helped that where is think it. on things a think the of But We're moving motion in speed track And uncertainty a right direction, in the the too terms we prudent. we sort our expectations high. there's about prudent uncertainty, guide we're

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

ex-PERP in ARR but new net that's a in the a on little X% bit, start around to growth wanted constant it just mouthful bounces QX. I and currency, Kevin,

be. if bit just And But number accounts a QX, a comments color more bit that wanted maybe to about Russia X% made new a for net to in think I little unpack maybe that. could QX QX of net thinking want what on expand new. little little number bit you clarify on if how some would ARR. real of you're you on you I the

Investor are new But new the answer in in actually impacted for The Sure, broken Mike, absolutely Relations your $XX.X our QX, that because ARR was out million the ARR interested we Russia. of $X have -- and X%, on our was net to and you million, those of right. you're question, who website, net by in do Reconciliation.

normalizing for XX%. that Russia, was growth that So rate

For sure on year-over-year net as million. a I'm basis. do XX% new ARR appreciate, million, grow year, to the $XXX total you $XXX That the up was

So, little we've fiscal with those in that 'XX COVID, bit comps We due we fairly that 'XX. in new believe net half fiscal always meaning, been in in There the year-over-year bit we're our made comps we've fiscal talking different do that in did with business back -- more, a XX% which That's normalize consistent and and in pleased what seasonality a a was will to into got of change little we half. 'XX. in that. year-over-year 'XX, about the XX% first about 'XX will historically, continue think

that So I helps hope Adam.

seeking example. be obviously, the mentioned big Rick, key that more be of in fill. some and you you looking Board for competency if maybe I'm you. know shoes you was not be to you talk like will Kevin's successor. important a open I follow-up about that a as just kind core that previously characteristics But if maybe might can And be bit to you'd a little any for that for? characteristics that Just general maybe M&A, to sure will

Thanks, big Kevin. It's Adam. to fill with for shoes sure

of on has financial great of person year couple and market that's Dynatrace as that sure the impeccable we them through last exciting a the space, true right make over course saw So to the we great board. quarter exactly obviously, years in company seen of results to get this very have and beyond. end the a the and is

role. exceptional will very, multibillion-dollar all in So, very want leader the and the in person's a want and join our leadership candidate of to obviously, an team look it. business global want else. Perhaps, and we you we ideally we background believe characteristics, beyond at capabilities you into strong experience, partner I terms The scale above as that attract

those some elements. of So, are the

M&A, Obviously, in, as at quarter, docket. that the tuck on is looking we tuck You in M&A look something Adam. we'll We're not is mentioned certainly M&A about talked M&A, at. transformational but last

of obviously kind a well, that So if person the that's plus. experience as has

Capital question next proceed line Hedberg Markets. Our from question. of Matt RBC Please the your comes with with

is Anushka Hedberg. This for Matt

you a growth fiscal Could you So at or 'XX. and to attracting the in with expand expecting wage hiring in environment hire 'XX quota-carrying this inflation? you're a again you're strong people similar in pace, labor continuing about reps competitive and shortages how on fiscal the think and right

engagement enthusiasm last And way do the in over is broadly amazing on introductory It's with people. passion, seeing quality been the very We a watch we're meetings new getting very, basis. high. very frequent in of the are that we're very, to I more by resumes team, three especially one, quarters. the our really two, but sales hires, adding strong candidates of very

So the also recruit strong for ourselves our have we levels it to ability numbers gives as FY the as prepared to as in set to very we our of the us high both look to to we described to quality that very look that the remarks, confidence but threshold we future. 'XX

very, is becoming a us and recognition awareness best in sure more is making very end talent and as brand brand well. And Dynatrace year, And So is more the we of recruit think I assisting visible. strong. far, that the

So, very optimistic the on at we recruiting front 'XX. look as FY

question America. Please proceed Next the of question. from of Koji comes Ikeda with your with line Bank

there XX.X% Have too, sort of about Kevin, here, up to that's the the about retention or it following embedded question, break. any you guidance guess looks or in inflation return of for first of fiscal I last at the on talent year? the guide, midpoint. for past, congrats well-deserved And then kind to about operating framework this conservatism. thinking margin the ask margin in-person year? kind I about expenses of thinking the about like this in typical sort guess Kevin one upcoming you're thinking the on or work wage how thought it's any guide the maybe Rick, wanted I 'XX

from terms inflation and incentives as also organization that compensation, cash some market standpoint, at so and all we the nice appreciate, long-term I of made a wage Yes, some adjustments think is moving, as in equity. we looked and an have

the is From business the requirements use bag about meeting where happen after will during 'XX back sure in we we're tools as that making of our in is right? to will in not frankly, appreciate, into investments, these that margin leverage tool demands going we fiscal model. investments I year. the standpoint, to of we a and we market It's targeted in the one in what in happen there 'XX. XX% margin to 'XX, fiscal forward They today. the way going additional we the So, we're that, the all But a course the the getting make these then are go think fiscal So, think quarter. should margin be see and operating

down XX%, investments from bringing that So, thereafter. we happening XX% about then down year, re-accretion this and targeted see margins the will shortly to

just simple And may, then if quick I one pretty follow-up, question.

the of thinking for revenue better, here rest both worse standpoint, does maybe macro with there. Just guidance kind I things the a about same headwinds full assume out a or guess, for even mean, the of margin about the year, assume there? thinking the guidance the year? it Does get and the out I from it macro-related

the macro it's respect would any environment material a constraints either environment But evaluating making in Thanks, improving we're in balanced it's prudent any say amidst to believe environment. and inflation in Koji. guide other geopolitically of way, market. the We or I the macro not or that factors macro with macroeconomic the terms considerations. a view about in prediction

add instrumented here to that business a in We're the just add change will see that in react us would brought we highly promptly for just six a very investments. to I well of see as I in and And the making pretty that years. environment, as do super instrumented circumstance well, last efficient so we're visibility we you well. if those think terms we're

with line comes Joel question question. Truist. from Please the of Fishbein your proceed next Our with

could you Kevin, observability? in last And congrats doubling to helpful. you there as on are Fed. the well call, and we Rick, luck. any input talked love color really be on Fed on would to down where and about get your I'd share you the good

Yes.

And growing significant federal think, the in believe us. overall last fit. So, really I of us for the months. nice at the than very a is government investments. of growth and opportunity, course ARR faster significant personally I've I terms that Company for the baseline place few the it opportunity additional is been to over bets engaged it's in of growth a

So, 'XX. we as that's doing precisely look what to we're FY

as I'd corroborate from the trends ongoing quarter in matter, that for well. we So, federal the last see all also slight government. of comments And terms around environment

with the Canaccord. line question Please Hynes of comes DJ with your from question. Our next proceed

you quick the and for on follow-up partnership, for Kevin. two-parter a Rick, a then Deloitte

of around that prefer industry a that? your that went other Any Deloitte, of then on customer, mean is to helpful. fast followers be along I they'd and or what question actually Dynatrace? they curious so And thoughts RFP know for know landed sort a two them, don't differentiated little does was of SIs kind or less about on into kind have more get consolidate Dynatrace? some I there Just likely the if would experience, in part bit this talk if build enough that practices maybe process they're I are but will lines those of why offering? in just

I've we and very at. senior view digital to the that as through back believe would transformation And really numbers workload about is it that partnership. Deloitte, do enthusiastic there that start, principal it our for the on of I reducing does that effort overall and and say, Dynatrace the Deloitte solution is And this to personal moving done companies observability working migrations, time of observability opportunity spent is an substantial transformative is cloud can of we digital because come team gap To we with objective. leadership to in are look our believe right. a deliver go the a really cloud between work notion environment Dynatrace

do the those this things pull can and We're Deloitte together can we excited if for that's us. So opportunity, a very substantial with partnership.

market, the thorough this point, which that are a got best to and and You but a ours assure for you of in review on I customer, very asked base, aligns is us they did their their solution customer nicely believe they Global XX,XXX. based input to the Dynatrace about we solutions how they target

So picked that's, I us. they think, why

with I well. there's think just to additional because integrators further as we with overlap that this is as system look an others global opportunities on-ramp ongoing ahead,

think come I opportunities in future. that there to are the additional

Can and the already And then received the quantify you. been confirm you in fiscal tax that follow-up then, refund, has 'XX? for Kevin,

received we Yes, a actually million DJ, $XX April. that was little It it over has. in

Next question. question your is from with Please Lenshow the proceed line of from Barclays. Raimo

Vinod for Raimo. It's on

some to have patterns like how solutions newer to how And other pointing trended then security, talk touch want just Can your worth app of trying there adoption are this any just about have for adoption patterns out? growth modules. infrastructure for I or First, infrastructure differences on you dynamic quarter?

be It's last Kevin. we growth Yes, rate I about rate it communicated fairly at this is consistent on quarter, the The infrastructure a think module. quarter to that. module with growth infrastructure continues XX%

continued we're our of penetration It's over very seeing So, module. infrastructure of also terms there. of customers adoption in still the half have early

infrastructure every be they $X they're communicated for about in customer services, to spends $X.XX dollar. spending dollar on And side. past, another now, our on on $X.XX believe should we've the apps in spending we right the As micro the

expand but customer the our opportunity So in terms base penetration. continue to to of in a also base our customer there, big expand to additional opportunity -- opportunity further

good. given ARR in side. happened LogXj, a the point. there So, at the the well. infrastructure mover that some App this line Security, the is things meaningful customers converted Not We've that's world demand lot a as of very to on the of

'XX. through to fiscal as a mover continue that's be we we So, think do going

me. for more one just then And

how and does learned terms a of of this on over productive? You take just long or in kind remind organization doing sales mentioned again last just Can XX% process? you get the have of about hired to you've plan you rep kind reps as of you year that this an year year. expediting what us And that it fully so,

So, it's five-quarter to the organization. a it's It our for that four- very -- priority in is in big time frame.

organization Rick sales enablement made our the team well, education. we've So, kickoff had on together we've big of mentioned that got our our for whole terms investments the We training big sales education. further in as just ongoing call where

next making of are over to time make in productivity. believe meaningful improvement we the couple do can investments we a and we years, So,

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

One more on follow-up the macro.

season demand So, we've companies this other software heard from generally while was that earnings several strong.

customer the conversations in see you and Some companies to in Europe. talk one deals Can And or changes what adopt seeing tools? about their have seen that slip two generally, you're did more in you any market? observability willingness

our we've moment, in isn't Kamil, slippage inclusive least any seen that it view at the at Europe. of deals

It's an changes business continued certainly that possible flow future. least are and so the pipeline rate to deal our we not in to the same at that that, our remain far, So, current impact at expected. has as time. roughly in But seeing as the

lag often the of about do transitions observability. the And tries source an you the to about very spoke mentioned, between to build is in attempts you talked internally, first which, we product past adoption Rick, open Company or this And cloud something and today. difficult as where

that. So, questions two on

that think of rates you acceleration lag customer and Or 'XX? second, First, past this year doing to new or in transitions the this is years 'XX. Do today? over maybe detail levels potential more on decisions? transitions provide two lag, likely what later down strong for accelerated And seen Dynatrace fiscal we've driver these the purchasing cut can of there you seeing a in cloud cloud of the be net wins benefits is in given of to you're higher

for the the and benefit of in in fueling absolutely Dynatrace of interest demand in movement particular, companies, increased Global fueling seeing customers think, transition, of XX,XXX the and to terms the cloud Dynatrace platform. yes, I cloud is the

So, I'd answer to that absolutely say, is question. the

migration or do is of dashboard really home those simple space that believe driving and cloud many time that lag, the gap against, that that too is to opportunity we're that solutions, the cloud so we best deploying decision? migration open customers and an source between how deploy companies observability And tools, we are the time companies get it the the build shorten of Dynatrace show out terms of on and the performance. at In

In and terms the of to data than terms their overall dashboards rather cloud glass. best answers get in platform precise of and results,

as been So talking direct that? generation, like logo efforts regard. that's really should what well terms about new as we're we pushing. Partners in our doing of How in where we've that help partnership are the partnerships Deloitte

So, where we're focused. that's

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

of I'm months tone curious on labor had chain that customers like, Rick, what how conversations question Dynatrace? a supply you've prioritizing how And shortage, or shortage, a in I -- year. ended? pressures, prioritized? fiscal customer is after any presumably change is the being have so finish X.X given get especially have there to your do ROI Dynatrace the to conversations your perspective fantastic are Congrats they Are inflationary on look since Kevin. there And quarter follow-up for those

very you ever, is bring need wage automation in greater at IT of automation, of market. especially automation tools, as Dynatrace would anything, that to that of as shortages Dynatrace amidst IT the a It's for resulting processes Cash, cetera. retain well for in as companies. if to can say And ROI difficult, that as I all et that's the strong personnel, current know, people inflation time. as

quickly We that And that in of kinds deliver deployments those in improved terms we as ensure are should actually it the companies so for results be in do if asking seeded strength experiencing infrastructures. to more work possible companies us bookings more get them and able to well as anything, as shortages. we that our see effectively are of inside ongoing to to terms of do of services

if collectability, to to could that risk ongoing or kind your with Maybe issue you you base tech congratulations industry customer respect not may base of be I the quality material get their was And not associated Kevin, maybe your impacted give your by wondering, other own we're for customer the some to on if certain factors more that of for can the guys? certain an verticals you exposure perspective are conditions retirement. companies. is recession. your the quality effect, insulated. statistics more the pressures negative you're you with financials or diversification business company any conviction somewhat see starting will, of of those aspects customer that for unprofitable the on base companies, thrown of But I that get and but your

enterprises Thanks, we're world. target, excited Kash, right? as very have, know, you that We about largest Look, appreciate the We XX,XXX customer retention in it. base we the rates. Global best-in-class had

very we're revenue, term. so, very to think And going long had and for be high-quality durable that's enterprise-first, we we the

more environment believe churn, in products, high And be investments the there's observability help areas ROI. value sticky an one especially we're they're IT about deliver, to where companies CIOs, because talking those when shortages. it's we So, become of to low CTOs, We're that make we is to efficient. going just these going looking

the think as we to Company. given big asset that So, the a operate we've thought well, We environment in. about that that's

discussed, flow a a you important free mid-XXs we on XX% to level I ARR of saw is 'XX past think, that strong company at XX at delivering, a pick companies. of top years. and the guess, that's like over solid to of couple Rule very into cash. also been and very re-accrete that on that guide growth, in I'd growth, good Dynatrace 'XX to you to, that, level margins FY of course of point And strong cash to understand in the profitable but a profitability portion operating terms and adjusted quick as around actually of guide expect very the This notion XX% Kash, at of very in just as high early and the range. strong It -- the for operating FY software a is of is the a free for we add really mid-XX% I raised

flow the continue the a to future through very in that way strong of profitability to intend maintaining cash operate the Company. balanced and we and So Company

well your covered customers absolutely that. and I going I Good appreciated. much. they're to see contracts. about you so the profitability it's But Kevin more and think That was Thank their renew curious conviction. to

with Keith BMO. Next of with question is from Please proceed question. your Bachman line the

I have two as well.

years. First broader Rick next on side, Kevin, about the portfolio think expansion I wanted thinking how to over about the and you're two

R&D be perception a innovating populating just perhaps there's are. the your that And surrounding something? X kind just how expand how the of think I next get investors making I speak faster wanted does your your portfolio, about should expansion then years, look could you have follow-up, two one in that the over their investment more the you're two and if X it now, portfolio competitors at to than what thinking dollars you're marketplace like please. in and of primary rapidly might years perhaps take I portfolio? plus you If is to And a

the here. investing innovation and rate am how of pleased of very with I engine we're our very, growth

of We Dynatrace have, the activities. as mentioned, I about or of R&D X/X people in R&D-related

So, this investment Company sizable driving for forth. we're a the very is that

in the modules, and as other are the outset. we, automation We in area are on making very security, the excited into described and investments, with I then logging which area as of we've at application course, cloud infrastructure discussed

upon as change I driving is R&D we do in a conduct are us past. of spend, just R&D based we we across overall to there been globe. engine have that where that just to R&D So, think innovating, the the aggressively. our primarily perception doesn't innovating difference the the But in commitment relative

to my preliminary license customers behavior pending the customers? that And have there we add-ons in Kevin, away have from probably What's Or have perpetual what is flowed or either again, think and perpetual conversion place your I'm how that, perpetual? mean follow-up, the even been how more sort some in the paying of by contract been flow. underlying the or the 'XX, congratulations of that transitioning leaving perpetual And And to as of trying you. economics about on of terms may directed I just maintenance? transition. the that just been FY and understand

Yes.

they've those then and customers couple of probably we those subscription If customers infrastructure, when you model. add pure would that half the about subscription or basis. years, reason those offerings, where to And are converted a today, go have to or say back, only a done on AppSec it's Keith, a I available is, to additional of them whether think started model were

So, in the perpetual of last sold been customers you direction. couple quarters, licenses. six, years, last in the our any know, over as we also we've moving And new that haven't seven

So, that underneath preparing. the covers, will lead that to

the converting converting and that perpetual then moving they're away maintenance subscription. to So, and from

Those the want expansion, that's micro or we At in see moving to those conversations infrastructure. add points want are when times apps, more services. of They where to it. more cover we're them having They them. doing

coming one session. is our we're of question, the is At line Gray BTIG. nearing with time end There of this for which question-and-answer Powell from time, final the

on Congratulations the Great. results. good Okay.

be second pricing be thinking how the monitoring maybe could log additive yes, how monitoring on log disruptive the How you are you about in to new on year? typical could And there your then, the So, the build? product space? to customers' that side, product half of

look other we in is monitoring it log a unique in for opportunity on that that don't a not we element first log is, is to isolation. believe do entire significant monitoring that of sell market. the disruption AppSec in monitoring in say modules look that portfolio to the and log That services, evaluate built logging do with at Well, the that believe, and independent We we essentially apps the part to really that Dynatrace offer. to value infrastructure, We have to capabilities it way. is and micro the parcel along

significant the number get point monitoring that one log it will really as said, That solution we the FY we do of 'XX log whole that future will of offer, value solution end added in the sort in a itself of of as the for we we is be terms that's and an portfolio is monitoring believe beyond. will and and up ARR So growth a leapfrog to. that add into believe, there opportunity

it would better? your monitoring traction Any follow-up Should guess I early, be traction how but there -- then the think really just be in there a seen And mean, how good, do side? couple of like can -- infrastructure you the with as know with last thought years I it's I what and you've the -- compare

Logging logging pricing infrastructure with with look the from is we terms standpoint. really for It growth. quite a occur way be that consistent will the typically way in model this consumption-based a that at would of opportunity

substantial that around of it in essentially it's So, it infrastructure will growth as of to be model this logging. to as consumption a at think terms oriented we like it. look But think safe opportunity is I yes, for pricing

Yes, you very very helpful. much. Thank

record you appreciate excellent that extremely are who today. ongoing about that I much forward committed of an you, And for strong strong extraordinary plus events. We support really all ahead. with so levels the ongoing and assure X,XXX for do remain growth, of can joining passionate We for the 'XX So the brings look a opportunity your and Dynatrace ARR you we've to very flow. got us. us our financial that was operating FY your Dynatrace. or with Thank to close. in future. call drove performance people today. all, that Thanks for very has speaking engagement We year joining really cash to margins, We revenue

today's conclude will This conference.

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