Dynatrace (DT) 1 Feb 232023 Q3 Earnings call transcript

Greetings. Welcome to Dynatrace’s Fiscal Third Quarter 2023 Earnings Call. [Operator Instructions] Please note this conference is being recorded. At this time, I will now turn the conference over to Noelle Faris, Vice President of Investor Relations. Noelle, you may now begin.

you call. Dynatrace’s thank XXXX quarter and conference earnings morning for third joining fiscal Good

on call me Jim Joining today’s Benson, Officer Chief Chief and Executive Financial Officer. are Rick McConnell,

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

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

GAAP be during non-GAAP detailed some financial of growth please earnings section non-GAAP, discuss reminder, today to non-GAAP and otherwise we currency a our can to website. be measures constant measures of will reconciliation Investor found on To Unless financial Relations As refer the of the the presentation A and under we section referring website. GAAP call. reconciliation the these press our non-GAAP reflecting release see today’s between rates growth. are noted, measures, today’s and Events

our over that, Executive with And to Rick Chief McConnell. me call the turn Officer, Rick? let

revenue beat basis a to backdrop. share our performance XX% These strong bottom business constant free year-over-year. cash moment. delivers In of run on margin ARR amidst on everyone. currency the XX% of both to Jim was support macro in business and Dynatrace’s XX-month margin flow meantime, execution call. durability future guidance am of was with performance. demonstrate to I differentiation growth will significant Thanks, with Adjusted the difficult Thank of in results team’s that XX% results the ability They growth, third line. coupled current the top share and for a and continue and the third quarter market high more also priorities quarter like the revenue. our today’s investment on quarter about past very Noelle you solidly leadership and environment, my strong platform market, ongoing platform and details and QX were good line joining expectations morning us value growth operating trailing to our this our pleased Non-GAAP a a customer our balanced model. the the of I’d our our are a strength view and testament bottom growth. to subscription

the an and our We transformation their survey CIOs independent X,XXX DevOps conducted start, has XX% their mandatory. manual code observability time perspective issues support vulnerabilities, our moving spent their quality security on teams whom also of organization stronger. managers, been average reduces involving innovation. in recently senior to tasks accelerated market on optional never findings that They past and over which increasingly the said spend XX DevOps from XX% digital research within the months. has on of To opportunity global indicated These of is time that

provide expect troubleshooting dashboards on as responsiveness. Consequently, data Dynatrace awareness streamline to answers innovation, making processes modernization deep employee their volume and while manual the operating their and improving maximize intelligent productivity. automation and transformation rapidly. based analytics nearly is their Digital from businesses to They keep to situational radically and impossible. efficiency need Organizations continue grow complexity, particular, data and cloud its in to exploding of initiatives, is

As our part customers’ ecosystems. cloud of indispensable an becoming our a result, solutions are

workloads more smarter exploding Google in increased the a cloud. high trend ensure broadly Cloud and noting cloud is digital and It’s it such Dynatrace It the causal is focus on number This insights customers company’s providing efficiency. worth optimization initiatives. Dynatrace. right ROI. to about as that to from AWS, deliver of benefits to deployments about liability. a that managing their effectively trusted with element of by mantra cloud This speak software AI-powered hyperscalers, substantially compelling about consistent efforts transformation an Microsoft and cloud enable in availability an facilitates is the resource analytics to of started automation directly is done that Cloud work based cloud optimizations and reflected ensuring higher our on is have optimization

across to efficiencies visibility agree. ability is IT consistently ecosystems and Industry provide our drive Our spending insight and unique. customers’ analysts optimize

AIOps selected a a received as security. report, for as we cloud-native Magic the Wave in were Dynatrace and topping further continue author saying, well Observability “the in in provider or leadership shared, our position. Forrester highest overall lens we ISG APN enhance to our published across the the and demonstrate differentiating Quadrant for differentiate reviewed. invest and strong was the Then capabilities ourselves December, XXXX to engine The Gartner leader As able And previously blog all Dynatrace.” in score best observability as providers innovation we solution later XX a offering other and vendor all to

three like focal innovation, our roadmap talk I’d next for areas. to turning about So to R&D

and AIOps, first automation, the The DevOps, DevSecOps is shift-left. of concept including increased

to customers a into issues exceptional software aspire end away before from and an automated deliver monitoring experience. is become of users. to environment next dashboarding answers. allow enable automated already customers manual user that they Our step the to proactive works platform integrate perfectly and to with visible to move increasingly The remediation directly We to code one Dynatrace

against massively with processing in to is data rail, to lakehouse is the data and manage us against data sizeable real analytics highly manage, observability and logs, it automation second process, for data use and this all data now metrics, have petabytes purpose-built open Grail. in in real-time we The technology in store mission-critical. traces, cases, etcetera analyze and This efficient deliver including are place near and user core Keeping October of foundation our challenge. telemetry, AIOps to mandates data, With context, analytics that of management parallel store customer requires our AppSec the real-time. data launch and real-time.

logs scale several only observability and performance just disruption for We It’s as active growing other of over and we management engaged believe market X-figure the POCs and inclusion still yet customers the in with now log case and early of This XXX a types our remains ripe deep in quarter a is use we paying community data of AIOps improved that started. closed analyses. as in well we are for deals through first analytics.

threat third leads and vulnerability security. their driven growing to focal converging looking in application in quarter, our to the are R&D data in their That by organizations new the XX generated area, Customers understand environments. Observability deals. to operationalize again, inside and better several inextricably the observability understand real-time me apps. AppSec for added activity and We AppSec need assess these including being to infrastructure threats and customers X-figure are

application Grail solutions going security product and and excellent where team’s market customer offering meet anticipate Our are develop ability needs. the examples that our to is of

our conference Vegas, hosting since Perform, comprehensive technology team of Las Investors in tune-in to Q&A and we customer virtually first be forward announcements looking global on ahead. set for most in-person our a which month our invited for tone stage moderated investor session. in-person to to are leadership will platform our main are of or share breakout year to-date, to XXXX. And attend the presentations. members hand this We plan set will Later the

our to our direct hyperscalers innovation, nearly relentless In our to to at investment our partners, and same we notably commitment year-over-year, time, global force addition increasing sales gaining leverage in advance and by most efforts. go-to-market In have also dramatically focus we or XX% by system GSIs. grown while integrators with and continue scale the particular,

last In Dynatrace between addition as strategic businesses transform we to with expanded alliance and help reduce GSIs relationship are well the our their announced DXC and agreement digitally cloud Deloitte as other have striving May, complexity. X to customers formal that we

doing critical construct in more flywheel in customers as and in the is start. as for installed our objective resilient Strong enable to base. earlier Our a new element partnerships the deployments growth establish well a projects to cloud participate consequently momentum expansion to purchasing cycle in from logo transformation in us are so digital

As continue I our of pricing unlock full the Dynatrace previously, packaging help will to believe also enhance and we potential we mentioned accelerate and platform structure, the which expansion.

us Our more model rapidly believe installed base a growing opportunity. will simplified that potential licensing amidst capture solution has growth we significant help extensible and portfolio and a

a solution platform subscription largest customers and or roughly experience already an Our licensing frictionless flexible DPS usage is committed Dynatrace accretive, across used XXX spend with set. by Dynatrace enables our ARR of through the model

of with are Cyber due X like discovered having I’d why value power provided including to They little dashboard choose to some of AWS to a that organizations on logs investment these We X-year emphasize tool existing airline. spots resource Dynatrace. X-figure, leveraging spikes. our delivering blind on the unpredictable major and to recent with priorities deal Monday a modules, value, cloud and customer partnered their Grail, land wins highlight share To

and customer the problems and their Now, more with proactively across automation. analysis AI insights has workloads solve with and can root effectively cause

The company’s insurance impacting U.S. time, thousands had from SevOne cause increase affecting We cease of year. would application a downtime teams satisfaction. the SaaS the downtime, was waste times with to complex an the and found to IT agents. that multiple been time cost leveraging dollars eliminating company saving past, X-figure agents, with millions also the customers. insurance landed resources dealing AWS. issue, company a highly for of company large helping a the policyholders, future they This per of for at multiyear transitioning In problem, root hours of application and With quickly customer Dynatrace, that deal and is work of recurring year additional a estimated tens

ability technology X-figure bank, us, efficiency existing annual major Another a to X-figure to expanded its up an bringing due relationship recurring Dynatrace’s entire total and drive customer, its across revenue with ecosystem. to its scale commitment

the on frictionless pre-negotiated largest rate card great truck of multiple deal licensing, negotiations placing for example the us. without agreement using as can brands in charge expansion within number luxury for with observability land the of opportunity a sign of a DPS brands create a signed With DPS the observability their one and premium is of This time producers internal and European simply the model place, Dynatrace chain. X-figure approval automobiles that solution this and one can in finally, or their marketplace. And consuming all car

achieving our In for they on objectives, with customers have relationships in closing, value significant I not positive to we provide business the their team. to am mention grateful that our their feedback

our opportunity an deliver line We platform economic as well business even top balanced the ourselves to continue to further managing while macro ability our bottom remain evolving innovate market. to in remain proven we market to have way. by through growth highly to customers’ to And solid even motivated conditions meet improves. be we focused in turbulent consistently needs a challenging our environment finally, differentiate execution, in and as We our leadership a position environment stronger when the on the in

call is let me that, Jim, your With board on to earnings you for the over great it to first have Dynatrace Jim. turn call.

I to good be Thank everyone. Dynatrace. be at you, morning and thrilled Rick more couldn’t

model, Rick As a and across revenue, Overall, predictability drove value across Dynatrace margins meeting customer resiliency the we a the strength of the our subscription results, metrics: performance. operating In of and environment, execution dynamic of Dynatrace business the the quarter of was operating our QX guidance disciplined and across EPS. the ARR, delivered revenue, subscription said, execution of high-end the of enterprise our our our the team. all base strong solid platform, macroeconomic

and and balance demonstrate and model to business deliver growth, durable to cash a a flow. We strong to continued profitability we attractive continue have expect of

be Now, more rates results in that detail. third basis unless and into note stated. growth let’s will the year-over-year on a the quarter constant currency, dive Please in mentioned otherwise

ARR adjusted down the perpetual shared key Please adjusted As wind the business past, of and website. and for keep of of metric can XX% a license we of mind, the growth which ARR ARR, we found delivered IR and the strength be growth quarter. in reconciliation performance currency normalizes have health in is third ARR a overall in on the our

third the was billion, of increase $XXX million an and $XX for sequentially. ARR Total $X.XX million quarter year-over-year

year-over-year tailwind $XX a $XX headwind sequentially. exchange a was and Foreign million million

than the net Excluding in of million, $XX quarter logo shared the the driven in was by license new roll-off, and perpetual roughly strong additions. ARR higher we the new last call, impact $XX added million currency expectations our

expectations. quarter, In new the the a third new The X% up of over we observability. basis, modules the shift third exceeding average Moving environment. logo initiatives. quarter, trailing more building prospects growth with strategic on rapid blocks of consistent to was logos year-over-year supporting the XX-month efficiencies operational and ARR budget deliver second of landed new ARR platform for platform towards as quarter. among a XX% lands our $XXX,XXX or added business, with logos deliver in XXX quickly tight greater the The our to that on Dynatrace three around resonate strong automation in us they drive to well look continues approach value the IT with positions for investment efficiency ability Dynatrace’s ROI and to for a

customers testament Our see new that remained we continue platform. and environment quarter grow as multi-module customers value enterprise the a existing now customer. to of budget strong average elongation $X To of total the enterprise takes healthy. in per sales customer over close more the an the of for average just a at standpoint, business, bit time, of XXX%, longer third expand to believe coverage modules the was driven rates million. demand we using ARR continue with and remains Gross rate retention ARR XX% the in the the and of ongoing adoption, in $XXX,XXX can north an modules scrutiny And net see customer customers for per clear, plus shy more be nearly strength to nearly to adopt of expansion It Dynatrace From just cycles. be by mid-XXs to deals. X our

non-GAAP revenue quarter point million, value FX Moving from platform. total third $X $XX margin a for a third exceeding Dynatrace last was basis, on XX% margins, efficiency reflecting for of quarter up the will third Gross of With revenue, to revenue quarter due million. X and XX%, the our and year-over-year of on million subscription subscription growing healthy margin for was and services $XXX quarter the was margins. improved was very the have scale our of million, discuss which the I we the the profile, both up guidance which respect business $XXX high-end by to to gross and

remain targeted initiatives high investments Rick innovation As in for and indicated, go-to-market priorities us.

$XX For the or million third invested in of R&D quarter, we XX% revenue.

when with you many As our providing vast our resides cost greater majority compared engineering to know, of U.S., much the competitors. of us organization outside efficiency the

million prioritize XX% marketing this basis invested spend or XXX $XX programs. year-over-year of continue basis the revenue, in On investments we partner marketing sequentially up go-to-market side, points XX program down we and sales and expanding in to as targeted our quarter points seasonal ramp and

Our was guidance margin points basis operating of revenue operating XX%, in exceeding end third by upside disciplined top and quarter $XX income range the management. primarily an resulting for the XXX over driven million, spend by the of

share, bottom guidance was of $XX the the non-GAAP $X.XX $X.XX or our On line, high end net income range. per million above

that this million remaining the and revolving facility very that were repay us on to $XXX replaced $XXX Turning due facility loan credit mature sheet, now balance, announced rendering August. prior committed debt-free. a cash with pleased the We to financing December, to was new execution hand of the we balance million in used million the $XX

four paid of of $XXX the quarters. last that’s million cash, we XX, last million increase debt to same December year, $XXX after million As period had compared and an of over we off of the $XX

period on trailing Our view a third We cash in is seasonality billings XX% variability free cash a $XXX the quarter-to-quarter. due to trailing revenue. XX-month to flow or best believe was and flow free of quarter $XX and million basis over it million in XX-month

cash make appropriate extremely the select accelerate in in to a growth and generation strong continued puts are our to healthy it believe investments areas. We position us our with pleased

an would rates. The $XXX next bookings in It last performance that we like XX% seasonality is RPO, our associated million, important and billion portion over the will quarters, quarter, end remember to increase expect of four measure RPO that over remaining recognize The the of last RPO of at to revenue variability discuss QX approximately was increase $X.X of year. of growth upselling as contract XX% an I obligation. the is current which cause to with was year-over-year. the

best the to associated as understand of As removes continue such, to timing it of the health believe billings. metric the and we business noise ARR with durability is

a I update Before to I move to on give guidance, brief want macro environment. the

is opportunity and rate budget Our ability strong QX to ecosystem demand is the and Dynatrace observability the execution and still remains team. done, in outperform therefore, expanding, but is with the testament growing, more a at market of a deals to healthy, slower pace. are scrutiny, getting the The environment still

in the of time, to areas this the environment confident we and growth. At headwinds levels pipeline ability in to delivering the of in persist. investing are continue our even attractive health targeted We are while monitoring closely profitability execute as investments our macro team’s same for

We will are operate we’re and with appropriate trends into the in in QX rigor the guidance. confident same that our macro factoring

guidance. constant projected fiscal our growth Let’s revenue U.S. million less to is than representing the $XX the growth $X.XXX mind, business This the ARR at guidance had million the billion to currency, creating points. of we currency. for headwind between midpoint headwind expect approximately an XX than $XX a the million now on a fiscal With year the we approximately guidance $X.XXX the weakening foreign XX%. or down XXX perpetual million basis expected to of for $X and start or year, wind to again, nearly is now expect with as-reported This full million From on standpoint, with basis represents last expected be as-reported billion, rates we a this to from is increase in full and ARR revenue. $XX ARR dollar a point approximately to prior We more an in compared of in quarter. million guidance, XX% $XX our license XXXX constant of be ARR headwind $XX and prior currency FX quarter. With currency Consistent be represents increase that last basis. denominated adjusted

to now for ARR increase logos. expect year. XXX last we is quarter’s added roughly expectation guidance, X% to new we Underpinning our a previous to growth logo decline new compared full year, This an where the be flat of compared the

elongation to the net expect scrutiny and high expansion sales of of tighter rate We in teens, cycles. budget be the reflective

year raising an also We basis for or in by the are the our basis currency. XXX as-reported points guidance million on $XX revenue at midpoint constant

We billion between $X.XXX in billion be expect total growth. $X.XXX and revenue billion, be and to to $X.XXX $X.XXX between year-over-year to XX% subscription and revenue which both of billion XX.X% result

standpoint, that a margin From we incremental non-GAAP in for With raising remain to profit are efficiencies macro with investment operating guidance appropriate operational we our fiscal management. offsetting committed and headwinds mind, still XXXX point prior to make representing increase guidance. appropriate us enable XX%, marketing. a XX to compared believe both to We will R&D and sales our the this investments and in basis

$XXX guidance. EPS free than non-GAAP prior be non-GAAP on the end. cash rate free representing shares and at firmed million on an million raising to tax cash of a And $X.XX effective high XX%. representing down the cash based midpoint This slightly flow $X.XX $X.XX basis XX share, we the which EPS on non-GAAP are $XXX low as and XX% guidance of million points finally, are margin to we XXX is revenue, tax cash XX.X% of between and increase higher to XXX million, expectations, to up per a We of share $X.XX of flow a expect end to count diluted

the one-time free in approximately refund by year full our a was impacted flow cash positively quarter. reminder, a of first tax million $XX As

carryovers to to basis. be beyond margin fiscal As levels and free profitability. operating rates we cash XXXX, margins utilize margins slightly free fully we loss to of op generate on tax-neutral expected an than margins, about a we given generally and expect non-GAAP expect align in Therefore, we flow and think as-reported increased flow cash cash our on tax flow basis credit see free lower tax increase as cash

Subscription million between and revenue to Looking standpoint, revenue income XX% year-over-year. million, seasonal XX% $X.XX taxes. or XX% mind to between be $XXX $XX.X incremental $X.XX expected profit have in conference to expected expect million expenses $XXX to the be million QX, to XX% non-GAAP Perform be revenue we is place payroll of $XXX non-GAAP as to to $XXX operating quarter, and as million XX% per and taking in From is and million, between our total up $XX.X well a a of fourth reset spend that Keep related share. EPS structural we including to some of growth.

third fiscal XXXX summary, solid dynamic combined performance a pleased ARR where line our are amidst cash we growth, we In saw environment. margins healthy and quarter with with top

consistent optimizing opportunities we we a we balanced have value. are invest disciplined execution. proven profitability and record consistently and to improving future of track a have continuing that costs We while maintaining And approach and expect to growth long-term as in committed demonstrated, efficiency drive to will

And with that, questions. open we for Operator? the line will

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

for my environment. a Congrats Thanks, for in Rick, Great. the you. on guys questions. taking tough execution

cloud actually really Dynatrace comment more you cloud comment. observability optimization dynamic? little many Your concerned directly about investors are be a could we Could Obviously, hurt bit found vendors. fascinating a benefits optimization, that talk that to to talk I that from that that

Dynatrace make we the In very of make is precisely want does. that’s all like all to optimization. want workloads, to Matt. And we optimization to Digital about exceptional cloud that much, this it’s increasingly as And getting of in to we in number they’re from what deployments Dynatrace to mandatory sure – are delivering Dynatrace delivering what cloud we that bring terms what works look deployment. cloud they many in and But order cloud. And they’re know, ways, going that ROI. the driving precisely drive satisfaction. sure to companies an customer as ahead. to to bring the cloud really sure ways, user cloud and and cloud migration fact, think transformation being software in satisfaction alive want think of think They Thanks a obviously huge cloud is They to optimization make chaos We many is perfectly. was built is do. the Sure. I optional well, and is I

to And then ‘XX you. logos, Thank be our for may obviously, things high-level if early, new it. yet. any maybe fiscal fine-tune guide bit but a Jim, didn’t sales It profitability blocks, one Got year? as growth you you capacity and we etcetera, like building of sort have wondering just expectations, estimates for next

Yes.

You’re right.

going remarks, in a mentioned We’re of provide May color a actually my customer quarter. a in little better say, on more will as blocks we the prepared to been I did bit lot I’ve I our the fiscal And new call. months fantastic building third on that company. ‘XX logos quarter a obviously, in relative couple here to now, for

logos And you it I and And to we’ve call it, to from ranges call talked think blocks going expansion. call fiscal as is so, come third about new is those, come into going ‘XX. approximate can two-third going in roughly building expect from it, the past,

Got you. it. Thank

Thank you.

Please of from question questions. Auty with the next comes SVB. Our with your Sterling line proceed

Yes, to ask one as And I’m welcome to just first as fit your back earnings call. so guys. Dynatrace thanks. many Hi, you going possible. can in question, Jim,

quarter of growth. of at kind Azure talk lot that is end what end you at get started? quarter, just one Can saw in of reported, the the terms the about talked dynamics Microsoft and I a in the questions they you I when of of particular, how quarter this weakening about think the

That’s great a question.

actually what you when tell came we would I kind roughly So, the linearity quarter. we for thought started of our line the in that with business in

that, certainly that, second budget the real in no are and change. there I sales in we mentioned but elongated, having the in So has environment would materially resulted say, remarks, I’d I as macroeconomic therefore, were not will scrutiny, our than that that quarter. certainly kind say I different they say, said is more no of will – prepared doubt current cycles

cycles. came say thought. in kind demand we of linearity of expect we what line that forward, kind our quite is going similar the will sales so, And with environment healthy. elongation of And I

is healthy. Our pipeline

dealing of healthy. and I better that at coverage forecasting this think the team been for our quarters, responding sales our I we’ve much business. is with that now a is kind think few actually

And so, we pretty kind comfort of have in and good pretty guide. good visibility our

Thank you. Got it.

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

you. am longer wallet? I some and I was wanted ask in of the and try describe, you or mix to this on change And see has two, it of and gain how packages up, In had if success. organizations share of One, of that you if going get to could. done over just of more years on the wallet. been packaging, gain of I But you manifest What by to how to you of large time? some maybe enables speak you’ve a Yes. are particular, attributes – period hoping to Thank pricing said I success? to what for do to granularity incremental revisit so hope Bundling rather. accomplishes this might time the intent could over years years many share

take one, I’ll Sure, that Keith.

model, do in very scaling got, workloads DPS adding subtracting wanting have in a we as customers. multi-module what to and all they more and I be they down to and which mentioned, basis. are all frankly, our I is virtually customers pricing you’re modules referring and fluid wanting – So up flexibility are largest to, are DPS. is what or to or multi-module They approximately imagine It so XXX our on tends

only customer process. up to DPS and deploy do. selling whenever spend modules friction what They us AppSec. go a and in have to, the multiple precisely turn already And it in selling ways, to So workloads. ready. we need in enables for what we’re into rather to DPS customer trying across example, a is and committed a multi than AppSec, would And a but and model model, workload remove back enables many it having essentially that’s own therefore, that That they’re

deployment process, and does we and see So as the it an create selling it more accretive model. that’s really precisely why fluidity ARR in

before you those rate? my And Or that net your your ask what evidence XX% retention on question, any rate kind retention net take to it to just next something too lines? to mean, know? does do is I early of or have to along does it

Retention with metrics DPS point the rates, of ARR, positive all deployment.

The a that of by bit fact the is our and fairness, customers. see some but are DPS it we that biased very being deployments. more see in so probably therefore, who is these Now positive it’s that in probably strategic a metrics conflated of Dynatrace largest set ones

question, moving Okay. you log describe management kind just what order are getting In that data talked success in in to particular, to real-time areas, Could you into generate strategic area? my having success? you displacing and you’re analytics. process, And second your second where that of about

On particular, those a And the data where analytics where requirement. are analytic lake workloads. is really observe that is Grail parallel there’s that as house. ones those shines high The focused that which in is workloads management most. looking customers are and preliminarily to observability-oriented where the are Grail log massively deploy really processing And our

and to reduce with pass So seeing faster Grail. the Grail. we’re that’s and with what essentially near where and analytics, to that’s workloads to we improve performance They real-time provide drastically cost, move fruition want come

Okay, many Cheers. thanks.

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

in new around product tougher you cycles some Can a all-time macro new specific go-to-market that the in wins drivers, some were this follow-up believe ledges and on high cloud X on around I detail or I an morning, congrats results. just drove at I the the intros, and the adds. growth strategy want of strongest everyone more logo Good sequential provide environment? years. uptick they to think despite whether

Yes. acknowledge gone that in to logos obviously customers than quarter, new a the are I’ll that. I a is cases, POC. we elongated in the say customer. cycles pipeline that a value had comment through guide in I more a were it’s would buying of customer a see trying of low for that be I’ll many already these attribute and And range from even tell to can on particular, because to And guess you they in elongated someone think we our I existing kind for that prudent third customers the have an new high.

the already of they’ve seen the value So platform. Dynatrace

a I far to you’re it, some adjustments a as some in here we of what the earlier see little is the I farming better rates selling we and on, – One, things. call been couple company was the get than so, close hunting of that. to year I for as model see concerned. traction also I’ll think more expected maybe that we the quarter starting think versus bit a think result that saw focus started had to as And there in

scrutiny on on you helpful. That’s head-to-head are seeing who around in customer whether environment have And competitive of deals increased changes these the a quick deals? on one competition, in seen any you or terms

got best you of time. And offering. mean, if still you’re the the competitive I win very we win of to competitive majority we head-to-head mean, And think are competitive environment, I’d environment. based I is quite but the our change No. on I environment, say go having similar. rates the win real competitive kind referring to no in when strong, the the pretty landscape

would we see sophisticated homegrown, that believe, were and that code, ecosystems. moving just days, that competitor more is I internally that, modern Kamil, in again. of terms DIY simple yellow, and green intelligent of data solutions very data cloud our we of really consistent open and with from that biggest to that the and thesis and are to much see answers from that run And required over we dashboards and these red, displays to automation over We something over walk it and built, is say see we continue add to source in,

And Thanks, questions. taking my for thanks really helpful.

from the Thank next with comes The you. of proceed Truist with line question questions. your Joel Please Fishbein Securities.

that it’s Thank a the obviously app you welcome and Appreciate as to strong to for well? execution it’s competitive you of you’re bring considering trying Love but pretty competitive lot a a you, some know customers the market the table, also you attack how mentioned good It’s to quick and and first really Rick, days, call. a question are maybe on a security-centric environment this the congrats of the are there. what Dynatrace it. guys I saying hear very approaching market Jim and differentiation to focus. out early about security. might

as do areas ensuring participate why to Thanks we going and be associated is with really and oriented platform are from converge, you pointed able AppSec Dynatrace market to out, most AppSec AppSec and which Where the The very crowded around significantly add where is overall to is our observability differentiate are those in market, that those the value leverage gain customers. Right. Joel. areas AppSec this strategy this deployment. are that the we

that’s so from and we are investing vulnerability are precisely starts areas like focused, we now. in areas that there with where And into management additional extends

Thank you. Great.

Our line with Please with next question JPMorgan. the Bora Pinjalim of questions. your from comes proceed

Do Thanks you Great. different and the congrats see the for spill in the ‘XX, fiscal [ph]. just to on Americas? the that about ask question across figure of kind I over want since to the Europe? the everybody environment the it performance on part challenging you Hi. of taking see outside just And out. of macro tiers quarter. second Did is you question the is trying

that? being Another what seeing set you terms IT are asking of observability how are or and I year it, in budgets from XXXX for way guess customers within of calendar hearing

So, questions. two I sure I make want the have to

about their but your in geography So, of one, point color then a bit budget on our understand ‘XX necessarily obviously, not view to decision. of guide, you And want around specifically I get of kind of kind on things. the customers fiscal

our we I obviously, all is That say the being we that we had did better for relative affecting dynamics, So, that region expected a a would would than I to geographies. that’s environment say soft. macro as will certainly the out in bit region. EMEA I third has of kind perform previously been region our geography say a quarter, called

So, I But change their little would say bit execution And in it’s in But EMEA had our would budgets, a North little seen everywhere. North it’s the in cycle. But macro EMEA weaker your wouldn’t necessarily and And our environment in say just I quarter better that, say been. third we little in to America. would have – I beginning better bit EMEA what is dynamic think significant in budget from the I in region. I bit I general, a America. relative of I way kind the third a that suggest in the are and the quarter. customers think stronger But that a it, we execution softer a performance was

I they am IT budgets. as and more I their with myself So, that it looking think customers are areas scrutinizing can that prioritize imagine, are dealing believe you spend They areas their specifically are at to strategic. of trying

and believe But I that say optimize. that are probably they are spending, space conservative. help on. that money to them are are Rick on spending be budgets And continuing going in they to that we is So, area would areas the outlined, as spend are they an still actually we

more slows cycle, just so And so down. you just dealing with going to you a through are you are deals with as a longer are of approval me, dealing question. it’s a It’s cycles, which much just not budget more levels, deal

demand quarter, the in so cycles you for strong. demand particular sometimes guide acknowledging But environment deal in healthy from strong is fourth our are And is the month-to-month. push can for that where general, specific –

Thank very it. you Got much.

you. Thank

the Our Nowinski Fargo. your line is question. Wells next with question Andrew of with from Please proceed

Congrats great a you. Thank quarter. on Great.

a want question. to just higher-level maybe I guess I So, ask

for second out of new and now is it to ARR looks last subscription wondering quarter to the made three turned may And cut could in know I QX? kind and If predict, enabled months revenue, last market be guidance that less you to look if hard the original that unnecessary. you of at and what in you a to logos your it’s you like a was put bring level guidance I have to guidance But finer changed that you back on gave headwind. point else over the FX

certainly then. back Yes, wasn’t I here

So, last guidance think I in very I the can do the be was comment there that believe prudence I guidance. to provided frank, a on was level the when of a bit. call,

And bit earlier longer. out environment where did third quarters in close the of one element the So, a have quarter. I a buying said do rates forecast say exceed I couple even where was the trying it. of kind think expectations we I uncertain internal think our in take is sales in how little you to will had and year deals customer earlier, figure as an organization that’s maybe we that I of that

the have in year. of think from half that. that I learned so, And from first learned we We the

think I better are at calling they that.

glide have us of execute think I so back can quarter. said confidence why that’s seeing function are we pretty we outlined. that we the maybe of numbers we that good a first And you what maybe have the to to And kind in

relative Look, logos. good that. saw strong Europe to increasing in saw new in to to strength add That just the would I quarter. was during period prior We we positive the results see.

earlier, as that well. As gave confidence Jim mentioned us

we QX. delivered course, a Of strong

that those put we of updated to leads So, are and us the today. we where view together

just spend couple also say a would at I ‘XX. environment quarters question, first as perspective continuing soft through are prior to overall the macro fiscal a assume the of to back of Going fairly quarters, from that in prior least we our

amount we prudence. so a going are with into good of And this

follow-up for got quick you maybe number a that you Thank a now XX just great. in And That’s market. have different GSIs, GSIs of routes color. the on to

got are have contributor. think should ‘XX contributor that is if as fiscal GSI about Resellers big could various a of being in wondering XX%. market am your the you course, set growth? and and maybe hyperscalers I rank direct biggest to routes just the I we about how capacity your up sales, to So, think you your

reported previously, but more primarily have a we deals already are the Sure. partner Well, of – model than XX% our and direct we it’s delivered. in had past that partner have influenced

And we get I in is presence where say that, in and prepared flywheel So, through more primarily really partners. believe coming we will momentum see the model as those really have from the GSIs. as very perspective would we partners. go-to-market with a remarks, we indicated strong continue. a And the movement hyperscalers we already from simply that and

you. Thank Super.

question. next from with Please proceed Barclays. Raimo with your Our the Lenschow of is question line

at Matt’s as Rick. me back from Congrats go Could Hey. I well. beginning, the Thanks. to question

is from have you you had to you optimization more that their people see run more, more their Maxo the to that. maybe are And when have, follow-up. you about talk like that I less comments like that contracts And the do like effectively? about bit overcommitted it want the you workloads [ph] about as, little was calls going some you? well I trying kind them So, talked cloud, now as to then see How one cloud. or when you a big and how the – on were to optimization, like the – run do out as I of talked already, play think about we were I for There workloads I believe

Well, Raimo, as Microsoft certainly, well optimization here there Azure. in Sathya as cost an of call, talked about the is element

manual in expand more remember, those cloud more to automate it what workloads rapidly. easier And and beginning explosion about. much And we perfectly. end-user optimization, are that complexity have which satisfaction, are question you software workloads the automate no of We is oversight is cloud that’s in element, overall thesis delivering our ROI, there that is that cloud sort is rationalization. which an its positive from out cost less, getting That overall data, you some difficult. the I that. you where that’s works that you And do renders an there most that, of made. making really also, comes key sure But it as the increase that Dynatrace optimization that making more and cloud of of really with deployments enable management workload is a to and creates process So, play mentioned, in that occurring as really is make getting sure that’s to exceptional

feel we with cloud efforts consistent trend is that very So, a optimization and right our to that entre. done cloud

Yes.

of out one you SIs. – you and that other you people congrats for And terms SIs please? the what the them? practice, What Is here are out to see theme me numbers but global do of positive today, talk global were Perfect. Okay. lot a number. one as and a to of more stood mentioned the And me add well. there it are from are – buildup then some lots addition the that, doing? there that Thank more? And out of customer Can spending you to – nice in the was

hundreds Raimo. would as those Thanks you with. capacity are literally we The different XX in that that GSIs deployed customers. have trained result on and people is effectively rates. get more that hundreds Sure. say, their And more growing working GSIs of us see, and at we now have can the Dynatrace. And for of are, But XX the Dynatrace we I with have to

tend part of consuming. typically be to GSI are They companies time efforts larger projects large that overall digital Now, are transformation for workloads.

In LatAm a transformation of over component we as a large see will we These fact, deal with deployment multimillion last that quarter a that and kinds we time believe of multiyear significant the closed that in is the become down digital in of. call a dollar, very will GSI. core deals a part that referenced I are one

a working believe time, get helps So, it’s we going to of take to us some that there. GSIs but different with number

Okay. Perfect. Thank you.

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

if wanted you. Thanks time pieces to and you. forward of I here, for just guys. I here to looking morning front put wanted Good back. could two taking with in to am working the trying cycle I and just this Jim, I to square see

that logo in think better comment adds Kamil’s than was close there new a I benefited response partially to question, rates expected. from in coming

we of was see prudence any this calling just way in like baking Has operating what are what’s back level understand close logo think conservatism well, new in play dynamic its conjunction in now that sounds as force sales better changed just And or about Dynatrace you for it on is, again, want a I adds are year-to-year question, looking to quote, guys basis? and QX coming I prudence we help backdrop? how in rates close those as for And flat are then the rates at guess into the what is that I here? out. your we you with think incorporated Andrew’s assuming can So, us that know given that to

follow-up Happy that. to kind on of

So, the as we new I logo than that adds said, have were expected. better

said, a As close of to in we a not a as of range imagine, I I were just Relative the outcomes. that QX, rates improvement we stronger. say you assuming bit kind a little close can are And had rates. significant would

prudence continuing reflected I in exercise close in to matter That’s think we As the of rates. fact, guide. a are

that ahead nervous being I don’t the here half you strong I – months have year. I that getting the is to here, given want obviously believe here get been a So, ourselves few in wasn’t And are you tell I But to with force from and we just of we prudence of first do can that kind think of the quite discussing they QX. I it’s that the of the reflect things will forecasting sales force general are a across deals are And rigor rates when significant that around cycles, that. of business. around longer the level close. sales in kind and close the deal expecting They and starting

strong. you rates. win have And as need And have those look you good good imagine to I you to is that you good pipeline would need have can of means say need coverage, to quite and all what things so,

a prudent we is we rates. the coverage. funnel, close good good on a But so, good pipe And say, I area would have are certainly being and

quarter of the pushing more be offset to to enough possible able is next. from there So, deals than to one kind

see, I color. way have you just technology to to compare there know back Grail, a there one great there. underlying do Rick. for wanted analytics log I coming – like and follow-up really But management is that, and I could is Jim. if sitting that the That’s have And appreciate just how to that

are power are customer or what and prior the because announced DPS your that reception assume greater we is And fair power maybe potentially if an seeing the scale as customers? flexibility can You for at faster this newer we like to that analytics, What really, is enabling launches? approach talking are you largest I analytics customers, for getting they bundling DPS log am is versus adoption analytics. launches, trends product assume it that or those example, product about shouldn’t

management We so. would full it certainly and so analytics is module log infrastructure, which typically where expectation hope the DPS hope around deployment. We that certainly enables is That includes that sit. is

opportunity the great a And example six precisely is module motion, did that that Mike. the ahead. enabling precisely deployment remarks, So, included talk prepared about in a of Grail. We that’s which

we about So, very with good feel we Grail. where are

as XXX we mentioned, than currently more have in are you I Grail October. have many POCs very jaded just converted early that paying out As orders. know, that there in already, the those It’s deployment, we very, customers

So, it. are customers But with at testing in very Grail it’s still and we still are point. pleased are we where this new,

turn will Thank I really do my colleagues, over Prefect. to answers. it the appreciate I you. but

Thank you.

line will Raymond Tindle of question be the Adam final your Our from coming with with question. proceed Please James.

from a mix customer about Good talked about perspective. where Thanks. fiscal wanted new, Okay. expect morning. expansion for Jim Rick, one-third I talk to ‘XX, two-thirds from growth

The a not you about scrutiny now question, a budget piece, with how expansion follow-up. in expansion their customers pressured, how And I with fiscal It’s budget scrutiny. Thanks. talked from budgets of ‘XX customer you one, those given growth customers, that existing maybe tight growth the a need customers. On two-fold get we to also existing existing the right got a more do better cultivate for dynamic? growth why have two, generally pivot as vector? And but to are lot new

new I of to focus in close the need Adam, is – we customers. Well, areas. them We think equally. both the And both opportunity, on and want

at opportunities want different of I of existing the the also look a the is if number are to there expansion workloads. expand existing net We And areas. existing expansion customers, One with workloads.

selling other come and those expand adjacencies, that new well. are fairly as DPS sets adding workload, opportunities have partner or in to and then modules. AppSec, in of where capabilities come am Well, areas well you order have as significant I this those cycle. new applications. and/or normal of to capacity tend other So, for Grail you an And could be a existing Then is might

look So, of those expansionary all we ahead. we look as as at will opportunity

would three on of modules. more last is than The announced new or modules, with XX% other that I point that closed more quarter, make logos modules than logos new three multiple with more we

So, something area. that selling more logo we platform also into that are is is seeing new the

it. Got

maybe just And follow-up, Okay. Jim. That’s helpful. a

QX was than adjusted. better New expected fully down ARR XX% in at

takes XX%, declines mean the or cadence down I growth and ARR year-over-year. tough to the of cadence into think we down wondering, going that I got in how I to puts you to of when of QX in the that part sense of be XX% we bottom new a see do think might Thanks. have new and it that if ARR guidance for next bottom. think about this the we backing kind potentially But trends? new QX, just have implies QX, piece. am year? Do get trying about could do at a is Just be metric of I still comps am ARR we beyond decelerating first

than QX, we QX, about between before XX-XX higher we in in split million just ARR net be obviously roughly had I Yes. million XX%. and back that at came think shared half, – new had very $XXX will $XX I the a strong thought would I we QX our that mean it, effectively expectations call

guys – dynamic. I fiscal of we fiscal talk will want level on effectively it will seeing ahead about guide. of and It’s will shared of this reflects pretty think into and our benefit similar with ourselves prudence on have prudence we tell ‘XX, May. providing when the is I months certainly fiscal have will the is we we you call. what QX before macro ‘XX you Relative in guide ‘XX of doing. we to it don’t three to guidance to in that environment get I obviously, another what our But And start build So, a consistent

significant will end a of As of I the joined I are with are growth in you I one the that mind. Rick the improvement with And the think business don’t just balanced. of not peers this strong company great that seeing as environment. the in managing kind that we our very it’s we when recipe. just any were of things with balance liked company And actually profitability. really said, expect And in It’s I

having are new they muscles. Dynatrace. muscles so These new to And not are some exercise for

we to conditions in as think I are on we be continue good opportunity. investments should to we that. to macro And capitalize the a able so long-term make And for need improve, where position to the

you. Thank

joining. everybody you for thank Well, Okay.

balance think prudence. remarks I is are are how with call that growth company. exactly that where we like good so on we the of Jim’s line would are profitability because running the top we to And doing and finish

delighted very ahead, we QX are about our delivered We and just to growing bullish very, differentiation. opportunity look mention we not as our the strong to as market that look we results platform

joining us all very a you person Vegas, in in there seeing day. Perform you forward For a at wish good I to those of I Las look in weeks you couple of and

today’s concludes conference. This

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