Dynatrace (DT) 2 Aug 232024 Q1 Earnings call transcript

Greetings, and welcome to the Dynatrace Fiscal First Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded.

to Relations. host, pleasure President Faris, my Investor of now introduce Noelle your Vice It's you. Thank you Noelle, begin. may

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

Executive me Officer; Officer. Joining Rick are McConnell, and Benson, Chief today Jim Financial Chief

of please results get today’s that in from to most we expectations X, may as recent differ started, circumstances. or statements represent guidance forward-looking in and XX-Q as no a quarterly new the report comments and due on result update risks We discussed regarding materially call Dynatrace’s revenue Before including XXXX. filed statements earnings forward-looking information, and Form that number to future economic this such August The our note we earlier statements obligation include today. events on statements filings, assume conditions. company's uncertainties views of these Actual SEC our included a

we and on reflecting growth non-GAAP discuss the are noted, basis. diluted a share otherwise per rates Unless today growth amounts currency constant are

measures Investor website. measures financial discuss provide and non-GAAP We will press between reconciliations of section in non-GAAP GAAP We call. on today's posted the slides and other in today's presentation release earnings the Relations our in also financial

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

to our ability start Noelle, good deliver of growth our XX% operating of was XX% and subscription year, combination $XX all to across solid in non-GAAP our top million, call. year-over-year fiscal Thank end or to continue revenue. results morning, had you profitability. everyone. revenue We of for the income powerful line constant and metrics. currency, Thanks, a a and XX% guidance These year-over-year, increased today's demonstrate joining us ARR for exceeding grew high

in application They impact environment to testament and customer performance of on as our the significant the the customers, I'd our will value are outlook, details and meantime, an our in economic Jim announcements. more continues share a behind platform like wins moment. to observability to provides recent to market about security the even QX market behavior. update broader share and criticality a In the the

with which opportunity, to and market start we view as growing. massive Let's our continue

cloud successful their rely troubleshooting. strategies, become for complex increasingly essential. have on execution through computing scale nature cloud native with of observability and a simplification made manual digital of too multi-cloud ecosystems organizations and alerts dashboards, The them transformation and dynamic to manage modern As has

better experiences, analytics. cases customers Organizations use makes are enabling frustrated customer combat with their I quarter, chaos IT purchasing these ecosystems to order and by behavior. negative to customers tools, control have Dynatrace and key become several limited drivers points. of of mentioned of this fragmented out have Last pain that help

and cost cloud of They they are They to to observability substantial infrastructure them, disconnected Among applications. savings improved myriad tools highly unified are looking applications. secure because Dynatrace consolidating by effective downtime. incidents their purchase organizations a performant insightful fully to investing more oversight management and material sums They log reduce using native are cloud and and seeking deliver cost are And they platform help dramatically at seeking they're today. scale. the drive want to

year-over-year logo based drive growth basis XX% These first in retention of on quarter XXX%. lead new helped of the use cases a net dollar to and

leading Kubernetes. machines the financial from a in is to Portal. deal This seven wins legacy software customer through Azure company include of modernizing signed the figure this the from notable virtual Some their quarter A following. process environment customer

them. incidents associated pain The time and with cost major manual in for was a troubleshooting and modern environment a triaging complex point

productivity customer on months logs efficiency, the across and save of deployment to full first Grail Now estimates teams. with will this due and three in greater Dynatrace, they $X.X higher with stack collaboration observability million

quarter tool the environment of number troubleshooting television in the existing of win and This largest monitoring the was was manual figure providers. their overwhelmed provided. to have alerts seven aspect satellite chosen Dynatrace. looking blind simplify cloud with every with customer were spots. no one get Another inefficiencies, and They on with now reduce visibility to as standardize well They their of as into

AppSec, product they was our And company business didn't integrate U.S. with applications security that their Dynatrace realized were either their the were Shell or the signed oil a reintroduced log into their add environment. to value a strength examples to visibility software DevSecOps. they and Dynatrace deployment. what of significant major and DevOps able better a offering vulnerabilities are into few now visibility have and into to gas provides. expansion With application These for of the have just After they unresolved platform vulnerability identified,

have Dynatrace past, choose market, enable As customers and in analytics drive approaches. to observability in customers the frequently deliver security us our interactions. flawless the our to to secure we we over said and and embedded differentiate unified platform are often strive what in The alternative automation digital and

after evaluating a Gartner the has to XX Performance furthest in ability Quadrant This the that was execute. positioning and of Application straight XXXX Observability, leader highest month, Last been for in time for named XXth Monitoring Dynatrace leader the vendors, completeness Dynatrace for Dynatrace Magic quadrant. vision and

the market. and anticipate all position, our Capabilities ability evolving reflect in one We Report. longevity in Critical constantly number execute APM in ranked criticality use change also Observability reports XXXX both for were this across Gartner six and to Dynatrace's believe We cases and

great our to we to made weeks two examples both over hypermodal key I'd and of of announcements focus the areas past the of which observability, core innovation. in next couple developer AI on like turn of are

AI intelligence. radically First, different artificial a evolving hypermodal start from to approach with let's

AI with Davis our environments. native for hundreds root have differentiator complex AI server single Dynatrace large long and engine years automate alerts has side the process a primary us. in cause is customers that of tie and used user Davis reduce been deterministically Dynatrace to for impact, problems, analysis to cloud scale observability

precision remediation. our predictive use such with security powerful by vulnerabilities based accelerating more identify forecast cases, great to machine leveraging as and anomalies behavior. And automating on AI investigations made of analysis causal historical our extended learning to future we've risk AI We've and patterns and

the Last year, AI answers leveraging real precise causal we first week, richer our massive solution driving planned with of we our extracting data capabilities our time Grail AI, predictive critical Last and at offering. context, automation to observability scale. even artificial in a AI third generative announced set, and data from and industry's intelligence lakehouse, extended architecture addition element deliver to the AI hypermodal

AI combination uses future models Hypermodal context massive actions sum analyzes precise based the answers deliver across dependencies recommend and much techniques Predictive three delivered AI automation. having but greater a the Causal parts. accurate to data Dynatrace, to on the AI past. with while than retaining each an different whole the by value fact-based a unique from of datasets is AI of

by automated And enriched customer's provided generative AI provides on of environment through tasks recommendations uniquely with context to prompts a how solve Dynatrace. specific

generative Davis recommendations Our tasks. Davis natural and issue named to optimization, AI create predictive actions is language remediation people complete CoPilot capability to allow with automatically and work will solve provide explore, CoPilot. and Dynatrace or for AI causal to use

around generative announced have strategies organizations AI. Many

solutions. on a far goes to natural generative interface intelligence AI approach, adding simply human Our relies that however, steer beyond language

and and to they or CoPilot causal and they active predictive specific avoid arise. Davis outages help designed to help resolve feed prompts before incidents AI happen Our to when will remediate degradations comprehensive be and

and Dynatrace breadth end and resulting as catalyst for who the leverage well will creation upsell significant a customer the of expansion, lead as cross-sell both We AI increasing hypermodal users platform. view based more of believe the customer in can to the from higher retention of We an workloads. increase dollar the as stickiness this platform net

We are about also ongoing the very developer in evolution of the of our excited platform area observability.

observability lifecycles software responsibility will in expand availability insights to decision role handling the of successful In turn, will and will operations, to for experience. in software have past, answers user the teams in more to application process. directly on shift believe As teams development we enable take continue that particular, to we continue that, these to development indicated security left the in greater and shift believe and lead And observability capabilities we right development into including of software. end productive

week, and expand observability to This code a area. In particular, to signed Tel platform we Aviv-based capabilities this Rookout, further definitive in agreement in acquire a investment our debugging developer first debugging efficient or an been pain applications. production for major has addressed without point production way troubleshoot a only have issues developers Traditionally, to tools developers. environments secure environments, leaving preproduction in

We address without Dynatrace even customers. platform, Rookout's in powerful in be highly differentiated live combination integrated more or the allows of the adding issues believe code, developers into technology technology, for our Rookout's seamlessly controls to code. restarting, privacy very with redeploying debugging will place

without better enabling disruption. create to code business We improve developers troubleshoot by and to debug standard deliver outcomes a expect quality for new how it engineers and

In on evolution, exciting announced of some relationship also of announcements the go-to-market the on with addition we our we've to ago, had innovation these product business. Microsoft. the platform announcements expansion side noteworthy Two weeks and

stepping our accelerate increasing enablement migration more are initiatives. horizon joint committed marketing spend sales Azure will of be through over our optimization cloud We even in growth multiyear anticipation Together, a platform. up it and to the and

integration quarter, collaboration Dynatrace Hat the into our how with turns example great and capabilities in Event-Driven This data Earlier Red answers announced we with Ansible. of that between boost remediation a of Red healing, such Dynatrace is Hat turned as to greater the use new This application into actions. efficiencies cases, integration and and enables drive to their of performance, the reliability security workloads. can then customers operational be automate loop DevSecOps closed and expansion

momentum strategic global or continue GSIs. a And to build we leading integrators, with system

last built their example, reference a one contribution strategic has and We momentum. few, largest have strong partnering XX and than us from than more to to continues and when of way into show have with doubled architectures. Dynatrace ESI compared more partners today Deloitte sales including pipeline By DXC, our GSIs year of

recently, on working a dollar deep in our have pleased transition. plans we the turn growth. CRO. as building is to his four and Jim, into strong spent I his over Dynatrace having scale I'd Zugelder June, weeks role multibillion Dan the ADP, moment background industry He to knowledge him be like organizations, phase our has and of Dan of brings instrumental at CRO extremely EMC, take which Dan sales Dell our In appointment Before career to call at board. we Dynatrace will new to as next most discuss are a announced in VMware. to

I'd to for CRO is Dynatrace in in sales Pace our October, class Dynatrace thank growth. positioned building involved early past entire will seven be dedication smooth ensuring from the and transition. he Dynatrace retiring years. Steve His team, a of long-term over behalf his as the a like organization and sustainable have On actively execution world for to Steve contributions

combination powerful as we market growth even the fiscal remain opportunity, macro a headwinds of in In platform and line confident year ongoing persist. top our closing, had profitability. to We leadership solid our a start highly and

are consistent and and continuing that from by Gartner the significant validation third humbled product customer of We our with committed leadership. delivery value our to party are innovations leadership, we of

to manage we Financially, future. we of those our business strength will believe a invest prudently that the continue in put us opportunities thoughtfully and for position strategic in

and purposeful of by deliver customers a which driven vision works are their in software We our our world perfectly. enabling to

the can of we which have software But We in end in and cloud-based great an context begun. made increasingly really engagement, only performance materially we progress. just have improve user software world

With let over call to me that, turn Jim. the

everyone. Rick, you, and morning, good Thank

As our we across start beating key our end all to of the a year, solid high metrics. guidance of mentioned, operating our off Rick to are fiscal

to dynamic macro our in the to application business proposition ongoing durability this of Our is our the environment the and executing testament product model. growing value criticality differentiation, market, continued and security our of provide a we customers, successfully the observability ability

more stated. in Please Now let's into quarter growth results unless year-over-year be and Starting rates with recurring that the currency, revenue. mentioned in dive otherwise detail. annual note will the first constant

is XXX As associated than with wind points. basis license the of a reminder, perpetual the down headwind less now

As last be no our will prepared adjusted in we growth remarks. quarter, to mentioned I referring longer ARR

will For trends website. presentation, in on file continue perpetual data and share our the our in comparison available purposes, to financial license quarterly the we impact of

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

originally currency $XX resulting sequentially, XX% constant tailwind currency lightest constant Foreign year-over-year $XX basis. in exchange ARR year-over-year which basis quarter. our a bookings million seasonally first 'XX, million we was a we renewals quarter year. and from $X a close shared QX tremendous as million call, fiscal million a was new And of in close a Net last expansions of to tailwind ARR to we had growth that in early our in incremental included on $XX on the expected the

trailing platform. The of with a total $XXX,XXX at in roughly logos to the basis. adding land a ARR per New logos consistent prior grew logo average on XX% first was XXX quarter, the Dynatrace XX-month new quarter the new

mid contributed XXX% first be expectation to continue based in gross fiscal dollar line a XXs the Our rates solid in our of retention mid-teens best-in-class to XXXX. in the retention with rate for net and quarter,

of With nearly our are clear their standardizing using it's security three observability stack customers full and customers that on or two-thirds more Dynatrace modules, platform. as

our innovation additional continues creating engine in upsell opportunities customer Our to cross-sell hone, and base.

Rick great the examples extend volume which will ultimately observability future. an As developer pace to to of a our believe in of and contribute are incremental and expansion hypermodal the reach we users AI range mentioned, to workloads, and accelerate building wider of new capabilities incremental

through making we're having accessible and deploy solutions of single customer as it model. allows trial strong the our simplified generally seeing made customers licensing platform leveraging available and we're addition, In broadly This any for model April. or a such solution, aspect subscription, easily a platform customers or DPS, commitment. DPS, to in logs AppSec, cross interest our With while to Dynatrace

expect will accelerate We DPS and periods. net drive in ARR enhanced future expansion

very revenue. for the revenue high of high the the exceeding end the $X exceeding to the first of quarter And was the up margins, have we range on XX% revenue $XXX million, to our and million. Total healthy Dynatrace $X up XX% respect by value end a first Moving quarter guidance million. $XXX of and efficiency continue and subscription reflecting for was profile, guidance platform. million, margin by to With

with the was first both XX%, levels. margin year last QX and consistent quarter for gross Non-GAAP

the XX%, due pace in Our non-GAAP of the staggered above range XXX anticipation quarter high for was guidance of or resulted end end $XX income the end non-GAAP exceeding points. by Rookout our upside Non-GAAP was of the per $XX guidance guidance our above mentioned. was roughly basis operating margin of revenue $XX I driven the million million share. income high the This in the in first a of of hiring $X.XX acquisition. top and by items the operating the range million, to a net This range quarter, $X.XX just

to Turning balance sheet. now the

sequential of of a million zero compared debt. This June we represents XX, increase and of balance XX. our million $XXX cash As to $XXX in had March cash

Our free healthy a million the cash $XXX was in flow very first quarter.

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

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

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

guidance. Now, let me turn to

Dynatrace. addressable application is As mentioned, and long-term we large confident in Rick are growth for are growing. becoming security even critical the and The deployments. more Observability market to and multi-cloud cloud successful opportunity

highly are offerings Our differentiated.

industry durable. are a both We is we the as have leader, financial that model balanced well and and positioned

scrutiny of our remain resiliency we And prudent current we landscape application in in the to will year, macro continue of cautious of the guidance a mindful while are we Near want market, And fiscal is we cycles and sales still seen to dynamic but do year. is believe persist. our to security that signs guidance. approach have in early tighter it ahead the start ourselves. had our of term, their Enterprises factor macro elongation observability And into solid it and We not to budgets to uncertainty. assumes spending. the get

continues our This guidance. net There things a and XXXX. to low respect digits fiscal to for to teens few logo the dollar are in single mid new rate in mind growth retention assume in guidance based with a the keep

to to prior million year roughly full reported tailwind million approximately revenue, foreign We exchange with approximately consistent expect $XX $XX as the our on and ARR be guidance.

second expected close the The and within to is Rookout our acquisition embedded guidance. quarter is in

a As insignificant of technology is there as tuck-in this acquisition, is part this revenue transaction.

code believe technology the powerful Dynatrace Rookout's pain However, a very combination unified major be seamlessly of debugging we into integrated the platform and will address developer point.

in our with with as guidance year full opener, for growth And let's currency. an start rates with that constant the

be maintaining are or net our this with half land is years, constant the Consistent growth. prior of to compared to XX% back to half. quarter, new last the XX% expected guidance year of in with expected to roughly $X.XX We XX% $X.XXX fiscal and XXXX in ARR backend approximately seasonality currency more loaded first of I billion what XX% to ARR the shared billion

Turning now to revenue.

for at the billion our guidance revenue growth, We XX% expect $X.X midpoint total XX% raising basis in in to revenue up first revenue we and XXX $XX points are be by the or quarter, Driven by overachievement the our subscription our from billion, year. million to guidance. prior $X.XXX between

a year, our million are of the at We subscription midpoint revenue $XX raising versus guidance services we services for higher subscription revenue. the slightly as mix expect by

growth, guidance revenue billion, up Total billion spend, and between increases discipline revenue basis the to range a given non-GAAP representing margin operating XX%. to we XX% be profit of by $X.XXX to our standpoint, basis From a is ongoing to prior raising XXX from are our of expected to subscription $X.XXX points XX.X% management XX points XX% guidance.

non-GAAP the at count midpoint of a to We and an guidance. $X.XX tax is non-GAAP of of per effective cash million to the to non-GAAP rate shares guidance consistent million EPS XXX prior with of $X.XX a representing share XX% on This XXX $X.XX based range. are EPS increase raising diluted share,

a cash tax in flow And XX% cash seasonality variability our well the of not skewed free QX and revenue. finally, lower million And loaded guidance and as approximately cash free timing than higher to we our $XXX flow guide bookings first fourth years. maintaining second flow are backend to linearity as of expected significantly payments, quarterly, flow third and be we quarters to in in we representing given more of expect even billings while due free $XXX year, million, quarters. margin be flow do of our in cash free prior cash this free cash And will and to our the

XX% Looking $XXX up at total or $XX $XX non-GAAP $XXX of we to growth. XX% million, From and between Subscription expect to standpoint, revenue profit income between a million and $X.XX share. be to million, QX, be XX% to revenue expected non-GAAP to revenue XX% year-over-year. million, $XXX million is XX% and operating and EPS per million between of $XXX is be XX% to $X.XX to expected or

In quarter performance. summary, our first fiscal we pleased are XXXX with

We record have proven a execution. track of consistent

have we that invest drive growth continuing to approach consistently balanced cost long-term optimize future in to will opportunities demonstrated, are a drive we As profitability expect to committed maintaining we to while value.

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

you. Thank

conducting We Instructions]. session. [Operator question-and-answer will now be a

question Pinjalim with first with Please question. Our proceed Bora JPMorgan. your is from

I questions the and their spend understand since on a customer want you able existing of the about because and you accelerating expansion Thank seen Is you're on congrats month-over-month? kind far people so taking the of anyway feedback learning ask DPS? DPS? about characteristics ARR period What from for I of to think on Are you on this map talked DPS. have quarter. to year. point you DPS to DPS there Great. leaning the on

here. understand that quarter just corroborate well. might indications that to said you think point I'm as that any I last trying

our late Rick. but just logos, still coming in already is new rollout. very of Hi, it. Very Pipeline April, pipeline Pinjalim. continues new already And DPS the in in, went It's We dollar good customers based momentum, DPS. in of vast on grow. for dozens to majority many early of GA closures

good very positive early, so I evolution So solid would on but far. performance say DPS

We've have rates add than And seen actually I'd you for shown DPS expansion that expansion certainly just on customers side. DPS better non-DPS mentioned customers that the something, Pinjalim, customers.

some Now is some largest of our admittedly, that customers. of

be So to bit a the great DPS sample contract that actually is is But going size skewed. optimistic drive expansion. vehicle more a to we're

net you, it. Jim, understand kind implied new you. follow Got guide. to for on ARR And of Thank ARR. trying one up I'm the QX

you ARR I seeing that. the early understand in of tick in that is growth. all QX into might kind of of that versus to you're But the -- I'm like of feel there bit QX? it pool-in kind if net kind trying next anything a does kind in kind conservatism, business given new any XX%. just And the down appreciate deals year from of a the Or the in of downtick the You quarter? makes QX kept imply new it's Was in CRO QX growth transition? any and net little more there

thought bit more Yes, year. first guide it's but -- XX% early that normal, well, in so very XX% the we're second seasonality solid year the year, the the I the a as very shared a would start than loaded had maintain still roughly would half. to year, in say that, We great half we little one, we question. a there's this in that the fairness and because backend for be in we'd that And the

get to we ourselves. sure wanted that of we make ahead So didn't

have maintained level you So seen, really you we a I pretty was that of strong, demand in with that, the solid. large sure later, the we and close to really bit especially close still later. that of month a is be certainly prudence. would timing saw might QX quarter sometimes guess, you But deals tell hard what One because which deals deals it a of maintained to was so have our is wanted is some could thing environment when that we a we caution make some really,

broader environment. sure we wanted we that, on to in make given So acknowledge what's the going

kind that loaded, prudence. renewal be makes which have year, business demand our of will sense, had good. shared of trends you look So of we the to of the more the a lot which activity majority tend in get maintained half a backend level where as expansions. back of happens certainly because the of And We is

And really kind guide. driving what's of broader so that's the

Got it. you Thank very much.

you. Thank

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

Hi, the disclosures guys. appreciate the guidance. for all I And Thanks for here. on me getting

this question I through wanted dollar at is erosion along in be happen the that levels? think I sense it the of up, going to now, to that we're in that a net my metric lines the I that though. to we'd more drive on the of view, construction back guess a net I in improvement, we're retention just looking if current just thought further in needs And improvement? year? what you. for your to what based retention climb that could then XXX get helps And that tack looking guidance for follow If Thank QX, view is but from there see your

very Yes, a so question. good it's

shared net had quarter would guide last in thought teens. the in based we be So we retention dollar our that mid

And expect still so that. I

So in with very in roughly QX quarter came strong for Very, logo thought. what new had we line QX.

that a think of pretty a good roughly logos in was $XXX,XXX. we I XX% you saw land size actually had new growth

the And to dollar and longer once. seen being cycles what's going large over level, given in at expect on expansions customers the new we've to a they've have whereas split give it do call the seen really strong think, expansions year. they periods, gone expectations. acceleration, shrink bit in we net at to funnel, -- cautious, buying mid-teens multiple an line used I one, cause expansions that And We our us front. XXX as with hover size to as XXX be through based may we're So the logo through be retention

Grail budgetary term. a we on So positive more maybe there's side, the in expansions sell tell you some the of the I'll and product perspective. other on environment to from have that less with business a lot near the opportunities has caused in logs

I budgetary we're think portfolio term, grow. think the near do I some with to that headwinds. So continues dealing

I market think continues the grow. to opportunity

see based So net we're dollar you're a to quite that optimistic going retention. reacceleration

we're over next think the being I cautious just year. here

my turn Great. over colleagues. to Jim. Thank you. you, it I'll Thank

you. Thank

Auty from with question. Our question Please is Sterling MoffettNathanson. next with proceed your

Hi, and Thanks. the you of now little the want at of this the matches changed what to of what's specific, lot if I have you quarter, quarter macro you're I color what guys. of through commentary degree end and versus that give experiencing? with on the bit continue in said in has calendar any question one you of using in been the experienced Yes. around can us just a the year. beginning just a been Because think terms

and So just the optimizations wondering bottom of question nearing And getting if anything's different? sense that? kind is cloud you. we ask one about all the your is then past specifically, what and Thank

change macro in comment. be the I say, seen, Sterling, very been it's haven't real I environment. frank The guess environment last the very consistent I'll start quarters. optimization We and -- macro cloud then maybe Rick can a the comment to more would really is, three on

consistent of it's Deal especially And sizes definitely approval I'd not say as of it's worse. shrinking But not through longer cycles. are better, go, expansions. kind they are taking deals means so go it consistent. is to kind for it's

healthy, environment either. not I'd the that It's they sales seeing say it's cycle, is the while not But as we're So worsening. go demand some through certainly lengthening. improving

an And, don't kind optimization it's think that you reflects have a want we uncertain in of until see cloud don't so is change I guide the get where that, know to environment. macro ahead we've in Rick, if to want we I prudent tried guide, that of will our trends. ensure And our a continue. that to on environment expectation that comment that And to ourselves

couple a optimizations, Right. cloud On points. of quick

the value Sterling, cloud the ways First, optimizations that in to as Dynatrace’s market. past, is add really we've our speak said in do in many view

continue see So to we that. believe and

many based approach ways just our on also cloud model solution to business optimizations. a impacted and to our less in We are We're pricing.

seem of to the we're sort the to that Not to be that impact view reduce optimizations that's end. progress making is So the Dynatrace toward overall are Overall, at we bottom, market. in perspective. sure cloud but beginning my

guys. Makes sense. you, Thank

Thank you.

your Our next Tindle with James. is proceed Please from Raymond question with Adam question.

needs with of observations morning. would AI did with bleeding would wanted curious, question general Good than the your Thanks. with software traditional Rick, hyperscalers. landscape from of does and the if I deployments? Okay. question those similar And on monitoring those change of start be the cases? rate offs to competitive a how The edge stack with be broadly. just maybe is the differ And use kind types how relationships deployment? different then your bake or observability just secondly, of attach or Wondering a customers

Thanks, Adam.

First general, to to hypermodal say even increased to for overall continues and evolution. on be and higher and show Observability of customers very, complexity that, continues and an generative in just workloads. strong data higher the to before our due the of volume demand, our would market I AI market need AI solution to of very getting

that's contribute commentary? customers overall AI relates comment management AI going notably be in AI efficient, their my The enabling How is way productive generative is the to more particular to on in the So that systems. and to does to relate market. more it that observability

future that also more be collectively we along the combination a course call future deterministic we predictive observability AI, elements within these of opening framework, to AI people the the catalyze mission AI, hypermodal of solution collectively, and catalyzing combination language using generative will productivity the believe demand AI to up with which substantial from to but with AI. of critical bringing capabilities over of demand. companies generative and predictive to users, causal And provide causal So value observability capabilities into end natural by think the more we the

about about wanted the but Microsoft, Got to talk Microsoft as a I follow bit much a this a Maybe it. ask Rick, hear little partnership. working lot competitors sounds of with That's strategic. we different up, And and helpful. more

So maybe this with And you associated about sounds It committed like if start Jim, into forging just what that talk could with went means some margin? there's this. you for costs could what partnership?

around margin perspective, financial us costs, of that Just are, curious what how it means this from anything can you they give the partnership? Thank a the variable aspect you.

to commit material point Adam, us commit you as and go-to-market Microsoft, extension with back them side. their our relationship to important Very on out, the of Sure.

evolution it, we of Jim? very obviously, it. just signed optimistic but the about So

them, on Yes. with Rick our can Azure we're from means imagine, we're perspective. expanding said, a And the them you dollar what financial is, side commitment with as I'd expanding say relationship which our as

telling it's interest customer signal business having is strong of Azure Dynatrace on you of what the So the platform.

And so an with increased pricing. much, with that and more we commitment, much get favorable

pricing is say, get we very pricing that And that we an with the consistent with AWS. get so

as we're where platform. in very are so pricing a is similar as Azure and well AWS customers on platform a And now an situation an your in situation

scale is this to to margins SaaS. say, be, on of to continue us So is I'd gross enable we more more business the something to going move and as

allow it very you this profile margin continue way should in so will XXs. expect gross it healthy very, is kind the of And us mid maintain to to the

Very helpful. Thank you.

you. Thank

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

Great, morning, everyone. Good thank you.

So I want to about ask partners. GSI your

pipeline specific that's a there partner with how and signed the or to up pipeline? maybe Is you think have nine doubled partners? that has the I nine compare said partners that year-over-year. other you does pipeline XX in -- more And have other their than one about anything unique the you partners now

grow has even appreciate notably continued us terms of in to Thanks, question. terms the in I of conversion. for GSI Andrew. pipeline, quite

solutions in coming types that quite of we're about our We initiatives, game. increasingly these So that over the hyper-cloud The But through tend we GSI transformation and primary be for feel cases migrations material many channel large are on other an the deals long very of playing is evolution. of do become nature. distribution has course this good that GSI believe time. segment the of to digital takeaway

little going close. to to longer a take So bit they're

which on great indicator, leading a that. provided leading is that of we is of why pipeline. of indicator our provided of we strategic The statistic that doubling an GSIs indication pipeline was just So one largest

observations ask you. been about a Thank the that any Officer. plans early to changes And implement? than then Chief new for I Okay. less go-to-market month, to the he Revenue maybe about to Dan's in but only wanted seat

or Yes. obviously, intensity would material our focus around planning say our What any At strategy. on we're partners. four in, changes weeks and are go-to-market in is notable we not I increasing that,

hyper-cloud the example, the GSIs. also For is

evident our in we grow in areas as to our be to going focus. partner in, those continue go-to-market we're going So to And particular to that's strategy lean evolve.

Okay. Thanks, Rick.

you. Thank

your Please Hedberg proceed with next question. with Capital is Markets. RBC from Our question Matt

It's in I the how taking areas to on that? Grail Great, up in like pipeline NRR, in to you guys. more Can you maybe logging thinking tend Rick, too a about on do Thanks for about give that, lot the the larger Grail. side. back And what show my does to a bit questions. these of that? think terms cross reaccelerate And wanted to color to go deals for look starting of partner like us context conversations. selling be how you're somewhat more

on out let logs call Grail Well, tried I quarter's start, Grail well. from to in which last to do separate of me as sort

is have. is SaaS expands, AWS on in parallel thing every a a that SaaS core virtually will. operating first processing a already AWS They is lakehouse, data focused [indiscernible] you technology. as and the as initially traces Grail one metrics, data logs, we the It used underlying So data on components the at and our using already is store if core Grail platform of massively would of core store that for technology are an as is customers all Grail technology. deployments of That

Now it's the happened background, didn’t customers a seamless to migration, do in have anything.

benefitting already and the from Grail are they So Grail deployment.

so requires logs customers Grail global Customers The on seeing is very that scale. Grail? good it logs evolution, doing strong on about per through at POCs. day, already what Logs there. evolution for is the example, a is of like question using terabytes material Now process the news next selling good retailer XX question

an we quarter-over-quarter, increase again we of on POCs see of Now POC evolution to in on about our saw logs active Grail. leading continue POCs the XX% for front so the as indicator a

that Grail Grail underlying between technology an core sale. the and incremental as logs as distinction So on clarifies an hopefully

to vector in the about the that in you about in give Dynatrace lot industry techs a Yes, and of going your of a on it talk we’ve for terms know Thank vector deck? I there’s don’t back got been AI, Can that. And perspective then that sort plays if platform. it. you role databases the of or talked search. vector

to is don’t for I spend to than sense from we’ve do believe want predictive approach that in too more that different to techniques to radically calendar Putting expect the linked together it that different enormous been in those our than and market history. those much an causal what for other has together we that a techniques, the very, for the AI of to other as end multiple decade believe it our the Yes, ongoing is GA been be with by the AI AI we platform and being a us very include on time we Dynatrace strong year brings our gives solution year the which or end hypermodal of the piece. view really AI throughout doing what AI generative say announcements differentiator in

Got it. Thanks, Rick.

Thank you.

is Our Please with with of next question. from question your Bank proceed America. Koji Ikeda

Yes. Hi, taking guys. question. the Thanks for

single low when nice the the rest definitely new very XX%, and the on wanted year. I a actually the growth new logo and harder logo think But growth for of question new at how harder. year, me. rest rest the for ask above quarter, logo new to at logo the of the to of digit In one about Just the look year. target get they of we compares for growth for that

thinking you So for front? growth here of cadence year and new the new giving remainder you that on seeing the is from the confidence the how are the about can in logo logo we pipeline what be

the in Koji, guide you half guide, I’ll next fourth look as And and a the visibility pipeline here the well. is at take single have good will right. had very low obviously, you tell maybe we’re a the new actually that. pipeline our the quarter. strong. that maintaining year. digits. we of good a at looks kind logo over Obviously, you’re pipeline quarter more had the mid question, this actually very We that quarter to of It’s our I to good We if quarter back quarter -- the new logo

other on expansion driving think we So the logo land we to I are pipeline shared logos, new our as are once think that incremental logos new right I the quite that right going focused drive with strong. calls is them. the we logos new on really And new

customers. signing new up new for up logos we’re not So the just signing sake of

size XX-month a which continue particular on see solid. trailing really you’ll which around is is average why we We’re that basis land average to $XXX,XXX pretty

land. quality on focusing of the we’re So

quarter I enough to is digits to to But going think in pretty where don’t good the mid Our logos. grow new visibility every I ability visibility grow have we’re think our single XX%. pretty in. have to confident to we you’re I low feel going that

question. Got taking it. Thanks, Jim. for Thanks the

you. Thank

question. next Rangan from Goldman your Sachs. Kash Our with question Please is proceed with

considering macro Hello. Thank Good your indicators I question have good for a you you [ph]. Rick, environment. look so quite much. morning. the on GSI forward

GSI expanding this with partnership got you pipeline, You to the is Xx Azure. that this got

the that share ramping go-to-market, consider have You longer, successful. like up end you also [indiscernible] would not sales does not a year we recession gain next very taking actually ones but up have or it’s discussed do look the why why your It capacity? being

looking counter way and extra to [ph] company deploying in still by the a sales the you do least regard, look ante capacity of coming position So the better conversion to sales good. But company, CEO when gain multiplied that the this proposition like does is value competition it one know indicators the in by look could veteran really in growth how slow capacity, growth because at up versus you’re you we well. achieve all could forward-looking this as look the product the increase as end are by with year to of share industry, you [indiscernible]

you. also, for maybe one what’s on front? So Jim, thoughts there that your And out

the would be like? ex ARR once out growth net you in what renewals new again. much If so QX, look the early you Thank

can. both. wants he if take comment, I’ll Then to So Rick

So we on good about side, sales feel the actually pretty capacity. sales capacity

higher been the on shared years. of our and it’s XX-year plus last I couple year call think now that it’s two reps the than over I last the that reps are same is

more productivity new drive year plus reps than you imagine, two reps. So as can

at I capacity. we’re so And sales that constraining believe don’t all

make to going adding as needed. sales align We’re sure capacity we

world. So we’re constrained think don’t I in a

to then sales more adding incremental will see that we with demand, going demand align We’re if environment the we capacity. modulate

all. we’re So I don’t at think constrained

an as to see opportunity of and that for we’ll better we kind change. get leverage that there’s augment the model out demand us existing we think signals have of I the

you’re pretty I expansions of opening about first quarter. kind renewals good in we first the to there in $XX million remarks about as -- feel So had renewals on in had We on early I’d that. say of side, I quarter X first the quarter. would nothing the going X quarter. fourth company’s right. quarter, in notable first it’s the were renewal the million quarter said was of of my the -- early scheduled million here, have that always you’re the but And seasonally kind say lightest

so year, the our start good And we to feel pretty about.

pretty confident reasons the be outlined. where now. I of little that to going backend loaded we As I I a we’re for more sit in said, bit right feel But kind

expense Jim, have the the into change QX? did effect business at any CRO QX in the pulling on of not [ph] leadership

No.

you Thank so much. good Okay, to that. clarify

you. Thank

with Keith next Capital your BMO from proceed Markets. with question. is question Our Bachman Please

analytics. Hi. and logs the and Thank about for ask wanted platform on targets Good Grail you. I analytics logs to security. enables I both understand morning. was that

new Grail talked the still us and of in both. those for where think some gave do where on as to number sort maybe you’re million number log adopt to then numbers the are Could to you Is 'XX it kind on in us XXX specifics have platform? relates Thank customers. DPS goals? is you. you update that to of on be analytic, of you EPS you need of contract. last understanding terms and customers contract and give of My of thereby the or You’ve case ARR in some ideas for direction about relative that And quarter you

Rick both take additionally, maybe I’ll So And those. can. he to of if comment wants

which good pretty being said Grail that of we both Grail three is Obviously, couple for is $XXX logs be versus a the numbers applications on little feel a the AppSec going years on security deliver talked about, a over track both and we we’re over mentioned, years. million to we So to about of areas that you sooner, each. bit

the So as the in good about can we points, pretty to longer. AppSec on Grail. feel Rick’s about interest because earlier we’re that. been say But AppSec along very imagine, market out you further we has the feel in I’d good

Grail And the in so logs uptick an the on I would expect course in of over see particular to year. next

kind that. still We’re of days early with

just I both feel Grail. confident DPS, on logs targets. in to buy And $XXX want million relative again, that So pretty make you we’re to sure clear can

contract have have don’t to logs to on DPS a buy You Grail.

to But on you can a logs logs vehicle. from the model. You you have DPS can a Grail platform benefit skew-based buy logs on SaaS of Obviously, be to Grail on Grail. through outside buy on

conversion are comments where of on in But any --? your the you Okay.

we Rick we’re where expect general the Like at to April. is think Rick it availability way as said, it. end of since DPS I only characterize had available, Yes, think I -- we’ve the

you can six cycles buying months. As to are nine imagine,

deals And vehicle. for So been didn’t the the as have that in were while. deals have a a deals you’ve necessarily most pipeline have DPS closing deals that of been those been

a see the back to to of logos expect an huge uptick see in one year. uptick wouldn’t would and DPS I you new DPS. half so And expect forward the more in going with

in an renew, and you’ll think contracts I But the that new to so of uptick and more as I would 'XX. of customers And more start see dozen say, DPS year going you’re going I fiscal of think in later we had more customers. I’d the Rick think expand several into see with quarter to with them as expect said, I incremental first DPS. And

Many great. thanks. Okay,

Thank you.

Suppiger JMP proceed question is next with Please from Our your Erik question. with Securities.

the if comments any Relic, if changes for of Relic? have front? landscape, from thanks I'm anything what change. about about New can In the of of you likes going any the New some you if going with competitive them private, curious to seen fitting competitive that you speak Yes, in. me on I'm you changes also, have curious on And see the light

in competitive competitor comment we fair both environment. the -- it on of and continue kind could the where pricing handful on Relic, the or And tools are of landscape. we've didn't be in in customers have have competitive whether in the see. kind place, change that competitor. you'll and script, we continues complex. that we to No And be change additional of do job And the get that seen continued DIY landscape, AppD takeouts, in outside competitive really vendors a there to DIY that large So particular. tools. a of New We're real seeing probably biggest no environments have real they of

And so the environment hasn't changed.

of to New reach fare point continue start And when the thing is relative competitive max that we only a tended would where to think We I well. well to to very they've say really focus were I competitive where on see mentioned takeouts DIY that of kind out. and we tools customers just Relic, Relic actually a them call New we actually, have. several competitive And we And different market segment we than do market, in our last takeouts. our in the compete fare well.

was of when obviously a well. them, where through say you're fare there take I disruption. we we that going private, would But bit see a So,

to where Or you cloud see in you they're are do when segment, are to -- customers say you you comment a referring first Any different smaller referring them? or customers?

the SMB number they're only not the they're customers space. customer targeting have, look general, of No. global you of also More XX,XXX. size targeting they just customers, at the We're targeting that the enterprise but that if

where So we and they've maybe customers' alternatives. that that them said well. wins. In cases haven't several we've competitor multiple scaled And environments key in where many I benefited tools where with the that tools as complicated see even alternative, have from have And we'll just they're space. playing is at found that really looked and gotten

observability of provided scaled with simply calls volume of the of existing And complexity have their we've examples that size, or competitors environments. in that takeouts not prior of

Thank good. Very very you much.

Thank you.

remain extremely All the in solutions. really opportunity bullish all more more needs the and observability software ongoing our support. of Fundamentally, that and your lies the they We your their We That very for environment end about observability sophisticated right. us that Well, appreciate to brings thank automating questions. much you do to more ahead. need, formal engaged the become needs call.

for Gartner, are highest by and party terms to that of the completeness vision, as in ability of that us from in and that We of third execute, believe fueled with proud furthest such being the very events with out provides we validations forward weeks very as look IR and over to look even all upcoming at good much you ahead. catalyst Dynatrace we coming a We connecting further we you day. a wish

conference. today's concludes This

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