Dynatrace (DT) 2 Nov 232024 Q2 Earnings call transcript

Greetings. Welcome to Dynatrace's Fiscal Second Quarter 2024 Earnings. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Noelle Faris, Vice President of Investor Relations. Ms. Faris, you may begin.

you Call. Dynatrace's thank XXXX Quarter and Conference Earnings morning, for Second joining Fiscal Good

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

contained report forward-looking note Before growth and are started, economic forward-looking uncertainties Form of future as SEC today. The information, expectations views conditions. on no differ we on Dynatrace's non-GAAP, are revenue, rates that amounts a due XXXX. currency this statements obligation may and such statements November assume the new filings, of events results discussed most from in discuss today's earnings and a we in we guidance as company's today or please call represent We per constant statements recent that including basis. risks comments share result filed reflecting on circumstances. materially the get Actual to regarding to statements Unless diluted number quarterly include XX-Q growth these our update our a noted, earlier X, otherwise

will which the of Officer, financial IR press today's McConnell. to and reconciliations website. And presentation, that, Rick Executive to see turn today's posted both GAAP measures non-GAAP section refer release discuss non-GAAP and We call, between earnings measures, Chief me let the supplemental on financial please other results in our are also to over with our call

increased revenue. a a free to income $XXX call. We for cash grew constant flow of revenue Noelle, in basis, million an Thank taxes. our And Thanks, a trailing us ARR or impact constant all including for XX-month operating quarter year-over-year today's on across metrics. X-point XX% in XX% currency. for had everyone. of XX% exceeding and good high guidance morning, outstanding XX% joining year-over-year margin the Non-GAAP Subscription delivered end we cash you increased currency.

execute They XXXX also top combination the meantime, ability our well resulting and Jim about our fiscal resilience and provides focus demonstrate perspective security, and customers. of a to the a environment. growth increasing profitability, observability the in will of moment. In guidance increased our and business a continue of platform balanced results market, to share line significant like details investment value as in performance of ongoing highlight strength QX our These macro to review innovation. our criticality and model, our areas and application as the to strategic more observability I'd the of on my go-to-market consistently challenging in

the with just ideas, provide They with prospects of makers terms to with add are Innovate conversations highlighting their wrapped start over series. critical in the businesses. A These Dynatrace our decision latest in X,XXX me our long-term person relationships. Sydney welcomed events Let me and exchanging to innovations one-on-one what Barcelona. the themes also São up hearing customers. We've about across tremendous key value Paulo, these have events our stood building out from We value events. annual and customers, of opportunity that I'm few and partners to in topics

element of that critical, business markets. a on the achieve outcome. CIO me their user Dynatrace a Pacific of transformation are security The their to further, their win Asia bank to digital only they that expect and also to application and a not observability this experience. strategy respective customers' is told to differentiate in journeys, And First, software key but major how quality part of core they transformation and business

metrics, platform and Dynatrace consolidation that or solution software move AI key to India. previously value otherwise a on are and Canadian don't." And and data availability prediction third, rather into their siloed DIY, observability to extra competitive their fix Dynatrace liability tools, effort a in CIO and they What alternative He application broad but across clear with Second, that through our their monitoring performance tell because financial organizational to and technology interface even reproduce software to have types made me based organizations it multiple is with the maintenance. I department even user couldn't all to a Observability priorities. improved that our had that They open tools. very the the seeking when and focus than helps rather from vendor especially a he Dynatrace This sleep source is outages. The teams company better proactively, customer user from at than improve issues, performance. magic, customers Global eliminate break centralizing. continue that efficiencies "We providing the next that in to radically told that resolving proactively dashboard a lot standardization They of Dynatrace outgrow resolve are from been enables deployment innovation unified to instead leverage. a traces, And in the XX large tools, enable data of of was platform. perhaps come productivity. and so in me fully-unified software large an performance, enterprises, major decisions on user a told in bank increasingly doing, level identifying gain more provides me, a to automation much issues our he complex of customer Dynatrace, really, to Dynatrace comes will increase analytics to more and reduce et issues cost you customers' CTO of believes capabilities our and and of insights level, growth, wants impacting result results. a and enterprises that before come large articulation common dynamic, leverage of logs, they data, business store, costly want cetera, requires context a leverages

to prioritizing automation the customers spend, principal second our of fiscal our the with differentiators, AI enabling these and strategies, from merging As investments accelerated year unified result dynamics of future and objectives investment to to me are value promote X a observability of market growth. drive technology areas them X and are strategic platform, half Dynatrace. This business leads and top these for line increased and go-to-market maximum of the leadership

we the continue directly global of that and world's most evolve First, partner hyperscalers. To especially with aligns our focus, GSIs. integrators preeminent our to base with and system expand start, customer the

have Given optional their Dynatrace moved and GSI projects, for the of observability selected And deployments, as has platform broadly our such of to transformation cloud broad-based observability complexity that's from partners digital choice mandatory. initiatives.

resulted focus and agreement X-figure which Kyndryl and largest given addition infrastructure IT experience leverages enhance In as relationships wins. and numerous yesterday, DXC, and the will global modernization services has announced together joint in Kyndryl's AIOps, our X- This our already to application offerings. on Deloitte a our with Dynatrace And cloud strategic shared existing world's provider. alliance,

accelerate new Paulo, expanded can transformation value respect partnership to We observability digital are Accenture. together of with Together, enable platform with to modernization we delivery we in and Sydney past our regions end-to-end journeys evolution modernization This the hyperscalers, announce engagement additionally cloud footprint brings professional the and our São with with and experience. and extended quarter, pleased cloud Dynatrace Zurich. their Accenture's customers this application security. With global of to the services capabilities

targeted calendar or our with go-to-market of Microsoft, end in in to of to is announced early of year, of the well term by this growth second addition availability accelerate investments pipeline. half an go-to-market the year. A marketing while currently can the as we on as second not plan deployments Grail, our meaningfully top expansion various near fiscal incremental the sales resources planned expanded constrained, area Additionally, drive contribute Azure, capacity plan beyond. And are we and of partnership capacity fiscal natively of we third, we add to believe to funnel XXXX

gains the conditions our to in spend to we end the enable current prudently plan expect incremental we to macro the While future. through levels persist year, increase fiscal of share

unanticipated make unable our Importantly, issue in for were customer Within source benefited win. A a granted, wins take of entire that of as decade. with of we than values. that leading that products within Davis for with and Dynatrace and the AI Dynatrace quarter, This existing to they analytics stream deliver. maturity each of our enhance over A I their illustrative Last relationship in agreement, originally potential Dynatrace like after dollars the air envelope relentless approach one value capabilities overages the shared plans of unified struggling day support the go-to-market of investments our rapidly expanded But drives past AI, million multiyear few technology that Jim they potential especially in that identified will quarter major this customers platform. Beginning months. I our customer instrumenting than our X-figure a our efforts their logs year they financial our struggling to the we other these a X earning place, organization evident in to we in resolve sprawl, platform core realizing depictions more we don't, the to Platform customer e-commerce some a had of of benefiting have to could leading AI AI government revenue. Davis DPS new are by a guidance large that competitive vendors, more the a day add critical X-figure third spiraling continuous a these them detail. I'd our occur, Dynatrace their signed is realized identified happy evolving resulting generative existing $X save named add we on like and new evolution. market-leading to a moment, cart, to love of architecture, agency landscape. I'd X during Dynatrace for our flexibility cover with The for our they our to perspectives identify automated and they could that realize on availability issues outages. And or from a online highly committed are a of them to focus of of with general track to to agency company apps, services share a development calendar of Subscription early to one I'm early resolve plan deal. a predictability root in POC, in problems previews before are was element key turn CoPilot. cost one lost the to Dynatrace next the Once share innovation Davis calendar the been the XXXX. problem capabilities. these our end of due deliver and capability, the customers to was allowing more shopping with millions years. additional chose tool cause before company from from costly

have Of course, AI. many organizations announced around generative strategies

human intelligence queries. on far steer Our relies excelling techniques, goes will causal AI, generative predictive, in beyond gen specific Davis approach, interface however, combine AI capabilities. to and one a natural adding language each simply that AI with Dynatrace's

these infrastructure incredible AI deliver user will arise. We and and and comprehensive convergence they IT performance degradations code active they For way CoPilot example, of experience. dashboards so all their turn they more This hypermodal, Davis feed incidents to to and predictive outages end and remediate prompts of workflows. techniques to X in automation CoPilot. their the ecosystem, causal think as customers or precise visibility Hypermodal and Davis create will from to and even Davis resolve power avoid customers suggested AI will help the enables queries AI advance enables individually in apps together. before happen, in when for that

Second, to October date, our several innovations including anniversary the in marked of significant platform Grail. first most the of

how As lake is environment provides near that is SaaS massively data a mentioned as which the comprises working. house, or is and IT parallel our real-time data into index-less an customer available past, analytics insights majority store of Grail in I've deployments. a offering, the Grail processing,

on mentioned, that Grail. our this end of Grail. is monetizable Log begin leverages are I Grail with of Azure use power our rollout Essentially, SaaS customers all deployment of running management the the case quarter. by now slated to as AWS a And is

instant alerts manual correlations logs As and we were had of deployment are causing and issues to to across and by cost. A to car multiple powered enterprise tools, help their on impact. remediation Grail revenue company and with metrics to major leveraging addition between reducing nearly learning custom quarter, Grail the business identify XXX data They eliminate customers proactively their existing performance silos, in to gain to the rental that XXX logs U.S. auto events second responses API business. grow resolve visibility delayed using into added

helping reporting Third, requirements we with of security. security elevate we innovate capabilities continue disclosures, awareness security our SEC coverage. In include application Public stolen to of for the to security breaches incident security in for analytics. headlines are August, new cybersecurity credentials, the and announced expansion along additional

Security expansion integrates impact a investigate existing with prioritize to can the time production. teams, detect, with which take larger government the them security Automation We are will about Dynatrace code Analytics protection closed vulnerabilities. of which and observability. can debug live believe for the their analytics, Engine, of security platform and developing finally, expanded value of the ongoing a of to assess area Rookout, deal. and integrating for and evolution seamlessly less workflows their streamline excited extend run continue their customers powerful us, to include will Texas the technology teams the in And than trigger product organizations. to the XX% acquisition we accounted are for enables development role We Now observability debugging we agency Rookout's life of to that development development on that into developer to deployment create our also in response. A cycle. We more very be highly enabling process. a observability platform believe developers tools And decision recently differentiated in technology

people, highlight the success The ethics. the to turn Jim, X governance to and We and report the I as to strategy I'd which our paramount Report, responsibility is Dynatrace's our sustaining and on details over advancing inaugural our pillars: Global Impact community, ESG like available and related company. is a to believe Before Dynatrace progress global ESG environment, our culture call website.

provided diversity, of we report, As on for baseline disclosed expanded time, our of emissions data greenhouse and and data the gas first inclusion an the scope part equity, belonging.

ESG on extremely half believe FY with develop stakeholders engage with continue and and and our deliver we We we positioned We our 'XX. expand results will map. In of pleased for to very application is and road in large our our strong programs I'm progress closing, implement back drive that ESG observability initiatives, growing. execution and well market QX to are the security as

AI strategically and to market to we future. Jim, unified Our you. manage prudently in in our the to our leadership place in automation our and strength we position in And and leadership competition. us that to of will those plan believe position extend continue over invest business us platform, relative to enable differentiate us a the areas

everyone. morning, Dynatrace the Thank consistent another you, Rick, was by quarter good of and QX execution team.

a across dynamic These all meeting the customers We high-value guidance end the combination business of and platform, expansion top line inherently delivered us of balance profitability the our our by an the strong results on high new allowing logo in continued deliver a existing strong of and of and profitability. environment, of metrics. Dynatrace results to were growth lands efficient ongoing driven model,

team. to the environment Our is incredible value ability in tight our to navigate budgetary to our successfully testament our a resilience proposition, commitment a success of and customer

will X-figure the several competitive base. We added recurring constant expansions representing basis the $X.XX be $XX bookings currency, what logos of to total of unless exceeded ARR, the increase in was million ARR $XXX XX% rates ongoing Dynatrace that latest quarter. our with in dive the in a by stated. Starting wins quarters growth. let's annual one And ago roughly year were Now quarter more Net notable currency QX, normally the consistent new outperformance million results revenue, driven the and on in This new the into our for an and year-over-year ARR year. customer with platform and expectations or is XXX note seasonally was mentioned otherwise quarter second growth of quarter please detail. second year-over-year the constant billion, in year-over-year, in

very was of have logo past, land the logo average basis, year-over-year. per we up new are and to As that a XX-month $XXX,XXX greater we lands have in on size to on continues quality the a expand. focused The propensity shared ARR roughly trailing XX% new grow

commercial their DIY existing unified As continue automation and to the are breadth tooling outgrowing we coming of Rick depth, and platform. enterprise customers to observability solutions Dynatrace or our that outlined, for attract

with rate a to retention our retention for our second a priority XXX% move of pace, industry XX% in net adoption from our line remains rate with and quarter, in remained or in at strong expectations. the over as we to albeit us, remains see customers expand uncertain quarter, moderate them contributed an in of Our gross economy. $XXX,XXX. they a an mid-XXs ARR customers and cautiously up platform using Observability ago X more continue of modules, Customer our with of and the with XX% best-in-class in year customers, more average in the

logs interest security. newer application we mentioned, including offerings, Grail customer product growing in Rick As and on see

Our support expected our latest meaningful fiscal introductions our in opportunities ARR installed expansion contribution innovation track will base, more record with of groundbreaking 'XX. product from in

that Duke new also the traction DPS drive our prefer area platform, another opportunities. seeing the customers who an We're DPS government agency and future like and and expansion the Energy licensing of is model flexibility pricing We new predictability believe both customers Australian existing will model. with during

the deals future. We of believe total rate XXX this early across generally DPS our year, to DPS customers have in closed we over accretion meaningful stages, available the of installed since retention is while net rollout still April most to the has in and it potential over drive base DPS the bringing XXX. in globally became And

up up and Moving X guidance QX $X the margins, high XX%, gross Total revenue XX% linearity up was prior subscription year. respect from X million, end quarter last was XX% driven non-GAAP was margin points quarter. With the second Both the the up for quarter on of year-over-year. by to to quarter and revenue. bookings strong in the second the by point from million, for our of second year-over-year, revenue for exceeded million, quarter $XXX $XXX

is by quarter for above of income the the the million second was operating this $XX driven revenue was our roughly quarter. range, million, the non-GAAP upside half of in $XXX high guidance the end overachievement Our

top was was margin from X margin end half gross of end prudent driven ongoing guidance of hiring the was highlighted. Rookout just the per our by by share. efforts, non-GAAP cloud a The points. Non-GAAP $X.XX range, the improvement acquisition the driven guidance income $X.XX the above of basis or resulted XX%, other diluted operating half XXX This in of range $XX closing. I high This million items and the hosting efficiency timing net by exceeding

free Our in quarter. the $XX was cash flow second million

past, view revenue. free is seasonality As quarter-to-quarter. On over flow due a we've of $XXX basis, million or mentioned the and billings XX-month cash it best believe to XX-month the trailing we period in to variability a trailing XX% free flow cash was in

As basis trailing XX% impact was taxes. and XX-month flow of includes reminder, points XX% a on cash a up year-over-year. to of free revenue cash this XXX related Pretax basis

ended we of quarter Finally, sheet $XXX cash second a and X with the balance robust debt. million including

guidance. to Moving on

our health visibility guidance raising of FX all year strength across back guidance metrics, quarter in headwinds from includes the performance, line dollar. our are incremental This and reflect half fiscal of into full of the pipeline We top our year. and increase our second the strengthening to U.S. profitability the a

into guidance. keep respect I with in to the items our Before few jump to a are there details, mind

and continue XXX% half the guidance net the of of new First, for a the of growth growth to net retention blocks XXXX. new single rate building rate. and to retention digits business logo low assumes fiscal XXX% second This the for in logos be

net X/X new new new the the X/X expansion of approach deal believe logos will will contribution new Second, XX%, roughly growing new from mix sizes, from to XX% new But from from mix in historical ARR, assumes, past. our be net pipeline are with This differs roughly new ARR logos weighted health and ARR we more expansion. of ARR the logos of activity. from than guidance mix net and given robust that growth logo our

our million with creates foreign roughly start the million to $X updated currency. of full full Incrementally, constant the exchange a year. And Third, for with growth the guidance in is to our call with year to that, our $XX U.S. relative the headwind the strengthening dollar last and let's since revenue prior rates guidance. year, ARR, approximately for full headwind

are points of We $X.XX our XXX to guidance raising billion growth prior basis billion raise on increase billion, roughly $X ARR basis. to to a XX% $XX approximately year-over-year, from by represents an up guidance constant midpoint representing million our guidance. This $X.XX currency XX%

second in be 'XX. to prior ARR fiscal now of Given the in net XX% years, back similar new slightly to seasonality XX% the new on of higher the of currency last expect to QX ARR QX net to half be the we basis. quarter, we year, strength half constant first expect the Also than in with ARR a similar roughly and

$X XXX our XX% raise raising from million guidance. and basis year-over-year, $XX are increase guidance $X.XXX to an midpoint billion roughly points constant by billion, basis. revenue to representing approximately represents We million at This guidance the of currency $X.XXX on our prior up XX% a growth

raising are prior XX% increase subscription $X.XXX million a roughly growth million our our billion from an to basis. on We guidance currency representing midpoint This $X.XXX revenue approximately up constant billion, to guidance XXX $XX of represents points at basis $X raise year-over-year, guidance. to by the XX%

evident to our of strength line. our our performance. Turning financial is and in model The margin ongoing resilience bottom

in will a drive future growth optimizes we believe We to that opportunities investing maintaining profitability, are while drive also cost committed value. to that approach balanced long-term

in the We step are raising sales basis heavily plan non-GAAP GSI XX%, invest With we by still mentioned, points margin capacity go-to-market this up year several will activities. $XX innovation. And partnerships, and to we Rick at in of million R&D midpoint. mind, to to our guidance investments in an full areas. continue as generation operating increase demand XXX

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

to As significantly expect a flow free fourth free and cash higher tax cash the in our quarters reminder, third billings, the timing as cash to first and lower be in due second flow seasonality variability while we payments, quarterly as we do well and and in not quarters. our guide of

at $XXX XX.X% Looking is or XX% is to good to non-GAAP or second million, total million QX, between expect be to expected and we standpoint, our million, revenue $XXX of and million, to $XX pleased $XX to XX% non-GAAP growth. visibility $XXX into revenue summary, a fiscal performance, million and we up $XXX share. In are profit income per be be $X.XX XX% Subscription EPS XX% $X.XX and and revenue, to remainder 'XX million expected between the with a year. very quarter we to pipeline between have be XX% the year-over-year. is and From operating expected strong of fiscal diluted to

the environment, prudent approach will balanced of take continue a the ongoing with line opportunities our macro profitability. And deliver given our We we long-term growth to and remain outlook, for our questions. Operator? open ability to and growth about but to the volatility that, we optimistic

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

stepping advantage, hiring talked up in double what outlining call. good the the macros struck the team. there. What all second bullish on guys quarter, to in and on lot give product sounded there, Great Great. sort to given guess the Thanks, a a job to you forward click to mentioned With unchanged look going me you out you in your certainly what comments, business we're gave maybe you to reinvest confidence the That's now. half. about us, just I of

What good visibility where we're we very pipeline the in last is were Thanks, which quarter. second Appreciate half visibility increasing is obviously the second half, to relative into the comment. Matt. seeing for

improve. number to place point point ramp is in to macro obviously, X them putting really get in takes that's some some people, stage, time at is, And it that number sales value. So to going one. And

to this at stage start prepared to 'XX. wanted for FY we be So

guys know tied on That But quick one. saw others. to curious, as sounds good. the Maybe as what just other of unchanged necessarily you you curious much sort In macros, consumption one aren't optimization kind of an But kind hyperscalers. with customer the your I on side. the what saying cloud base? optimization been curious it's customers your are within ongoing of trends debate

is Our model. news cycle The subscription opposed optimization that directly a continues. the as view consumption-oriented business to with good is,

an opportunity of cycles. really to see that the impact the others have in prevent degree same We optimization

I'd observability point by So deployments two, ways, to maintained the really perspective is couple of that's in an say see that's our cycles from good. optimization antidote more one. Point cloud that our we as calls, many last has, we over that cloud actually making efficient.

continue we strong So very last to logo were lands, in which see new our that quarter.

from Our Pinjalim Bora the next question with is of JPMorgan. line

anything any to quick process double terms of I in out in to -- the QX this wanted helped about just studies. on performance strength federal that. that there call Was pushouts talk budget from ARR quarter. Maybe what drove

would that anything So help?

Pinjalim. take you, that. I'll Thank

the a a in growing X we high-quality really been really logo strong to So we front, or in probably quarters see, X had really, has new see lands. on continue with Dynatrace continue row, QX. we we to actually, interest where this And now

has And continued. that trend so

in Our logos mentioned strong. remarks as I pipeline, also the for half prepared back in quite new our is

Customers had we cases, that Dynatrace is So outgrowing couldn't outgrowing really scale. are the testament a just strong a proposition solutions I think DIY for quarter value either new in several to solutions or platform. the lands, competitive which second of logo

I before, expansions. macro customers moderated just expansions pace seeing seeing we're And given was Pinjalim. environment. are And at so healthy still as as driver, the largely We're that more the a mentioned more cautious

any logs to closures. of seeing Grail conversations, been for has Grail, touch for for acquisitions on in analytics been second if of kind impact pipeline on the recent the on pricing logs the on analytics you're least On in an customers. in maybe and industry starting industry kind around Rick. log general for if the deal One Grail. And from customer cost issue the on the the Understood. not, feedback What from at half log help in has in

Pinjalim.

cover got the here, we I'll on one that Grail order over as logs perhaps last pipeline customers, this XXX hundred POCs pipeline, about POC has the of quarter, so on on where we we we've Last few and Grail. And in logs reported On were paying sit year. quarter, XX% about or by first. the increased a

Grail seeing, we're say, of logs on penetration good overall. I would So very

the area area to we're is say, On other logs or still discount ingest do we in more heavily of our market piece, on pricing vendors. that price storage analytics most provide that the to while the from average, a going in expectation pricing and current

a solution a in be pricing should and good we cost endpoint well. the So as from market

next Our the Baird. Will from line Power question of with is

you. Okay. Great. with Rick, starting maybe

of GA customers kind there, look are looking what interested in demand thinking meetings in comments how that year? for to then front? kind that some of you're expect on there? And hearing on, hear of to your hypermodal particular, respect Just around next demand of you're capabilities the love what go like monetization are indicators the working customer and to as some on perspective Just your with to your you what AI about innovate

decade. today Will. deliver customers are that notion and highly they Well, deterministic techniques. understand and story, short And causal the for as form predictive our we AI AI that the over we a have is fully these appreciate

in generative So only to but an intelligent than whole sum the the incremental and the they the causal data a of Davis so language way do CoPilot, is provide, greater interface in answers AI, and already. The precise iterative automation make parts. not natural to from provide predictive very to through IPs that essentially

to future. São So around Dynatrace Barcelona, sessions we as a AI Paulo, leverage for talk feedback X we that lot how look techniques from there the got Sydney, did is the from the to all I innovate of

thoughts, respect piece equation? of folds kind of into that just that, Any Okay. kind the of monetization the how with to

the finalized on we monetization report haven't Davis but We to do at CoPilot to over out, so yet quarter so piece, we're the that But Will, particular. generative AI point. will coming this and sort in nothing going monetize to

in just if one, sneak for I And Okay. maybe could Jim.

could it fewer love new weaker Is to know retention try expected, get there a that. expansions? any driving rates. else I Just although thinking additional color lighter usage, color net as about a of would anything you just there? product it Is other know Is renewals? kind what's add, down I little to bit, to

Well, our I I'll retention rate mean the we've remains strong. really with, renewals mean, about that mid-XXs. our talked I gross start remain in

very sticky. product is the So very,

a continue every as remain of there not and but I rate. It's prepared cautious the customers customers And in certainly not kind that the we it's same. are to customer expansions. doing that is observability, continue -- remarks, So outlined, prioritize would say retention they're I to

until I then better I'm to workloads line workloads of into moderate seeing of new are customers there kind have adding I'm going hey, where Some are in growth own maybe have observability and prioritizing, business. And customers my sight workloads. newer that new cases are

by would see make it new So by decisions, varies. better and for get observability, to continue industry. logos, I optimistic I to that their are we're expansions. we observability quite we going also to customers starting I that's suggests customer, I varies But said probably But they I until seeing that and in customers prioritize that visibility not net it a what architecture into It with will to of think logos, that positive environments, just say, kind growing is think, particular, think remain are as varies say continue Dynatrace. new pipeline kind own consistent. I of earlier,

in I think we're well space. positioned that

Nice job you. Thank results. on the

Will. Thanks,

the with question Barclays. line next Lenschow comes Raimo of from Our

base in new are installed on and I you're bit. the The -- we a stay leaning and kind other it's seems can maybe of understanding in and usually, little terms up logos slower, side, topic times, bit of a Actually, your coming tough the message? in I tougher of broader mean, to with in competitors there. that leverage that look, logo on out. got almost driven much the of the you, lot There's that a it way. How people but new is taken them sign on

So of a lot in disruption market. the there's

speak a driving logos, to hear et that? anyone to Because can of kind you little a you different better, And on work else. with from what's So partners bit? you what cetera. did more that's than kind that lot of getting started Like new obviously work

that. take I'll Yes,

So base be healthy with see customers. want continuing clear, we're to to I growth installed

really the to expansion seeing continue see particular, where installed we their that solutions which ascertain it's And alerts cumbersome. strong, They're So growth I or see chasing existing complex the we're it's more sure customers. large, to kind are would seeing pain the are architectural base that is making architectural very to complex clear large want really, our where and they're evaluating with it is in there's customers solutions, just proposition we value say, And good competitor especially that it's When and I vendors, is, more customers, of And when points. increased an at seeing people outages, on their, more, we they're -- could than they're Those pace customers front, so logo pain well. environments. existing difficult their for in points either rates making and even average be decisions. growing decisions customers the observability, more company. And score are new tooling. environments, which make with

customers to think platform are making I so platform as that making decisions. observability a of they're observability relative would security. kind platform on and decisions They're a in And and make, say, we're that I seeing with decisions to pipeline different obviously, application starting areas,

quality in quality for of So we I so sales the the that number better as think more I opportunity. on longer And said organization because logos focusing expansion we're quarters, well after I results appropriately that the land we're than last positioned. And going the find of of think land term. the few is the new

of, then able getting of me and little to the are seeing a what that infrastructure, terms talked Yes. That's from seeing more like perfect. is broader being of logs. in of infrastructure than architecture are DPS where you the kind still, way? are newer full logs bit people it very guys terms it's you observability Grail, there going kind clear. of kind understanding logs, just that you into terms decisions, about is And et with Yes. of go of the package you as areas we like kind about That that APM Or the offering talk well. more, you Congrats the deals, parts, when you what big on cetera. the I in logs into in But but to know is be different on tough

modules Raimo. on What now particular, so ago, we I or front, modules, Thanks, penetration or say were XX% X/X. DPS X-plus would is of that's that the around at in multi so of customer a on year the lands were

So portfolio to for that of facilitating platform broader of a we have modules expansion key Dynatrace continue array across utilize the we play. to of customers broad see We certainly component a be the that by expect to the platform. DPS

So DPS this really multi-module facilitate does use. deployment and

from is the line question Rangan Kash with Next of Goldman Sachs.

well go-to-market Congrats. at up drive the different timed. when of is, one a for Grail. initiatives to look really, got Rick, financial investments, you you growth, applaud really on, product got stepping I you question. One more initiatives, you've the I've on

got up that that app macro you company SI. core pick little got probably the partnerships then the printed, business security And and when slower. clears rate which with growth of the will Maybe hyperscalers, up. in You a is you solid the is very the whatever the APM underlying means bit

you on you're looking initiatives research how we the the come do to forefront. the ways which and dollar exposure And ex are for? out growth as could investing back opportunities how to return is, question or development. really of in this measure a the the any whether see What quantify growth return So go-to-market, financial and like, underlying investment, it's start thoughts you come company's on looks acceleration to you malaise,

can Well, Rick it some let of me offer then and comments. crack at a kind take

the continue better you in that continue observability it we to there's So of we logs -- -- we're the I or security said on we're space. And Grail. well, we with multiple application portfolio doing. One, are it application think to offerings have best probably things make

making of with that the side analytics make security that to it enhancements quarter. one continue application we're security on around we with made some We the the of within the better announcements

investments, So can capabilities. platform, the unified of get you unified we're making a platform. within And bunch

And well different of and newer full And it of we're be logs. continuing that. around some we're doing so Kash, to application stack around doing we're whether phases, security at areas areas. we're well obviously do other And of penetration, the monitoring,

continue customer to to areas us of so. do to base, make product-related and lots penetrate continue broaden the logos. into those for We're there's to continuing we'll introduce and So new investments

front, those I the of be once conditions growth, for point, things. multiple go-to-market catalyst to it's think your kind uneven subside. And macro on a will

before But Kyndryl, one. another that they already the and Kyndryl really of mentioned were critical partner. are We a we're continue talking about We've strategic they these these GSIs. large to make investments GSIs, in business partnerships. we partnerships won years. Obviously, multiple that announcement even take with And

we do adding it definitely your pipeline you sales sense product going products a more to to and as does go-to-market look you look period definitely go-to-market of to where kind have the in certain make plus on far side, incremental then R&D, and R&D to of then make additional in and more So as And the levels. relative making in on investments and leveraging areas revenue at you're be to you're to sell, investments more you at expect particular, demand channel really when is different that looking based time. over need upon what environment, at the dollars. capacity, productivity Depends again catalyst, able capacity be go-to-market the offerings ROI, that. And including we versus

there's beyond trying multiple positioned be the a earlier we're at, we're when go-to-market we're is make thought And We're for and get it's that in that. looking in to So investments, of to good on these in that pipeline. we're step that more capitalize make to that and up the half as visibility. the And that sure you want we time return think that. we the sure indicated we some doing signal we're we'd happen we back a these maybe on the Rick very the Rick And levers 'XX that said, investments. bit future, as having you to make growth And seeing I think year. fiscal now and making investments investments had said,

would I Kash, of simply add, extraordinarily in we are evaluation a ROI disciplined investments. as company that incremental

acquisitions and there, AppSec at all the that at that there, the making So logs on tuck-ins Grail through any the we and investments we're and look of like, we're provided when partnerships, we way making investments the force marketing are half, very, investments targeted GSI within partnerships, approach. investments, and we disciplined -- expansion we very sales the in hyperscaler second the suggested, go-to-market in envelope the the all marketing guidance engagements look

Capital Keith comes question with line BMO from Bachman Markets. the of Next

had likewise results. solid -- And I but to first,

the get The a during slowed first many question. course well of as companies, more In your has those SIs on the see pipe slowed observability I Or slowing that Do space. observability along you September the global the one that of quarter. wanted spending And within perspective reflected you in lines? close rates or macro things or and to guys of not the infrastructure suggested software is the and has you outperform? indeed spending did of think the context

that opening we was towards seen. -- we one I Yes, of the the didn't actually but did the see we've the would good I'll at to the tail had this mentioned, monthly change linearity be strong, of some quarter we remarks, see any logo really new any had really thing strong say end really in we that suggested change. One quarter. throughout quarter, That I so that, honest, our take Keith. Again, I mention quarter. anything lands didn't strongest that the linearity

it in so certainly didn't September. And suggest didn't kind that -- things of weakened

analytics. on security Okay. And logs then the and second question on

track Rick, You logs suggested you said you think I for of sort the exiting because... XX% just you that? Are million mean run was did for year-over-year, clarify, on rate 'XX. previously to sequentially, that still $XXX pipe And up but

meant Yes. last and quarter. I I year-over-year, quarter. I Keith, speaking, said, from was last compared sequentially to

the for The tracking And is we answer penetration... are track saw end is by customers POC paying XXX question Grail. And we still now $XXX on of increase logs. still a to on good a that, And of, So AppSec first FY that addition in for logs number. in we're to XX% in 'XX. answer to in million yes, quarter-over-quarter

about And how log? for

million said to those 'XX, Same continue thing. both of the X and XX, track FY numbers. $XXX to put quarters, Logs, AppSec $XXX we at we million had us end within within would

is line Andrew with of Fargo. Wells Nowinski question from Next the

quarter. great a on Congrats

I a question on to So wanted Microsoft. start with

you'll them with partnership your expanding you're know the and end on I of year the have So Grail Azure. at on

to relative pervasively other and benefit an your talking would in increase given So about 'XX, how go-to-market AI I'm about which in platform seeing are wondering, your particularly of that how the given you Dynatrace into is AI think Microsoft would thinking some you channels, CoPilot. I have FY Davis opportunity weaved workloads,

think our Andy. just future. business generative be more about to to tailwind observability. be provide also Thanks, that isn't agree all look compute about Absolutely is will dramatically to generative for AI increase it CoPilot, therefore, deploy and workloads on Davis the in generative will companies to the it a we that the as It AI. as going AI, deploying And are think need organizations to

Microsoft, a tailwind. will So core us absolutely, that's obviously, a with be in leader them. that and

the with and next excited the on front, rollout year calendar of course completed specifically, quarter, early the to, through the we're began beginning at Grail On very of then Azure. Microsoft

that terms nicely say customers. that a in simply is So particular, acceleration would we're very as addition Microsoft, excited the Azure because partnership grow increases one, of channel for is of major joint I preferred a go-to-market selling. with which with in to transaction method a forward percentage from volume the very to overall that advance. well, in continues important hyperscaler in us Overall, our of about choice, simply is that, And the step large a which purchase of

follow-up question. very That's helpful. last Maybe one

maybe if raised some on, you given already. 'XX expansion free your wondering cash flow outlook. You margin and talk And fiscal go, could you here nice we're long-term just think seeing thoughts I'm the where free that it flow your about could cash

software talk you one about a in will free very of class I cash cash I'm of that, the Yes. are the or one, prepared profitable. that companies few rare tell the pays actually kind because space margins. only, we're taxes not long-term infrastructure flow to we they're that probably

flow XXs. pretax cash in our are so the high And margins free

very, healthy. So very

deliver is, I about margin place. margins. to getting prepared really, focused And free long-term flow we and continue will really cash on growth the of And reacceleration, I'm good make while model in we continuing not -- really to balanced would say investments to a that we operating we line think be tell top are so good you think I while will kind what

up work. Keep the guys. Thanks, Wonderful. good

Andy. Thanks,

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

to adopters versus DPS in your questioning north from management XXX of were the of to on earlier I'm today, largest really second. the think how on kind a also you're for DPS know looking line is of cohort drive of if some wanted And circle customers remarks, NRR over that prepared citing just the I had. But improved back customers Raimo team time. I DPS noted I obviously, powered follows that expected the of that some users. is It the of at that growing

of little get size time. scale what Given into color this with is they those to come that into bit this you enough far the customers of you're spending those a as maybe growing size seeing about we coming a start have how from of cohort DPS? at Like better as here a respect as base, or of trends customer providing translating customer can do when thinking to NRR sense that us

think size question. It's the yet. would a I big is say that enough cohort not great I

your but While is traction on more color, with happy DPS, we're yes. question provide more answer we're answer to will really you that the directly about we getting the

limited adopters of difficult just early of to earlier now, color. I think our more comments when a make point, DPS were you to the provide lot customers. will it was don't availability largest We it's your

information to two, make DPS, we a a have a of size. But size of sample bullish that's there overall frictionless kind is that a about rate think broader information annual So size that small. we general think just it's an being sure our is around technology, adopting just do our drawdown on to of which we're sample a comments accretive. We good is, that multiyear platform is the kind a versus all commit where just with why way skewed. we or we'll is with kind a much premise bit it customer one can capabilities, the provide But sample model consumption expansion more make a to just having something interest; a broader customers of as of bit better you want and of you that access of

just number the and gives multiyear them remarks, much the one, in durations customers extremely consume from maybe more highlight It prepared feedback comments positive. flexibility some over Mike, say, to the use on DPS platform. of is

is, XX% years is had over the will XX% piece of Jim that base second as The our few the on DPS. next expectation customer earlier, to said be

and definitely preferred both directional So heading this for for customers a us is at Dynatrace.

displacing that And flows in is, it. hoping make commonly? kind net was feel there competitive like, then wanted actually things second wins for vendor like unpack, the are And finding an X when to the or looks other that. it don't are you here, based I product is rates win you answer bake-offs is are competitive some you could third, shift know could thinking of at sure Dynatrace it's then your the you Is kind to who as are actually these look want categories, I a lot unpack DT? but that first maybe that lead the that to you about and towards like ARR I'm if you so all you expanded like different then Got DPS? more frictionless management I I But new well to I solutions, cited guess, of or as the seeing just far appropriately. increasing? And with more any do but was right? And as the kind outperformance, replacing of is question on coming of know as consolidation the things here. into one team announcements expansions, the more this these packaging of next like, getting And

optimistic quarters. I when multiple seen -- very It's again, start wins. with, that architecture observability certainly customers the about wins the do to one, QX, are net I kind you think a space, pipeline make I because who I to to in had decisions. got and think And I'd the we're positive which reasons customers bat would we've and logo I for are come particular, at, lot leaders for -- what would would new you grow for we in to that, say, and I do the say well, outlined, be there. mind. say, look they we in is, been of, competitive beginning continues

we get a point very of fare And we when POC. well to so the

that So at getting pipeline a yes, think I is good think bats. space. And there growing that some we're I in

good new the ARR guide as speaks a expansion I But a these it's that XX% just existing the we're full think be I by team. And for they're we to bit for to it, expand. customers that It's little to logos, color is we've historically, call maybe sales said that year, they I weighted choices. versus would continuing the logos customers new And in I X/X. And being weighting and as that of bit so, optimistic. why before, make X/X, even cautious. a I I importance more than provided of a think net thought think continued platform our which roughly new that unified customers seen the execution just a reflected have, our it XX% bit are of

X a had piece competitors. our that of quarter, wins add TCV you. takeouts we provide were and simply would to for Last direct I logos, of new for those data just of Mike, competitive million-plus $XX

our our is there carefully. feel win very win and about as in track very, rates environments market competitive we doing, think And good well. and we rates very, contributing very target DPS space, in So so I

color, Great the on really and stand results in to appreciate uncertain all hear. macro, here out. strong I congrats the the

Roberge will the with of Jake from line final be Our William Blair. question

on Congrats the great results.

on the any Grail. have referenced drive initial the What to landing Grail deals that follow those actually logs those the front? did wanted like Just logos XXX look sizes expansion you platform? new deals? then customers to Or on up still for for started And the to largely see on are you

we've many those Yes. to again, one, POC. way I starting to will Grail, say said with work think is, before, see on going logs this we're the of would this customers but it's a that, I and do

in good Rick As the we said, talked XXX-kind about POCs the last plus is quarter. news of

customers XXX quarter. have paying we Now this

to to the work get they'll suggests positive. upon customers workloads. think add And where then depending product workloads, the to have shift value more it's that are they'll existing the will And point it that to then to start with new offering it going largely to going new they're leverage workloads. getting the we to they're from that POCs been try is workloads. you new those But the way going and So

we ramp, year, the a going is they're ramp that more ramp of is, way fiscal the they back start So to as they're small doing to you'll the in half some view see going as going 'XX a this start over adoption. but you'll ramp bigger and much expectation to we're And and our get see, see the in time. ramp

like train we tangible some DXC, us color some GSI Dynatrace differences and Accenture, with? Very big relationships GSIs Okay. when growth when on the the in actually And practices Deloitte think seeing started from could they some helpful. you're And you where then count compared more ago Kyndryl, other you years X those those working or of you're head versus are motion. And perspective? that partners segment? how to about that X were give what Just about are a today

now Thanks, Most Jake. The think, keep them, I have XX import. working last with we've in of They GSIs. all they GSI we partnerships of them. about very, succinctly, as have each the XX relationships But opportunity. excited of quarter, runway top we reported, we're very each and escalating been substantial really with,

reasonable mutual relationship Accenture, that a strategic thing into Same We had example, a continue, number previously. the we've talked a with Those we've investment of So as an Kyndryl about existed. both X-, escalated wins sides. on with X-digit go-to-market partnership. has

going about So period GSIs in long. initiatives because digital a to sale evolve of time longer are very transformation that. The excited the over cycles very, are

it's going very some could for in meaningful that is way. But us a significant develop So channel leaned gestate. to it we partnerships very, take a these time over time, to into and we're believe that

the on again results. Congrats great Great.

Thanks, Jay.

a wish you that and me bullish about it. the We support. and ongoing opportunity joining. to lies questions, upcoming at engaged forward wrap ahead. your up do IR for connecting you for we quite appreciate We coming Let really all all We're this your very over the weeks, ahead point. Thank Thanks go your with look events good day.

conclude you. Thank today's This will conference.

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