Dynatrace (DT) 15 May 242024 Q4 Earnings call transcript

Greetings, and welcome to the Dynatrace Fourth Quarter and Full Year Fiscal 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Noelle Faris, Vice President of Investor Relations for Dynatrace. Thank you.

You may begin.

Good morning, and thank you for joining Dynatrace's Fourth Quarter and Full Year Fiscal 2024 Earnings Conference Call.

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

month. get please earnings we from such conditions. Before started, results our as forward-looking comments Actual a statements Form Dynatrace's statements file of expectations include due Form upcoming our regarding XX-Q number differ in including XX-K we most to SEC on revenue, plan that may risks guidance to this and economic uncertainties note recent our and later and annual filings, materially that today's discussed quarterly on report report

The noted, per the new We of forward-looking May diluted share growth today discuss the and statements statements reflecting assume contained a basis. views XXXX. result otherwise in a information, this rates currency we future these call XX, growth non-GAAP update rate, as company's amounts are represent events no or constant on to obligation are Unless on circumstances.

other and will please non-GAAP in non-GAAP both the between financial discuss today's posted today's Financial see presentation, reconciliations on measures earnings which and press GAAP section website. our are We IR supplemental also release of call. measures, Results to refer To

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

fiscal surpassed X-figure $X everyone. to morning, landed TCV billion Thanks, compared Noelle, We We joining X strong today's us reports the year. basis plus in margins XXXX, first added for Dynatrace growth you and good ARR, level closed XX% grew basis the delivered to XXXX, $X.X a free named deal. Thank flow milestones by our years having accomplishments. noteworthy our deal. ACV and for fiscal call. AI representing And finish during very from a billion XXX ago. Top We achieved several non-GAAP ops leader pretax XXXX XXX over logo firms past new largest X-figure points. and nearly approximately of X margin in times observability a operating cash Dynatrace fiscal points we on ever, analyst

investments I strategic that more guidance share and continue In will QX key with program to platform our call: X moment. a and balanced XXXX that wins 'XX to market as in we profitability. Jim observability discuss trend which is differentiator ongoing go-to-market we expect to in some about from architecture the toward looking begin meaningful we innovation in evolution. Starting observability vendor this are notable were our second, evolution a of observability we a wins. fiscal the the consolidation our performance, would we end-to-end I'd themes deals meantime, larger, like repurchase architecture decisions. and the that expanding highlight we quarter, confident earlier in in with is like today market; the persist; benefiting FY customers Last are were platform and broader large quarter, or announced strategic the opportunity, seeing today's There some are the make growth initiatives, we third, to demand business key increased we details execute first, to shared share and model and well more and in

benefit improve significantly uniquely and siloed eliminate experience, organizational reduce software thesis performance that helping user of from positioned cost is and Dynatrace record given customers to innovation Our track proven tools, trend, productivity. was and our this drive

Accenture. closed expansion multiyear Among reduced a played was won a environments, quarter. the thesis for time TCV resolve ACV also wins that record pleased in Our had global a numerous to deal as X-figure consolidation most conjunction this prevent showed were incidents. dramatically out resulting the cloud and to financial XX POC, successfully customer cost that In I'm contributing XX the QX institution. with to with results a this X-figure, Dynatrace and the top and deals, very we offering following: platform expected. have container these found closed We we advanced in in

deal X-figure with XX selected a their to existing TCV This Dynatrace corporation. mid- moving won cloud, a to We monitoring the company Fortune displace the solutions. and expansion process is of in

is seeking of they selected applications hybrid are to of help expansion of by to their on or than aiming a and deal. prove contextual public every and awareness with won to efforts, provide X-figure data real-time their new this part half end-to-end a care transformation developers to one transformation view As nearly focus X-figure of our rather than multi-cloud this innovation XX% fit airlines. on a Dynatrace's tool observability expansion health vulnerabilities. more enable issues made and transport private ACV was or the large digital its nearly the of their win, them environment. We led largest initiatives to X.X their but business up a consolidation that logo what across It XX% with day. And platform focus and have clouds their is deal we end the analytics yet entire vulnerability of in could another selection seamlessly and performance passengers world's Dynatrace's how Dynatrace perfect company was ultimately landed million year. the

pleased to come extremely we We that they in large, these larger be continue types believe a our approach strategic quarter, to these will are closed to that ability of long-term of their with do that deals a while guidance. a of increased growth. prudent with contributor the necessitate deals number will strategic an material And level

deals increased QX, DPS were In a over XX% of our to over vehicle. or DPS And I monitoring. closed just offerings, date, of logo XXX transaction DPS Platform newer also log they new and continues DPS and our our to our for security leveraging contract Interest to application those approximately is largest for DPS deal generally from already customers XXX mentioned available log monitoring number airline are especially became year Dynatrace we've since with licensing. just grow, leveraging The the including ago. Subscription customers

are our installed in penetration driving and our base. default DPS is new now offering increased for logos, we

still of is momentum While consumption were DPS with it building. rate ARR in these at and XX growing especially for of a deals partner customers faster is significantly hyperscalers. note, closed early, growth. XX collaboration partners, X-figure than our is GSIs Also

to in provides modernization next combined of We market. our a is $XXX GenAI nearly in are billion, already a deals catalysts. growing and what revenue Cloud weeks tailwind believe GCP the that and evidence space. and year-over-year. anchor success of the XX% Two Azure closing Turning annualized large reported additional ago, AWS, growing

in IT the premises. before And Jassy that the stated we GenAI from will the radically impact. than Each remains this of data productivity. GenAI. increase decade workloads mentioned both We time, over of Andy well growth GenAI as XX% to our spend drivers which contemplate as on of expected is Dynatrace a leadership developer to that Amazon of more is given as play turn, complexity, of the in of more hyperscalers global in more as AI. materially to underlying strengths differentiation cloud moving believe This, well and or result

events metrics, innovation highly front, with context, technology driving providing massively logs, in advancements. integrated, store ongoing as business that data keeps user types, we the evolution awareness. a engine all an we Grail, our R&D see Last end-to-end performant together traces, really near released and data, On platform scalable an data year, real-time game-changing stream of

relentless and in business core all that XXXX, as including on differentiated value team's our provide as application areas. and full platform further security. innovation adjacent solutions, enhancements executives monitoring of infrastructure, Grail monetization unmatched about. log highly Throughout in fiscal the serves with platform is the believe for evident delivers market-leading stack focus plethora foundation transformation as that the of business We driving opportunities well initiatives the most Dynatrace care the was

integrated is end. the platform the from back end Our to front

underlying where each solutions set of store We have core through access that same of the data a the store single, technologies. data

and We context. the technologies, AI provides industry's that precise in have automation leading causal along with predictive answers

of stores only and contrast, SMB peers experience. level may tagging. recognize that generally performance separate enriched aggregated series In software have platform end-user highly effective but user the be enabling error-prone are AI, through companies complex deliver for interface large, to This Dynatrace's more a data automation enterprises of a end-to-end the them value with manual in much at our

as Digital the recognized of We radar. also of GigaOM Peer a solutions, were in positioned report to only exceptional this choice third-party the XXXX Monitoring as receive to Experience Insights in Dynatrace or Radar XXXX observability named a the Gartner vendor customer's leader the continue Customer and provider was the center recently, platform Most the leadership. market cloud our we for resultant recognition of distinction. to receive the report, closest Voice

this position. our validation We third-party remain investment are to we ongoing to ongoing humbled committed and differentiation, strategic by maintain leadership this our of

The in high. excitement energy recently hosted an to last our strategy, Turning at we global team. our Orlando kickoff with our sales were all-time annual go-to-market and

of our leaders have Chief new XX Over plans with their Alliances. Chief specific large vision functions extensive strategy. XXXX experience execute the SVP seasoned this leadership the we scaling past and fiscal and provided to addition Revenue Sales Marketing the go-to-market our team, and of Officer share Partner months, opportunity kickoff Officer, several added with go-to-market to on

capture our evolving and base enhancing better focal front us. opportunity the and X and areas extend leadership to are deeper penetration drive in our We maximize go-to-market to of installed within our approach in

First is customer segmentation.

ARR. the executing to We productivity accounts force enterprise drive have are we focus and on accounts largest accordingly. increasing sales coverage and potential be the Global already have Territory and highest changes been account XXX our the of will strategic the that with the communicated,

customer and our expanding deployment, And to our investing expansion. in we sector these specialization, and segmentation success will mapping to We this with reach to align ensure be are successful approach. resources international adoption segmentation also consistent

our for go-to-market of Partners earlier, more enormous XX% our is in highlighting than but partners. influence area, ARR, I the they origination, of white which space X/X second opportunity of account this on mentioned The area. deal today only focus

We and our impactful our on most partners. highest priority are focusing energy

compensation are partner closer our we are hyperscalers We and model simplifying and priority drive remove to building And dedicated economic our partner-neutral scale co-sale partners. to friction enablement with with collaboration. approach engine a a

area market competitive penetration. final relates to and base to adoption deeper broader and go-to-market harnessing third our installed differentiation The focal drive

increasingly opportunities will have focus end-to-end we We as discussed. observability on

finally, teams organizations for We modernization data of platform us will to at traditional and efforts our application in enables cloud DevOps develop to continue target which And their across expand software motion release drive workloads. scale. how engagements, visibility will require and complete we that sales responsible customers' are and engineers and our land performance

globally fiscal And the I'd closing, year. finish Dynatracers delivered excellence commitment approximately X,XXX thank past like to we fantastic to In XXXX. this a for and their incredible to innovation

fiscal is where growing XXXX, I rapidly. I'm look began, highly our application enthusiastic market and the for we about As observability prospects. to security Finishing

growth of Our us that to have balance business continues position. And finally, and end-to-end competitive deliver you. over in platform a profitability. Jim, strong differentiates puts solid us model a to we and a strong

Thank and top a you, guidance to everyone. very morning, strong of again, XXXX. indeed line was good we finish profitability fiscal metrics. high growth surpassed Rick, the QX our and Once end

to resonate unified Our dynamic, in value the monitoring as enterprises multi-cloud growing proposition observability to environments. consolidate look a inherent continues architected platform, specifically enterprise into their to complexity address tools siloed

Dynatrace and Our relentless execution of platform results and security market the reflect our the team, application observability the differentiation. in criticality by

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

guidance, the Beginning mentioned, recurring call. XX% our above large, consolidation including as the was result threshold observability high growth. of primarily Rick vendor This end strategic deals $X.X in surpassed outlined earnings QX, the strong billion basis last representing for annual XXX we architecture ARR, many of or in by points our execution, with ARR, driven revenue, we

X-figure year, on the logos the We geo, of Our new wins, record particular, automation. year. We to results in of added XX-month nearly a closed new ARR the were $XXX,XXX AI the constant X-figure a deals new new our logo of for data-driven choosing fourth to largest consistent in fiscal A These clearly X-figure EMEA are in million customers trailing driven contextual and $XX unified currency quarter platform logos land a demonstrate ever highly competitive logo new ACV a enterprise had with roughly the total quarter number roughly new and our our tremendous and by differentiated size land in of added with contributed net the finish number basis. ago. Dynatrace expansion. for first a quarter average year logos X-figure for analytics, the XXX XXX leadership of TCV

have shared expand. greater in new quality As focused logo we the on past, we that lands have of are propensity the to a

commercial customers of existing solutions, and resonate platforms. tooling DIY that Our tool to value proposition automation Dynatrace or the and enterprise breadth are for and with our unified outgrowing to depth, consolidation their seeking continues observability business value coming

Dynatrace the platform, of experience the their are quick benefits to customers usage. Once they expand

is ARR Our $XXX,XXX, average customer provide approaching the continues we increase and customers. highlighting per to business to value

gross NRR, representing year. was and continues Our rate fourth in an the best-in-class over over or in last retention is in to ended rate, X,XXX the industry increase quarter. with We and the customers, retention year our mid-XXs XX% Dynatrace be net of nearly XXX%

model see Our DPS traction. licensing continues to strong

should we over now flexible, believe which in noted, encounter DPS predictable more lead in for of X/X as our DPS will the more newer Rick licensing more access our customers. XX% can We transparent greater to NRR As over base the platform consumption of to our cross-platform capabilities growth enjoy all and customers, simplified the business than and value further have more gain of customer solutions, to model XXX pricing, representing customers contribute our over time process less buying of in and more friction easily deliver and ARR.

it's very across while healthy early usage our DPS seeing we're platform. days the And customers, still for

In growing Xx is customers nearly customers the opportunity in platform the of and increasing for expansion future. non-DPS indication DPS than an fact, consumption of faster

logs our exiting consumption of solutions, is areas to very and leveraging customers security XXXX. and Turning for north XXX% growing offerings roughly of rapidly, emerging XXX these we of each traction, now these fiscal have solution application

thresholds million our ourselves such, we exceed in time we annualized to some confident ago. As the remain for set ability revenue $XXX

sequencing solutions. the trends, shift consumption deploying we of is away XXXX during end-to-end of likely end fiscal current than fiscal XXXX. surpass more ramping decisions relative opportunity based differentiation. changed these or our from Nothing will is But the on solutions the has point increasing thresholds observability market platform new it these However, the rather impacting market to to competitive and broader

our quarter above the to for gross non-GAAP the was high end fourth quarter revenue above was the to Total revenue. the margin XX% fourth revenue end our and margins. with million, guidance. growth XX% million Total Moving last XX%, guidance. growth year. quarter for on $XXX of fourth million $X $X was and million, consistent $XXX high Shifting the Subscription of

resulted quarter disciplined or Our basis exceeding the non-GAAP upside $X the top This operating in was end to non-GAAP was expense management. end income just by high income fourth above of $XX XX%, per is a points. guidance million, $X.XX driven of for of highlighted. combination the I operating the guidance due primarily and by $X.XX million Non-GAAP diluted revenue share. high the the net nearly of million This $XX items XXX above margin end of guidance,

Total above leverage have growth. resulting was Turning income consistently fiscal growth. of of year model. business or diluted XX% our Subscription billion, per result to margin XXX the drive operating was a revenue to XX results revenue points for was further basis ability income financial is summary in operating guidance full XX% XX%. a points year. as net representing Non-GAAP representing the non-GAAP billion, for our the XXXX Non-GAAP year quick demonstrated million, $XXX This $X.XX end of $X.XX was the for million above the nearly high and $X.XX basis $XXX share. we in

non-GAAP effective XX.X%. Our rate cash an EPS tax of includes

the to balance Turning sheet.

cash As had of debt. $XXX investments and and million X XX, of we March

and quarter exceeding $XXX in basis cash guidance the fourth full million flow $XXX year XXX the free of points. XX% was by of or revenue, the million end Our for high

year-over-year. this revenue XXXX taxes. up cash was basis more and of result XXX absorbing XXX XX%, cash up cash pretax representing flow XX% points Adjusted for nearly As strong than points of taxes, a reminder, includes fiscal basis cash impact flow

profile also cash capital free evolves. our strategy evolves, allocation our flow As

continues be priority investing help acquisitions the organically in both growth. through and long-term top sustainable, solution adjacency business, to Our to drive

driving we increased strategically invest, cash we as Even are to committed equally flow. free

of another profitability, the strong add flow is program we believe share our also sheet, strategic to Given as balance cash use and time repurchase right a capital.

we in we our long-term to program, based underscores repurchase the utilize has $XXX which our in This As shareholder authorized significant our plan Board exceptional value. conviction the opportunistically driving to on today, ahead conditions. and confidence business, our opportunities share commitment market a million announced program

turn With me that, to let guidance.

long-term healthy. The security We large opportunity environment The Dynatrace. growth growing. are is demand addressable observability and ecosystem confident in expanding. The market for and the is remains

our faster Our to growth. than grow pipeline ARR continues

Our platform our and balanced differentiated, growing capabilities and are is and highly financial durable. both model

and appropriate their ongoing in to Near cycles macro continue through term, seen market, we've to will we that resiliency it's XXXX. in guidance mindful assumes And be we elongation macro the while climate believe of are budget of continue our dynamic fiscal the approach and assume ongoing to spending, scrutiny Enterprises a challenging cautious in sales landscape. persist to guidance our philosophy. observability

We and will observability architecture also growing expect continue. the strategic larger, more related to vendor deals consolidation of initiatives trend

At We come deals variability with capitalize are positioned longer duration to well trend. these close. the increased on and to this timing same time,

as guidance enhancing are go-to-market These better deeper take new changes of installed now they impacting evolving as and from and and than extend changes our global to reps, With performance. the near-term all leadership, fiscal incorporates more with our our our sales within strategy begin positively segments. penetration accounts XXXX. strategic time in for and account will outlined, designed enterprise and capture intimacy potential mature we our transitioned to these XX% to Lastly, some impact Rick our are drive sales and base especially customer

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

a be quarterly similar quarterly net and of to to billion, ARR $X.XXX ARR to basis, XXXX. don't fiscal while XX% to And we of to billion new on between be XX%. ARR seasonality the representing expect expect growth We ARR $X.XXX guide we

QX our an on when fiscal go-to-market our of we call guidance full traction. ARR sense expect earnings update We have on a year our to better provide

revenue. now Turning to

We year-over-year. rates revenue foreign expect XX, revenue on that, for and fiscal XX% to year XX% total is subscription XXXX, billion expect to and headwind $X.XXX XX% billion, both to $X.XXX expected year to April be Underlying exchange Based $X.XXX revenue be XXXX. XX%. million for up full billion ARR the a of to billion, $X.XXX as up to we $XX

operating for improvement between non-GAAP in XX% basis approximately XXXX. an and $XXX This be fiscal million non-GAAP million, point expect a We resulting income operating anticipated of margin year. $XXX over the XX represents to

plan We R&D, other leverage and capacity, program customer our additional to while in partnership prioritizing success continue realizing investments in areas. sales

We income million, in a million net expect $XXX diluted on based to non-GAAP shares million outstanding. $XXX non-GAAP per $X.XX to be XXX to to of resulting XXX EPS million share, $X.XX roughly

and our our on utilized basis, primarily the requires Internal R&D by given the of fully Section are a amortization period outside significantly we carryforwards our impacted tax profitability XXXX. for XX-year fiscal credit U.S., Given capitalization Further, R&D. strength we XXX, Revenue GAAP in international remaining a which Code is

As effective rate cash such, in our fiscal related cash in we an expect XXXX. tax and increase taxes

Our net effective a rate tax of XXXX. EPS cash non-GAAP income from non-GAAP XX%, assume in fiscal XX% up and calculations non-GAAP

cash anticipated impact X% million taxes free XX.X% XX% revenue of cash fiscal low in rate million revenue. approximately the or XXXX. cash be stabilize going of forward. in, the tax up million of $XX X% expect cash from we cash XXs to or is to million $XXX flow to We factored $XXX $XXX or in from With taxes to revenue, The free expect incremental flow between

XX.X%, between be Excluding the up cash of XX from end points range. basis the XXXX flow expected and at taxes, XX% fiscal pretax is free high cash to

billings, second and significantly quarters seasonality modeling, in variability significantly the As a free flow reminder third and due first lower flow expect higher in quarters. for cash your in free to cash the fourth and helpful we and

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

shares. count Lastly, approximately on to non-GAAP of $X.XX $X.XX be a million share is share EPS to XXX based approximately expected diluted to million XXX per

In we fiscal and are quarter our XXXX with fourth very summary, pleased performance.

opportunity of evolve We competitive adoption our growing long-term conviction are displacement pipeline near-term and in balancing our as our with we large, support drive go-to-market customer opportunities. prudence to

We of have a record consistent execution. strong track

and and future we growth efficiency we We approach to a to expect optimizing long-term in balanced are disciplined time, drive committed the that improving profitability. continue to opportunities will will costs, invest maintaining value. At same

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

Singh [Operator Instructions] with Our first Sanjit question Stanley. from comes Morgan

little X-figure large lot landed healthy in telling in reaffirms QX. land like on quarters wanted a and TCV been the of deal of some that what X-figure there's a have us about QX, of you it a of larger [ talk I closed deal in deals sort Congrats a deals these of that to you these guys ] QX. pipeline, couple looks amount last and you the the guys them bit

go-to-market what more some have changes you the to first customer of that of to market these success I'd you the wondering just sales you're go-to-market close the success was the more changes more planned I I QX? of understand changes, down you you're the these that that have the Should enterprise Or volume sort other better landing half. take that deals, Rick, just for trying rationale for context go-to-market the part deals. in meaning large and of year of early seeing focus in the given seen for love to capacity planned you've segments? need with

traction, increased of observability the centralization that is And and increased energy. observability of answer focus is increased decisions. where momentum, your you result we're that's end-to-end the sales short-form broad-based seeing that The architecture

consistent very things into the go-to-market FY that's in address what the focus making architecture and customer approach the like partners on So really market, end-to-end -- what evolution, our segmentation seeing and we're we're with that observability 'XX. to is in headed

of it's, add thing, other at the actually I'd it's pyramid. more providing resource only top to is Sanjit, that The the

that for is XXX, if are higher So than below spend you there Global those propensity think customers the the about that. significantly

the at pyramid. more end higher resource weighting of are we the So

tend our proposition what what outlined, decisions occur in Rick thrives. end-to-end really doing, with where very and customers primarily that's more which is with observability we're line large it's value enterprise to So

anchor Yes. strong It thesis of performance. a deals, deals was than X-figure so the in greater XX closed QX great to very, and $X very see million, the validation ACV

very no, impressive. Yes,

just sort in what to you're could assuming sort not get As some outlook, improvement some of any guidance, can you follow-up, under things guidance, the of XX% a the to drive if look of guidance? of what swing specific of certainly if be will, that your you factors, in -- terms of the that upside but would at XX% the ARR north

building take to That's a good think environment still We Sanjit, context for I'll kind outline observability as enhancements, we're the in And doing these do this as question that suggest decisions outlined we not Customers we leveraging to it's we a a of expect hey, that we the Yes, is go-to-market for worsen. is, some architecture did are we're going prudence. priority. around to observability of that. continue. what going that, some guidance, as trend outlined not did improve, macro as of we

mentioned some my going rep. the remarks year, going factor that change per tried that our is of that to times we result not changed new XX% to in. at can already taken rep. We've are a so accounts like prepared but disruption. We in it's to have know roughly near-term I in throughout place, this accounts It's

timing I drive be them minimize, extent would to this guidance. faster, these of can that So the question to improvement the those think the occurs factors extent some deals, X answer to that your of to would we larger directly,

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

One question and Jim. Rick for for one

Rick, a trailing net it you're great. So on that's basis deals, XX-month working, clearly, and look strategic landing very like rate the does move engagements, the But upmarket down. big expansion came is

you happen business wondering happening what talk what's if other set, and the the the there. there about could So of could and side mid-market

for to like the but what first is of the And was do that are If changes year down, holds, thanks ARR, tell net ARR, that Trend for up. the few quarter new does right? I so this The guidance? the net better, new notwithstanding that organization, to disclose transparency. of looks the you was to the one Jim, one got you, trend you very guys all, getting field

Let me one, take Kash. the first

around So around ARR the new question really the lot. relative partners. mid-market, to mid-market talk We strategy that is and particular a net about

attack that definitely the leaned is and to through would the piece? mid-market avenue. that space, to relative in which are We Jim, is on how second GSIs And really we expect hyperscalers.

to net one right are the relative things Well, ARR, the new of that. you --

look you would suggest for this a 'XX. at for the fiscal ARR new in guide, moderation net If year the guide slight

changes that. are some improvement As felt given the we to mentioned Sanjit, some factors start think to there that I it a drive guide I could with actually that to We reflected that we of important that was prudence thought outlined.

in particular. of in lightest lighter in half our Because 'XX, should is it's call expect QX, was and we you, heavier year, similar included is remarks from you quarter QX to new which ARR, tell seasonally it, fiscal the the to quarter. would in second it I thing the in other what half net the prepared as you know, is first just a first seasonality be in the the the seasonality perspective,

So...

But It XXX%. was appreciate the versus through I were patience. really went the that enterprise on be well. rates really doing Absolutely you that. like is large Jim, what's Rick, And That mid-market? appreciate happening XXX% is the to your crystal couldn't the looks the the mid-market factor mid-market, they XXX%, clear. in net really, because So swing it. back why expansion

the really that going us, again are especially hyperscalers. drive for say would to I Yes. partners mid-market

if more anything. you granular get up to cash, If headed we would expect be GSIs market,

to thing the with likely Those TCV are drive with Hyperscaler the will kind that's of deal the Accenture partnership, the large at well. we in global elements institution, look engagements, a X-digit in NRR that GCP the announced mid-market. as GSIs. and out partnership quarter You see we're go-to-market of past the financial that going

next of line question America. Our comes from the with of Bank Koji Ikeda

part And how A to those I of on couple part Grail incumbent from a back X-figure XX Was consolidation. go And Grail replacing ask deals. wanted that a or record wanted to often ask, I thinking I deals? of logs was the to me. about big was vendors?

Yes, do at is and part SaaS point. essentially every deal this that yes, Grail of we

is to data logs. this be logs Grail of Logs can cetera. not is equal data et parallel and store access a So Grail, Grail, remember, enormous of for types, logs, architecture traces, store key sorts metrics, approach. to different amounts element processing of underlying accessed massively observability end-to-end are that all data

independent things viewed for as element orientation. it universal customers into cost, log one all it What that They better lower better drives It an are the incorporate like really to not be should outcomes. experience, independent types root data want observability cause or drives avenue instead is easier type an analysis. finding data drives

And on are of Grail the deployments. typically so part very Grail logs

And pretax the Jim it. here. company said business, a internally, follow-up growth cash with thinks you In coming of XX% plus free past, type Got ARR the a business that the maybe for from the remainder as rule-of-XX flow.

starting And the that why the it at is appreciate the is. so bit way all on target. looking guidance guide of the I shy the a commentary today,

side of it's when you're looking mostly growth the But from falling type short it the does rule-of-XX at equation. sound the like ARR business profile,

you ARR you growth XX bit are And differently view of to that achieve that so next, it, call the months over Or a about how XX do target? shape now? to the thinking target

this XX. Koji. rule it's great question, very still We No, of much view do a internally

XX% with leverage the flow You're job absolutely fantastic pretax model in free we've cash margins. a done right, driving

be 'XX. So bit below going suggest to for the that a would fiscal guide we're

a that better on You driving certainly imagine we're the business outcome top can line. to the

ambition. So certainly that is our

those mature, know to side of a while changes the in changes that are changes we're we that the lead take go-to-market that making on will believe to outlined, kind may we acceleration ARR And those but growth. the little Rick

the will us be that so getting to of And rule driver XX. of back

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

there's of growth, particularly go-to-market been feedback wanted I it's my ongoing what there's guiding take focus look you've particularly Dynatrace with new. that 'XX, to if if why. And mean has that Grail. on the if changes I comments technology, I to trend leading from universally a pretty and made advent yet on first erosion appreciate I some trend. we on by what and direct And this net the the 'XX, question 'XX, you're whatnot, the that of I from And channels, some get for at to an while has steady we is, 'XX

that, And deceleration, maybe bit I'm to about of, light logs views out what doing, little I'm anniversaries superimpose if will, more at understand are elongation I having trying because security the and core, or just cycles, meaningful think the you just tease some why the in deceleration. more time. our a why trying suggests legacy of point a deal you the of it would in that And particularly to if is

you're it's amount reconcile that to the hard of deceleration that demonstrating. So with

because it and the why to it. you APM this couple what's fact focused last perhaps quarter slowdown tighter was are of quarter, doesn't trend such that it years, significant the an a largest seem just it what deceleration? underlying is not down? is, spend guys is fully of but really and there is the on Because trying is the market And slowing understand that there? the is Or so Just go-to-market explains customers, which over really, excellent

can Rick, you I can offer. that Well, start with and

frame that talking I'd that frame one, a environment you you're remind time where worsened time about macro the the materially. So is

has So at companies. growth a that moderation the software look sector, in affected generally in all anyone rates, software

to is unique So not that Dynatrace.

specifically growth is concur would So I the I anomaly. moderation 'XX would is fiscal prudent. not say for this that an guide

the company are the think all. abandoned building the not term. We've long for land-and-expand I we changes at model for

still to propensity of to motion. that and penetration an we needed We weighting to resources to spend predominant order need, growth believe that's adjustment get customers. go-to-market more So needed. to the do get we model was higher a in But the

the And -- sweet customers these a are customers that for our is offering them. spot

value the Ensuring is Our focus had is there adjust. very to enterprise-oriented largely proposition driver. needed environment companies. what That oriented right is complex really the to we we

value we So proposition reacceleration. these this, a on once to through that that provide and of for lead the the making, changes will are right we're that we focusing navigate we customers think, profile

would simply through gone go-to-market add transition. that a gone two, transition one. to Grail, I Yes. platform we've we've Number Keith, through number really

play go-to-market take future. that combined think with trends along this the these our described amidst these favor, that to as we a as of macro well. changes decisions we observability been the there of have of So the this underlying architecture couple end-to-end about And towards Jim transitions environment trend, look Grail, it, optimistic as strength to advantage the platform market strength to we're with of very

Okay, relates my I'll that. to question, direct just which okay. Terrific. And maybe Jim, follow-on

will, you bit Was security being are you for hear pushing -- are you both You in those which you if had you logs? maybe just anticipated that's and past some into 'XX? the little think -- for a logs. into But indicated 'XX. out sort what 'XX And targets I previously that could had that correctly both conversations, pushed did tease out. that optimism, that I -- for pushing million And of more around why are $XXX

You did.

with, of making those. good So I'll traction both we're start very with

XXX log we So XXX-plus our side. either application have both leveraging and the on customers security areas, solution

So we're getting good traction.

those adoption particular, would I in good and be market confidence, on adoption for would the half in have we offerings. that I've said the uptick back would an always and the a of say take for is 'XX. there a on the still requirement still side, that logs Again, so fiscal while

be still million-plus our I just that we think think differentiation $XXX will wanted that, might competitive compelling. businesses. open But be extend. is We to that I they think

road logs that what days from on following. deploy. when deploy, what growing reason things it, their nature still trend we and deploying they observability end-to-end those first and but the call and is these sequence are application sequence decisions is, security customers, those are as a And are, they they observability, it's have what sometimes like they're monitoring, of early map, And infrastructure we of found they application see

of areas, those little the adoption so to And push a we probably are believe, bit. going

will and emerging with these be some areas. of consolidation adoption think will $XXX businesses. of We sequencing the what new this change platform we million-plus businesses So seeing trend of we're do these still think

also just customers quarter-over-quarter would to the I which customers. Yes. add number that -- is increase increase up increase in a log in of of similar XX% number AppSec XXX,

core So in areas these growth continue with see continue to consumption. in substantial to and see deployment we traction

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

about -- only can bit Is vendor there's deals, you guys we with talk of the kind obviously, you that tools? things? -- dealing pursue as consolidation like you them? landscape of like larger a few of Are replacing in little As a changes that the like these a you're kind

kind you getting larger then to side, the of about but like timing seem a renewals. of the the building locked then lot there's that on one could Can obviously kind have talk just of we customers bit comes to a in and of one the deal then momentum just some that on big their side? in little mind, kind that And on here replacement see terms of

this many trend space were reduce few get I too increased can to core incidents. we're felt too experience, saw, them. overall user dramatically Raimo, an and the multiple was observability. of with among that of different very in landscape is is there reduce to prepared in in user is they too frankly, decisions and solution just example spending would number What they cost we orientation, earlier, much they provided this mentioned the seeing. towards the And And incidents. By evolving, improve we the Dynatrace really view that landscape the our are, they together, that remarks for consolidating money provide experience vendors towards vendors as airline the and landscape example, felt and centralization little associated large that

Yes.

managing cetera. Okay. cetera. into that pre-invest were Jim, numbers in and bit to at achieve -- you're sales you well. some doing need to the then actually I and of like show the the for about about talk the still looks you the invest to one look And the little et of of investments, first needs to of still good If there kind profitability previous seem you're point to talked it -- et guidance quarters, like a a And kind that? you Can us bit Perfect. little for I out the capacity, levels now, initiatives

and things one is the points that Dynatrace this as drive to to operating evidenced flow. You're of free drive a cash gotten -- commitment right, leverage always expansion you've balance is points Raimo, of by basis continue to basis XXX XXX almost of try margin year, what with

We're -- drive are business. scale across going to the we to continuing

modest should So doing where things saw we There's gross expect to in hosting G&A, leverage margin. more we're some if in around see cloud leverage drive leverage you you G&A. potentially costs, in can

investments investments making areas say, making adds The are that specific would in it are I we it, areas call and in specific modest multiple very So but we it's R&D. it's, up. very are

R&D a 'XX. actually grow to as in revenue fiscal expect to We percent of

the of on see sales we think will bit do side, a We little marketing leverage. and

make also driving will from, through Some partners of to opening that to rep going leverage it are partners. I about clear, But sales come 'XX. and we fiscal Rick's point investments incremental in do to more want make

addition of better in productivity. partner kind capacity will there be and investments So getting to in leverage sales

and/or stabilize a is it's expand committed different what for to we're areas. to So And of bunch margins business. the

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

for Bergstrom Dan It's Matt Hedberg.

X-figure again like on for partner great the contribution sounds partners deals. on side, So large those

remarks. some for whitespace partners logos to talked around prepared You new in the

of help equation Just you partners. can maybe side the wondering origination do what the to for

thrust to deeply GSIs so partner origination already. and the is with community real have XX% engaged we over which the driving are prepared partners purpose partner remarks, of really substantial hyperscalers. we're of with that already very influence influenced, is I already a higher drive origination. Well, partner doing is are of our that my mentioned deals. precisely the the whole We initiatives The X/X around percentage deals for partner what in

of our is that So strategy. partner thrust major the

Jefferies. line the next of question with Brent from comes Our Thill

you you the seen? It what go-to-market. And you XX% in like know changing your trying change logos. achieve? force sales to done big are past? the And mentioned changes that in have I out pretty have I what the guess, the of in effectively, seems this you a

double So could just on click to curious through you if this. achieve expect I'm what you

Yes.

So I'll take that.

there is level some year, of So every movement. modest account

large more And sales per had we again, be one kind rep that your clear, So the just I'd to that's, part we move kind to investment rep. in was felt of there. coverage Dynatrace the we call enterprise that But we is doing of Global accounts density that unique more is what and having We to looked it, a not capacity we things say the is the it now coverage spot is that environments. accounts -- is pyramid that new wanted. the XX% resource needed we're needed at unique. XXX, the of of not sweet when number of for weight very in of there, the

making we So more are investments.

Some commercial to of mid that investment call the from, is just global the strategic accounts. investments reallocating it,

The customers intimacy would propensity to get Obviously, the their them, whole more with the spend. I coverage can for the the to greater have say, a and of spend. more get can do we better is we more -- those this point more penetration

so spend whole of drive that garner we observability to customers to and Dynatrace logos it And the with space of some dedication more today. that also don't those have in point is new

focus. the really that's So

these broader the the point, ecosystem. of leveraging of also had the the it's motion, in end better and of ultimately, are we've productivity an which partners certainly, Rick's to to drive an acceleration bookings an there then sales adding designed sales more And But But growth. bottom changes with inside ARR and at in motion. kind capacity drive it's And in to pyramid, inside past. all

XX% all accelerating to back growth are you're just accounting Okay. hyperscalers growth teens deceleration maybe And the between and tying the that's for high to anywhere despite these think guide, the seeing plus. I actions seen

when Yes. this, I would trying say make what mindful changes sometimes to we're go-to-market prudence to pause. doing these like reps changes we're can that cause some is you that build we're

build near-term that movement. some that nature some that reps of are there may impact be things are we trying to new that prudence relationships, account in accounts, have You building that this learning reps and from are

if that outcome. we're it modeling this, think do we're do. doesn't I said, we us disruption to what better I a we -- we allow to if that's striving Sanjit, transition is then through could this was, And to deliver As what occur, could better certainly as

Citi. question with of morning line from comes the this final Boolani Fatima Our

especially takes deceleration haven't a a trends metric, the quarter. for in if you sequential commentary necessarily Just, for in some I XXX% worse, and on time net are that DPS rate dollar-based And of consumption speak know could macros the but to X-point going. under slope Jim, and performance wanted unpack your gotten puts I as you hoping in paint of I retention superimpose a the the to successful us when some selling this or pathway to around was re-expansion of you, hitting quarter. how the the can the vehicle I

the and bridge So I levels, lightness the quarter a your you can gap and XXX% towards quick could how this we compression for get back was hoping in historical the please. us of of to terms and some path follow-up, a

Right.

say, XXX%. just was I'd right that -- you're from XXX% I'd NRR -- So the it down to was it was, say, rounded

that's had quarter. by strong we logo lighter, very, I driven that So fact the but bit very new think little a a largely

new where quarters you expansions. new have logos are sometimes stronger had so logo And good very a quarter. We than

are indicator some faster is now to It XX-plus it which a good a of of rate, indicator it consuming a comment early make more on, leading a the a as of making they're customers means as they we future DPS that getting they're consuming our a means faster platform. It days, is that if indicator. it, think sure value faster, call You is out our a important leading The traction, highlight expansion. that XX% consume still vehicle, these means percent things -- customers, of at leading fact is ARR. it's of did

early relatively days with DPS. We're

have we it at cohorts So you year. been for of a that only we've the think that

thought, will time this which exactly access we're what to it is expectation. itself and a to in vehicle NRR, leading little platform customers so indicator of committing SKU-based they're capabilities. is otherwise that the manifest commitment, at a And model. rate the a consuming the they will expansion is bit the have dollar-based allows that that as the in as have means ability take that They but see doing DPS seeing for contracting platform. that all believe And that an without we leveraging items, we a product occurred much of you earlier fact leverage would expansion under SKU-based to they're The rapid is are an

think will in some fiscal of of that. see I really, you'll 'XX more we fiscal even But 'XX. see exiting think I that is

to the who 'XX of about dynamic logo expansion talked down acquisition. and spend. I the propensity But straddling logo new curious customers comment can have acquiring a I new new quality the please on sales appreciate logos some and thinking very the your historically, you've between growth. your rebalancing And know new you just the algorithm capacity context very path of on large an that logo fiscal and with loyal of how resources of I'm in in new if about trajectory going quantity that. point versus logo and the you're

It's would model fundamentally. changed ARR, the hasn't great XX% to XX% I a our new as, far that from of I'd today, as say of comes fundamentally not say roughly from our question. ARR going change That's logos, expansion.

Your about much they focused have customers as versus expand we focused we quantity. -- on quantity on $XXX,XXX quality. comment land the very What of faster. if found that the ARR, not of are quality than we greater at I'm is

very, we seen in they're trend had the you're quarters Obviously, to this like very, is where large. some you're of architecture and that quarter have in fourth you've going overweighted growing very decisions, what area,

more focused the on of land. quality we're say the I'd So

towards more the but again, quality. that a in think we've geared Some go-to-market quantity, I changes of I'd bit it's are, mid-market, these say primarily little outlined,

we it, -- the, from let's think think that's about, expansion. of probably going coming I it, continue. XX% And And from call ARR roughly so XX% equation new call the the to

right. as the momentum XXXX strong as Well, we and QX you all fiscal establishing into to questions ongoing your year. and for a very thank saw All support. We finish fiscal new head

to bullish are about end-to-end the opportunity observability or come. quite decisions We

We weeks, good at over the look IR a you all very coming day. and upcoming events with forward you connecting to wish we

today's you. Thank conference call. concludes This

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