DT - Earnings call transcript Q1 2020

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Operator

Good afternoon. My name is Sheryl and I will be your conference operator today. At this time, I would like to welcome everyone to the Dynatrace, Inc. Fiscal First Quarter 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. there a remarks, session. speakers the will question-and-answer be After [Operator you. Instructions] Thank

begin Relations, Investor Bowen, your you Michael may conference.

Michael Bowen

quarter session. results. operator. we prepared you today and today call first Kevin for the you, are will joining XXXX Thank Good Chief a Financial for us open to afternoon John Van Burns, review up Executive the Chief me remarks, on With and Siclen, thank fiscal question-and-answer call financial Officer; Dynatrace’s After Officer.

your draw attention the we start, to Before today’s like statement harbor release. in to included I’d safe press

XXXX our this that meaning will During Securities amended Exchange we make as call, XXA of XXE Section considered statements Act the amended. related within Section to XXXX as Securities and business forward-looking of of maybe of of Act

than outlook, are operational All guidance our regarding and statements including statements future fact business expectations and for operational XXXX. second performance quarter of and statements, including historical management’s growth, and forward-looking of full-year financial fiscal financial the expected statements expenditures, other

Forward-looking the update SEC to except law, obligation today’s cautionary materially and from our as in no of expectations. we IPO forward-looking undertake perspective, which statements discussion actual to defer July and cause required to results is filed SEC today uncertainties XX, XXXX risks and language only our final revise and Please refer by these filings the press statements. to reflect on our with or as other of a for that could views

non-GAAP be directly financial our we G. each section of financial financial GAAP between discussed, GAAP comparable found XXXX release financial as fiscal our in of non-GAAP Regulation quarter measures today’s to Relations The each measure, used differences During non-GAAP a or the most measure at website defined Investor press earnings measure reconciliation course dynatrace.com. with will the refer and measure first call, the certain to and of financial by comparable can

Executive turn Officer, John? the our call John like over Chief Siclen. to I’d that, to With Van

John Van Siclen

Thanks our I to by like public thanking today you start conference on all as first And a of us Michael. call for joining company.

our to X. important to We ability enhances one awareness completed growth brand strategy. the and and long-term milestone are our company’s that have IPO represented excited execute This further on for an successful Dynatrace August

We pleased where achieved $XXX the quarter revenue, financial first revenue are and also growth, XX% year-over-year. XX% we driven which and very subscription strong growth with results, by million, total to increased ARR services

balanced We time. greater continue flow business a for to over focus and on durability growth building cash strong with

key a I to As overview this behind is opportunity is recent company, wanted our drivers details a software business. built brief value intelligence Dynatrace enterprise transforming and provide the proposition, of into to market public Dynatrace’s software company, a transformation, in cloud. first a a our market performance. quarter as addition providing industry purpose every is on Every leading and company for our

run While assure revenue the Intelligence they success new the works digital for every business interact streams to perfectly interaction, transformations software to these Software quality experiences, optimize that existing core software or transaction, sits failure journey. with these the their and down customers, create Dynatrace of every at supporting assure comes user efforts. ones, every and always

cloud and entire the would ground XXXX, spent APM, work minds application got determine our world. up, disrupt moment platform dozen our icon the a in is of monitoring. how that leader to in after to we future, nine refresh a of top monitoring team we in our the XX entire from back talk realizes a model. doing, so category decision bold about business made the This reinvent a here. would old. years the how sending product building Dynatrace and now step years We performance Let’s In first

market. the if we And change. would Everything the could redefine seize we opportunity,

an at already were the market. recognized engine XXXX ourselves. one a The powerful core. APM of we result was platform, And disrupt AI Dynatrace, Cloud with we doing, a in the widely launch the to decided in leader, all as so disrupt full-stack Although monitoring

the we chose experience simply on first could complexity, change cloud and frequency versus these of ecosystems and more scope, hoping modern With glass answers up. to keep would IT put teams pumping data

since. a answers has of end the and XX% management, XX% new new approach up highly platform infrastructure ARR, been XX% brings and growth from This Dynatrace ago. to cases driving March This cloud digital our up used of our At quarter, the total comprise of the first ops]. the platform our of experience differentiated quarter, platform our year value at from [AI company's APM, monitoring, June ever end

actively The our continues transition to platform. to Classic remaining relates XX% our Dynatrace of which products, ARR

quarters now our transition, Customer five to launching of are to what believe quarter we motion We expectations. XX XX evolved. Classic is platform, has our into program a also go-to-market new ahead After conversion run Dynatrace and the continues

most acquisition with value-added growing further and now a sales direct discovering exploring customer system and become of frictionless of then land much has a process sales We customers through number trial. resellers, more our believe integrators. our through free We process efficient expand Dynatrace resources, nurture and enterprise

the that gen With are automatically, data baselines, traditional hinder growing the of continues approaches. beyond a the barrier X customers to platform X% our cloud instruments implementation we dramatically entire seeing is streamlined, expanding and that stack number and

to we end balance the majority Consistent at net the Dynatrace our X,XXX customers quarter. new our days. prior were with prior platform Dynatrace to an X,XXX customers, from fiscal QX, of of the from with these to of end quarters, had new logos At the Classic the Dynatrace the converting increase business,

consistent expansion for net quarters across increasingly now customers past rate five on XXX%, all customer larger Dynatrace cohorts. over was the our again, Once

platform and go-to-market a in $XX streamlined front we capture of TAM, innovative estimate believe we share AI growing us. our powered can and billion Given we strategy, of meaningful this

applications instrumented forward ranges that what is and platform, between from of longer-term of X% XX% and an accounts versus enterprise believe having a XX%. where the industry be about global XX% to perspective adopted estimates target XX,XXX only With Gartner target we Dynatrace

There ongoing to expansion, both on. goes cloud it is further potential opportunity when large add growth significant our to application cases, additional time expand the ability time. plenty very you And we used platform to as TAM company our and to is this, build in over there believe add and

provide Now, the insights some to and and the let several power land expand our new differentiation me with in value along expansion our approach. customers of illustrate

hybrid QX to hundreds of policyholders. of services First, large of new modernization as one that’s improve for in government benefits U.S. part a of logos a an environment and to overall moving thousands program our IT to agency access multi-cloud was

has with migration in complexity IT approach for of exponential to rise the the this performance to resource efforts. our brings first AI modernization organizations. cloud accelerate improve reduce answers it an The advanced As with and strapped many data, dramatically issues, Dynatrace agency customers, automation the move operational their and allowed engine efficiency, leveraging Cloud Dynatrace and

Federal market side a U.S. market time. us the note, new a is for we opportunity which As for relatively tremendous see over

example their next plus is have would has A a customer. manufacturer to They new product centers like too expansion with APM the Cloud limited Google across for found been auto naïve environment X inadequate manual own cumbersome, Azure, it that major share and Platform. an too was competitors data cloud and been proving The their observability. stack Gen environment. It using standing AWS, European I and to hybrid multi-cloud moving

just toward set experiencing and few customer workloads their ago, months weeks of a started the with of taste this was a in Dynatrace, IT advanced Although initial of additional of several applications team licenses. Dynatrace roll-out dozens hosts to small acquiring additional an automation after after able X,XXX

searching operations now impacting versus answers their or problems With the continuous that or focus to not wasting teams dashboard their intelligent through and to may value flowing may of monitoring for using loss building on development data’s, a be users. time for company

line, final This managing and to translate who greater marketplace. auto platform. classic Dynatrace gain Bottom is the innovation is in products a from example like of customer would a option for a core transformation. speed operation company efficiency, the running their share large to greater these I and business The converted our new digital manufacturers into which

saw offering, and environment Dynatrace to an own opportunity our their shift and modernize they With to Azure. infrastructure application

process, concept that our interested. teams with became access As been to able a Dynatrace conversion previously application of as never number proof we had of a did we part of

new these Before but these were cloud, teams services. resources separate, their Cloud, teams enterprise were with the software sharing and cloud

weeks conversion an to there from management is Dynatrace only the finish came to coverage planning than extend two This upsell is took common. very change with Classic result, more process workloads six a and of to and includes the start expand conversion more. from to potential This time. As and times that for

to dynamic Switching front innovate so now. to expanded automatically it short, while the for we support [indiscernible] and minute, realized In we have a Kubernetes, monitored continue effort some very a convert we time is QX, from environment product for for the compelling. announced The to organically. doing instrumented and time value

In the their performance our a analysis application solution fully single quarter, delivering Kubernetes automatic and extended analysis of our within clusters, leveraging engine we full containers workloads now in the of stack the AI Kubernetes data’s.

to stage first multi-cloud it for than environment. Red an Hat Kubernetes and and continuously introduced X to adding we making environments, for ever our AWS, support addition, In easier coverage enterprise Azure OpenShift Google, observe manage

integration IBM for we their coverage for addition, mainframes, and support with agent on CICS hybrid the and workloads In frameworks. one with experienced of middleware observability clouds associated announcement our IMS along

from better and visibility or IoT critical mainframe understand workloads This resources Now, through mainframe and Dynatrace allows behavior unique to their leverage on compute customers can these impact end-to-end resources. regions our device back. mobile to application and observability infrastructure cloud customers application maintain the mainframe expensive optimize deep the

ecosystem compatibility, to software XX hundreds year our and For assure enterprise customers. and platform of we our and for to market-leading scope minor capabilities cloud the major increase continue per intelligence releases of releases currency

forward, exciting about future. we excited be more look shaping is our a XXXX we As couldn't very up year, to be fiscal and

today's on reinvented ideally stack, have dynamic suited fresh multi We new our clouds. for technology business a

our is subscription new shift evident in customer halfway to of mark, classic our is essentially profile. us our of efficiency affords is the the the strong approaching base conversion platform and Our complete, profitability

to us. continued focus great work to with capture success in massive a opportunity customers, to building place We're is and on investments the value a our marketing and as know shareholders excited for long-term for long-term of as public R&D. our employees. ongoing There commercial ahead company, innovation sales our for we a plan and in operating We

let our me With over to call CFO. turn that, Burns, Kevin? Kevin the

Kevin Burns

existing in our in Thanks, strong even than ranges to public pleased a S-X. I'm the share, to connect John. shareholders shared we financial great prospective as call were have company. that we with better It is our which both first and results

you for first review may to be and our want the aspects XXXX, of revenue as as in our considering Before I well the discussing to the our results second story. business new guidance detail, that and important Dynatrace fiscal model quarter some of

outlined is associated platform. focus in a we subscription and S-X, during future our as roadshow, discussed All of the our company recognized with the as Dynatrace and platform revenue As our long-term the and a reported on rentable basis revenue. Dynatrace is

significantly through With run revenues term Perpetual respect are to is has our are recognized an becoming classic and the license P&L. Overall, on subscription maintenance for is on and offering, growth. reported subscription model rapidly our one-time complete insignificant to offerings down this revenue. classic declined as recognized and delivery revenue. SaaS our Classic and transition revenue revenue licenses the in and percent total our of is apparent we to substantially a now and believe license

XXXX quarter results. let Now, to turn fiscal me first our

annual key metric an revenue. Our is organization financial as recurring

of the was ARR. at a John ARR June, year-over-year. million, percent which For to platform as of said, increase was an as continues end and quarter, our increase Dynatrace million total XX% the of XX% The $XXX.X of total was ARR $XXX.X

of conversion XX% base next remaining ARR the Classic and with we Classic activity to occur most the years, to of expect convert remaining Dynatrace of over two in to to The customer next relates four to offering, our majority the quarters. six the

the expand from reminder, As can our that growth is ARR in to possible the not there, because opportunity a simply footprint platform, were It is on not conversion. the before. ways we Dynatrace getting customers

down not do And as quarter platform. ending upgrade Dynatrace break X,XXX quarter, expansion we footprint is growth move or we during Dynatrace, new drivers, a net the Dynatrace added two fee XXX the to our new of logos conversion or to new expansion new result, ARR quickly the the business. Dynatrace with to all either investors ARR customers charge for addition, If a In to customers. we these

net to quarters, new healthy Dynatrace balance recent the logos a of customers moving Consistent as with customers new franchise, as well to for classic platform. adding the

have remain we rates efforts net In offering customers, ramped the with that flow addition experienced net quarters, customers. XXX% to existing since we a threshold expansion steady over the new above five Dynatrace our on our of the dollar-based last

We the expansion a on end and expansion year, specific a to fiscal of level will for basis, net confirm quarterly share year. the the plan net continue to this we at rate

keep Dynatrace platform. net excludes rate our please that expansion a convert mind the that Importantly, to when Classic occurs expansion in upfront customers

our net they expansion So, account with only reported into customers expansion the are Dynatrace takes rate on platform. after

revenue. an year-over-year The increase in This revenue, Turning a acceleration by $XXX.X basis. was to revenue Total year-over-year. XX% which is increase $XXX.X on XX% of growth was total million. in was the strong growth subscription revenue being million, an driven of

the to revenue. will Classic six conversion quarter, $X.X to the be our license revenue only we Classic mind to wrap over of down quarters up keep that million going zero For represented four X% the this quarterly was and as next program. Please in

the From subscription XX% revenue, think and we million a a believe way increase the quarter, $XXX.X revenue about an combination standpoint, which of and services revenue, in our representing basis. of of to is total best on year-over-year growth XX% the was growth

Before exclude other stock-based metrics, the going results non-GAAP forward would like release. unless amortization our outlined of and profit be measures out that moving and I'll in stated, compensation, our to that acquired discussing non-GAAP press I point otherwise intangibles items as to

over the improvement platform, current Gross margin to the first our version gross margins quarter, fiscal of compared due and subscription one for in first base efficiency an increasing margins, benefiting XXXX. was from XX.X% the customers in last a the XX% non-GAAP has in Our are quarter Dynatrace released are the of which XX.X% XX days. to of

of up QX the of XX% a operating in million, non-GAAP a income a subscription was The the completing when that revenue XX%, resulting model. operating from stages model, $XX.X largely transition as non-GAAP moved XXXX. negatively to is upfront for to subscription Our first by the we was quarter driven impacted from an fact we final are margin in increase in margin operating in of historical our perpetual

had year. XXXX from of addition, In quarter balance driven quarter and to that first overachievement the margin of certain of of some shifting the combination expenses a the the the was we revenue first in by

expenses million $X.XX, was keep XXX.X net per show do please the which Finally, mind that outstanding. net in company, in forward. income of Non-GAAP quarter shares income include our was will going not public a up first million $X.X and being on cost share G&A based

Turning to our balance sheet.

of was XX, had of the XX and June net equivalents $XXX.X first When of cash our we million. million pro net million. This trailing adjusted quarter, leverage $XX.X debt basis, million. into ratio of of at As $XXX cash of On have looking the IPO, XX at EBITDA the debt our months from proceeds of leverage $XXX account forma June times, a the our end X.X a been net would million. as $XXX a represents taking

debt and balance million our current of the we've Since $XXX debt, is end paid first $XXX down the quarter, of million.

naturally steadily due over holders. down cash which will we create pay to our will for business value the believe debt margins equity and forward, healthy we will Going time, de-lever,

QX, The I end months last IPO, which an million as last expect the QX our year. million, that of XX at The was $XXX share next to current of balance of portion the our XX% up metric recognize was of year-over-year. want XX% sheet IPO, was over revenue to we $XXX which over increase

our impact customers. Classic unlevered unlevered our from we was seasonality at XX-month in Dynatrace, we the our cash To free clear, convert and we on this for we flow of when be cash cash fluctuations and timing million as trailing and our flow quarterly $XX.X invoice Looking million how may a $XXX free to QX, have as it also basis. was have customers

fiscal guidance, moving a like Before GAAP for that of the XXXX. second review to I'd to results items impact our few will quarter

First These the IPO that IPO second [indiscernible] of will fees to in we hit the million quarter. addition cash of the commissions structuring previously. approximately were against discussed related all, or to incurred proceeds and in netted IPO $XX P&L the the are that

pay second also taxes that neutral as mainframe a business, that and tax which to federal from used the these majority received paid in quarter calendar will the spin Dynatrace. item fiscal will is state funds Second, recording of the second the balance year million of to keep $XXX and the quarter million. this the of business pre-IPO, XXXX. and we mind charge Overall, will a be cash of we Please be in the mainframe and [popular] cash be result in XXXX a in early $XXX

charge IPO quarter mark-to-market.com our our Finally, second million. S-X the one-time on based a in as of we're in disclosed recording value, and $XXX

to turn me let Now, guidance.

For the a revenue fiscal million, to $XXX of of we expect XX%. growth total year-over-year representing of be $XXX XXXX, to range to quarter XX% second in million

to income expect and share. the our XXX This income of $XX be of in million and non-GAAP per million $XX We million outstanding. range net shares operating non-GAAP assumes, approximately $X.XX

full the a representing year, range $XXX be to Total million, $XXX the to million to million range growth $XXX of representing fiscal expected to XX%. XX%. to of XX% year-over-year of in we growth year-over-year of is be $XXX to ARR expect For in XX% million, revenue

XXX to income We $X.XX expect operating be per our fiscal range in million to $XXX This the range and the share. our of non-GAAP of non-GAAP $XXX for $X.XX the million income net million in shares year. assumes to outstanding approximately

as record well very positioned we're and long-term. profile With the scale, including a public as its is company very believe operate a and cash front track large in a financial believe of building of for with position, in market-leading us hand success is growth flow. We out the to unique, we the pleased quarter look summary, company. in our forward performance first In we a Dynatrace’s

Operator? for open With that, will the call we questions. up

Operator

go of Please The Sterling from Instructions] ahead. Auty first is question JPMorgan. [Operator

line open. Your is

Sterling Auty

you Hi, the onion and you're in experience of peel seeing in thanks. in pace guys. the Yes, terms where the of or a you And front conversions? Wonder the where finished what little us What's of update of you bit kind terms on quarter if back left conversions? just can of are us? those legacy

John Van Siclen

we how is ARR through XX% but halfway conversion Sterling, We nearly five quarters. halfway we've through is point. Hi, after on as now at are of conversions the process now of the said, first about right conversion Dynatrace, you? We're are So, we this the as believe talked two-and-a-half about little goals. to over we're years those ahead it's with now. majority very and or internal a pleased where of converting that process, and three-year a plans so, our are two

Sterling Auty

Alright, logging, great. color and seeing areas then new you buckets qualitative follow-up the give – the monitoring, of think momentum one of as in the three can about just that you're one each in of some And is, you kind give you terms infrastructure of APM, the platform? on can me those

John Van Siclen

of some Well, who you our and day maybe full as those has assumed always listening one, are so know, platform, complete in, observability. since stack

if whether with pieces it log [AI with you you're customer, infrastructure cloud well, as ops] cetera. comes in APM, stack it, So, and et get an full the APM the

knows That So, that's legacy standpoint, most and and market through our know as for customers the momentum, what from since that and we of the of plenty of in APM, us you been for our us see can best. opportunities has sort numbers. our that's enter

platform stitches like us, our one mean, full we're AI get the the adds they characteristics new engine a And to cloud is that extend in and also engine module, hosts. of that component, at As along therefore, expansion. for far environments, AI that the their view, everything core. stack traction with expansion is when an the good of together, infrastructure-only seeing a I someone infrastructure-only that's our as unique

well. that's that with the same – that's as management that – digital So, experience and

to platform full You the portfolio engine and powered first also add stack, that or to AI that the answers you. the AI absorbs the into view of

it, seeing platform a to present the additional of the think good So, piece ourselves much all way we parts. and those but do standpoint, of we market set from we're more that than modules, is about on a traction

Sterling Auty

sense. That makes you. Thank

Operator

RBC Markets. of question comes go Capital Matt Hedberg ahead. Please from next Your

line is Your open.

MattSwanson

on Swanson Thanks. This for is Matt Matt. actually

seeing international just about uneasiness so demand You what earnings, heard certain of from guys some Could the just very regions, you seeing recent had a presence. we've have what a from And little some out there? you're a you're well-established talk environment? just in

John Van Siclen

Yes.

So, outside XX% XX% I we to pretty America. right, comes of And have appreciate from our footprint, you're the do question. business North a mature

seen on of in of We shift central cloud those digital transformation sort negatively modern that that world. real haven't dynamic the demand, Part of a to any the more be environments, everyone's and sort around the may multi-cloud exclusively in environments region. focus are we

of So point part this at that, that more at be the difference us may what's of keeping resilient. least

Matt Swanson

bit I helpful. capitalize really Thanks. to the here just the make maybe technology think talk more, how opportunity. really about early days, said you And interesting you investments vertical but in a at look Could to and That's federal it's that's you are on know, you might maybe in that you U.S. expand that what you need little future? go-to-market or

John Van Siclen

very different The those market, watch longer-term ever to who've commercial talk it. it, is a a been or or U.S. those to requires market horizon. It about others investment Federal market than close Sure. the

hesitated understood had that quality team quality leader really we who so, market longer-term investment we in that sales space. and to until And a place put a

we said, you as see reiterated, it's payoff the couple years, early but the I started last the starting promising. so, And begin. investment, to days, we're and But

in is your off, process a One momentum in we’re federal in environment the that certification, also long-term that's of you momentum the things an space. [ramp] this build to important get help which – sure important and component the is make

Matt Swanson

you. Thank

Operator

Sachs. from is Bellini next of Your Heather go Goldman Please ahead. question

Your line open. is

Heather Bellini

about us Great, yours bit any seeing? in And kind Ops through questions. wanted you've wondering you could could us that But Thank if AI little the secondly, about competitor a was Ops of you. early the thank just been kind of who, that a the of you. just There then you changing ask walk standpoint. from trends offering? and August competitive what marketplace integration with AI two I a you're seeing I think, to wondering Was you’re environment. one, talks if had competitive it landscape share was

John Van Siclen

some So, data The from sort and really – from having core even and precise stories glass who shifting an approach in ago new and both I at the fashion. platform just on a moment reiterated answers answers AI they're a come AI Ops converting of about customers. a standpoint, customers, first, and of we're where very our seeing existing automatically

that within that’s So extremely their additional more by resource [ph]. have anomalies, it of user serving actionable. degradations from organizations, shortlist come on it's customers strapped of answers And the seconds extremely for know well CTOs ranked us impact, and CIOs and and because automation and more a are differentiation they're their IT they standpoint,

extremely number actually been things cases new It's with six now the of as that's So, used balance available. the our are around sort now, integrations, of of into fairly But old box accelerating. we've of of going well also. low early been going data FX, – kind months far bring as the It's those AI service had Dynatrace sources And integration APIs that a new some we're to since out that's well. some environment, APIs utilizing folks it's of days. more

pleased we're there. So, very

the really important it a a where made a also as we platform landscape space obviously AI observability. view in of the comes the really cloud modern observability – that's interest lot the as But reinvented advanced far definitely of on value observability competitive days. see analytics these that automation paying we is in when we see real it and investment as And component, step, the Ops first or environments. that that general, advanced off. We come just As getting we the top the

Heather Bellini

you. Great, thank

Operator

go is question Jennifer Please ahead. Lowe UBS. next from of Your

Your line is open.

Rakesh Kumar

in is sitting This Rakesh for Kumar Jennifer Lowe. thanks. Hi,

you think which levers just impressive. net new expansion logos how growth, it I So, if ARR talk growth on ARR about was plus you as of ARR of could growth, relates to conversions a bought you and wondering conversion? XX% versus is totally

John Van Siclen

I’ll pass Kevin. to it

Kevin Burns

is Yes, sure. This Kevin.

earlier, and our is of business, S-X, quarter combination really over And thing I'm great the road see you the we're can really XX%. for healthy And then franchise. as is during John that in we new it majority mentioned yes, a additions quarters, were been discussed sure our as ARR couple to nice the logos in the of a logos the new show the last seeing has of growth expansion So, other as our rate. over Dynatrace in

point, So, last not at in was a the on three this it talked the total show, XXX% the for it when range. north but of was number quarters, road that disclosing high-XXX% we about

combination nicely. really they're platform, So, the a they're is once expanding and new logos on then Dynatrace franchise, the getting to very of

Rakesh Kumar

plans I Got it. trends And then for I long to hiring have if taking how is have productivity follow-up. for talk ramp about and and a sales was wondering you that reps you could it year? the

John Van Siclen

the what from reviews job we're I than of years attracts I is a two for the in pieces better or course, and et we've cetera, business, also momentum been But of think not that, it is hiring Part in is company to in will position online helping. et we're relative the So, all say sales hiring some standpoint. disclosing sort of also, positives of cetera. now, site the and the our three – But talent. a

doing well talent. So, retaining from our extremely attracting our standpoint, goals, talent we're meeting hiring and

Rakesh Kumar

Thank you.

Operator

next Please go Bhavan Your from ahead. of Suri William is question Blair.

line Your open. is

Bhavan Suri

out out you maybe to on DM guess, nice rate, obviously, trended about love of gate little recent how skew job a seen thanks, separate terms touch there to and in rates the you've quarters? the congratulations the I want just in that of quarter first of more as bit Thank adoption attach there understand I'd sell a there. I gentlemen, and there. you. the a attach what that’s and Hi, the

John Van Siclen

experience just detached, a we that for set. sort is set in which area, separate management has of experience been, while, components the product – was had So, the product of we've user it sort a Classic our module digital

Bhavan Suri

Right.

John Van Siclen

components In the every tap view. integrated everything the the from together Dynatrace in module, swipe stitch through, a pulls full infrastructure click, AI platform it of all a into together stack the back-end engine way is single view an where the all

So, as in we’re cloud, to seeing foundation rate. years attach the for had three, the to that we to continued ago rate the in that four starting an see interesting building cloud, numbers the an Classic world our of interest just what from in the standpoint. we attach fact, move It’s momentum we went to lot are now is acceleration, a

exact place been investment go and want attach to for the forward stats there's opportunities it's market list, to attach the rate for don't down banking, are where community. any healthy and we I have the module]. bring perfect rate. talking attached and But e-commerce, solid users present home about We're to [dem the that in those how – the

Bhavan Suri

that's should But John, as instrumentation, of have maybe the it strategic you think guess, and I first. make easier more No, sort of the asked achieve customers, automation question automatic like you for I penetration this features and one greater Dynatrace deploy a helpful. easier about to much to the platform, new it it manage. because within feels should it's – makes it maybe

applications that with look think customers bit, like platform of is but rate, think the know, way if Dynatrace that historically? think sort talk maybe that by percentage average that the – about the is [indiscernible] to as and trends what's automatic because of about monitored about little sort to obviously, of I seeing shift? higher detection, sort platform that an the it? what the you way of or number which historically, way Because customers, that sort instrumentation the guess, of and of seen the does love of of Classic become lights about sort – meaningfully to And a applications you're expansion up, you've

John Van Siclen

management the misunderstood meant digital experience. I question, I if piece. you sorry, thought first Yes, the

Bhavan Suri

did. I did. is – was strategic more you Thanks. I as this

You answered. Yes.

John Van Siclen

set It's the work and But continues expansion – get expansion, in on rapid. that and a the that talking try weapon I wield it our show more it the than that people rapid advertise, I product Fair other how was in a ago, net the Classic hang more modules, with just the is you're words, mentioned few easy is enough. as expansion nature to automatic in taste, is, minute and the rate. up really my really about this than quite say of been start – much they few the the spot customer minutes people a

is yes, of expansion the additional bulk So, applications. today the net

we cross-selling modules. forward, additional it'll additional consistent between applications and mix a believe be of Going nice

Bhavan Suri

Thank it. taking my you, questions. I appreciate you Got it, helpful. Got guys.

John Van Siclen

Thank Okay. you.

Operator

Canaccord. question is from of Davis next Richard Your ahead. Please go

Your open. line is

Richard Davis

very thanks Hi, much.

to One you what into have if Thanks. but of the is you to and is – do of feel an companies To and – can’t like marks like some that extent ramp or companies that things run? an know that. you said of pivot you long the as the that that. try areas recall not, we've things that extent of opportunity Have seen opportunity check over one you and that's some kind government see I do our what

John Van Siclen

top Number like Yes, one of I countries the mean was huge is spend. as saying opportunity. days X government I technology used don't U.S. as far X it a the X, worth a be I where to these or falls consumer know

process, the market. customer pertinent an example are I but is part of of I requires a while investment to a we From forward, about standpoint example, before good which and look it, the to as and that’s ongoing thought definitely it think just something an success days project, opportunity uptake, now important size going I market more excited stories of that in forward are that we with. So, a lot for you the in see see starting space, we in pieces [indiscernible] early beginning mainly that that’s but it because the a

Richard Davis

Thank you very much.

Operator

question [indiscernible] Jefferies. go Please next from of comes ahead. Your

is open. line Your

Unidentified Analyst

classic point consecutive the from XXs My three you. I we XXs, really net just too. I'm think the prior to ARR hey quarters, question high stay is, a ARR understand which this ARR broader because you platform, that’s to we get Dynatrace ARR accelerated that, as those trying growth because from new clients XX% quarter question also but accelerated you're goes that and with low so grew in in the and the growth goes listen, pre-allude you and how Thank to away XXs, we is we Kevin much retention the see question, all sustainable know a out and that doesn’t like that that’s pointed guess my when seeing but Kevin, the adoption convert impressive the revenue. I pretty when that future to is a lot question like okay, back are numbers,

going something there understand trying out like like, we how about to to just changed that maybe has So, related, that but thinking in the be market forward? ARR second that’s a growth question, should

Kevin Burns

Yes.

to well, I things then there right in are I’ll working that favor. John think behind now couple of think, as this us maybe is add in but I our can jump and

ramping last bookings. XX will been some organization we’ve increase and months, all, to to XX expect do sales we that, to know so our that of you continue over First the

So, that’s one driver. growth

John automatic second use to platform implementation mentioned generation Second and monitoring. compared ability and much existing growth to the of for scale customers ease is and the out rapid Dynatrace, is driver more

expansion net that’s So, rate. driving higher

So, core the tremendous [indiscernible] has you know adding I months as company to the that opportunity. we as focus logos and are think combination the last new XX and the over well,

and ARR averaging is time. us of know Dynatrace you think for a Our opportunity we the north one customers over can for each ARR today million-dollar $XXX,XXX, of customer those platform be

in our So, new to continue logos to updates. a of ARR brought expand lot opportunity and

Unidentified Analyst

anything, a this And something there John, also it in never in asked there the know sense all in questions, well? seeing really the and was because other companies the are fulfilled wasn’t really especially well to today and do to something we is be, there Dynatrace, doing experience just others. then sense competition else but your after the was to that Compuware/Dynatrace promise, trying for something of Has there lot of [indiscernible] never XXXXs is even as on but the will in of I’m changed call, and there lot about always you? and other promise, something of room is with because too. your of, now became a companies a helping too, lot others. APM And Has a but opportunity – is guys continue a right lot there and enough a lot get right, market, made also from back went in or it’s Classic, Okay. it market early you the maybe that’s

John Van Siclen

going there talked the is before. going tooling. entirely around think I it else applications you This that’s just the know centers new And set about a quo]. of the for hybrid This data shift we isn't is shift multi-clouds. to requiring cloud, the big to that’s disruptive an cloud and [status everything

there. way platforms go tooling years’ and that’s having the tools. about That’s to years. I in out over change the after in a of say the cloud, the shift because So, XX think years old the of of All can’t a XX, modern been X to worth you bag to XX next, it accelerating platforms, with set

have about entire You stack much way is software. think holistic because to the it in more

with back. get wet. So, and of of to feet that three cases, sort years and we’re saw dramatic We market We at class years with traditional haven’t you our shift in a icon really have disrupted we offering ago four that ago to five XXXX came enterprise we looked what years moment. shifting initial used took starting that an ago,

on have that’s position. competitive is what so the only four and mean, think the and it’s disruptive is paying why great the the for we sites we’re and And expansion rapid. with that’s pleased innings I really beginning, so moment TAM this off, seeing I we're So, sure. is

Unidentified Analyst

thanks John, Kevin. Thanks Great.

Operator

your Lenschow question of is next open. Your line Barclays. Raimo from go comes Please ahead,

Unidentified Analyst

different APM along on cases some question question that board? give you look us if you again wondering if consistent but the just is [indiscernible] Raimo. the used areas Hi you if obviously focused update, first across I'm like so product is for Ops, or quarter I my look this the product to AI it have is the more monitoring shed logs you question at those roadmap, you across I it follow-up the Thanks on is could in so and can have that. my of across unified and on, congrats infrastructure with guys, And the priorities if taking light more more for platform, at those are sense a guess of a the

John Van Siclen

words. for kind question your Good you thank and

that all are across consistent They effort all some modules, have monetizable when them really. put is into then going are Our it. investment and is monetizable you of you something to

that strong So, we we’re of one used expect, those, of we that’s, as APM extremely high every team ground. in have think the but believe is cases. as The, we key would on you

and same in essential at it’s CTOs their the and It’s very difficult CIOs we for transformations, even monitoring now experience well. infrastructure space, AI the the strategic feel Ops cloud to and digital do digital us space time for think CEOs also we ground way in very investments significant do about well have which a and but at as in scale, high the as

we as cover the to think all full So, in a we’ve order it had do because these of to Cloud, of pieces do stack.

with, sort the beyond is And if fall and that breaking we so, components what puzzle just you. the of standalone to doing in extensibility view pieces of sort started now different we're for stack out reach that of the sense makes

Unidentified Analyst

the model. that pricing the question Follow-up of is, to helpful the other part is That’s guys.

the color pricing of you're because sort just more your talking competitors I'm you seeing are if some about I mean, us environment So, wondering give what the some on of can in like from models, seeing? just if can pricing so some conversations you maybe the you. you're new environment hearing our same, us are Thank you that give more pricing on personal wondering color

John Van Siclen

licensing pricing how customers. manage and believe a to customers say, you we need and I do think standpoint, From with you the I we we're to are been, happy that are smart make would have we I mean sure to business easy that rest, our don't pricing being the, models. our that and really with listened I your

flexibility. We have amount a fair of

and XX% sellers strategies license we fit enterprise flexibility, expand see and are are you and help direct some customers outbound We net that customers And we’re I who you organization, a adapting expect to I within expansion the see have just wouldn't our them product in think at We that. good the mean, our organizations. sales really that challenging of their market. with if set pretty sell difficult widely rates.

and models, ourselves, our we happy licensing our I only how that’s I'm No in happy we're speak sit can I'm to flexibility where but with change. pricing. today. So, need for with

Unidentified Analyst

guys. Thanks

Operator

of Securities. Suppiger Your question Please JMP Erik next go comes ahead. from

is line open. Your

Joe Goodwin

guys Joe on some and give is could you on around questions. containers applications Dynatrace our color us containers how then Erik. actually I you for hoping customers what business using running fast growing? the for Goodwin for on was this taking of Hi, anything Thank portion are is

John Van Siclen

here And while watch XX cloud-based can we So, that’s in portability the shift the customers. multi-cloud for from don't platform sure, customers it’s of but rapid nearly of the they XX% the exact whether and of to on workloads what or couple that Dynatrace but the what container tell containers, I or customers as you next running Kubernetes Dynatrace for what really are native environments seen to our to whether cloud customers I over been of the has little you, that not is sleep through customers across the is going done are orchestrated now, more XX% we've darker strategy. years. has do of months what enterprise numbers And I'm toward interesting but or contain that what today, around we the people have XX% on surveys on world sort last started so been have to to XX% with tune a and whether of have customers our look and XXX% than

Joe Goodwin

Understood

John Van Siclen

great know that, we you I actually built for should for us because purposely dynamic containerized on it’s situation add environments. probably a

from to dynamic of environments. rise of our great rapid it’s So, standpoint see orchestrated the this kind

Joe Goodwin

Understood. cause quarter? the just provide can of margins the supporting during you a much was drag on Classic then gross And a product and insight follow-up, how quick the of any

Kevin Burns

in Kevin is are a the superefficient customers customers Dynatrace is – firewall. data of behind the [indiscernible] all their our this have we back cloud [indiscernible] or we as So, so you know, here, when

over margin standpoint. it’s expansion and is gross will superefficient Classic winding So, a margin there. see from The down time product you the

out many not are have to to as margin forward. gross breaking we we So, down business, be going pulled really will continue that seen are how going see of we expansion and dollars

John Van Siclen

products of XX as four if expect the the XX from that products go stack. as is five can years sort Dynatrace, a years technology years, that classic efficient think classic are that the you they stack, some that I point not versus to new is back and of totally

Joe Goodwin

Great. Thank you.

Operator

closing at time. no to will the Siclen remarks. I are further Van for John There turn over questions this call

John Van Siclen

all employees look I thank have, the as I'd to of partners time well who’ve and company, you thank thank forward many and as a you. Thank Good analysts today, to build we’re we excited helped very like you for XX strong about about us Yes, like from know investors your customers to we’re we the you path opportunity very we’re now. excited about all ahead much. the evening. and on, updating in days of

Operator

This concludes conference today's call.

You may now disconnect.

Dynatrace (DT) 4 Sep 192020 Q1 Earnings call transcript