DT - Earnings call transcript Q3 2025

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings. Welcome to Dynatrace Fiscal Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Noelle Faris, Vice President, Investor Relations. Thank you.

You may begin.

Noelle Faris

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

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

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

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

Rick McConnell

modernization significant disciplined external we call. margin for Jim platform year-over-year. the metrics. execution, guidance tailwinds, to our team's Noelle, begin, to QX, meantime, fiscal value growth performance our proud observability Thank across Thanks, us market profitability differentiation, testament increased a line for XX%. Dynatrace today's these previously. And of adds better increase drivers and are XX% inefficiency expansion cost top billion continues and observability in share and free observability guidance conviction deliver ARR about its platform for of details and effective several by a have drives layer on strength To has, market Each is QX our that AI annualized observability organizations obtain customer look of demand evidenced companies untenable a is as for market resulting into of accelerate observability now tool aim tools the dozen organizations, and more consolidate than and a not to cost. It's sprawl and contributed manage Aggressive high revenue. and any to It customer to We're based XXXX to resulting unified and everyone. once discuss in uncommon opportunity and and than trailing in the in revenue competitive to scale simply I'd good lower XX% more to the Cloud internal was Subscription will like within AI-powered and outperformed factors. drivers all morning, operational organizations another business that the cloud more our wins. a joining customers. In provide revolution an explosion cash is however, both flow in $XXX hyperscaler advantage. grew again more strengthen to in have the them service, And they approach. innovation, XX-month our complexity year-over-year. moment. In efficiency as drive data, complexity the core massive our you

to core vital the parallel in needed and platform observability, and metrics, become of us maintains to in work context. technology analytics responses apply and us real business Grail, and performing just Grail our contextual and to is business security and end-to-end especially interconnected believe mandatory, AI dashboards. providing that a data We automation all data user larger data answers, the leverage capabilities of incidents. with to Dynatrace that to software AI is all to and events, reflects primary customer massive uniquely just a then enables data billions is called We automate data The perfectly, feedback sophisticated our highly for insights types, contextual in time organizations. not leads then observability AI an analyze avoid It me processing, peers. that. This real deliver logs, analytics, AI-powered traces, store need importantly, differentiators. and observability the As visibility not analytics to automation just has for our result, for from comprehensive our differentiate that points platform help

and These capabilities include and us to context business cloud technologies issues recommendations new outcomes. observability resolve the to a environments, anticipate and not stack data full adopt customers complex enrich business and enabled insights help deliver AI in for of security native help but inherent IT only has also architecture to that unified provide confidence. customers observability Our with with improved benefits

to platform differentiation have this broader of engineers and development users. to We introducing extend SREs, been teams end for new other and array a these capabilities

Next, Dynatrace. to I'd highlight key growth like for drivers X

Let's start with AI.

with ability As data. opportunity. We in market leverage driver our to I And a huge AI, this history parse into it Dynatrace AI distinct mentioned, has long buckets. of X is a unique

and and the Ops, to AI years, Ops to been for enable First has innovating Dynatrace is customers keep and to core automation. from AI we to solution use foundational many we AI to the all visibility includes to deliver security is move capabilities automation which observability, customers.

detect overhead. issues remediation generative that assess and AI-powered identify, system including techniques, and manual analyze actions error-prone by to data automatically the resolve the prevent to points rapidly an without using causal, to and Our platform drive enables AI most AI this advanced space. them our tedious in believe and observability is of achieve billions interconnected leveraging predictive automatic we problems, customers multiple We

to Dynatrace more inference Second augmented Agentic biggest evolved Secular retrieval ever RAG, and quickly AI being innovation is AI. observability driver the the the themselves. What around change of viewed landscape. with as started for GenAI workloads recently, has technology AI cycle or generation, sea AI in is AI

this native an need Dynatrace information from changes illustrates automated observability As cloud real can rapid solution to and evolution that And enterprises those itself, response. the migration with innovation, in a and adapt time. with to pace of insights AI

enormous Grail, to enable and the can analyze of processing in model cost benefit and business enterprises to prevent and With safeguard successfully. Dynatrace the misuse, ROI. output positioned calculate uniquely multimodel GenAI to predict LLM technologies behavior, adopt of other and observability, input performance the we power deliver end-to-end AI and application changes quality LLM tracing for are

customers initiatives. production the by One help deployment of the with they already cases GenAI We hundreds with insurance could found AI use AI are XX% Dynatrace into provider, accelerate observing engaged that in of large customer, a observability. their such of

ripe The disruption. existing Dynatrace to log management, market growth which is for second driver continue as the being we see substantial for for

operate well costs, too too tools. are unique and market delayed little our given value solutions security that expensive, positioned told This from operational us We to management existing our have customers. approach. Customers grow log vulnerabilities dissatisfied monitoring and provide share incident creates that resolution, are to increased independently broadly legacy lead inefficiencies

XX% logs data approach, of logs observability They we manual access last our store. or Our We extend next-generation X,XXX into And have metrics them new teams and platform, log cases. Leveraging analytics at single traces, ecosystems. from of Combined enormous to understand our greater need log can AI security XX% query and Grail security holistic do the our than setup core management with a IT deployments. well customers and providing to enable now a in solutions. Plus, That's use offering to health faster more can derive leveraging scale. and of value the observability past quarter. over the up are view leveraging logs, is initial added without over and so our languages. types data integrates logos year deployment other their log compared

driver strategy. is in for the ongoing growth third our investment The Dynatrace go-to-market

on As accounts. of go-to-market adjustments a made year, application beginning to beginning end-to-end the our segmentation, cloud enablement the target observability IT the and in introduced to force expanding beyond our at year, and focused sales fiscal XXX this and motion customer partner we we performance modernization. At strategic sales include of reminder, changes

addition since of year accelerated reps of second sales have the increase to during the We capacity. the half

traction. were Our quarter more investments in gain logos of continue new to the enablement In originated. the in QX, half partner partner than

customer benefiting the observability end-to-end deals In $X We than dollar million greater from interest in QX, contribution grew and tool consolidation. of increased are year-over-year. XX%

key resolve. banking were in which the existing Finally, several our to impacting one sales quarter, deal with wins motion unable a frequent the issues monitoring services struggling to moving their in in users, TCV their tools micro cloud private top were India. They and bank contributed environment platform to cloud, X-figure end including modernization a with were major

the is capabilities end model, without overages to new impacted POC, Dynatrace Dynatrace issues growth DPS provided rapidly. driver licensing or I insights potential subscription allows traction they the model to identified which premiums. and This wanted of cover or trialing During proactively users. The final customer-friendly platform continues gain surprise licensing deeper before

customers our DPS than of IT the the leveraging play now DPS On customer of our customers nearly consume is customers XX% on that anniversaries more our access Dynatrace consumption of cohorts have over expand that DPS across our them double rate customers rate out. base and And Our to licensing In particular, growth have customers, roughly globally, we're model, full X,XXX and their adopt the from roughly ARR earlier. customers. We our environment. annual our enabling broadly have platform, for XX% seeing legacy we they of several Dynatrace more passed approach. benefit of value to now DPS representing customers the of thesis average, of non-DPS this

and were key deal, the ongoing code risk and with impact signed lower service customers personalize Dynatrace. with an several to their to X-figure an costs displacing concerned of manufacturer changing Canadian in notable and deal peak A X-figure the season. A large Dynatrace. provider signed benefiting existing products. on simplify, expansion They log displacing to TCV associated business from during deployment major harmful their Dynatrace an led adapt automate needs Dynatrace, Next, and and top X-figure DPS, to win. A the quarter ability which American as environments, their with analysis I'd TCV of part journey with why of already processes bank them discuss tool digitize this change Dynatrace's flexibility automate allowed standardizing production analytics reduce their to a semiconductor occurring them like a cost we that automobile that wins announced validate and into won design They signed deal Midwest to technology highlight choose the X-figure TCV quickly be and to their track One Cash TCV an App performance their have logo and resolve known production side Dynatrace, as Every their a availability. We IT also observability issues VCARB, vehicle and increase give to Bulls, delivering partner competitive of allowing With maximize British on official the the company. the production in to were into meet new and Dynatrace engineering team. performance. recently, performance the with looking issues millisecond in the will counts optimization productivity. dynamics, of the driver become race the edge Visa of number software and insights platform to VCARB can Racing to we significantly real-time more deployment process teams Formula faster, detect goals. And FX, on racing retailer a

Dynatrace going Finally, the partners of world annual we Customers to next how the are is This share yet, covered they in conference wrap platform theme our is taking about drive observability the Customer today. week be at around business-critical to host understand There's stories opportunity over power customer our unified our a and mission-critical. of stage to their XX innovation ahead. enthusiastic from we've customers here excited to reliable accelerate largest common with are highly up, Las we're software. To that more harnessing Perform, prospects deliver a and customers, Vegas. Conference initiatives,

see Dynatrace-specific we significantly you. We platform, several have to over there AI-powered differentiated a supporting our are and growth. Jim, observability drivers that

James Benson

demand metrics, once Thank line everyone. QX and profitability our morning, execution end durability AI-powered of our you, top surpassed for consistent growth as guidance the balanced showcasing business platform. Rick, ongoing another good of and observability leading and our quarter of model again marked we the high

or XXX last constant results million, note, Now QX, the rates was Please in X% new $X.XX up ARR, new and detail. review year-to-date ARR ended be XX% will same a quarter at growth in down added for QX more constant basis revenue, billion, referenced unless quarter Dynatrace net third period year-over-year currency, otherwise third modestly up recurring the let's the fiscal to currency the the year-over-year. $XX platform. from year and XXXX. In logos we on stated. Annual

expand. logos new landing stated propensity have continue the a we we to As greater high-quality in that to past, have target

per prior average Our and new prior basis, a the ARR and was versus quarter on trailing logo year. XX-month up over $XXX,XXX both

$XXX,XXX customer DIY that to the business and often the platform. Once quarter. outgrowing continues proposition third of and continued Net unified Dynatrace the tooling retention consolidation coming customers. Gross breadth their mission-critical strategic platform per first or remained the rate, for with quick to we part the in or customers platform, adoption a remains and NRR, experience value relevance depth, to customers' from Dynatrace continues as was and Our grow, of it our provide of surpassed our highlighting expand to demonstrating retention their the in the of enterprise automation operations. usage. seeking mid-XXs, existing benefits of the the commercial Average value Dynatrace XXX% platform rate to are time, tool solutions. ARR resonate value are They customers for are observability they the

Our X,XXX DPS of base have and and globally, more our continues our model ARR. XX% traction to We almost representing of licensing DPS over gain customers than now adoption. customer XX%

broadly QX. mentioned, is to expectations DPS proving their we platform to pleased for say Rick penalize more Dynatrace and exceeding not demand, on-demand would when to growth, DPS revenue out. What renewing As in has that scale, trial to thesis more DPS pricing, IT as consumption adopt nicely of within early. capabilities does subscription mature customer-friendly started leading that become instead launched outperformed I'm which This itself access is which expectation is customers has some commitments, benefiting environment. consume with approach customers that to is the full customers to clear, our on was DPS and the

However, only it's our this important which revenue captured is include committed revenue. to note metrics, in not or ARR contractually NRR

on-demand that million broadening the Let expanding be numbers basis year-over-year had customers around subscription basis, revenue. XXX QX, financials some year-to-date whether of Dynatrace. of consume $XX to of me our subscription contractually In we continued This revenue. The consumption on drives growth. had to $X committed for impact make points million positive clearer. in the easier to or our we on-demand a put subscription fact revenue this revenue contributed makes the outcome On platform, of it of platform is DPS consumption usage demand, growth. The that and their on

the on-demand both largest growth Going which business forward, believe taking we into health be consideration investors will by underlying should still the of revenue. the ARR, and consumption assess indicator,

scales Our that with so too likely as on-demand expectation is seasonality will variability consumption, and grows DPS quarter-to-quarter. and

third seasonality Due exceeding believe generated exceeding we the to hosting year basis, of of $XXX for in income the XX-month quarter free on non-GAAP for slightly prior flowing a year-over-year This trailing increasing $XXX from a the Moving above in revenue. by million, $XX Total our net line. from year-over-year solution. Non-GAAP the by $X.XX of million the of through million third revenue $XXX or diluted and guidance exceeding above driven On quarter due non-GAAP view includes $XXX is FX was of XXX per for to million, quarter driven we was flow the million. XX% $X was revenues migrate to for to and resulted quarter by the bottom end the or strengthening costs was in end million million margin million variability was points. Non-GAAP I dollar. Subscription end million over quarter-to-quarter, XX% XX-month $X by flow of from million period. $XXX $X.XX the constant a This increased primarily was high of $X top guidance headwind high consumption customers beat quarter. absorbing revenue best cash million, operations down $XX billings high margin up U.S. the guidance, end was end share. the the the guidance. We quarter prior reported by and income to XX% guidance XX%, basis the of as margins, free up the and This cash third and free third dynamic of it revenue. our mentioned. Shifting in cash cloud high flow trailing just as to upside a operating SaaS more our $XX to gross with on-demand currency, XX%, third

to and EPS. of a of our tax basis a noncash cash a There More free basis impact in As Pretax is an revenue or $XXX we our in to subsidiary, impact planning it follow completed impact taxes. resulting IP XXXX reminder, impact cash and no fiscal and the a as net flow to fiscal XXX income May in a a efforts, call. expect related includes was our this do meaningful we net strategic insignificant, Swiss EPS. point this benefit up trailing will year-over-year. On more transfer note, million XX-month XX% IP-related on cash XX% of related tax to income transfer beyond. to have while XXXX part on tax a ongoing non-GAAP And earnings taxes GAAP to this was

a XXX,XXX shares average million million the inception the at QX, for price In December $XXX million in shares $XX for we X.X of XX, May we an of update $XXX our Finally, share repurchased an program brief program. XXXX repurchase Since through million average $XX.XX. of price repurchased $XX.XX. at on

Moving now to guidance.

the of me Let our and guidance. updated walk insights assumptions some through underpinning

of end exceeded their customers early subscription a upfront choose for upfront contracts will and commitment. is DPS renew put forward to the our First, part growth model as early on once we revenue on will ARR combination likely believe on-demand based tail of that the stream growing driven an and point from consumption be not To by revenue of it contracting a finer consumption DPS going that cohorts, our learnings ongoing on they've be this, subscription on-demand growth matures. those

and Second, to related types deals. the trend initiatives strategic consolidation of of observability to weighted and to is heavily platform grow. larger The more architecture these deals funnel continues sales tool

this introduces given we increased variability While positions platform believe on our us also and and in trend net it these to capitalize both for well is Dynatrace positive terms timing deal certainty. highly differentiated a AI-powered of close opportunities,

go-to-market beginning to fiscal in we of made Third, this continue the mature we the year. adjustments

material macro positively expected, do spending. their to demand while change be relationships we time continue remains the in and to in sales healthy, observability assume the environment productivity. Fourth, takes build we reps for enterprises it As a new impact cautious for environment as not

million business of creates strength XX% last currency, call since our expect in U.S. denominated be context, and with $XX the headwind outline to let Finally, million We the updated as ARR revenue. And incremental our sizable represents ARR to of an dollar foreign with million to now FX revenue. of our of outlook. headwind. million that and $XX headwind a $XX a $XX This to to me

line our and We currency are across growth year top metrics. constant raising all profitability guidance full

We growth year billion. points to are ARR increasing year-over-year. midpoint, our at XX.X% growth $X.XXX XX basis This billion XX% the full represents to guidance, $X.XXX to

growth revenue XXX growth of $X.XXX this point the at beginning year-over-year. XX% are our representing $X.XXX of the the $X.XXX are basis provided at XXX our XXX basis year-over-year. And XX% to subscription a raising billion growth billion, midpoint, at fiscal guidance, midpoint, representing year. total midpoint growth This uptick to points guidance points billion, from billion to increase rate $X.XXX we that represents growth raising guidance, the We consumption in on-demand to we basis with revenue, revenue the

where we roughly bottom of guidance the XX basis XX.X% translates guidance range end million. basis our XX.XX%. full by at margin landed fiscal of points line, raising up points Up Turning XX in XXXX. to high non-GAAP to we and non-GAAP operating This operating the year are our to $XX from income

share EPS per of an EPS potential non-GAAP midpoint excludes million based guidance to guidance count a to EPS to of the of count on representing at share range. any repurchases $X.XX $X.XX the non-GAAP raising are a and the share of range of impact We million XXX increase diluted in share, $X.XX shares. This QX. is This diluted XXX

increase free our $XXX cash $XX of revenue. cash to flow million flow at margin million, midpoint, of XX% $XXX guidance the an We representing of a are raising free million to

from points pretax Excluding fiscal XX.X%, free XXX impact XXX an XXXX. basis taxes, which basis expected up represents point cash a from is margin cash of this flow

million. million. Looking have XX% the some incremental between to at Subscription believe revenue standpoint, and structural From XX% between payroll non-GAAP taxes. is a be of expect $XXX in for We Perform full revenue to profit and million QX, from is and basis. is at expected customer a be between million to fourth seasonal $XXX year quarter, on $XXX million $XXX income we reset to $XXX to expected operations or revenue. it of Keep margins spending total mind, be including our we look million $XXX expenses conference best in a to

Lastly, to healthy is summary, to fiscal is market share. In observability with and pleased EPS XXXX third per non-GAAP expected we quarter performance. our are diluted $X.XX $X.XX be The growing.

We flow. have profitability a cash proven disciplined free top execution, track line and record expanding with growth balancing of

the While we the optimistic of long-term of questions. front in and us after we the with about that, line continue the opportunities near-term to it. And for go-to-market are our evolution will Operator? a maturation to open go to we growth maintain approach prudent outlook,

Operator

[Operator with is Matt Instructions] Our question Hedberg from first RBC.

Matthew Hedberg

the questions piece. results. on Jim, on getting the on-demand Congrats Great. we're

of any ARR to what's assumptions, what's is fiscal year? good implied as about sense kind your think rapidly, next of which -- XQ? a conceptual when for how in next bit guess we're thinking on-demand It on-demand a for a it's framework adoption for there. early, year, little question -- we you think of we the but I you long-term for about have should what's know ramping I there 'XX about do And about we wanted think So sort to thing when I of DPS. I QX ask be think guidance seems your

James Benson

DPS a to what Matt. vehicle say the And question, evolves. as that see DPS we're is I'd And customers we're more the that absolutely we out frictionless play consumed model which are model right platform. are wanted consume is what seeing have seeing SKU-based play the for you're learning on with for Thanks Yes. out, on that the the DPS at platform. them very that that a customers of to of Xx rate we're customers exactly is that

is initially DPS this that what some that is when came commitments even something with didn't driving we're early. are in would to we phenomenon finding of on-demand. period that about we're that all consumption. I we up that means customers just are So DPS customers is really exceeding finding this on-demand say, consumption expect with a their willing go And

us, it's mentioned for that subscription year to guide a the in I revenue. all improved XXX Now points. about beginning the subscription of our component of on-demand now prepared the basis remarks we revenue that consumption. Obviously, is from

year-to-date, uncommitted, at it's kind And leading absolutely it's you're at believe to consumption, you continue which million, do going ARR if on-demand so Dynatrace, then both we look that, seeing what look you obviously to $XX really of obviously, primary this Because grow will to do we're growth, something we're grown. And at a right, here grows. is DPS and indicator. as where need level of rapidly we're it in. build But just a has caution with

equate by XX by Now of it's in if bps ARR you cohort will vary just it kind uncommitted terms, that's even though quarter. But of ARR. class that,

good a it's model. so And

it going exactly would. For that don't is what with because, modeled the it's be. driving we've we're very, because know it like we to digits pleased the that consumption were specifically, fourth quarter you in DPS But hoping what it's because we're very seeing here mid-single uncommitted, with again,

Operator

Boolani. is from Fatima question next Our

Fatima Boolani

or retention ARR question, see usage? how Matt's the behavior greater and continue should off contracted of will, DPS the to if you think between grounds decoupling to Jim, trajectory Just and as consumption rate breakage, customer of this consumption riff on sort of net we about you

James Benson

Okay.

question, So good that's a very Fatima.

the in said NRR phenomenon DPS, embedded with that you committed with not in ODC, does consumption neither will NRR I prepared mean remarks, that not or show that That That in see business. But up on-demand this is accretion. the we're has it metric. not because seeing just NRR as will So ARR contractually it.

a though and a of bias to the I we're fact, SKU-based DPS, diminish. now that, expand of bias even sampling the our XX% seeing ARR with days very with pace probably with we matter classes DPS there's than rate at a As But admit that. early start customers. component on customers we are of cohort sampling have bit I'd that will greater say

see maybe because of so we NRR, will just will you time a And of expansion. see investors at consumption have our clarification most multiyear and on is for that's the NRR And ARR contracts. but on-demand is you an DPS

I it's, of our XX-plus ARR it, call contracts. So multiyear think percent are

think So commitments call X-year about is it, contract customers the in, way to individually. X this

clock year they that you can X customer to so consumption have And a go component, then the resets. necessarily their they of may that's have when in on be expand demand, They through contract, don't go into X going just this think as on-demand early. year and of it

a consuming Now at rate greater pace. and they're obviously

an get expansion. will So you

you'll and the get an you until in in year later X, life. contract expansion sometimes expansion early get an Sometimes won't

So do DPS it reflected NRR. see will timing see NRR. will in you you And and NRR when and as matures, benefit. will the when more you of just see It's think ODC I grows

Operator

Power Will from is with question next Our Baird.

William Power

Great. comments come of to to some I AI. back around want the introductory Rick, Okay.

help You laid help out to just fronts, a on AI are observing agentic are if where work. tools today? designed guess, to all ARR of revenue traction that? way is something what's you just the most there around nice conceptualize to you wonder suite contribution that benefit LLMs and the kind help I or AI whether you of agentic I seeing And And or outlook any there? with highlight, it's could is that's helping starting

Rick McConnell

Thanks, Will.

absolute moving for It's bit voice this piece, RAG, morning, continuing AI. you but together. The the AI a AI, And generative us, went of sorry say, to raspy on off across with through agentic a we'll it would Started inference. I [indiscernible] tailwind, to board. I it for is with get it's an

we're moving, you answers, all at in as AI is moving way also we through automation. if onward and about driving many data, deep to because intuitive results will, are inference, mirroring ways, automation. And and this and think of knowledge, Dynatrace and behavior from to All that analytics overall observability that the our agents strategy from analytics to

And in AI day, complexity amounts paramount we to tailwind platform with data, of end customers a increases a believe its board have point, through observability hundreds so last the the sophisticated huge we industries. sectors of that and complexity of it's customers. One the is driving observability importance that is to really are and already because Dynatrace that manage in ability enormous using at our AI of across our the

and it our being believe AI adopted AI AI result capabilities very that. They're So as is we observability see a workloads, a we broadly. in tailwind interested observing of for

Operator

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

Keith Bachman

question a for philosophically, more a -- a help, to sneak digits, off just Is I there's jumping our have we're you clarification. that I as about the fine-tune said doing is want us our is 'XX, just think mid-XXs year-over-year maybe tax for I numbers a give you terms understand QX, And think taxes. for said sort contracts said FY see anything in or cash at our maybe of is broadly, year-over-year. starts sort know If impact know point it the cash the down to then still I'm just just clarification, because which right estimates on ARR we it models math Jim, change us new, a help or to I hurt can think trying you you the I if -- just guidance. it us it's help mid-single but DPS consumption-based to is the net you'd begin suggests we again I of element free to declining But your pursuant look neutral, help flow free guidance quickly, your implied cash set if the about in as 'XX. flow. of just 'XX. And

James Benson

questions, the for Keith. XX% way ARR Thanks of We're X/X ARR we the guide, year. driver Relative now last the through XX% I the think guide, to of time. obviously had primary growth the the to

You have one quarter left.

to last said in high binary the year, my when funnel. we're you year, funnel more the the And that inch execution strategic weighted say is in off because remarks, days necessarily even largely a So the heavily have we of that's did we and last same of it have the more up last funnel end year. large probably to certainly way, weighted we the we level a up pretty not that weighted have left And so it ran prepared actually you I did very we The expecting on prudently, maybe lopped than low inched heavily the end. deals. range, year. XX We I'd table

as the consolidation, about customers those is good positive with is good to this we because And so news we're in think thinking opportunities. position Dynatrace net for good actually a a compete

timing positive we So and level term, close a introduce to think does deal of near it it's a variability net relative trend. Obviously, a certainty.

know on So of guide, think ARR fiscal revenue. the the is, will though Keith, simple to 'XX taxpayer, very of 'XX. And as way will that's we to it put way fiscal not think as our percent cash maybe points front. And basis cash it, taxes we kind relative a to is taxes, are I significant Even continue. XXX into this about the expectation of continued -- that can trend a continue you imagine, providing we're trend the

so this been planning, what and around for lower Switzerland And can tax tax we will doing the the rate company. IP-related strategic to transfer we've

benefit So cash this 'XX. taxes will fiscal be lower a to in

fiscal over tailwind. headwind. will see be. much lower share cash about 'XX the more extent a of a you of So a in it's years, It's I'll taxes. how the will It will that tailwind but from benefit not build

Operator

Our next Bora JPMorgan. with question is from Pinjalim

Pinjalim Bora

quarter. dynamics on might. if time, like It $X said million I NRR seems you understand Congrats the last overages quarter. Jim, you DPS tool to one wanted has increased, the the just more

low you something or like that. digits single said think I

million headwind a understand. ARR, I is that to But a $X is that So quarterly number.

have which tailwind headwind it the ARR, quarter, to of if you like with in caught X you you an those some So last take would But obviously, up the caught seems have annualized that. not be might be maybe up a would months, from should than can number? And that more ARR, then it to contracts, have.

is this? this quarter, And of Because I'm net XXX%, you what last that the would to trying if say? NRR XXX% the downtick is because downtick I'm understand net that it from out, dynamic So did trying understand of is you sequentially. to

James Benson

takes with is the the what's with -- companies. And is, NRR downtick to go-to-market news build year-to-date, while top result and say see our we se would of the more from would it on actually a are applying changes resource -- ODC. I I a Yes. around green our I while relationships, kind the going necessarily the that don't pyramid, changes good the to this would XXX phenomena shoots go-to-market if at of I quarter effort. really starting know IT we being for say, we per segmentation of and oriented global of -- talked about some customer

to see space. in that we're so pipeline starting And grow

closures are space. starting in that We see deal to

feel the the about the though days. I'd still the say of segment, we commercial not -- say the early IT commercial segment, we're segment it's admittedly, even the we commercial around level good same performance the traction call I'd in seeing XXX, so below And which expansions.

to model. else the And need that -- areas there's so tune like everything that in you

just So understand to relative has the a most traction X-year on. works, to X the people for us, probably focusing contracts commercial to DPS making area bit We bit NRR. And have the getting how where of that commitments. more that for -- try the need tune are. They for contract, individual use pressured DPS I less. little our was that's example a which little multiyear a were we're we've been of sure the expansions segment model And in areas

for phenomenon mean consumption up not the not a needs renewal for By to years. they're X does on-demand necessarily definition, this customer So renewal. do

the early maybe get in be go amount reduction X is to their wouldn't more But does through X want they're impactful which to of year because platform, maybe year they a early, the we consuming would not exactly unit burn You're in broad as what through pricing an year The effort. which not do commitment renewal of wanted. The overage was they customer substantial. X. necessarily means

reset go following to into the then they're willing So year.

So think of it as year X, you get on-demand consumption.

X You're maybe. done with your year

starts in you're in this when you're clock Now again. X. X, at year X year But

in as million million consumption. year. So a the $X first of TCV. think spend They with XXX that's year of contract a $X.X million maybe on-demand $X a it

again. the X Following clock at starts year,

early renewal benefit that run do that but year the that It just they'll the sometimes be It X Now is not increases so that's higher, through that their happens, class, because in It's the you'll because we're way. rate customers some of it cases, cohort a the necessarily kind on-demand you're in may because that expansion see quarter in work work works. way then. But maybe granted on doesn't it following of doing does an consumption, likelihood necessarily early in how very sometimes go reset. just expansion. it

Rick McConnell

And we are is world. both Pinjalim, increase a we increasingly going this also because just add look just we these that not but I ARR, in on metrics that revenue on to of DPS would suggesting ahead that view a are reason subscription matter as

James Benson

annualize didn't $X that commentary the were that And Pinjalim, it's would saw thing only million?" would about say, maybe can I this other the -- you impact that you uncommitted. saying, way say answer that I we in I your "Hey,

about of because a that's always of right generally has it because yes, yes, way kind kind to we're it. I'd it's you -- to is grows, I'd as your say So DPS the could one. your But would variability say think because you model apply of bit uncommitted, expect the it annualize caution. going that, mental

equivalent, of it's the the up annualize it amount an to of value, uncommitted customer that did does the that a then ARR would you matter see which equate then timing by is expansion ARR. what's to. of show If in that that kind And the

Operator

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

Michael Cikos

get And the to guys order cycle that magnitude know I recognizing this sense the the give of a we and he remarks, in go-to-market in really, gains from I prepared accelerate sales where on you just changes? an you that back the confidence? had year productivity management those fact earlier us announced wanted to just an to what you get wanted that this cited looking changes Rick's on are guys here gives Because transition. of are update. front? Can I

James Benson

we've that. very the Yes. question. good I won't done a do know what go-to-market That's change you because belabor around

expect in, quarters and X X we're certainly didn't productivity we in. So quarters improvements

answer accounts, Your it, And does relationships. I'd green establish rolling the we at transitioning a see, starting it look that yes. take call leading is the you're accounts, shoots to and X-quarter indicators, pipeline are especially Mike, in to is when strategic we while say improve?

establishing new see to is the first people we'd the like want the Well, see? So improving. What's pipeline you we're first going relationships. thing to in, thing know, they're are X-quarter rolling settling to that

that. seeing are We

some segment are already. some in we cases, so that And in closures seeing, deal

in deeper So that that in already within then maybe this an seeing customers had -- penetration and expansion. you're closures that we deal segment, improvement segment in already

do the about I'd showing point So not expect. still say we're feel an in where at improvement like are -- we would we're is at productivity. where we of But we

level again, some us the segment always As tune But There get to I model. the tuning of to you're segment which to accounts. seeing the level commercial mentioned, was do same the that activity is is to strategic expansion work improve the we're there. necessarily that commercial We're for focus, not seeing. the

on we'll something I to we 'XX. continue that fiscal work as think into that's head

Rick McConnell

reps north our reported would having of I quarter, add with just last tenure. X of also we year of than on XX% Mike, that less

We add reps. continue to

And or a tenure. so be XX% where in of to than we of reps greater less in year than continue XX% which situation with we have X

course So as increase XX-year expect over increases productivity to will time. that the of

like new partner which to now transacted XX% the logos of new of a than through are seeing see we'd business, well. to see partner, as on greater side, transacted the is than we're traction ecosystem, our Also More through we partner there. which X/X deals net continue and

Operator

with next is Sanjit Our Morgan Stanley. question from Singh

Sanjit Singh

is back is, step-ups event multiyear let's you they're Just out? And guess context is $X That more I on little like say contract. DPS was Rick, a commitments? feel expansion, if another DPS, an the How year million guess in I playing the what's see of for in of contracts. $X that sort in constructed. a sort customer going sort X, X, I clarity structure within the color, bit year X, How million triggering X X? year in that of year their is of the DPS provided for not of do to hope dynamics, are years. what they you you is X-plus of million to year sort on in question sort the of the of year renewal X noting of year here be these helpful, that X, average some sort are $X Coming better. see Or Jim, that? super there you the contract do

James Benson

variety Yes. take first, there DPS. your will we question they a It's good with models -- are I'll last have very question, customers that of a that I guess Sanjit.

what we deals. are call ramp Some

to X, X point, in it, and a So think it's of X year X in X your in X. year year

So it ramps, that's for some customers.

over Some contract life. where customers the it's deal, a have TCV

their is the contract So DPS over life.

And it X have have varies. a customers they X my maybe point, you're same to equivalent that -- example, they them have X, Some but it's your volumes, resets. using in the

the way get even That And value to is the platform becomes is more what the we're looking us, and regardless faster. of do customer looking we're it to So of the decision, right? for kind vehicle to hard again, of consume what -- ultimately it's equate from you're work all on, it a have customer them. But that for will happened.

overages I repackage I consumption. are commitment, more overages. And that depends price, indifferent. dynamics upon it fast more events the we an would mentioned some to for consuming. then for "All say is this shows that. a result improved kind budget or the whether go I'll in XXX% faster. I'd triggering they in would some they maybe Now because platform, consuming means you they're They're be budget expansion, doing spend for you're shows we customers commitment." happy do what have minimum they they're up to to contract budget minimum life, if getting the and willing seeing they they'll there through just whether up of might value significantly for on-demand you more how that early are your And say, I'll cases, an recontract point, right, of there think in to what which extent, for as earlier on-demand have consumption And an than conviction to it or a consider unit a for are we're

they're that will not so again, might stay. And see benefit are how it pricing. consuming, there don't because a be those be repackage on on fast depending unit then And that, worth the will customers customers they

And so it varies.

so growth. going of revenue And dynamic -- very that clear improvement combined. to And those that on-demand mean a it, out been to bring the need It's consumption we you of the different that you're going plus subscription what than you're I NRR be just forward, difficult what's near need going probably to timing this at focus better And of see profile with going in revenue But upon of call ARR ARR. is, depending model there's to is at the it's going it back there are term. in going look subscription customers. Again, to kind to the to look play to do to benefits staged on a call. this probably is on ARR, you'll going think you're to see dynamic to

Operator

Wells with Andrew Nowinski from is question Fargo. next Our

Andrew Nowinski

most you're a your It it sounds tailwinds of leading lot to the seeing positive in relates as the like of business with pipeline improving. indicators

I adds, down more partners at more guess said traction the talked through there Is segment about? going through partners. you and else the Or were commercial you something look transacted business weakness logo that on you there? think is I But if to related year-over-year. new they

James Benson

basis. little from saw yes, the bit we remind very we we're actually the continue think we size last which were I new land, land size. right of over very, average I light But And XXX. in a We lands are trailing on were -- talked well XX-month that the logo focused at to the that unit a third perspective. quality healthy quarter, a is quarter. We a a just on XXX,XXX over you on very say, I'd landing them bit

land QX, look large if very, had individual at the itself, individual the So for quarter very you by quarter, sizes average. on

Those units we of have north want that land yes, be units we that highest $XXX,XXX. but so units, propensity the to to expand. want units And tend

say, pleased, pretty we're with the So size. I'd land

we'd the the units is obviously XXX volume. be And -- area segment. commercial going segment as would the right, see are to like be to well. legacy But increase new You like more an a Global you're say in we'd obviously, to in commercial in the see volume going I'd where to that larger

Operator

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

Koji Ikeda

the NRR level, to compares it's there metrics no then high subscription gauge a of a from if why perspective? defined much understand, right why a business? to real part ARR And health NRR to long-term on-demand and NRR, how becoming bigger from the just compares to about not the trying way Maybe as just today, Maybe is the of or to longer you qualitatively, talk with how could. DPS subscription story, NRR? is maybe NRR, reported a So

James Benson

to consumption, getting, to ODC important from of DPS are as on-demand ARR so they're you I about say would just exception what qualitatively, will going what say behave, you are and say on-demand how is can't at that the far them at when those Because see is growth important of ARR you with measures not that the say, I'd advent vehicle the to do that the think talked isolation. and NRR may of behave metrics health of go ARR in NRR can't Those ARR historically. I DPS, both look with and to contracting Maybe together going the are again, for delayed think business. And not metrics. and -- and consumption you need I'd look fact see kind NRR earlier. best more I the I because the Dynatrace. the remain is we would the is you way of of may have they behave way they're you they'll and

may later. You expansions see

look of if is could some cases, up you I delay when It in DPS about it up I is given as mentioned. just And It consumption. showing be ARR But expansions, a back driving you at is dynamic be show the doing. is so may different about early about? combined, what actually think where driving future again, what revenue. metrics. in go in there DPS It's subscription X see it let's That's to is. But

Rick McConnell

close, and brings coming those as of to your support. course, week, the That person, of to tailwinds questions you opportunities we of forward next to remain much growth over and market look end. We we that you. very about with Perform a call. To us, well you us at the ahead look very Thank months. us covered the on good Thank given you we joining very engage seeing ongoing your this enthusiastic for as all in you Dynatrace-specific connecting IR events especially many wish all day. in the you forward of we To

Operator

This you. today's conclude will Thank conference.

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

Dynatrace (DT) 30 Jan 252025 Q3 Earnings call transcript