Dynatrace Inc at Citi TMT Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Fatima Boolani - Citi - Analyst : So I think a good place to start is taking us through some of the highlights and milestones out of your recent quarter's results and some of the things that are worthwhile reemphasizing and reiterating, and I know we'll have a lot of threads to pull on from there.

Question: Fatima Boolani - Citi - Analyst : Thank you.

Question: Fatima Boolani - Citi - Analyst : Thank you.

Question: Fatima Boolani - Citi - Analyst : Jim, I'm going to double down on the comment you made around DPS. That has been a very consequential change in the business. I think 2.5 years out on paper, but really a year and change of getting reps with customers and selling. So a pretty significant part of your story and the evolution of the financial model and the business model. So can you -- generally, for those who of us kind of initiate it, walk us through some of the mechanics of DPS. And Dan, I would love for you to chime in on, hey, I think we're in year two

Question: Fatima Boolani - Citi - Analyst : It was more organic from the customer's --

Question: Fatima Boolani - Citi - Analyst : I think, Jim, one of the things that you've realized in managing the business is the reality is sometimes doesn't match our Excel spreadsheets, right? And what I mean by that is there is a contractual commitment on a drawdown model, a DPS. But incidentally, a lot of customers tend to blow through those commitments, right? And then you have this persnickety concept of on-demand consumption, which is something you all have talked about. So how much of that has influenced the model from a financial perspective in the last six months, again, as DPS has hit more of a critical mass in the model in the business? And I understand you've sort of reoriented and tweaked some of the incentive structures around ODC, we'll refer to it as ODC, going forward. So just a little bit of a walk down memory lane on, hey, this ODC concept has come up, how that has impacted numbers and how we should think about the impact of ODC on the business over the course of fiscal '26?

Question: Fatima Boolani - Citi - Analyst : It's then punitive for them either way.

Question: Fatima Boolani - Citi - Analyst : Dan, you said 6 months, so it triggered my antennas. This time last year, one of the more novel changes to the go-to-market incentive structure was introducing biannual quotas -- or implementing biannual quotas for the sales organization. At the time, I think you all were appropriately conservative in saying, Hey, we don't expect this to have any material change right out the gate, but now we're here in. We're -- you're better where you're stronger. How has -- how is year two of having a biannual quota implemented and cemented in the organization impacted downstream KPIs like funnel creation, deal size, deal size growth? Anything you can share on that, that can give us confidence that now the biannual quota system is really hitting its stride in a very positive way. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2025 / 2:50PM, DT.N - Dynatrace Inc at Citi TMT Conference

Question: Fatima Boolani - Citi - Analyst : Jim, back to you. Just one of the questions we get a lot is this divergence that we're seeing on the subscription revenue growth trajectory versus the ARR. To borrow your term, it's a deferred ARR. That's sort of transpiring right now. So it's sort of this short-term nuisance, if I can use my own word, to the model. To ask it more simply, when should we start to see a little bit more equilibrium in the ARR and subscription revenue growth trajectory?

Question: Fatima Boolani - Citi - Analyst : Over the course of what times?

Question: Fatima Boolani - Citi - Analyst : Jim, you and Rick have not been shy about expressing that there is a quality over quantity bias in terms of how you think about customer and customer acquisition. You did the large account segmentation project as well, among other things, last year in the go-to-market. But the installed base is fantastic. It's the gift that keeps on giving. You have diehard Dynatrace customers who continue to come back to the well, right, and that's important. But just from a logo growth perspective, that's potentially an area that you've also expressed a need and a desire to improve. So what are some of the steps you are taking or have been taking to really energize the new logo growth velocity? And how does the strengthening of relationships with the GSI and partner community play into that? And I'd love to have you slap some numbers around that as well and how that's done.

Question: Fatima Boolani - Citi - Analyst : Well, I think that's an important distinction because what I was actually going to ask you, and I'm glad you brought this up, but it's not necessarily, and you can correct me if I'm wrong, that the cost of large customer acquisition has gone up. It's just the sales cycle conversation or the sales engagement has, I don't want to say, elongated because that sort of has a pejorative context. It's just it's going to take more stakeholders for you to engage, and that's why the -- when the new logo lands, they land big. And I believe some of your disclosures have been around 140,000 or 150,000 in ARR lands, which is -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2025 / 2:50PM, DT.N - Dynatrace Inc at Citi TMT Conference

Question: Fatima Boolani - Citi - Analyst : I'm great inflating a little bit. But -- which is outside of the historical band of the 90,000 to 120,000 that you very habitually did a couple of years ago. So it's not necessarily that it's much more expensive to get after these accounts. It's just taking a little bit longer to cajole a lot more constituents internally.

Question: Fatima Boolani - Citi - Analyst : I want to talk about net retention rates, again, in the context of transitioning to more the DPS motion as the primary conduit of customer activity. How should we take net retention rates at face value? What should we consider? What are some of the kind of the mitigating forces on net retention rate?

Question: Fatima Boolani - Citi - Analyst : I know we're out of time, but I think it's incumbent upon me to ask you the question around your operating rigor and operating performance and cash flow performance. You talked a lot about maybe indexing more to expansionary business over the course of year '26 -- near term. So by definition, that necessarily means you're going back to a customer that is already familiar with you, is already an avid user of the platform and the portfolio. So can we take away from that fact that there is incremental leverage to be had in the business because it eliminates some of that net new customer acquisition costs? So tell us -- or tell me, rather, where I'm maybe not right in that assumption.

Question: Fatima Boolani - Citi - Analyst : Time flies when you're having fun. Good place to end the discussion. Thank you so much.

Question: Fatima Boolani - Citi - Analyst : Fantastic conversation.