Dynatrace Inc at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference Transcript

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

Question: Matthew Hedberg - RBC Capital Markets - Analyst : All right. So you guys came off a really solid Q2 -- really solid first half of the year, of your fiscal year. Can you talk about just how the broad macros performed relative to your expectations? Any trends you've kind of seen as you've exited Q2 and kind of early in Q3?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Yeah, that's great. We'll get into some of the go-to-market changes in a bit. But what I just continue to find really, really interesting is, to track your progress at DPS, it continues -- maybe -- it continues to do really well, but for maybe -- I assume that everybody knows what DPS is, but maybe just talk a little bit about DPS. Right now, I think you said in the last quarter, it's 50% of ARR and it's 30% of your customers. How is that resonating? And how do kind of long-term customers think about migrating to DPS and what that means for them?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : It just, it really seems to resonate when we talk to partners out there, because customers like it because it's just -- I don't -- I think they don't -- they're not getting nickels and dimes.

Question: Matthew Hedberg - RBC Capital Markets - Analyst : The question I get is, if a customer either is over or under their dollar committed, how do you deal with that?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Okay. Yeah, I think what I also find interesting is, I think it's -- you guys are focused certainly on the Global 15,000, but even more specifically on the Fortune 500. Are you seeing -- I'm thinking outside of your base, are you seeing some customers that are like, wow, I didn't even realize this was an option, I'm used to paying more of an ala carte pricing, are you seeing the potential? And I don't -- we're not really seeing it necessarily yet in new customers. But do you think there's the potential for some unintended consequences, i.e., outside of your installed base, to really sort of be brought into the Dynatrace family because of DPS?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Excellent. Yeah. And I guess when you think about 30% of your base on it, what do you think that gets to? Do you think 100% of your base will be in DPS at some point?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Maybe excluding government, yeah.

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Yeah. Somewhere in that, right. Yeah.

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Okay. So a lot of room for expansion, especially with that --

Question: Matthew Hedberg - RBC Capital Markets - Analyst : You started off the conversation referencing your go-to-market change. I think we've seen others implement go-to-market changes been very disruptive. And I think you probably planned for some of that in your guidance, first half guidance. Talk about what the opportunity is for that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 19, 2024 / 1:45PM, DT.N - Dynatrace Inc at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference Because it really seems like you're potentially unlocking a lot of uncaptured ARR with some of these changes. And when can we start to see some of the benefits from this?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : That's certainly our view. On the six months quota, walk us through an example -- you and I talked about this on our call back. But if you're a sales rep and you had a $500,000 first half quota and a $500,000 second half quota, and let's say you did $600,000 in the first half, what's the risk like you pull that $100,000 in? And then what happens to that like $500,000 second half number?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Give me better numbers, yeah.

Question: Matthew Hedberg - RBC Capital Markets - Analyst : You sort of talked about the conservatism based on some of the uncertainty in the sales model changes. One of the questions that I'm sure everybody has been asking you is, why didn't you raise the second half number? And part -- we spent a lot of time on the road last year. And I remember vividly you raised after Q2 last year and then you lowered after Q3. You ended up beating, I think, Q3 and Q4. But I mean, how much did that play into like, we don't -- there's no sense of getting ahead of ourselves. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 19, 2024 / 1:45PM, DT.N - Dynatrace Inc at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference

Question: Matthew Hedberg - RBC Capital Markets - Analyst : So I think the point is, and this is the question that I gave you, you didn't see anything that gave you increased levels of caution, it's more just you're like, hey, it's just early -- yeah.

Question: Matthew Hedberg - RBC Capital Markets - Analyst : So then, yes, we're in Q3 now. What are some of the things that you're -- is it like, hey, we're seeing NRR start to stabilize? I mean what are some of the signals that you would look at to say, now, hey, I actually felt comfortable that we're not going to do 15 to 16?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Okay. This is going fast. We've got to rifle through some more of these. This is good though. So we touched on some of the go-to-market changes, we touched on DPS. From a product perspective, you mentioned logs on Grail. It's something that we've been talking about, I think now for -- how long -- has it been over two years? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 19, 2024 / 1:45PM, DT.N - Dynatrace Inc at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Almost two years. What are you seeing out there? Because it really seems like the competitive environment is certainly ripe for some additional logging deals for Dynatrace.

Question: Matthew Hedberg - RBC Capital Markets - Analyst : That was like a -- that sales process, didn't it take like over two years to kind of --

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Twelve months? Twelve months.

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Excellent. Yeah. It certainly seems like there's a lot of dollars up for grab, but it could take years to unlock some of those. I'm going to ask one more question and we'll see if there's something from the audience. I fundamentally believe you guys are a 20% plus grower. I think the building blocks are there. Walk us through like what are -- between new business, expansions, EPS, like how do you think about that 20% threshold and getting there?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : The building blocks are there. Yes. Is there a question here from the group? Yeah. He'll bring the microphone really quick. Unidentified Participant Just on logs. Previously, you were talking about $100 million for that business segment. What is the current expectation for that?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Fair point. We maybe have time for one more quick one. Thank for that question. Going once, going twice. Sold. All right. So we talked about a lot of -- and just from my perspective, I think Dynatrace as an investment vehicle is one of the most attractive mid-cap names that I cover right now, just because of some of the optionality on upside both for -- we haven't really talked about margins either, but that's a whole another. So if you were to leave folks here, what is the sort of the single biggest thing that you're most excited about for the future of Dynatrace? Because there's certainly a lot to choose from, just from what we talked about.

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Well, best from all of us at RBC, Jim and the whole team, best of luck. And thanks for coming.