Dynatrace Inc at RBC Global Technology, Internet, Media and Telecommunications Conference (Virtual) Transcript

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

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : I think, John, I'll start with you. I mean there's been a lot of -- well, let me just say, so in the early innings of COVID, I mean, we sort of had this opinion that we thought the monitoring space in general could be one of the most profound areas that sees a benefit in really is obviously a terrible situation with COVID. And I think we've seen that with a lot of numbers so far. You guys put up a quarter where ARR grew 33%. It did decelerate a bit from prior quarters here. But maybe to set the playing field, could you talk about the selling environment? Can you talk about maybe what's changed post-COVID? And then, fundamentally, how you think COVID is changing how customers consume your technology?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : So yes, that's a perfect segue. So effectively, it seems like it's been both a headwind but also a tailwind to certain folks. And so in other words, is it also safe to assume that COVID has fundamentally changed how CIOs think about the importance of monitoring? And therefore, with news of the vaccine, obviously, it's going to take time to work its way through the system. But when we get through that point, one would expect this to be a pretty good selling -- very good selling environment for you guys? So kind of life post-vaccine probably improves a bit.

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : That makes a lot of sense. Yes, I want to spend just a minute on reflecting on your Analyst Day, which wasn't that long ago. And I thought you guys did a really good job presenting, effectively, the building blocks to what you thought would be 25% type ARR growth, I think, you said for the foreseeable future. And obviously, COVID is kind of getting the way of some of that right now. But could you just -- and I guess it could be for both John or Kevin, both perhaps. Remind us again about those building blocks? How you get to that 25% level? And obviously, I think, some of the things that I think investors would like to hear, I think you've already illustrated the 3- to 4-point headwind from COVID but also the perpetual runoff that you guys talked about last quarter and at the Analyst Day. But I want to -- capacity adds, new customer adds, net revenue retention, just how do you feel still about that 25% threshold?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : That's super helpful. John, do you have anything to add to that or does that kind of summarize the thoughts for you as well?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : That's super helpful. Great context. We're getting a couple of questions on competition, as I'm sure you expect and you probably spend a lot of your time answering competitive questions. So in the spirit of asking these questions because I know what's on everybody's mind, one of the question is -- says, "How is the competitive landscape evolved over the last 2 years?" And I guess I'll add into that. Obviously, you guys have a dominant position in enterprise G15K APM, but others are starting to move into observability. Splunk has a suite. Datadog is talking about some APM wins. Can you talk about how the competitive landscape has evolved and how customers look to perhaps standardize on a platform? And what does that mean competitively?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : That's a great perspective. And I know, John, we spent a lot of time chatting over the years. Could you just refresh our memory again about when you're seeing a net new opportunity? How much of that is replacing a legacy vendor? How much of it's greenfield? And when it is greenfield, who do you see the most? I mean, are you starting to see Datadog a little bit more? I think, in the last call, you guys suggested that you're starting to land increasingly in observability type deals. So therefore, I think what's implied is you are probably seeing Datadog a bit more today than maybe you were a year or 2 ago. So kind of talk about when you see deal legacy greenfield and on the greenfield, who's showing up the most these days?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : And I think then the flip side to that. We -- and I'm sure you get a lot of questions about pricing. And I know we've talked about that in the past. You guys aren't a low price tool. There's a lot of value. Some of your competitors, including New Relic, have been changing the way they price lower in price. You talk about how your pricing is holding up and why customers pay for what is really a superior product in Dynatrace?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : That's great. We're getting a lot of good technical questions here, too. So Kevin, I apologize for the -- this is kind of what's coming in here now. One question...

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : Okay, Kevin. Could you talk about the role in OpenTelemetry? And what impact is that having on standardizing ingest?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : That's great. Another one. I know you guys have alluded to this at Analyst Day, but the question is stated. Could you talk about the role of security and observability? What are you guys doing there? And what do you need to do to be successful?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : That's great. I can't -- this is again a broken record here, but this is going way too fast this time with you. We're getting a lot of good questions here. I won't unfortunately be able to get all of them. But one of them, I think, is really good, and I was going to ask you this anyway. Can you talk about the opportunities related to your partnerships with ServiceNow? How much overlap is there between your customer bases? And how many of them are leveraging an integration between ServiceNow and Dynatrace? It's then followed up by there. Are there any other SaaS vendors you would consider developing partnerships? And let me add to this because of time to also talk about the GSI opportunity. And ultimately, when you look at your deal funnel, how many of these deals today are either partner-driven, GSI, or tech-driven like ServiceNow today? And what might that look in the future?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : That's fantastic. Again, I feel like we're just scratching surface here, and I apologize, Kevin, these -- there were a lot of tech-focused questions, so a bit more from inbound that. But guys, we certainly do appreciate your time. I think it's not lost on us the challenges but also the opportunities that COVID presents. And we just feel like Dynatrace is so well positioned longer-term for that durable growth and margin expansion. We didn't get to that today, but it's that unique combination that I think makes Dynatrace an interesting and really one of our favorite ideas here. So thank you both. And actually, Noelle, you, too, for your time, and best of luck this year.