Dynatrace Inc at UBS Global TMT Conference (Virtual) Transcript

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

Question: Jennifer Alexandra Swanson Lowe - UBS Investment Bank, Research Division - Analyst : Great. You touched on a few different things, but maybe starting a little bit with the history of the company, you noted the current cloud environment, how dynamic it is, how it requires sort of always-on monitoring and management in a different way. But certainly, that's not where the original Dynatrace started out. So maybe we could just touch on that quickly. The decision to kind of rebuild everything 4 years ago, that -- or launch and rebuild product 4 years ago, what were some of the themes or some of the breakpoints that you were seeing with the prior generation of technology? And where are you at that point in the newer Dynatrace platform migrating the base over to that?

Question: Jennifer Alexandra Swanson Lowe - UBS Investment Bank, Research Division - Analyst : So we were talking about sort of the challenges of cloud infrastructure and all of the dependencies and the complexity, that's just very different from the current environment or from the legacy environment. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 09, 2020 / 8:45PM, DT.N - Dynatrace Inc at UBS Global TMT Conference (Virtual) I notice following on that theme, I think a lot of the other companies that have been at the conference this week have talked about digital transformation, how the current environment is maybe accelerating some of these migrations to the cloud or into forward-leaning technologies that are well suited for the world we're working in right now. And maybe just sort of look at it through a Dynatrace lens, when are customers or companies typically at that point, where they bring in Dynatrace, is it usually attached to those cloud and digital transformation initiatives? What are sort of the things that get you in the door, given this focus on the more complex environment of hybrid cloud?

Question: Jennifer Alexandra Swanson Lowe - UBS Investment Bank, Research Division - Analyst : And sort of taking that to today, to the extent that there does seem a bit more immediacy around these digital transformation initiatives, is that -- are they at that point where it's starting to really translate to meaningful business for you? Or is that still kind of on the come at this point?

Question: Jennifer Alexandra Swanson Lowe - UBS Investment Bank, Research Division - Analyst : So I was going to ask about -- competition comes up a lot in discussions I have with investors because -- Dynatrace was really the first to identify this need for a fully integrated stack, but other players in the application performance management space have made similar moves over the last REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 09, 2020 / 8:45PM, DT.N - Dynatrace Inc at UBS Global TMT Conference (Virtual) couple of years. So now that -- there was a sort of view that the end-to-end integration was a point of differentiation. Now it feels like others have the same message. Where are still the opportunities to innovate or add value outside of that integrated stack approach?

Question: Jennifer Alexandra Swanson Lowe - UBS Investment Bank, Research Division - Analyst : And just looking at the footprint you have within your existing base, one of the challenges that Gartner and others talk about with the traditional APM market is, it's applicable to a certain subset of workloads, but maybe not every workload, 5%, 10% is kind of the historical number. As you're getting into these hybrid cloud environments that are more complex, what do you think the potential penetration of those APM type capabilities are over time within those use scenarios?

Question: Jennifer Alexandra Swanson Lowe - UBS Investment Bank, Research Division - Analyst : Yes. I just had -- my screen just switched off for some reason. But I'm okay now. So just following on that, so you've had this success with the full stack offering. Not too long ago, you also launched an infrastructure-only module, how does that sort of fit into that world view of the 60% to 70% that could be relevant for full stack? Is infrastructure designed to attack the other 30%? How should we think about that fitting into the product strategy?

Question: Jennifer Alexandra Swanson Lowe - UBS Investment Bank, Research Division - Analyst : And kind of speaking in that theme of expanding the product portfolio, there is a new announcement yesterday of the Application Security Module. It's something you hinted about on the last earnings call, but can you just give us a quick overview of what the new module does and how that fits into the product strategy?

Question: Jennifer Alexandra Swanson Lowe - UBS Investment Bank, Research Division - Analyst : And maybe just looking at that through the lens of the potential footprint, what I thought was interesting was in the announcement yesterday, there was a comment that it was an uplift to either the full stack or infrastructure-only, which implies that this has value even in environments where maybe it didn't make sense to pay for the full -- to the full stack. Can you just comment on that a bit? I mean is this similar in that it can cover every point or every host within the organization, potentially?

Question: Jennifer Alexandra Swanson Lowe - UBS Investment Bank, Research Division - Analyst : And maybe just to round that out, for the traditional full stack -- or at least for APM and infrastructure, there is always discussion around you're selling to the developer, you're selling to IT ops. With something like security, you're signed to another audience within the organization, at least the traditional security model. Does this require your sales force to kind of deepen their relationships within the IT department or form new relationships? Or is this still something that you think ultimately gets pulled in through the DevOps organization?

Question: Jennifer Alexandra Swanson Lowe - UBS Investment Bank, Research Division - Analyst : And since you touched on the sales organization there, one of the things that I think has come across in the last couple of calls is, as you get greater visibility and comfort with the current selling environment, it's given you some confidence to lean into the sales hiring. Maybe first, can you just sort of walk through the trajectory of hiring broadly and then, specifically, in sales this year? And then secondly, are you still confident that, that's the right move and seeing a demand come through as you add capacity?

Question: Jennifer Alexandra Swanson Lowe - UBS Investment Bank, Research Division - Analyst : Great. I don't know if Kevin managed to make it on. I know we were having a lot of issues at the outset. But I'll throw it out there and hopefully he's there. One of the questions I've been getting is looking at ARR through the year and the seasonality in the business. And Q2 was a great quarter, you raised guidance for the year on ARR, but some people are looking at kind of comps in Q3 and Q4 and a little nervous that you had a really great Q3 last year, can you do it again? I'm just curious to see if there's anything we should be watchful for or if it's normal seasonality as we think about the trajectory on ARR through the back half of the year.

Question: Jennifer Alexandra Swanson Lowe - UBS Investment Bank, Research Division - Analyst : Great. Well, I think we are at time. Again, apologies for some of the technology difficulties. But hopefully, next year, we'll get to do this again in person and we won't have strange messages playing in the background for a change. Thanks for the time today.