Dynatrace Inc Q2 2025 Earnings Call Transcript

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

Question: Pinjalim Bora - JPMorgan - Analyst : Congrats on a solid quarter. Jim, I just wanted to learn a little bit more about the ARR or decision to not raise the ARR guide. You had a pretty solid Q2. It seems like the unbilled RPO build sequentially seems massive. I understand the prudence stands, but it sounds like you're a little bit more cautious about the second half despite having completed kind of the first half of all the changes on the sales side and things are looking good. So I wanted to just understand if there is something in the sales cycle, pipeline conversion rates that you're seeing that gives you caution for the second half or maybe was there a pull-forward of deals into Q2 from the second half because of the half yearly quota structure? Any color would be helpful.

Question: Pinjalim Bora - JPMorgan - Analyst : Understood. If I can have a follow-up. Can you talk maybe about the adoption curve of the DPS customers across the portfolio? Just trying to understand how does the consumption curve look like for logs and AppSec related to kind of your core products?

Question: Sanjit Singh - Morgan Stanley - Analyst : I wanted to stick on DPS again. You mentioned that it's -- we've sort of 18 months into the launch. In terms of customers sort of renewing on DPS, what are sort of the trend lines there after you get that first full year of experience under DPS pricing. Any sort of trend lines that you've seen when customers start to renew, is that resulting in an uplift of expansion given the stronger underlying consumption trend?

Question: Jacob Roberge - William Blair - Analyst : Just wanted to double-click on the sales front. Would that change to the six-month comp plans, do you feel like anything was pulled into Q2 that may be causing a lower-than-normal pipeline heading into the back half? Or is pipeline still growing pretty healthy and those Q2 deals were more just a healthy result of the new comp plan. Just trying to understand the puts and takes around that.

Question: Jacob Roberge - William Blair - Analyst : Okay. That's helpful. And then great to hear partners now influence close to 75% of deals. I think that's uptick from about two-thirds last year. Could you talk about what you're seeing on the partner sourced deals front and if they're actually starting to lead more of those deals through the funnel?

Question: Brad Reback - Stifel - Analyst : Jim, can you give us a sense as we think about the back half guidance, is there much contribution from consumption in there at all? Or is that all upside?

Question: Brad Reback - Stifel - Analyst : Yes. Well, I was going to say in both, as well as NRR. Just how is all that captured in the P&L?

Question: Brad Reback - Stifel - Analyst : Got it. And then real quickly, we're hearing more about customers using Grail in the platform within line of business for actual operational analytics. Is that happening just organically? Or has that been a bit of a pivot by the sales force to pursue some of those opportunities?

Question: Raimo Lenschow - Barclays - Analyst : Perfect. Let me try that again. I want to stay on that subject. As part of Grail, you obviously will likely get more logs. Like, what are you seeing on the log momentum for you guys? What are you seeing there in terms of one of the things from your customer conference in February, where that there was a lot of unhappiness with kind of the main log vendor out there that is now with a different entity. Do you see there more conversations already kind of that because you are innovating more that you're seeing more traction towards that?

Question: Raimo Lenschow - Barclays - Analyst : Okay. Perfect. And then maybe one for Jim, maybe what did you see on new logos this quarter? Like was there anything to call out for in terms of new logo momentum?

Question: Andrew Sherman - TD Cowen - Analyst : Congrats on the quarter. Rick, you talked about having a lot more newer reps with less than one-year tenure. Has the churn of more tenured reps been fairly stable? Or is this just because of your hiring over the past few quarters? And Jim, sales and marketing expense was down quarter over quarter. Anything to call out there?

Question: Andrew Sherman - TD Cowen - Analyst : Okay. Great. And then what are you assuming for a budget flush in December? How does it feel out there from the enterprise budget flush perspective versus last year?

Question: Howard Ma - Guggenheim Securities - Analyst : This is Howard Ma on for John. Rick and Jim, if you look at the deals closed in the first half so far, what you've been clear about was driven in part by the change to the six months of the comp cycle, which is -- I understand that's the intended effect. But how would you describe the quality of those deals relative to your expectations? And is there a step-up in observability deals? And could that lead to more avenues for expansion in the back half relative to last year. And also in the back half, as you're thinking about timing of renewal expansions, is there anything that would make you more cautious about timing of those deal closures?

Question: Howard Ma - Guggenheim Securities - Analyst : That's really encouraging. If I could slip in a follow on to it. At this point in the DPS journey, how much of DPS growth is coming from organic expansions and new logos as compared to migrations? And are you starting to see more of a deal size uplift at the point of migration? So I understand the consumption, the 2x, but at the point of migration, are you seeing any uptick there? 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 07, 2024 / 1:00PM, DT.N - Q2 2025 Dynatrace Inc Earnings Call