Dynatrace(US:DT)2023-02-01 17:05Financial Data and Key Metrics Changes - Total ARR for Q3 2023 was $1.16 billion, an increase of $233 million year-over-year and $98 million sequentially [23] - Total revenue for Q3 was $297 million, with subscription revenue also at $279 million, both up 29% year-over-year [24] - Non-GAAP operating margin for Q3 was 27%, with free cash flow margin on a trailing 12-month basis also at 27% of revenue [10][27] - Non-GAAP net income was $73 million or $0.25 per share, exceeding the high end of guidance by $0.03 [26] Business Line Data and Key Metrics Changes - The net expansion rate for Q3 was just shy of 120%, with gross retention rates in the mid-90s [11] - Nearly 60% of total customers are using 3 or more modules, with an average ARR of nearly $500,000 per customer [11] - The company added 215 new logos in Q3, up 4% year-over-year, with an average ARR for new logos around $120,000 [49] Market Data and Key Metrics Changes - The demand environment remains healthy, although sales cycles are elongating due to budget scrutiny [53] - The company expects new logo growth to be roughly flat compared to last year, with a net expansion rate in the high teens [54] Company Strategy and Development Direction - The company is focusing on cloud optimization as a key growth driver, emphasizing the importance of delivering a compelling ROI for cloud deployments [5] - Investments in innovation and targeted go-to-market initiatives are high priorities, with $42 million invested in R&D and $98 million in sales and marketing for Q3 [25] - The company aims to enhance its pricing and packaging structure to unlock the full potential of its platform and accelerate expansion [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the health of the pipeline and the ability to execute despite macroeconomic headwinds [53] - The company remains focused on solid execution and innovation to meet evolving customer needs [22] - Management raised non-GAAP operating margin guidance for fiscal 2023 to 25%, reflecting operational efficiencies [29] Other Important Information - The company was selected as a leader in the Gartner Magic Quadrant for APN and Observability, and received the highest score in the Forrester 2022 Wave for AIOps [17] - The company has a new $400 million committed revolving credit facility, replacing a prior $60 million facility, and is now debt-free [51] Q&A Session Summary Question: How does cloud optimization impact Dynatrace? - Management stated that cloud optimization is essential for ensuring ROI and delivering high-quality software, positioning Dynatrace as a necessary solution in cloud deployments [33] Question: What are the expectations for fiscal '24? - Management indicated that more details will be provided in the May call, but new customer logos and expansion are expected to contribute to growth [34][35] Question: How is the company addressing budget scrutiny? - Management noted that while budgets are tight, the focus remains on delivering value to existing customers to drive expansion [108] Question: What is the competitive landscape like? - Management reported no significant changes in the competitive environment, with strong win rates against competitors [88] Question: How is the AppSec market being approached? - Management emphasized focusing on areas where observability and AppSec converge to differentiate and add value [90]