Dynatrace(US:DT)2020-07-29 18:37Financial Data and Key Metrics Changes - Annual Recurring Revenue (ARR) grew to $601 million, up 39% year-over-year, an increase of $164 million compared to the previous year [44] - Total revenue for Q1 was $155.5 million, representing a 30% year-over-year increase, driven by a 37% growth in subscription revenue [48][49] - Non-GAAP operating income was $50.8 million, leading to a non-GAAP operating margin of 33%, up 11 percentage points from the previous year [50] - Non-GAAP net income was $36.9 million or $0.13 per share, exceeding guidance by $0.03 [51] - Remaining performance obligation (RPO) was $857 million, a 40% increase year-over-year, with the current portion expected to be recognized as revenue over the next 12 months at $503 million, up 42% year-over-year [55] Business Line Data and Key Metrics Changes - Subscription revenue growth was a significant driver of overall revenue, with classic license revenue now representing less than 1% of total revenue [48] - ARR per customer increased to $229,000, up over 10% year-over-year [45] - The number of customers using three or more modules increased by 44% over the past six months, indicating strong platform expansion [41] Market Data and Key Metrics Changes - The company added 85 net new customers in Q1, bringing the total customer count to 2,458 [46] - The net expansion rate remained above 120% for the ninth consecutive quarter, reflecting strong customer retention and expansion [16][61] Company Strategy and Development Direction - The company plans to continue investing in growth, expanding its global team by over 90 employees in Q1 and expecting over 100 more in Q2 [34] - Focus on digital transformation projects is expected to accelerate, with 75% of CEOs anticipating an increase in such projects according to a recent survey [14] - The company aims to leverage its position in the multicloud environment, emphasizing the need for intelligent observability and automation [26][27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's sustainable growth potential despite economic uncertainties, highlighting the critical role of digital transformation for business success [43] - The company anticipates a strong pipeline for new logos and expects to add approximately 450 new logos for the remainder of the year [47] - Management noted that the ongoing pandemic has shifted customer conversations towards essential projects, enhancing the company's value proposition [80] Other Important Information - The company completed its FedRAMP certification, allowing broader access to U.S. government digital transformation efforts [35] - The company is committed to ongoing innovation, with a focus on expanding capabilities across its monetizable modules [36][39] Q&A Session Summary Question: Can you talk about the level of monitoring at some of these customers? - Management noted that as companies accelerate digital transformation, the complexity of their environments increases, necessitating advanced observability solutions like Dynatrace [67] Question: Can you remind us roughly what the benefit was last year on that class of conversion? - Management indicated that the reduction in ARR growth was primarily due to the transition of customers to the Dynatrace platform, with a consistent growth rate of 39% on a constant currency basis [68] Question: Is the increase in ARR guidance purely a function of the change in the assumption around net retention? - Management clarified that the increase in guidance is a combination of stronger new logo growth and an improved net expansion rate [74] Question: What have you done differently in this new environment of no travel to generate new logo demand? - Management highlighted that conversations have shifted to emphasize the essential nature of projects, facilitating smoother sales cycles [80] Question: Can you provide metrics that represent the monitoring side of the business versus the APM side? - Management shared that the cross-selling of modules is increasing, with a shift from 80% APM and 20% emerging products to approximately 70% APM and 30% emerging products [87]