Dynatrace, Inc. (DT)

Investor Day 2020

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Sep 16, 2020

I should know. What do you think about that anyway? Internet is, that massive computer network. Allison, can you explain what internet is? What is the name? It spans the globe like a superhighway an ipod, a cell phone, an affordable internet. We are all having more and more interactions with machines, bank tellers have given way to ATMs, sales, Clarity, e Commerce. We think it's part of the new American economy. All of this data was never available in the past. We are focusing more on the software side of the experience. Every industrial company in the coming age is also gonna have to be a softer man with its company. You say your success or failure over the next decade depends on the digital transformation. Software is now sort of eating the world as a lot of folks now it's, how we bank, how we shop, how we do just about everything. A lot can happen in 2 decades. A worldwide digital transformation. Today, every experience is a software experience, which means it's critical that software to ensure it company into the next level. It has allowed us to grow technologically and allowed us to deploy late technologies with less concern. Ultimately, autonomous cloud management is required in complex environments. You can't do things all in, right? You have to have the machines triggering actions and you have to trust the machines that you're doing the right actions. This is where you need time, please. Dyna just is definitely changing the way we work. No longer in reactive mode. We're now in proactive mode, but we are now leaner and developing quicker and developing better solutions. It's still early days. There's a lot of room to go in this marketplace. I mean, you think you have 50 years of data center that's shifting to the cloud and then 10, and we are early days. Ladies and gentlemen, Welcome to the 2020 Dynatrace Investor Day event. Please note that this program will be recorded and available to view online after the broadcast. Now, we welcome Diana Trace, Vice President of Investor Relations, Noel Ferris. Hello, everyone, and thank you for joining us today. We look forward to spending the next few hours with you. My name is Noel Ferris, and I'm the Vice President of Investor Relations at Dynatrace. We have a great lineup of topics and speakers for you today. The purpose of today's event is to share our perspective opportunity. From a logistics standpoint, to stretch your legs. We will be hosting a moderated Q And A session starting around 12 pm Eastern. John Byrne, Steve Tach, and feature within the event platform. And now, before I turn it over to John, let me share our Safe Harbor statement with you. I won't read through it in detail, but to summarize, we will be making forward looking statements today that reflect our views as of September 16, 2020. These forward looking statements are subject to risks and uncertainties will results to differ materially from those expressed or implied by such statements. Please refer to our SEC filing For a summary of these risks, Dynatrace disclaims any obligation to update these statements to reflect future events or circumstances. As a reminder, we will be referring to some non GAAP financial measures during today's virtual event. A detailed reconciliation of GAAP and non GAAP measures section of our website. And lastly, references to growth rates will be in constant currency unless otherwise noted. And with that, let me hand it over to our Chief Executive Officer, John Van Sicklin. John? Good morning, Thanks, Noel, and thank you all for joining us today for our 1st Investor Day. 13 months ago, when we went public, we were in the mid 2 significant transitions: the first, converting our customer base to the new Dynatrace platform and the second, completing our shift to a predictable subscription business model. I'm very pleased to say these transitions are both behind us. The new Dynatrace platform now makes up 94% of overall company ARR and subscription revenue now makes up 93% of overall company revenue. We are a single cloud native SaaS platform delivering solid financial results simplified, streamlined, to focus on the tremendous market opportunity we have ahead of us. With these transitions behind us is time to provide greater visibility and depth into the building blocks for sustained growth and profitability, a balance we believe matters for Scribe in greater detail these building blocks. We will cover go to market with Steve PACE, who runs sales for us globally, The power approach for sustained differentiation and value with Bern Greifenator, our founder and CTO. Kevin Burns will then pull this all together in financial terms to provide visibility into how we drive continual growth at scale. Also as part of our agenda, we've invited several of our customers to join us to share their experience with Dynatrace, why they chose us and the ongoing value we provide to them. Mike Masiak, our Chief Marketing Officer, will be facilitating the panel discussion with Angel Sim of BMO Christian Heckleman of ERT Jay Cotton from Kroger and Mark Forrester from Mitchell's and Butler. The before the team goes deep into each of these topics, let me quickly level set the audience on these 4 themes you'll hear throughout the day. First, our market opportunity has never And the second is that dynamic clouds are the platform of choice for these transformations. Digital transformation drives disruptive change in the of applications and services of greater value and the importance of these applications to revenue, customer loyalty, and brand image. To the agility, flexibility, and efficiency required for successful digital transformation, multi clouds are the platform of choice, certainly within our enterprise customer base. The cloud has disrupted the entire IT operations management mark as clouds have become too large, too dynamic and too complex for older generation approaches. As you know, we reinvented our platform to take advantage advantage of the trends we see ahead, with a $30,000,000,000 plus TAM today and accelerating digital transformation and cloud market fueling TAM expansion. And new modules coming to expand our TAM even further, we believe we have the market opportunity to sustain strong growth for years to come. This second theme you'll hear throughout the day is that we are enterprise account focused. This does not mean $250,000,000 and above companies, nor does it mean companies with $100,000 ARR and above, we mean $1,000,000,000 in larger companies, of which there are 15,000 around the world. We believe these enterprises have more complex, larger scale, digital transformation challenges. And we believe to drive over 10,000,000 Experian, JP Morgan Chase, Lloyds, and so on. These are companies who continue to invest significantly in their digital transformation effort for agility, efficiency and business advantage. These companies typically have a number of custom applications, multiple clouds, including complex hybrid extensions and large digital teams who must collaborate effectively to accelerate innovation. Part with these enterprise accounts is different than servicing a single app small to medium sized business. And we excel at it. The 3rd theme is that our approach to monitoring and observability is radically different than that of our competitors. Our unique roach puts automation and AI at the core, not simply gathering data and serving it up in charts on dash sports. Yes, we do this too and we do it very well, but we see the volume, velocity, variety, and interconnectedness of data already overwhelm many enterprise cloud customers. And if you pause for a moment and think about the world 3 to 5 years down the road, with the amount of data being processed, one hundred times to a 1000 times greater than today. The urgency for automation and AI powered assistance will only grow. We believe investing in these areas of differentiation will continue to drive value for our customers over time, increase our expansion and cross sell success and help us in both existing and new modules that take advantage of this powerful core differentiation. And fourth, you will hear a talk about our balanced approach to the business. We believe a healthy combination of growth and profitability is sustainable as we scale and make us a more resilient and durable business for the long term. Over the last year, we have proven the balance is real that is not hindering our ability to invest aggressively in commercial expansion and continuous innovation and that we simply have an inherently efficient platform operating model and culture that will continue to generate strong margins and cash flow. We see the path to a multibillion dollar category leader and are excited to share more about this trajectory over the next few our Senior Vice President of Global Sales. Steve? Thank you, John. And for those of you who don't know me, I've been responsible for running Dynatrace sales for the past four and a half years, leading our direct sales team and our partner network through the transition from the classic products to the new Dynatrace platform. And as John had mentioned, the business had previously been mostly perpetual license business, to now where it is much more predictable SaaS subscription business. And I must say, I'm very proud of how our global sales team accepted and executed on these significant and very important transitions. And I could not be happier to have these transitions behind us. Being able to simply focus on selling the Dynatrace platform balancing new logo growth with ongoing expansion and cross selling is a much more straightforward proposition. I'd like to discuss 3 topics today to give you a little bit more insight to our go to market program. First, I'll give you an overview of what we refer to as our frictionless enterprise sales model. Next, I want to share with you why I believe the Direct Enterprise sales model is an extremely a powerful approach to fuel growth given the accounts we target and the customers that we serve. And then I'll wrap up with a look into what we see as an increasingly exciting go to market extension for us, our cloud partner network. Before I expand on these topics, let me level set on a few important building blocks of our go to market strategy. As John said, we begin by specifically targeting the Global 15,000, which are companies of $1,000,000,000 in revenue and higher. The vast majority of these companies are in the midst of some type of digital transformation and we seek out their most advanced cloud application teams and use cases as our initial landings zone into these accounts. It is here that our differentiation and value are most pronounced in dynamic clouds mostly multi cloud with multiple cloud native workloads and DevOps teams. These teams are responsible for the applications, user experiences, and technology stacks that deliver significant revenue streams, customer or partner interaction and strategic business impacting services. Any delay in these new innovations, degradation of service frustrated users, our business impacting outages is a big deal. It's here where performance matters most. It's here where complexity is accelerating And it's here where traditional tool based approaches simply do not work. Next, our sales, marketing, services and support teams are global. Sell directly in 5 continents and through partners on a 6th in North And South Africa. This global footprint allows us to scale all these organizations quite efficiently as we've been in territory for years now with a proven management team in all major geographies. And finally, armed with a SaaS platform, we can sell remotely as well as we can sell on-site face to face. When COVID hit, We pivoted to a complete work from home sales program overnight without missing a beat. Zoom has replaced air travel and physical events. However, The need for Dynatrace and the platform we deliver has never been stronger. This has given us the confidence to continue to expand our sales force in all geographies and in fact, accelerate our Salesforce expansion over our original operating plan for the fiscal year. Now on to the 3 key go to market topics: the first is our frictionless enterprise sales model. When the new Dynatrace platform was designed, a fully functional free trial is part of the SaaS platform model, a steadily growing number of and sales engineering specialists until they're ready to engage in the sales cycle. SAP came to us this way. Intel came to us this way. And Mitchell's and Butler, the popular English pub franchise who you'll hear from later also came to us this way, as have many, many more. We find that many digitally transforming companies start in a relatively simple static cloud world, usually with a single public cloud provider, and release cycles that are measured in months. In this simple state, nearly any type of observability and performance tooling can work, but as the cloud becomes larger, as hybrid data sources are connected in, as more applications and services are deployed, as multiple DevOps teams deploy code more frequently, and more customers, partners and revenue streams depend on the cloud to perform flawlessly, the need set changes. It's here in the 2nd phase of their digital transformation efforts, where Dynatrace enters, and it's here where our unique platform advantages with advanced automation and AI power, low people away. They're looking for something better than what they currently have, and they find something radically different with the Dynatrace platform, something that transforms the way they work, taking them from their current state of reacting to the flood of alerts, issues, and outages to an elevated state of proactive optimization and accelerated innovation. We really don't care who the incumbent may be, whether APM or infrastructure, sooner or later, complexity gets the better of the situation we have a unique and powerful solution that delivers immediate value that scales with the customers as they evolve. It's also important to understand that we try very hard to keep our initial deployment of Dynitrace modest. Our reasonable landing zone somewhere between $80,000 $120,000, This is large enough to cover a meaningful set of cloud applications and infrastructure, enough to experience the Dynatrace value, but not so large that the sales cycle gets overly elongated and complex. We know that the product successful in expanding our initial land with both additional applications, as well as in cross selling additional modules. It's a combination of both that really ramps our ARR per customer. Currently, the average ARR per customer for 3 plus module customers is over $400,000 well above our $229,000 average ARR for the entire 2400 Dynatrace customer base. And 3 plus module customers now represent 30% of our customer base in Climbing. This leads me to the second point I'd like to make. The power of a direct selling organization for predictably scaling old pain of reactive monitoring, where companies have a disparate bag of tools and an overwhelming amount of data that must be analyzed by a limited amount of people resulting in tools for all. Finger pointing and alert fatigue. In addition, the time they have to perform their jobs get squeezed more and more each quarter with greater and greater business repercussions when the surprises happen. As I said earlier, our customers are usually in the 2nd phase of their cloud journey as they move more complex dynamic multi cloud use with a growing number of DevOps teams and serious modern cloud workloads. I hear more and more from the CIOs and the CTOs that I make on how they want one observability platform, one source of truth so they can still gain situational awareness across their entire cloud ecosystem. They can break down the silos between development, operations, and business and accelerate agility and innovation. They're looking for a new way, not more of the same, and this is where a direct consultative sales approach a relationship with expertise to ensure success comes in. Their success is our success. We provide an essential platform to accelerate successful digital transformation and we understand the responsibility that comes with this. Although our platform is incredibly easy to deploy, with time to value measured in hours, Our customers expect education, best practices and expanded use case support to get the most out of our platform and its various capabilities and modules. To accomplish this, we utilize a global service, customer success and support organization working closely with partners to assure post sale success. It is this attention to go beyond simply selling software that builds a trusted relationship and accelerates ongoing expansion. Few enterprise customers I've ever met with want more vendors, rather, they're looking for a select few true partners that they can consolidate around. We believe our direct relationship approach will continue to set us apart as the cloud continues to collapse use cases and customers continue to consolidate vendors around those who are viewed as trusted advisors. Now let me hit my 3rd and final go to market topic for today, and that is the potential of our cloud partner program. And I say potential because we believe the big opportunity is still ahead of us. Of course, we've had a global partner program for some time now. These are mainly smaller regional value added partners who focus on reselling Dynatrace for APM use cases. This partner network is several 100 strong and especially robust and deep outside of North America. They augment our sales efforts and are an important part of our current sales productivity profile in EMEA, Latin America and Asia Pacific. But what is particularly exciting for us is the growing interest in our platform and AI approach by the global cloud systems integrators and the larger regional cloud systems integrators in North America and around the world. They see their customers pushing beyond initial static cloud implementations to the dynamic multi cloud world that we serve so well. We work well with them in the field, and now we have several who have built us into their blueprints and offerings that they're actively introducing us to their customers. We are becoming part of their go to market. For example, Wipro's AI ops and cloud studio offerings are both powered by Dynatrace. HCL includes Dynatrace in their dry ice and elastic ops offerings with active customers such as Manchester United. Dxc's platform DXC and Vionics is fully integrated with the Dynatrace platform, supporting joint customers such as Campbell Soup. And similar embedded offerings are in the works with Cognizant, Fujitsu, TCS and Accenture. It's the combination of advanced observability at scale, an extensible automation framework and open explainable AI approach that they can build around that gets them excited. We are beginning to be viewed as a powerful augmentation to their current services engagements and value propositions that they are actively bringing to their many digitally transforming customers. My team is leaning into this opportunity, and I look forward to discussing our success here with more tangible results next time we meet. With that, let me summarize. Our approach to increasing new logo lens is well oiled. It's a proven frictionless approach that fits our well differentiated platform and target account segment, and the market continues to move forward our value proposition. Once we land locations and a cross sell of additional modules. And as we scale as a company and our platform becomes recognized in more and more of the Global 15,000, Cloud Systems integrators are taking notice, educating their consultants and incorporating us into their offerings. Our land and expand model is stronger than ever, with the ongoing expansion of our direct sales team combined with the leverage of global systems integrators, we have the potential to kick it into another gear moving forward. But you don't have to take just my word for it. As John mentioned earlier, we have invited several of our customers to join us today to provide a view into their digital transformation initiatives, why they chose Dynatrace and the ongoing value we provide to them. And with that, I'd like to turn it over to Mike Masiak, our Chief Marketing Officer. Mike? Great. Thanks Steve. Really excited today to have a panel of experts together to talk about their digital transformations and how Dynatrace has helped them along that path and how they're moving to the cloud. Joining me today, I've got Angela Sim from the Bank of Montreal, Jay Cotton from Kroger, Mark Forrester from Mitchell's and Butler, and Christian Heckelman from ERT. So first, let me start with Angela Sim from the Bank of Montreal. Angela, Can you tell us a little bit about, what's important to you and the bank right now and, and maybe a bit about your company as we do so? Yes, I'd love to, Mike. Thanks so much for having me here. Bank of Montreal is a two hundred year old bank with more than 12,000,000 customers For those of you who aren't familiar with it, it's the 8th largest bank by assets in North America. We have a very large present in both Canada and also the Midwest and States with BMO Harris Bank. I personally lead BMO's infrastructure team globally, and I'm responsible for all the non production end production systems. So that really includes server, mainframe, network, storage, other devices. It's really the whole infrastructure end to end. Mark, what about Mitchell's and Butler? I know you guys have a lot of properties. Tell us a little bit more about the company. Yes. So Mitchell's and Butler's is one of the UK's largest restaurant companies. We have 1800 outlets roughly, which covers, in total, roughly around 14,000 employees. We have a turnover in the UK of around GBP 2,500,000,000, which will be about USD 3,000,000,000. We have multiple brands across the business. So we have traditional brands such as Toby Carvary for that Great British Sunday dinnerhead experience, and harvested, which is a chicken brand, all the way through to, wet, outlets such as Castle and, Nicholson's which to have the traditional cat scales and whiskies, etcetera. So we have a full round of bars and restaurants to complement to total of that 1800 outlets? Christian, can you tell us a little bit more about ERT? So, ERT is a global endpoint driven data and technology company. We are working with the top farmer and biotech companies and supported over 50% of all FDA drug approvals since 2013. So, our solutions including cardiac safety, co respiratory and imaging. Jenn, I know most of us have shopped at Kroger, but can you tell us more about the company? So Kroger is a one hundred and thirty seven year old company that has gone through several transformations and many, many different iterations of everything that we've done. We are the largest U. S. Grocery store largest U. S. Retailer. We have, in this time and this age, we have been absolutely pivotal and probably the most important thing a lot of people and a lot of people in their lives. And we have to keep up and we have to innovate and we have to keep doing things moving forward. We do not want to be known as the 137 year old grocery store that's doing 137 year old things. So we try to move as quickly as we can within being safe. To make sure we do the right things for our customers and for our base going forward. I know everybody on the panel is going through a digital transformation of one form or another. I think it would be great if we could just give everybody a sense of what your digital transformation looks like. Jay, do you want to start with Kroger? So when you're essential, you're essential. And we are responsible for people's lifelines, for people to get food, for people to move forward, and be able to feed their family. And the, the tolerant rate went from 0.001 to absolute 0. I mean, there is no time for downtime We've converted some of our stores into digital only stores because the digital e commerce has just absolutely gone through the roof. We have probably 3 or 4 stores out here in Cincinnati that only take digital orders, and it allows us to kind of encapsulate our employees and make sure everybody's in at COVID free environment, and they could go and pick groceries and do all sorts of things. And just in the digital space, we did over 1500 deployments last year. And we're doing real time, middle of the day, no customer impact. And we need to be able to have that complexity under control and be able to understand everything that's going on at any given time. Yeah. Sounds like a very complex environment. What role does Dynatrace play in that complex environment and and does it help you to simplify? Well, it enables us to see everything. We have public cloud. We have private cloud. We have our own data centers. We have things inside of the GCP data center. We have things inside of Azure Data Center, and it gives us kind of that single pane of glass to make sure that we could see everything and everything that's going on. We are in highlight dynamic scale environments. We utilize Kubernetes. We utilize Pivotal Cloud Foundry. We have a lot of different pieces that allow our business to flex and to move as we get more people into our system, as we get higher levels of engagement, as more people come on the website, think of it almost like a Black Friday. Every day is pretty much Friday for us. I mean, in this current environment, everybody needs their groceries, everybody needs it up, everybody needs it available all the time. So we need to be up available and have the ability to flex and move with that. Previously, we were on all the incident calls. Anytime there was a problem, it was me and my team, and we were a small team. We were essentially known as the guys that knew how to read the tea leaves. I don't do that anymore. We don't get on the incident calls anymore. We have a platform that enables the teams through automation, through artificial intelligence, to be able to go out and find the issues by themselves. I mean, the data is all there, and it's very approachable. The Dynatrace tool is so easy and so approachable. Leverages infographics. It gives us the ability to, when a developer or a team gets an incident, the incident comes to them. They have a link. They click on the link and AI and, and the Davis just tells them what the problem is. They don't have to go digging. They don't have to go looking. They don't have to engage us. They say, Hey, I got this ticket. I don't know where it's coming from. The answers are in the ticket. The answers are right there. They just have to have one click, and they know exactly where the problem is, and they could go and fix it and move on. And it cuts down the time of the resolution time for a lot of our incidents. I mean, it's just that quick and that easy. That's great. Thanks, Jay. Now Angela, what's important to you and your digital transformation at the Bank of Montreal? Mike, when you ask about what's important to Bank of Montreal, BMOs like most Financial Institutions are focused on digital transformation, along with cloud migrations, and although the new modern technology is really important. Stability and operational excellence is still continuing to be a top priority us. When I look at what Dynatrace AI and alerting proactively shows us, it shows me even a modest change in either a transaction volume, a performance degradation, which addresses which allows me to quickly address an issue. What I love about Dynatrace is it enables me to learn in my environment. So it means that Dynatrace automatically baseline my transactions for performance and failure rates. It raises events when we deviate from automatically established norms. So there isn't a lot of custom configuration that I have to do within my environment. When I look at what Dynatrace has done, it's really been that gold thread that could enable our environment end to end to dynamically tie things together. No more manual documents that no one maintains, but actually Dynatrace dynamically creates the flow live in the environment. I think it's fascinating how restaurant and pub chains can go through digital transformations. Maybe you can share a little bit about what you've been doing at Mitchell's and Butler. So we're on a very accelerated plan. We started off probably 2 years ago now when we first boarded Dynatrace. That was, that was the first part of our digital transformation to understand our infrastructure, make sure it was ready for the next phase of the digital rollout. We began about 18 months ago now, doing things like order at table. So you walk into one of our bars, find an empty table, open your mobile phone, there's the menu. Select the items you want you click it, you pay for it, and then their waitress will deliver it to your table. But obviously in the current climate with COVID-nineteen, we've seen since lockdown, there's been a massive lifting the people for Audra Table because that means that the social distancing can be a dear to, and that allows the business to do that order at Tableau facility across multiple brands now. So that is rolling out that pace across more and more brands within the business. So Obviously, we need the infrastructure and the capacity and the monitoring and the support to obviously make sure that all of these digital touch points are there. And accessible for our customers. And I think I heard, as you begin to implement order to table, it had an impact on ticket sales and average ticket. Yeah, that's correct. So we initially trialed this as like a version 1 as a proof of concept, obviously. What we saw in our, one of our brands is that basically when the customers, compared to an order at the bar, the customers actually were spending roughly 20% more in the basket total. And what we put this down to is the, the, we take that friction away. I always, kind of express the story of a customer comes into a busy bar. They would to find the shortest queue to get to the bar, to get to the front, to get the attention of the waiter or waitress behind the bar. And then obviously, they go, what would you like? Can they Oh, and then the, at that point only then, do they consider what that they would like to purchase? But with the order at table application, what that does is gives them the full menu all of that friction away and allows our customers to browse the full menu and make a more informed informed choice at their own time. And what we're finding is that people are literally upselling themselves into higher quality drinks because they may not have seen it, when they were at the bar, it might not have been in that location of where they were. So that allows them to upsell and basically purchase higher quality drinks, etcetera, and make a more informed choice, which normally leads to them spending more money on the transaction. That's That's great. Thanks. So how did you come to find Dynatrace? When you were when you were looking for a solution, how did you come to find Dynatrace and maybe talk a little bit about how Dynatrace came on board? Yeah. So, I've tell this story many times, but, the Dynatrace we didn't really know Dana Trace, as a product. So what we did was our current monitoring platform, we could see that it was, you know, it didn't really our needs anymore as we were moving into this digital era. There was a lot of manual configuration that we needed to do. So what we did was just went to the quadrant, and we could see that, you know, our current supplier was New Relic, and we would see that there was 2 more, obviously, products in the market that were higher placed in, in the top quarter. So we decided to, reach out to both suppliers. Obviously, we had a demonstration from AppDynamics. It was number 2. And we went to Data Show's website, could see that we could, take a trial. So we just went on the website, literally clicked a few buttons, got the, the, the test tenant as it was back then. And we took the agent and installed it into our, like a UAT environment. And within minutes, it was becoming very clear that we looked at the website and thought, can it really do that? And the answer is yes, it can. Because, we obviously went on to then purchase the product because we could see that, what it was doing in the, the way the AI was alerting and the ease of use of program. So we have a very small team in Mitchell's and Butlers of, like, five people that look after all of our digital, resources from a support perspective, and then it's, it's supplier backed up through contract etcetera. Christian, I know when you came across Dynatrace, there was a lot of doubt of this couldn't be true. And you went to prove Dynatrace wrong. And I think that is wound on a train or something like that. Sure a little bit about that. Yes, sure. So we first met Anna Trace at the AWS summit in Berlin and back in 2018 when my bosses league and to dive went to Berlin to actually, plan with the competitor of Dynatrace, our next steps in adopting the solution. And, on the last day, we had an appointment with, banner trace on the booth. And we said, okay, let's take a look at their solution and, Yeah. And when it's not mind blowing, then we will move that with with the competitor. And then we go to the booth, and the guy on the who sold us. So, yeah, all you have to do is to do deploys 1H and then 1H will do all the stuff for you, and you don't need figure anything, from, applications got a level perspective or something like this. And we were like, yes, sure, you're right. And this will definitely work and and so on. And then we left the booth. And while we were in the train back from Berlin's workbook, my boss opened a Dynatrace trial account on the SaaS platform. And so let's say, guys, here's a SaaS platform account. You should have a deep invitation play around if you want. And while we were sitting in the train, we were rolling out one agent to one of our production environments. And was really easy because, it's only three lines of code you have to to round circles. And, nowadays it's with with answer and all the different tools. It's really easy. And then we rolled up the diamond trace on H2 servers and suddenly it seemed popping up all the all the servers and services in the smart gate technology. And this was really cool to see how to, yeah, how the services speak with each other because the done phrase agent will automatically inject into this network stack and so on and so on. So, this was the start of, how we are using data trace and, even with the preppy internet and the churn train, it's, it was possible to roll out one agent without any extra configuration efforts, like, as I said before, configuring any plugins, or or or configuration from the applications of level perspective. That's great. Thanks, Christian. I'm not sure, but I'm willing to bet that ERT is the only company to undertake a Dynatrace trial on a speeding train. But, switching back to the value of Dynatrace again. I'm finding we're finding that lots of customers are using Dynatrace to enable greater levels of automation to leave more time for innovation in their organizations. Jay, I know you've done some of that at Kroger. Can you share? Yes, absolutely. So one of the things that I mentioned is that you need to automate everything that you do to make sure stuff. Make sure you're at a point where you get to do the fun stuff. So we've set up a CICD pipeline that allows teams to tag their services with whatever, kind of alerting that they need. We have an automated process that runs through a couple scripts. And when they deploy their service, it puts the group that's for that service on them. So when it gets deployed to Dynatrace, Dynatrace automatically knows who's responsible for it, and we could leverage Davis a little bit better. And team A is responsible for a service today. Tomorrow, team B is responsible for it. They just have to change a little file in their deployment cycles, and now they've completely shifted broken down dependencies. And teams are not sitting around doing just churning time, waiting for someone else to do something to help them. They can enable, and they could do things on their own, and they could automated. So we've embedded things in the CICD pipeline. We've embedded the ability for them to do SLOs and SLA stuff, which is hugely important in a large organization, you need to be able to have something to measure yourself against. And we've, we're working on right now doing automatic remediation, the auto remediation through we're leveraging that so that if teams do deployments overnight, if something goes wrong, it'll roll it back automatically. It doesn't affect customer and they get an email, and they could actually sleep. So you get happy developers, you get happy teams, and you get happy customers because we're pushing forward with new technologies and new features set every day. Great. Thanks. Christian, I know that automation is important to ERT, and you've got some ambitious goals. Tell us more. So what is our goal of trying to achieve is to, to, working towards the autonomous cloud. So, the full automation or fully automated life cycle of our application, when you think about deploying applications, automated quality gate, FLI, as low evaluation of our bills, then automated roll out to higher environment deploying the production, automatic remediation, and so, less meantime to remediate. Some some issues when found. So, this will be for Dynatrace is enabling us to go towards is gold. Great. Thanks. Angela, when we were chatting earlier, it sounds like Dynatrace has become a pretty strategic platform to the bank. Is that one of many? Are there other strategic platforms in the Bank of Montreal? Dyna Trace is a critical platform Bank of Montreal. What we've chosen to do is also integrate it with other critical platforms like ServiceNow, which is our ITSM capability and also event management with ServiceNow. And what we found was that the integration was fairly seamless that we really use ServiceNow event management, which integrates beautifully with Dynatrace and its capabilities. We've decided to make Dyna Trace for corporate standard across the environment. We've enabled a large number of our critical systems, and we've just actually recently expanded our road map substantially with our roadmap for Dynatrace for the next year that will substantially increase our footprint. Our plan is to continue to leverage Dynatrace in both our performance and production environments. And now we're actually expanding to our non production environment because we think if we can enable also our testing environments, it will give us some quality and capabilities it strikes me as I listen to the panel talk that Dynatrace has fundamentally changed the way that your teams work. Enabling them to be more proactive rather than just reacting the problems. Anybody want to comment on that? So, yes, I mean, it fundamentally changed the way the whole team works. So I say traditionally, as a team, we were only known because when something went wrong, people came knocking on our door. That is completely changed in today's environment. So we are being asked for advice, how can we hook down a trace in better because everyone's understanding that the level of insight, the further we hook down a trace into all of our digital platform the Davis AI and the rest of the, you know, the product can actually leverage things and give us insight into things that we never knew. So it allowed us to, streamline our products, I call it virtual gardening because we had a very bloated application layer and the good down address allowed us to prune and pull out the weeds and make it a very efficient platform to work with. So from our perspective, it's changed that. And what it's allowed us to do is change the team and their ethos because They're enjoying now more their day to day job because people are integrating with them. People are coming and asking questions rather than that constant feed off. This is broke. That is broke. Ex has broke. With the Davis AI, we can see that things are broke, but it'll us to see that breakage in that, that small minute break at a very low level. So before, it was only broken when, you know, somebody couldn't book a table and it catastrophic to the business, obviously, because that's a revenue driver. But with Dynatrace, we can see when we're exhausting connection pools, and we can fix that. And so therefore, most people are now unaware that we have issues because I say failure is inevitable in this digital age, but we can see these failures that so granular level, we can put out these very, very tiny fires so fast and react to these alerts that are coming through that actually never gets to that stage where you're having a full scale table bookings is out of door. The basket isn't working. So from our perspective, it allows to be way more efficient because we can deal with lots of little issues much quicker than we can obviously with a full scale issue trying to understand what's broken back trace it because we understand what the root cause is straightaway because David's AI will tell you that. Thanks, Mark. That was great. And thanks to everybody who's been on the panel today. It's always great to hear directly from customers. Hopefully, it was useful to those watching on Investor Day as well. And with that, we wrap the customer panel, and I turn it over to my colleague, Steve Tack. Steve? Take it away. Thanks, Mike. Hi. I'm Steve Tack, SVP of Product Management at Dynatrace. I work closely with Steve Pace and his team in the field to collaborate with customers on their cloud and digital transformation needs. It would burn our CTO and founder who we'll hear from next on the direction of the Dynatrace platform. You've heard the story of our reinvention back in 2015, take an enterprise in 2016, how we saw the cloud coming, containerization coming, scope and skill expanding a 1000 x, the DevOps Movement accelerating, and so on. These macro trends continue to shape the technology and business strategy of the enterprise as digital transformation accelerates. What is most important to note is that a reinvention of the Dynatrace platform was not a one time replatforming event. We established the culture, the processes and resource the team for the continual reinvention that is required to win development market segments are all continually changing and driving toward the future of a truly autonomous cloud, one that requires no human intervention. And we major releases a year, and over 90 percent of our customers always on our latest release, we are bringing innovation and value to our customers at an accelerating rate. There are three dimensions of our platform that create sustainable advantages for our business as the market rapidly evolves. Each one positions Dynatrace to adjust quickly to changing market dynamics and anticipate new requirements. Most importantly, these are not elements that competitors can quickly copy or bolt on later. Each one required us to build it into the core of the platform. I'll address all three of these elements throughout my talk, which are automatic and intelligent observability of scale, radically different approach to AI ops and addressing purpose built use cases through modules that leverage a common platform. Before I begin, it's important to remember that we focus on the largest enterprise accounts in the world, the Global 15,000. These companies are 1,000,000,000 or more in revenue, And as Steve Pays said earlier, these customers have fundamentally different requirements than SMB or single application customers. And our platform approach and key differentiators fit them exceptionally well. The foundation of our platform is how we collect and manage observability data at scale, which we've been doing ever since we reinvented our platform. It starts with a platform approach, gathering a wide breadth of data in a purpose built common data model that supports our many use cases, while making it easy, automatic, and web scale. The market shift to observability is significant as cloud native technology broken traditional silo based monitoring approaches. This realization has led to the rise of observability as a new approach to a modern cloud world. This market shift is perfect for Dynatrace as we anticipated this need and have a broader, more automatic and more intelligent approach. And it provides the perfect opportunity to bring the power of the Dynatrace platform to significant and growing markets. The observability basics of metrics, logs, and traces are important, but enabling IT to accelerate digital transformation projects requires a lot more To start with, we believe that modern cloud observability requires a broader set of data to complete the use cases our enterprise cloud customers expect. Beyond metrics logs and traces, Dynatrace provides distributed tracing, co level detail, entity relationships in topology, and user experience behavior data. Distributed tracing and code level detail are required by development, DevOps, and site reliability engineering teams to quickly identify anomalies and understand precise root cause so problems can be fixed immediately, proactively, and performance can be continually optimized. User experience data capturing every user journey, whether from mobile device, laptop, kiosks or IoT device experiences, and more, provide an important outside in view of how the full cloud stack is supporting user interactivity required to assure applications are continually delivering what users and the business expects. Metadata, such as version, deployment and business context are also captured tying full stack observability data, directly to business metrics and workflows. For example, product teams can measure the adoption and success of new features in Bluegreen or canary releases and make decisions on where to invest resources initiatives to drive collaboration. Again, it's not about collecting another set of data. It's about tying the entire set together, so better data informed decisions can be made. And in addition to collecting a broad set of data and organizing it into a common data model, We put all this data in the context of a precise real time topology. Dynatrace understands the exact relationships and dependencies across the enterprise cloud, literally billions of dependencies between applications, services, processes, hosts, networks and infrastructure. As a dynamic multicloud evolves, this real time technology is updated continuously, providing end to end top to bottom situational awareness that digital teams in our AI engine dependent. Now trying to do all this data collection via scripts and tags, topology mapping manual might be possible in an SMB with 1 or few applications in a relatively static cloud environment. But this simply is not possible to do at scale. With multiple cloud native workloads running across a modern dynamic multi cloud. And with 84% of enterprises embracing containers in production, and 55% moving to a daily or weekly release cycle, cloud native application techniques present a rapidly growing challenge that Dynatrace uniquely solves, highlighted by over 90% of our platform customers using Dynatrace in these environments. Through our patented 1 agent and PurePath Technologies, we automatically discover an entire multi cloud environment, dynamically instrument, modern and traditional applications, and continually learn and update without human scripting or user configuration. Our competitors like to claim 1 agent capabilities as well. But offering a single binary followed by several manual steps to configure each agent is not what we are talking about. Dynatrace is truly automatic. No human intervention to set up, configure, providing the only way to keep up with dynamically orchestrated cloud native workloads at scale. Before I move on from observability, let me touch on future data gathering trends, in particular, the promise of open telemetry. I've been asked, will this disrupt Dynatrace's unique advantages? The answer is no. In fact, we are fully embracing open telemetry. Though it's in its very early innings, we are excited about its potential. We've always said collecting data will become a commodity. It's how you do it and what you do with it to save customer's time resource and money that matters. We believe open telemetry will simplify our development efforts to collect data, extend the reach of our platform, and make our AI engine even smarter. We've been an early and significant contributor to OpenTelemetry, along with Microsoft and Google, and we do at the rest of the broad set of data we collect, Dynatrace will enrich open telemetry with code level analytics. Extended distributed tracing support, will continue to be strong, high value, and sustainable. Now let me move on to the second core differentiator for Dynatry. Our embedded AI approach, we call Davis. AI ops is another hot topic in the industry and getting hotter as multicloud complexity explodes. As John said, the volume, velocity, and variety of data is quickly outstripping human ability to process and analyze in any reasonable time frame. AI ops promises to bridge the growing gap between cloud complexity and limited trained resources, a promise of proactive response versus reactive fire drills. To fulfill the promise is very difficult. Dynamic multi clouds are ever changing and evolving, which makes learning approaches like correlation engines and practical. These approaches are, therefore, imprecise and very hard to maintain. On the other hand, no one wants a black box AI solution either. I've not met a cloud architect or IT exec yet, who is ready to trust critical cloud operation decisions to a machine. So how did we solve this AI ops challenge? We stepped back and took a radically different approach. We knew we had to eliminate the need to learn, and we had to provide an explainable approach that could be trusted. So we invented smartscape. Smartscape builds and maintains a precise topology of any dynamic webscale multi cloud. By observing every transaction and entity at runtime with no manual intervention. All relationships are captured with code level precision across cloud platforms, containers, microservices, and traditional applications. SmartScape is always current, and uses its understanding of relationships as one of the building blocks for Davis, are deterministic and explainable AI engine. Davis is built into the core of the platform, combining the context of smartscape with patented algorithms and embedded expertise. This unique approach doesn't rely on training or correlation based guessing. Davis delivers automatic and out noise, and with problems and anomalies prioritized by business input. By eliminating reactive manual work, time consuming war rooms and unproductive finger pointing, digital teams shift from reactive to proactive, spending less time on firefighting and more time driving innovate and strategic business value. It's important to note that DeannaTracer's AI ops value comes with every module delivered as a unifying characteristic of the platform. Polygon and automated, delivering 1+1 equals 3 value. As modules are added versus alternative solutions where separate tooling or lack of unified data model yield a 1+1 equals 2 value proposition at best. And it's not just AI ops for what Dynatrace delivers out of the box. Our platform is completely open through APIs and SDKs, to extend to other data sources and use cases, making any dynamic multi cloud ecosystem even smarter. For example, we have a growing number of customers integrating Dynatrace throughout their continual delivery pipeline and IT operations management workflows, combining Dynatrace with offerings like ServiceNow and Ansible or or illustration and self healing. With over 450 technologies provided by Dynatrace, the openness and intelligence of our platform, provides an exciting opportunity partner and customer contributed extensions and applications. Bottom line, our AI approach is unique and we believe it will continue to deliver sustainable differentiation for our business for years to come. For others to compete our AIF scale, they'll need to fundamentally rearchitect, and that takes time. In the meantime, we'll continue to invest to widen that gap. The 3rd platform differentiator I'll take you through today is our approach to deliver purpose built modules on top of our highly differentiated platform each module is designed and packaged to address the needs of development teams DevOps and SRE teams, IT ops and line of business stakeholders. Our competitors either go to market with a suite of tools or provide a unified data model but without purpose built use cases. Each of our modules And as I just said, each comes unified through SmartScape And Davis. Our most popular module is our APM module. As you know, APM has been where we traditionally land. We are well known and best in class with distributed tracing, code level detail, an automatic precise root cause determination built in. It is important to note that with Dynatrace's APM module, Customers get infrastructure and log monitoring included, unified. Because to understand cloud application workloads, customers need full stack observability, all at once. We believe applications are still the high ground where IT meets the business, but we continue to see a healthy spending environment year as companies digitally transform through more and more applications. In fact, IDC projects that over the next 3 years, there will be as many new applications built and deployed as have been built and deployed over the past 40 years. And we believe The monitoring coverage of applications will double from 30 to 60% as the interdependency of services increases and CICD pipelines drive an increase in business impacting workloads. With more applications being built and deployed, existing apps scaling further in the higher percentage of cloud app workloads needing full stack monitoring, it's an evergreen market that Dynatrace is in great position to continue to capture. Our most popular add on module today is our digital experience module We have been in the digital experience monitoring market for over 5 years now and have over 70% of our APM customers extending APM with digital experience capabilities. With applications distributed between smart browsers at the edge and back end cloud and hybrid services, To understand end to end experience requires APM plus them, not a separate silos of data, like most of our competitors, but interconnected end to end. The core of our offering is our real user capabilities where we automatically instrument and monitor every tap, click, swipe of NEI's device, mobile, laptop, IoT devices, and so on. We not only capture the click pass, we also produce 4K movie playback, we call session replay. To complete the module, we offer synthetic monitoring as well for operational use cases and proactive baselining of key transactions, services, and APIs. We believe our down capabilities are second to none, when coupled with our APM module and AI, it's no wonder our attach rate is so high. With mobile use on the rise, up over 300% year over year in our customer base, and the continued innovation in IoT, connected car, kiosk Simor, we believe there are significant ARR growth ahead for this module. Next, though still maturing as a standalone module, digital business analytics is an exciting addition to portfolio, It directly connects observability data with business KPIs, such as conversion rates, revenue, feature adoption, and so on. 4 out of 5 achievable executives I talked to, want to link their IT efforts to business value more effectively, and our digital business analytics module does just that. It breaks down the silos between business and getting everyone on the same page for bizdevops. And we see more and more customers combining its use with Dem for digital business owner use cases. And then there's finally our infrastructure log module. This has been an exciting growth area for us. We now have 32% of our APM customers expanding their platform use with infrastructure log monitoring. This is up from 22% a year ago. Perhaps most exciting is that in this past quarter, 30% of our Ethiopian land deals included these extended capabilities. So why are customers selecting Dynatrace for infrastructure log monitoring? Well, first, we have been rapidly expanding 1 agent coverage for infrastructure metrics and logs. You may have seen our announcements around complete coverage for both AWS and Azure services, and there's more to follow here. And second, When you consider the Unifying Power SmartScape and Davis, to provide broad situational awareness with precise detail automatically 24x7, It's not hard to see why more customers are consolidating their cloud tooling and going with Dynatrace as their automatic and intelligent observability platform. We continue to believe in the power and value of an all in one platform. We like our landings done with APM, and we are expanding more and more rapidly with 3 or more modules. In fact, 3 plus module usage is at 28%, up from 19% 1 year ago and 22% 6 months ago. And importantly, this customer segment has traced customer of $229,000. Our platform selling and cross selling muscles are getting stronger. And as it does, our ARR per customer should continue to climb. Let me summarize, as I know, I've covered a lot. In response to the massive disruption we saw coming in the cloud, We are contacted built and continue to innovate on a highly differentiated platform with powerful and defensible modes. We approach the problem differently. Automatic and intelligent observability at scale. AI ops at the core and purpose built modules on a common platform for rapid land and powerful expand over time. This approach brings us sustainable differentiation that will continue into the future. The current platform will support our journey to a multibillion dollar company and was perhaps even more exciting as what we have in store nuts which you'll hear more about from burned. But first, we'll take a short break, and we'll see everyone back here in 10 minutes. Please welcome back, Noel Ferris, Hello, everyone, and welcome back We're going to go ahead and get started. Up next, we have Bern Greifinator to kick off the second half of today's agenda. Bern? Thank you, Nielle. Happy to be here today. Hello. I am Brent cryfinita, found off Dyna Trace and is my Chief Technology Officer. What really energizes me every day is the ability to create the best product in the market and to experience the that customers have as we solve their problems in new and easy ways. The fact that this requires continuous reinvention on the technology business and cultural fronts, and beating the competition makes it all more fun. Then we anticipated the volume velocity and variety of data generated by modern multi clouds, we knew that AI and automation at the core of our platform would be required to simplify complexity that would quickly grow beyond human scale. We also realized that the old approach still taken by our competitors of packaging, siloed products in suite like offerings, whatnot were A powerful and explainable AI requires an all in one approach to fully leverage the data context for actionable precision. We experienced ourselves that high grades of automation coupled with a cloud native software development culture helps to keep innovation speed and productivity up while customer count in size grows rapidly. This way we scale to 780 R&D employees today, scaling to 3000 R and D employees powered by an open Dynatrix platform in the modern value creation culture. We moved from dev ops to no ops in 2014, allowing us to maintain uptime for well over 1500 production notes and 1900 managed clusters in the 4 9s while delivering a major release every other week with no 20 fourseven operations team. You heard that correctly. 0 people on a 20 fourseven operations team. These results are only possible with remediation and self healing based automation, driven by Dyna TracyI, coupled with modern software development and delivery processes, sharing our cultural and process innovations with customers has turned Dynatrace into a role model that inspired them towards greater levels of AI and automation through weaving Dynatrace into their fabric. Today, we call this no ops methodology autonomous cloud enablement, and we are confident that customers will adopt it over the next several years. The crucial need for automating the cloud presents a great opportunity for Dynatrace as a business critical automation platform in the fast growing delivery and IT automation market estimated to reach CHF 22,000,000,000 by 2025. Automation is an essential weapon to combat the growing gap between constrained IT resources and accelerating cloud scale and complexity. Through automation, IT frees up scarce talent stays competitive and creates new digital services faster with better experiences. In addition to our AI and automation driven platform, in our disruptive know up, autonomous cloud enablement methodology, we have created a simple and reliable way to codify autonomous cloud know how into an open source project called Kapton. Kapton has already reached over 4000 downloads, and has recently been accepted by the Cloud Native Computing Foundation is a sandbox project. This CNCF Foundation actually also hosts Kubernetes. Captain automates continued softer delivery with quality checks and automates operations, including self healing capabilities. This unique event driven approach has a patent pending as well. While it is a true open source project, which can be used for free, we've already heard from our customers that they will only run a commercial supported version of kept in production. Of course, we will capture this opportunity for us. What is particularly cool is that the enterprise edition of KEP will be seamlessly embedded in the Dynatris platform as part of an autonomous cloud solution that leverages all of the platform benefits, including enterprise scale, security, intelligent observability, DBCI and our SaaS and managed deployment models. As a result, customers gain immediate best practice approaches for modern cloud automation, and as such, they can faster transform to cloud native DevOps models, can release faster at higher qualities, in this car's IT staff can focus on delivering new services at higher frequencies, while letting Dynatrace and Captain take the leg work out of operations. As the tech stack shifts, enterprises adopt dynamic cloud technologies like Kubernetes, we see the number of instances quadrupling deployment speeds drastically accelerating and online services becoming increasingly interconnected. This new level of scale and complexity alongside agile continuous delivery process completely breaks existing security approaches which provides Dynatories with a second big market opportunity I'd like to discuss next. Existing problems in security today are Enterprise firewalls get perforated by web service integrations and hybrid cloud deployments intrusion detection systems get blind to network contents vulnerability skinners miss what's actually running in production. And the EdgeL softer rollouts are much faster than existing security and compliance processes can handle. Security operation centers all were overwhelmed with 100,000 of false positives from their log based security information, event management systems that lack the context and causal information. And risk management turns into gambling because configuration management databases are constantly out of date Its dependencies grow exponentially, too. So basically, this means that every company who moves to cloud technology must upgrade their security approach. Many of the core technologies of the Dynatrix platform allow us to solve exactly those previously mentioned problems at higher speed, higher scale, higher precision, and in a market disrupting manner, that is just too good of an opportunity to pass up. So Dynatrace will soon enter the cybersecurity software market Focusing on the field of application security, a fast growing market segment sized at $18,000,000,000 by 2025. We plan to bring our first component of a complete application security offering to market within the next 9 months. It starts with solving application security pain in cloud native Kubernetes deployments. We have many unique advantages that make confident in our ability to disrupt this market. Dynatrace is the only vendor with an automatically discovered and continuously updated graph called Smart Skip. In a trace is deterministic AI engine davis, leverages this directed graph to provide true cost station and enables automated could impact analysis to speed up analysis by 1000 times, while providing a new level of precision reducing false positives by 90% or more. 2nd, the automatic intelligent observability for the most complete coverage. Dynatrix 1 agent technology automatically instruments applications built on the most common stacks without relying on developers manually placing observability routines into the code. So Dynatories won't miss a code change or new deployments because one agent continuously and automatically discovers changes. Such high coverage limits the exposure to vulnerabilities and can make difference between a critical application being debt or a life for enterprises and its customers. Vanagers, one agent is the market. It's only unified, lowest overhead and most enterprise proven enterprise technology. So monitoring customers, get the additional benefit that the same agent that they use for automatic observability today is used for application security as well. This means enabling Dynatrace application security capabilities is a matter of a single click. Drastically simplifying deployments and making our upsell frictionless. 3rd, the automatic context beyond observability. The unique advantage of having smart skip dependency graph, web and mobile, real user monitoring, deep code visibility, automatic observability in the unified platform is that we can automatically leverage context like a user search for behavioral analytics and fraud analysis. This can save 90% or more of developers and security analysis work and solve problems that previously couldn't be solved. Today, there are over 3,500,000 job openings for security tenant, with a shift to dynamic multi clouds and growing cloud complexity, The labor shortage will only get worse, meaning automating security is not an option. It's a requirement. There's simply not enough talent to keep doing things the same way. That is why I believe in no suck, as much as I believed in no ops when we brought that to life. Cloud automation, and application security are huge growth areas for Dynatories. Let me explain the 3rd long term growth area that opens the Dynatrix platform to a massive ecosystem. It enterprises digitalized to automate and build new services they doubled their survey incentives and data capture every 3 to 4 years. So obviously, there is too much data that is too hard to process. As enterprises understand the importance of the data, they need easy to use enterprise grade digital business analytics to drive automation. Smart orchestration, IT And Business Automation, fraud detection remediation, customer experience optimization, business analytics, automatic compliance checking, real time VIP user segmentation, feature adoption, cloud cost optimization, vertical specific application performance management, automating quality gates, are just a few examples of almost unlimited use cases. Digital business analytics and automation corresponds to the business intelligence and product analytics markets sized at CHF 29,000,000,000 by 2025. Customers have told us for years that the Dynatrace data that we automatically capture is gold and ask us how they can leverage it beyond the use cases that we provide out of the box. This convinced us to open the Dynatrace platform even further and bring Granatrace to a new level of programmability analytics and openness for integration custom use cases. So we are extending the platform in 3 areas. First, a massive scale, hypergraph data engine. Dynatrace is already the most scalable software intelligence solution. You're scaling our storage and analytics capability by another 1000 times to meet the scalability and data growth needs for the next decade. The open data access with rapid distributed mesh based processing will not only be enterprise scaling secure, but it will also be the only in the market that brings a graph based database approach with metrics, logs, traces, behavioral and deep code level information together, make it the only digital business analytics with a graph based causation engine to tackle today's multi cloud problems with unmatched precision. 2nd, the Dynatrix apps, customers, partners, and even Dynatraces will write offs that run on top of the Dynatrades platform because it is most feasible to bring the custom logic to data is not vice versa. For that, we are adding a low code development interface and functioning as a service capability into the Dynatrix platform. 3rd, the Dynetries hub. We are building an ecosystem of partners who create Dynetries apps that are valuable to enterprise cost them. A new Dynatris hub will make creation a publishing of Dynatris apps easy, what makes the Dynatris platform additionally attractive is to low development efforts because financial results build on the platform's existing enterprise capabilities, like similar sign on, enterprise security, automaticsize its managed deployments, and it provides access to the power of Dynatrace AI into hypergraph based analytics. A final success criterion is to differentiate from generic business intelligence. Therefore, we'll focus on digital business data where we provide greatest value and differentiation, allowing us to take the lead This is a multiyear journey that will get Dynatrix woven deeper into customer's cloud fabric and multiply the value we can provide. Customers will extend Dynatrace with custom use cases, partners will drive business with custom applications, and Dynatrace can build apps to provide offerings for vertical markets. I do believe that focusing our innovation efforts in the three areas of cloud automation, application security, in digital business analytics that includes automation plus an ecosystem around the Dynatrace hub will fuel. The future growth for Dynatrace and to pave the way for a rapidly growing multibillion dollar business. I believe the value of our unique platform approach is only getting started. Given our technology lead and continued innovation culture, it will be hard for the others to follow us on the course I've just laid out. The market continues to move towards us, and I'm excited about what we'll accomplish over the next several years. Thank you. With that, I'm handing it over to Calin. Great. Thanks, Bern. Today, from a financial perspective, I'm going to review 3 main areas. First, I will recap our now completed journey through the 2 major transitions that John mentioned earlier and our financial success during our 1st year as a public company. 2nd, how we've built a well diversified business and third, how we are well positioned to deliver sustainable growth and profitability over the long term. A good portion of my discussion will focus on our path and the building blocks to achieve our goal of becoming a multi $1,000,000,000 category leader. But before I get there, let me start by reflecting on our performance against our internal and external goals that we established before we went public last year. Beginning a few years ago We set a goal to convert our classic customer base to the new Dynatrace platform, and at the same time, transition our financial model from perpetual revenue to a more predictable and durable subscription business. We believe we have successfully delivered if not over delivered these goals. The result has been rapid growth in ARR, strong growth in total revenue being driven by an increasing mix a subscription business and solid profitability that is driving healthy cash flow that enables us to de lever our balance sheet. As John mentioned earlier, we consider the perpetual to subscription transition and the classic to Dynatrace conversion as being complete. Subscription revenue as a percent of total revenue grew from 65% in fiscal 2018, to 93% this past quarter. And the Dynatrace platform ARR now makes up over 94% of total ARR up from 30% at acute and adapt as a business has transitioned and not just on the top line in terms of ARR and revenue, but also on the bottom line, in terms of operating income and unlevered We ended Q1 of twenty one with ARR of $601,000,000. That's up 39% year over year. And an annualized revenue run rate of almost $625,000,000, which is up 30% year over year. I'm equally pleased with our bottom line performance with operating income in the first quarter of $154,000,000, eye trailing 12 month basis, representing a 27% operating margin and unlevered free cash flow, of $141,000,000 over the same time period. This represents a 24% cash margin. Overall, it is a powerful balance of growth and profitability at scale during our 1st year as a public company. Looking at our dollars. In addition to using IPO proceeds to reduce our debt, the primary use of our strong cash generation With our debt repayment plan well underway and our leverage ratio at 1.6 times EBITDA, we are now increasing our focus on strategic uses of cash. We will continue to reinvest back into the business with a particular focus on investments in customer success, innovation and commercial expansion, a track we have been on and will work to accelerate. We also plan to be To complement and leverage the nearly 800 engineers we now have in our R And D organization, focus on enhancing and expanding the debt entry platform. As we move forward, we will grow on the balance sheet over the short to midterm, appropriate to support the scale of the business we are building, while we continue to reduce our debt and de lever the business. Taking our execution into consideration, our bottom line performance enables us to reduce our debt, while continuing to make strategic investments to fuel top line growth. This demonstrates our approach to operating a balanced business. Many of you are familiar with the rule of 40, a common measure that is used to analyze the health of software companies. It takes into consideration 2 of the most important metrics for a SaaS company, top line growth and profitability. When we combine our revenue or ARR growth rates with our unlevered free cash flow or operating margin, you can see that we are running the business at an impressive This puts us well over a rule of 60. No matter how you slice it, we are very pleased with our performance over the last year, where we have delivered what we believe is a best in class combination of growth So now that we are through what are the right metrics to view the business going forward? Let me start off with the metrics that are not accurate reflections on the health of our business. RPO, deferred revenue, and calculated billings. This is consistent with our previous commentary on these metrics. It's important to understand that there are several factors in play causing variability within each of these three metrics. And this variability will continue to play out over the near term. Called 1 contract, one price. Historically, as our customers expanded, each purchase would require an added contract, with unique prices and anniversary dates. This could result in a customer with 510 or more renewal contracts at different times over the course of several years, which is extremely inefficient from an administrative perspective for both us and our customers. As a result, we are looking to move all of our customers to a single, often multiyear contract with a fixed price for expansion and 1 renewal but it can create significant variability in our billings, deferred revenue and RPO. As we act acute against this one contract, one price program over the next few years, there will continue to be variability in these metrics that had nothing to do with the underlying health of our business. The second factor impacting RPO is being driven by a change in contract durations. As we transitioned to a subscription business, we saw a tailwind in our total RPO growth, driven by longer contract lengths. Our average subscription contract length has increased from a little over 1 year in fiscal 2018 to almost 2 years this past quarter, resulting in a higher long term RPO growth rate. Finally, to subscription has caused variability in our deferred revenue. As a reminder, when we sold a perpetual license, we will recognize the license value ratably over 3 years. This resulted in an increase in short and long term deferred revenue initially and a decline in deferred revenue as we recognize these licenses. As of June 30th, we had about $50,000,000 of ARR related to these perpetual licenses and assuming minimal new perpetual licenses, which is what we are seeing today, we expect this to wind down to almost 0 by the end of fiscal 23. You are seeing this decline initially in our long term deferred revenue, and it will then be a headwind to short term deferred revenue as the recognition is completed. When this wind down is over, deferred revenue will start to normalize with the full subscription business. Over the next few years, as we work through these items, we believe RPO, deferred revenue and calculated billings will become meaningful metrics of growth. In the meantime, we continue to believe that ARR, subscription revenue and margin are the key high level metrics to the key growth drivers for AR will continue to be: 1, new logos to the Diamond Trace platform, 2, the average ARR of the initial land and 3, our net expansion rate. All of these translate to ARR per customer which is a measure we will talk about more often moving forward. As a reminder, expansion from classic to Dynatrace was only about 4 to 5 points of our ARR growth rate in fiscal 2020 and now we are essentially complete with this conversion program, it is immaterial going forward. From a revenue perspective, our strategic focus is growing subscription revenue which is derived from our ARR growth. Looking forward, we believe subs revenue will increase as a percent of total revenue due to the compounding effect of a subs model, combined with the fact that more services work will be done through our cloud partners. As the most important revenue metric over and above total revenue growth. From a profitability standpoint, as I mentioned earlier, we believe in running a balanced business, which means top line growth, combined with profitability. For those of you not familiar with Dynatrace, There are several items that help us run a balanced business. Perhaps the most important is a highly efficient SaaS offering. As Byrne mentioned, we do 25 major data trace platform releases a year and 100 of compatibility updates. Resulting in a very efficient customer 2nd, as Burn outlined, our major R and D labs are in Austria, Poland and Spain, where we are able to recruit and retain top If we had this investment in major U. S. Cities, our R and D spend as a percent of revenue would be double certainly a little secret sauce here. And third, as Steve Pace mentioned earlier, our global sales, marketing, services and support organization are quite mature from a geographic standpoint, allowing us to more efficiently scale globally. Overall, these factors help deliver healthy margins. And as we continue to grow the top line, we believe we can continue to be efficient as we invest aggressively of our portfolio and what gives us There are three factors contributing to the durability of our business. First, as we mentioned several times today, 93% of our revenue is now recurring, which provides us with solid visibility and predictability. 2nd, Digital transformation is accelerating, and you could argue is even more important now than ever. And third, as Steve Pace mentioned, We target large enterprise class customers, defined as customers with revenue greater than $1,000,000,000 and have a healthy and growing modern cloud customer base. Let's double click on our customers to give you a better sense of where we operate. The vast majority of our ARR comes from customers that spend more than $100,000 with us annually, near half of that comes from customer spending more than $1,000,000 per year. We have succeeded in expanding our platform penetration, most notably among our large customer cohorts. As a result, we now generate the majority of our ARR from customers that are using 3 or more of our product modules. We believe this sets the foundation for future growth as we expand our footprint and module across our customer base. They have the largest IT budgets, and we believe they are far more resilient and will continue to invest in digital transformation initiatives for agility, efficiency and business advantage. We believe the results speak for themselves. These customers fees with the business well diversified on a global basis. So moving on to my 3rd main topic, let's review what gives us confidence for sustained growth into the future. Let me share with you how I think about it. As you know, there are 2 core building blocks to ARR growth. There are new logos to the platform, and expansion of existing customers. Assuming our growing direct sales organization and expanding cloud partner network, can deliver new logo growth in $1000, while keeping our net expansion rate over 120 percent, this would translate to an ARR CAGR in the mid-twenty percent range for the next several years and create a multibillion dollar business. Breaking down these growth drivers, the first one I'd like to focus on is our new logo growth. While we saw a headwind in the first quarter due to the pandemic, We remain confident in our ability to achieve sustainable growth and new customer additions over the longer term. With less than 20% penetration of the target global 15,000 enterprise accounts, we have a lot of runway for future growth. We continue to see very healthy win rates, not only in competitive situations where we have an opportunity to displace a legacy vendor, Also, as more companies embark on digital transformation journeys and mature their approach to multi cloud monitoring, we believe we'll continue to see ample greenfield opportunity to acquire new customers. The 2nd growth driver is our ability to expand with a net expansion rate greater than 120 percent. We remain confident in our land and expand strategy. Underpinning this expansion, are several key drivers. First, as Bern And Seed mentioned, we are making aggressive investments in both building out our platform offering, and in the go to market muscle that will allow us to cross sell these modules to our existing customer base. As we and log use cases and eventually security, we believe we have a massive opportunity to drive a larger platform footprint across the enterprise. In addition to the cross sell opportunity, we also believe that there will be continued tailwinds in the cloud application monitoring market as the number of applications per enterprise increases, resulting in continued expansion opportunity, in this core Dynictrace use case. Taking all of this into account, these building blocks provide us with confident for sustained growth into the future. So what does the financial profile look like for us moving forward? We believe we have the foundation in place to continue scaling the business and operate under the rule of 50 as we make the with the revenue CAGR slightly below that. While we believe there may be a longer term opportunity, to raise profit and company. Operating margin in the mid-twenty percent range is very healthy and gives us a lot of firepower continue to invest in innovation and commercial expansion. Double clicking on non GAAP operating margin, we intend to maintain our current levels of investment in R&D, while growing the top line. We continue to expand our sales force and marketing efforts so you may see those levels of investments tick up, while we expect to have leverage on the G and A line. The bottom line is this. With a large TAM fueled by digital transformation and cloud adoption, an enterprise cloud customer base that continues to grow steadily, and a platform that continues to expand and become more robust, we believe that a mid-twenty percent ARR growth rate is sustainable for many years to for the next several years I will turn it over to John for a quick recap before we jump into Q and we are focused on building a multibillion dollar category leader, certainly in the enterprise segment of the market. This segment alone, we provides us a massive TAM of over $30,000,000,000 and is growing quickly. These accounts are large, They are digitally transforming aggressively, and we are in the early innings of their transformation journeys. You heard from Steve Pace, how we continue to perfect and adapt our land and expand go to market from frictionless free trial to remote Zoom selling and onboarding, to trusted relationships for platform expansion, with an expanding direct sales organization and increasing leverage from cloud partners, we believe we can You heard from Steve Tack and our customers on the powerful differentiation of our platform and purpose built modules and the ongoing value they provide multi cloud observability is highly differentiated and defensible over time, even as data sources, cloud building blocks, and cloud ecosystems evolve. And we're not stopping here to catch our breath. As Byrne discussed, we are aggressively extending our differentiation and value into new markets, disrupting the status quo and continually redefining what's possible. Autonomous cloud enablement, cloud native app security, and function as a service programmability will extend our platform in new ways, expanding our market opportunity, increasing go to market potential with cloud partners and expanding ARR potential for customer. With file is strong and balanced. As Kevin said, we have the building blocks in place to continue to grow rapidly, while generating very healthy margins and cash flows, a rule of 50 business with potential, even beyond this. No question. It's an exciting time for interest rates. The course is set. Our objective to become a multibillion dollar category leader is clear. We have Thank you very much. Noelle, shall we open the floor for questions? Thank you John. We have a little over 30 minutes remaining to answer questions. As a reminder, We'll start off first with a question for you, John. This question comes from Jen Lowe of UBS. She says Steve talked about the land and expand sales motion. Is there any general flow around when those expansions happen? Time from the first land to the first expand? And has that timeline changed at all? Sure. Yeah. There's actually probably two thoughts there. The first one that we're seeing is that our land is actually a little bit larger. Steve TAC mentioned that we're starting to see more of our lands with 3 plus modules, and that is driving up the ASP of the lands. It, it also means that we're getting better at that cross selling of the multi modules of the platform. Sooner in the sales cycle. And that actually sets us up for what we're also seeing, which is expansion that's coming a little bit quicker. Now, whether that's sort of our sales skills getting better, of selling that platform, whether it's the observability movement kicking in, which actually, anticipates the platform, or whether it's digital transformation accelerating, I'm not really sure, but whatever it is, it is, kicking in expansions a little bit faster. We see most of those initial expansions within the 1st 6 months. Okay. So our next question is also for you, John, and it's on the topic of, cloud partner program. The question is from DJ Hines of Canaccord. He says, he would love to hear a bit more about the cloud partner program. What is the go to market strategy there? And how do they contribute to, bookings today? And how do the economics work? So maybe Kevin can pick up on that one. And, how do you see this evolving And then if we fast forward 5 years, how significant could the channel be to Dynatrace? Well, it was wrapped in there a few different questions, but let me try to sort that out. Our cloud partner program has been active now for a little over 18 months. And it's, it's an extension or sort of, an outcropping of a partner program we've had for a number of years, as Steve Pace mentioned. But this one's focused really on the cloud system integrators who are the ones behind many of the enterprise digital transformation efforts. And they bring to those, their clients their customer base, a series of solutions that include multiple different pieces that need to come together to put together a cloud ecosystem. It'll include a platform player like AWS, Azure, or Google, It'll include often some kind of Kubernetes orchestration layer. It'll include some kind of an ITSM management system like a ServiceNow, So there's number of components that need to be brought together. Within that portfolio, There also needs to be automatic intelligent observability. And that's where we fit in. And we see more and more of those SIs who thought monitoring was done with a collection of, of tools starting to now seek a platform that they can weave into the ecosystem and make that entire ecosystem smarter and more automatic. And with that, that serves us extremely well and why we've been leaning in. As Steve also mentioned, it's early days, Okay. The, the economics of this are baked into sort of our financial models and the rest. But they're starting to embed us into the way they think about their solution set. That does not mean they're OEM ing us That just means they bake us into their solution set and take us to market with them. We do believe it's an accelerant to the business, a future accelerant or certainly potential accelerant, and that's why we're why we're so, excited about that opportunity that we see ahead of us. Great. And I noticed that you also picked up on the economic we don't even need to volley that to Kevin. So thanks for that. So there'll be plenty for Kevin. Yes, I'm sure. So our next question is from, Parthas. Bara Dejohn of Jefferies. And Steve, we're going to, we're going to have you start with this one and maybe some additional commentary from Burned, if that makes sense. So regarding today's ServiceNow connector program announcement, as application architectures shift toward containers, Can you speak to the challenges faced change at the application and infrastructure layer? And how does today's announcement address some of those challenges? So the dynamism of these modern cloud environments is, moving at an unprecedented pace. So microservices, infrastructure is code, These are all changing at the moment. And for some of the downstream applications to drive workflows, they need a real time view of that topology of the dependencies. And so that's why we're excited about how we worked with a lot of mutual customers with ServiceNow in this example to deliver that real time view powered uniquely through our one agent observing the applications at runtime, discovering that full stack, and then also connecting that together into a real time topology with Smartscape to enrich the, insights of the CMDB. And that will help drive those, those automated workflows and move those customers forward in those cloud native environments. Great. Anything additional to add there, Bernardo? No, Steve covered everything. Obviously, the keys that the smart scape is all, real time, all this up to date. And the more the world shifts and transforms, towards the cloud, the more imminent this problem is, and this is why, these partnerships helps customers perfectly. Great. Thanks, Byron. So, John, this next question comes from Matt Hedberg at RBC. Can you talk a bit more about the competitive dynamics within your core APM market? And within the G15000, you don't have the ones that you don't have as customers, where does most of that share reside today? Yes. So Let me take that in a couple different thoughts. So the first one is that when we think about the competitive landscape, of all, the market's massive. And the second thing is that there's actually a couple different swim lanes that need to be considered. The first one is a technology kind of swim lane or what the, the sort of core go to market technology set is that, that a competitor may have. And the second one is their go to market strategy. Are they, freemium mid market company, or are they in enterprise sales organization, you know, go sort of top down to the global 15 or 20 And so, you know, the dynamics haven't really changed for us a lot in who we see and how often we've talked about, AppDynamics as sort of in that same APM swim lane and enterprise focused, New Relic really more in a, in a APM, but mid market kind of focus. What I would say is that as the cloud continues to become more dynamic, and, containerized microservice cloud native environments sort of permeating, you know, more and more of the workloads We see our differentiation that we anticipated that Steve Tack went through, I think, quite well, really helping to propel us you know, forward from a win rate perspective and a new logo capture perspective. If you look at, you know, the, the global 15,000 that we, we don't cover today, we see about 60% of our engagements being either replacing some incumbent you know, technology or going head to head with 1 of our sort of gen 2 kind of competitors. We also see do it yourself increasing much more rapidly. Do it yourself really coming from organizations that have figured out that the cloud actually disrupts their tooling strategies significantly, and they've had to go to alternative ways of trying to figure out the observability in those environments. So that's an opportunity us for us and our marketing effort to to go wider faster. But that's sort of the portfolio we see. 60% of the time with an incumbent and 40% now and growing with, do it yourself. Great. Thanks, John. And so our next question is going to go to Steve Tack, and this question comes from Michael Turits of KeyBanc. As application shift to the out narrative architectures, specifically microservices, containers, etcetera, do you see any shift in which the pillars of observability become more or less important, meaning logs, metrics, or tracing? And if so, how are you steering your product development in that direction? Good question. So I I wouldn't say I see a change in a pillar that becomes more or less important, but I I do see 2 changes are critical to the success. The first one is the importance of having them all in context. And so we've seen the challenges and the shortcomings of when treat pillars as individual data silos or individual products. As I spoke about with the rearchitecture and the reinvention of Dynatrace, we brought all that together. But we also extended it because metrics logs traces are required, but you also need to compliment that with the outside view in of the digital journey. Of understanding the business KPIs and more. And so all those come together to really drive the changes needed, as well as maybe, de emphasize the importance a little individual silos like a log, but, really put an emphasis on everything in context and extending those pillars. Great. Okay. Thanks, Steve. So our next question is for John, and this is from Sterling Auty, at JP Morgan? And what has happened to the quota headcount through COVID-nineteen? And what are your plans for hiring given that you said that your expansion is above original plan? Yes, no, great question. As I think I've said, probably in our last earnings call, The one area that we kept our foot on the gas on, you know, even in the early days of COVID was the sales organization expansion. Because we believe the opportunity is great. We're well differentiated, and, tremendous opportunity ahead. We did pause some of the other parts of the business from growth for about 6 to 8 weeks. So we sort of got through from sort of into mid May, early June, but we have our foot on the gas now across the board. From a sales standpoint, We've talked about growing that organization 20% to 25% per year, which is the track we're on for this year. And, we're also, as you heard today, have a number of sort of productivity enhancers along the way, not only the modules that currently exist for the platform, but some coming shortly, right behind it. So we're extremely excited about, you know, not only the, the progress we made with your sales organization to date, but also the productivity enhancements, that we know are coming right behind it. Super. Also, he had a follow on, Sterling did. And he wants to know how would you characterize productivity in winning new logos as the transition of legacy customers completes. Yes. So, yeah, that's that it's funny because COVID hit at the same time where we're coming off of the conversion program. So we're I'd say we're probably about, you know, about where we would be, with sort of if there were still a little bit of conversion headwind in there, because we just replaced with some COVID headwind. But new logos continue to grow. And at a fairly good clip. We had a little slowdown in our Q1 as we really focus on the base to help them with their work from home initiatives. But here this quarter, we have a pretty good, you know, growth going and we'll see how it all plays out and we'll talk about it in October. Great. Good. Okay. And, Steve, this next one is for you. This question comes from Gaurav Mehultra of Shannon Partners, who are the primary users of Dynatrace? And how is that evolving? Is it SREs? Is it devs? Is it ops? Is it biz on the DBA side? So we've seen how important, collaboration has become across different users, as you go to cloud native. Typically, we do start with production audiences. Those are the IT accessory folks because that's where, the initial pain sometimes are felt. From cloud native adoption, but we see that spread out in 2 different directions. The first one is expanding 2 development teams. As organizations want to develop faster, deploy new technology with more confidence, they get a huge value out of Dynatrace with the collaboration across dev and production teams. And then the second one, which is really exciting and you highlighted with digital business analytics, is the expansion to application owners in line of business. These people wanna see real time views of of how their new deployments are affecting the business want to understand how to invest resources moving forward. And, what's been exciting is we've heard from some of our customers that it's the first time they've really been able to collaborate across IT And Business on those business goals. And we've seen guy to trace collaboration go from tens to 100 to 1000 of users as people deliver these new capabilities. Great. Thanks, Steve. So let's shift to financial questions a little bit. This one is for Kevin and it's coming from DJ Hines. His point is, Kevin, you didn't mention current RPO and, he's assuming that this is still a pretty clean metric to use to analyze performance. Despite the contract realignment and increasing terms, would you consider that to be a correct statement? So I think actually, when we talk about some of the metrics that are not relevant for the business when we won IPO. I think those, those remain the same today. Obviously, it's a calculated billing ones, billings we talked about. It's the deferred revenue movement But it's also RPO. As we're moving customers from 1 to 1 contract, one price, it's changing those billing patterns. So customers may be built 3 month period or 12 month period. As a result, unfortunately, that, that will also impact our current RPO calculation. So It may be a little bit more meaningful, but I'd say probably in about 2 years, I think that's going to be a really good metric for us. At the end of the day, similar to what happened when we went IPO, we we continue to believe that AR is the best leading indicator of growth for the company. Great. Good. All right, Bern. This next question is going to come from Raimo Lenschow from Barclays. And he asked, how does your application security fit into the broader security landscape of a customer and what does it mean to your relationship with other security Yeah. That's, perfect. So this is so easy for our customers because they already own or have already deployed the Dynatrace application security offering in the environment because this module that we are about to launch, is part of the existing Dynatrace platform already. And we sort of reuse for the application security about 80% of the existing platform and build then the application security pieces on top So for our custom, it's as easy as, sort of doing a deal with us and we flip the license switch and this is the first entry into the Dynatrace application security world. Great. And so our next question is for you, John, and this is, again, from Sterling at JP Morgan, and it's around, Datadog to June quarter. They talked about account slowing and the spin up of additional hosts because of COVID-nineteen, given uncertainty in macro. Have you seen the same thing from existing customers, and in other words, will net expansion rates low as the number of hosts flatten? Yes. So we really haven't seen that in our world. We did talk about, some of the slowdown in certain vertical markets. Travel and hospitality, of course, mainly, but also being offset by some other markets that are on the rise. State and local government, citizen portals, education and different streaming services, things like that. So So it's been a been a balance. But we focus, you know, and as you know, we think about the world through the lens of the application because we really do believe that is the high ground where the business meets IT. And it said that area that's actually getting more attention and we see, you know, a step up in opportunity because of that. And so it may just be a factor of the swim lane in which we play mainly. But we have not seen that kind of a kind of a slowdown to date. Great. Okay. Thanks, John. So, Bern, this 6 months for you, and it's on the topic of open telemetry, RK Mahindrin of HMI, Capital says one agent seems like it's very advanced tech. However, it feels like most vendors are open sourcing their agents and embracing open standards via open telemetry. Can you talk about how the embrace of open telemetry fits with the Dynatrace strategy and one agent? Yes, that's a good question because open telemetry is to us nothing more than actually one additional data source to the platform and even to one agent. And therefore, to ensure interoperability, we actually drive the standardization of open telemetry forward, and we are part of this, standardization forum. And so in fact, at the point is also that it's sort of a subset of our peer path technology that we leverage already for years, in the largest environments, for distributed tracing in a fully automatic and scalable fashion, And on top of this, versus open telemetry focuses on tracing only, Dynatrace spare path goes deep down to the code level and folds in also end user experience as well as, other cloud technologies and everything fully automatic. So at the end, what this means is customers and all of vendors of components it opt open telemetry, actually Dynatrace becomes the vendor of choice to pick up that open telemetry data and put it into context of the rest of all the information that Dynatrace picks up through the sort of 7 data sources that go beyond just their normal observability. And we provide them with a Davis AI engine, the analytics that's actually needed in order to drive answers from this in the action to drive automation. So basically, open telemetry is this piece in VHub customers to leverage everything in context with a full scope of Dynatrace as a platform. Great. Thanks, Bern. And so, John, this next question is from Shebly Sarafi of FBN Securities. And he says, you mentioned that you're considering expanding inorganically with tech tuck ins in what areas does it logically make sense for Dynatrace to expand into inorganically? So we're always on the lookout for different technologies and teams to augment our platform and help us extend our reach in different, market segments faster. So that will continue that's been the case to date We haven't found too many of those yet, but now that we've been out in the public markets for a year, We've done a pretty good job. I think as Kevin walked us through on, on how we've managed, our net debt ratios and so on, you know, our our antennas are back up for different kinds of tuck ins that might accelerate things. We don't have, specific segments that I would, would want to share. We do have them that we're on the lookout within, but, That will be one of those things that will be news at 11. I think the big takeaway is that we're open. We do believe in the platform, so they will be tucked in And, we will find, opportunities, I'm sure, you know, over the next, you know, few years to help accelerate our expansion plans. Question, we're going to bounce over to the financials a little bit. And this question is for Kevin, and it's from Mohit Goja from Barclays. Can you put some timing and framework around the ARR CAGR of roughly 25% and what do you see as the key drivers for potential up side to that number. So actually if you take a step back and you actually do some of the math around the key building blocks that we shared with investors today. And you add in 15 to 20 percent new logo growth. And then on top of that, you add in 120 percent net expansion rate that's actually a CAGR in the high 20% range. The way John and I and the rest of the management team think about this growth and where we want to set that bar is 25 percent. We think that's a good, good sort of base to set, communicate with investors and set the stage for the next 4 to 6 years. There's ample opportunity for further further acceleration across the business. We don't want to get over our skis, but one is John talked about more salespeople, how do we accelerate the rate of hiring in our sales organization? How do we increase productivity as we wind down the classic as we had wound down the classic customer conversion program. And then obviously given everything that Byrne and Steve had talked about in terms product announcements and direction, that gives us a lot of opportunity on that 120% net expansion rate. So when you bring all those pieces together, we're pretty excited about the future. Great. Thanks, Kevin. So this next one is for you, Steve, and this comes from Matt Hedberg of RBC. And he asked, the attach rate on the digital experience monitoring and infrastructure was very helpful? And what are you seeing competitively in both markets? So regarding the attach, as people invest in new applications, they're often doing it for increased reach, competitive advantage. Many of the topics that John brought up in terms of where we're seeing acceleration. It's not enough just to understand how things are performing on the back end across the apps and the infrastructure that are servicing it, but it's required to get out into the digital experience. And we believe that we uniquely provide an outside in view to understand not only how people are engaging with the applications, but what the what impact that has on the actual business. And so by bringing that world together, by using the, unique visibility that we automatically gather that Burn hit upon, We're giving customers not only a view of that outside in journey, but also a better understanding of how their digital business is running. Great. Thanks, Steve. And so Kevin, this next one's for you, and it's from Andrew Nowinski of D. A. Davidson. And his question relates to the increasing contract duration length. So do you think this is a result of COVID And, is it more temporary in nature? Or is this something you're incentivizing your sales force to push, meaning will it be a long term trend and eventually push it to an average contract length of maybe 3 years? So this journey actually started when we moved, when we started to move the business away from a perpetual model to a subscription model. So going back 2, 3 years ago when we're, when it was perpetual intensive, we're selling 1 year deals. As we've moved that business to to term agreements to subscription agreement, SaaS agreements, that average duration has increased to 2 years. And we do expect probably over time, as for a fully 100% subscription business, if that will slightly increase. Buyers today, our enterprise buyers are typically looking to enter into 3 year agreement. So that's what we're seeing. Don't want to sort of project and count on that going to two and a half or three years quite yet. But the trend is in the right direction. COVID not did not really impact, sort of that average duration significantly over the last couple of months. So we're continuing to see pretty healthy average contract durations. Great. And I'm going to jump around a little bit. This one's going to go to you, Steve. This is from Walter Pritchard, and it is from and he's from Citi. And he asks, can you give us an update on the ASK on Dynatrace APM versus the full suite sale? So Kevin, that might be a better one for you to take on unless, how do you, how would you like to approach that? Yeah. No, we've seen we've started to see a nice increase over the last 12 months in terms of our average AR land. I think that's attributable to a couple different things. One is as an organization, when we announced infrastructure only 4 quarters ago, 6 quarters ago, that took a little bit of time for our sales organization to get up and up and running on that. That's we've seen nice, nice movement in that direction. So I think we're starting to see those average land in the $100,000 zone. At the end of the day, we're also comfortable with that. We think that's a great landing spot, right? It's a nice amount of business to go into an enterprise account, and it gives us ample opportunity to expand from there. So if we can be more and more successful, landing with 2 modules or three modules as we've been doing over the last four quarters, we think that's a great recipe. Yes. Maybe I can, maybe I can add a couple ideas for because I know this sort of gets into sort of that whole expansion thought process. And I think we've talked about this before that if we think of every dollar of APM, that, that we generate that the infrastructure log area should eventually yield another dollar and that the digital experience, depending on the type of business, are you more heavily weighted toward, consumer kinds of applications or not that can yield anywhere from $0.30 to 50% $0.50 or maybe even more on the dollar as well. And with more modules coming, you can see that there's even more opportunity. You know, ahead. And so that's, that's why we say, you know, today, average 2.29 k per customer 400 plus cave with 3 plus modules, and we have many accounts over $1,000,000 in ARR. And believe that the whole portfolio, the whole Global 15,000, no reason why, you know, if you're a $1,000,000,000 company you wouldn't spend a $1,000,000 on making sure you are portfolio of applications that your business depends on run flawlessly all the time. Great. Thank you, John for adding that. And this next one's for you, John, and it is from Jack Andrews from Needham And Company. And he says, given continued investment in existing product modules, as well as the future roadmap outlined by Byrne, how do you balance R&D priorities? What framework do you use And should we expect cloud automation, application security, and digital business analytic capabilities, all to be introduced concurrently Or is there a specific timeframe in mind for each? Yes. No, it's a great question. And you know, burned is probably the best equipped to answer it, but I'll start and then, Burns, you can add on to it. So first of all, the, R and D investment that we've been making, the continuous innovation investment, you know, is being fueled rapidly as almost as rapidly as our revenue growth. So that's the first thing to take away, and that's been ongoing for the last several years. The second thing to note is that because our R and D is done in Europe, you know, we, we end up with, you know, maybe, you know, 2 different, engineers for the price of 1, certainly from a Silicon Valley standpoint. And so our investments go that much further and faster. Which also helps fuel innovation, you know, expansion. And the third thing, and this is really important, and that is that When we go into an adjacent market, it's a market that we already have many of the building blocks in place for. So you heard Byrne talk about the security space. We already have 80% of the platform elements and all the things you need to have a robust enterprise environment for that. And it's a 20% add on on top to go into what's arguably equally as large market as a performance market. So those are just a few characteristics. That we look at when we enter an adjacency. And, Byrne, I don't know whether you have some other comments to add, but, you're the man behind the program. Yes, sure. So basically, I scale already the R and D team for growth. So in our mind, you're planning for, Hey, what if we are 3000 people in R&D? And this is where the form also Excels because at the core, it provides everything that I need for data collection, data analytics, and building the solutions on top of it, or as we call it here, the modules. So and yes, those modules have different sort of maturity levels, like as we come from APM, and on the other side, for instance, are about to introduce application security, but the other modules in the same fashion that we bring to market are also building on the same core or the same platform elements and allow us then with this to gradually, on one hand, think, startup like to enter the market with this, but also always leverage the enterprise grade professional engineering and quality of the product so that we never ever compromise the quality, but sort of step by step in an agile fashion, work towards expanding, the use cases towards the customer for this particular module. And I guess sticking with the both of you kind of tag teaming a question, here's another one that I think applies to both. As apps get built natively in the cloud, how does the value proposition of Dynatrace hold up against the hyperscalers and their cloud native APM and monitoring tools? Maybe I'll give that one to you burned. You start and then maybe I'll finish. So, can you rephrase the question a bit? What was meant with hyper scalars in here? I wasn't really clear on the question. Yes, so I'll repeat it. And it's, if that's get built natively in the cloud, how does the value proposition of Dynatrace hold up against the hyperscalers and the cloud native APM and monitoring tools. Yeah. So I first have to say that by inventories here is the next generation versus the classic APM products out there. That are not meeting the cloud native needs here of the dynamism, that is in today's Kubernetes type of setups in the cloud. I mean, when we think about OpenShift, which is Kubernetes or we think about the public clouds. Everything is so dynamic that the standard scalability approaches, the standard approaches to APM are way to static. And therefore, you need an approach that discovers automatically and does not require any manual, or too much of manual instrumentation there at all, because only this fuel will stand the proper AI engine for providing answers towards the automation. And automation is then the other piece to this equation because at the end, the more you move towards large scale environment, so this fits with with hyper scale there as well, it is that it was just a few years ago where the largest environments had 17,000 hosts. Today, we are in 100,000 hosts. It's just a few years away where we talk about the 1,000,000 instances, per customer account which means this goes far beyond the human capabilities. And therefore, you need the ability with an autonomous cloud approach to tackle the automation in a fully automatic way, and there's just no time to mess with, manual customization, manual instrumentation and all of those manual toilets around these days. I guess I'd add, you know, a couple of things here. You know, we've, we've consistently said that, you know, data is is the commodity. It's what you do with the data that matters, which is what Burns is talking about there. It's the analytics and sort of the context you provide that really separates things. And that's one of the advantages of Dynatrace is, take multiple different, data sources, pull it all together, put it into context, and apply intelligence on top of it. The second thing that I'd say is that And we haven't really talked too much about this, but our customer base, our enterprise customers, $1,000,000,000 plus, and they all have investments in IT to technologies. It's not all public cloud. Public cloud is a key part of their strategy, but they tie back to data sources and sources of record or applications of record that may sit inside their firewall. It's that hybrid dynamic that also has to come together and we excel at monitoring and providing the the situational awareness across that entire spectrum. And again, that's somewhat unique to our customer base. So that's why we invest in a number of different things. And really, as we talked about, you know, we're well positioned to service, you know, that global 15,000 customer base in unique ways because they do have unique requirements. Great. Thanks, John. And I think we have time to fit in one more question Jim. And this one's for you, John, and it's from Rob Magic of, Raymond James. And he says earlier in the year, you mentioned that 25 percent of the customer base is using 3 or more modules. Can you help us understand where that adoption rate can go over the next few years? It's a great question. And, you know, I can pretty much you know, assure it will continue to climb at what pace, you know, that's, you know, that's something that is in the execution across the sales organization on our partner base. But the one of the big things we did April 1st when we hit our fiscal year, our new fiscal year, as I think we've talked about is we took the sales organization and said, Sunset conversions, those are over, let's increase our focus on cross selling, multi module cross selling. You can see how that has started to impact, not only some of the some of the numbers as far as how many customers are now multi module, but also how many new land customers, our multi module. So we're still a little bit in the early days of moving that sales organization to being extremely competent in that cross sell. It usually takes 6 to 9 months to move a sales organization from one thought process to another one. But we're well on the way, and I think the Obviously, the early days have a lot of promise in them. And I think you'll see us continue to execute very well against that multi module cross selling strategy. Great. So that was our last question, John. I don't know if you want to wrap up for us. Sure. First of all, thank you everybody for joining us today. And I want to say a special thank you to our customers who shared their stories with us. Hopefully, it was insightful and lightning informative for everyone. We have a massive market in front of us. It's early days. We're being fueled by some fantastic macro trends, that we're just getting going with. We have an extremely well differentiated platform, as I hopefully you heard from today. We believe that differentiation is sustainable. We're certainly investing heavily in it. And we have plenty of new things coming as well that drive that market expansion and ARR per more opportunity, even faster. So we're thrilled with where we are. We believe we have a sustainable, balanced rule of 50 business. That, that we can maintain for years to come. And we're excited to continue to share the story as it unfolds. With everybody. And I look forward to the next time we're able to catch up at the end of October and take another step on the journey. Thank you again, everybody. Stay healthy. Stay safe. Appreciate you joining us.

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