Dynatrace, Inc. (NYSE:DT) Q3 2023 Earnings Call Transcript

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So, we will look at all of those as expansionary opportunity as we look ahead. The other point that I would make on new logos is that we announced last quarter, more than 60% of new logos closed with multiple modules with more than three modules, three or more modules. So, that is something that we are also seeing is more platform selling into the new logo area.

Adam Tindle: Got it. Okay. That’s helpful. And maybe just a follow-up, Jim. New ARR in Q3 was better than expected at down 13% fully adjusted. I think if I am backing into the guidance for Q4, it implies that metric is going to be down about 20% year-over-year. I am just wondering, we have got this kind of cadence of decelerating growth in that new ARR piece. But beyond Q4, I mean how do we think about the puts and takes to new ARR trends? Do you think Q4 could potentially be a bottom at that down 20%, or do we still have tough comps in the first part of next year? Just trying to get a sense of cadence of new ARR declines and when we might see the bottom. Thanks.

Jim Benson: Yes. I mean I will just €“ we obviously had a very strong Q3, effectively $20 million higher than our expectations that I think we had shared before that we thought net new ARR would be about $120 million in the back half, call it, split 50-50 between Q3 and Q4, came in at roughly 80%. So, Q4 is effectively consistent with what we shared before and it reflects prudence in our guide. Relative to fiscal €˜24, I certainly don’t want to get ahead of ourselves and start providing guidance on fiscal €˜24 on this call. But I will tell you that we will build a similar level of prudence into our fiscal €˜24 guide when we talk to you guys about it in May. And I think we will have €“ obviously, we will have the benefit of another three months of seeing what the macro environment is doing.

It’s pretty dynamic. As Rick said, we don’t expect any significant improvement in the environment. And we are actually managing the business with that in mind. And it’s one of the things that I will just end with that I really liked when I joined the company of the balance of very strong growth in this company with profitability. It’s just a great recipe. And I think you are seeing kind of our peers were not as balanced. And so they are having to exercise some new muscles. These are not new muscles for Dynatrace. And so I think we are in a good position to continue to make the investments where we need to for the long-term opportunity. And as macro conditions improve, we should be able to capitalize on that.

Adam Tindle: Thank you.

Rick McConnell: Okay. Well, thank you everybody for joining. I think that Jim’s remarks on balance of top line growth and profitability are exactly where we would like to finish the call because that is how we are running the company. And we are doing so with good prudence. We are delighted about the strong Q3 results that we just delivered and very, very bullish as we look to our market opportunity as we look ahead, not to mention our growing platform differentiation. For those of you joining us in person at Perform in Las Vegas, I look forward to seeing you there in a couple of weeks and I wish you all a very good day.

Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.

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