Greetings. Welcome to Dynatrace Fiscal Q3 2022 Earnings Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. At this time, I'll now turn the conference over to Noelle Faris, Vice President, Investor Relations. Noelle, you may now begin. Thanks, operator. Good morning, everyone, and thank you for joining Dynatrace's Q3 FY 2022 Earnings Conference Call. With me on the call today are Rick McConnell, Chief Executive Officer, and Kevin Burns, Chief Financial Officer. Before we get started, please note that today's comments include forward-looking statements such as statements regarding revenue and earnings guidance. These forward-looking statements are subject to risks and uncertainties depending on a number of factors that could cause actual results to differ materially from those expressed or implied by such statements. Additional information concerning these uncertainties and risk factors is contained in Dynatrace's filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q. The forward-looking statements included in this call represent the company's views on February 2, 2022. 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 call. A detailed reconciliation of GAAP and non-GAAP measures can be found on the Investor Relations section of our website. With that, let me turn the call over to our Chief Executive Officer, Rick McConnell. Rick? Thanks, Noelle, and good morning, everyone. Thank you for joining us on today's call. I am very excited to be kicking off what I anticipate will be the first of many positive earnings calls as Dynatrace's CEO. First, I'd like to thank John Van Siclen for his contributions in growing Dynatrace as CEO to nearly $1 billion in ARR. He set the stage for a smooth and seamless transition in leadership, for which I'm very grateful. I'm gonna cover a lot of ground today. At the highest level, there are three key messages I'm hoping you take away from today's discussion. First, Dynatrace has established a solid foundation, and we are continuing to fire on all cylinders. Second, Q3 was a very strong quarter, beating expectations across all key operating metrics, and we are raising guidance for FY 2022. Third, we're leaning further into our sales and marketing as well as R&D investments with the intention to drive accelerated growth. Before talking about our financial performance and how I think about the future of the business, I thought it would be helpful to share with you my primary reasons for joining Dynatrace. First, the addressable market is enormous, over $50 billion and accelerating across all industries, and we've only scratched the surface. Second, Dynatrace's technology is world-class and highly differentiated. Customers and analysts provided me with powerful third-party validation of the strength of Dynatrace and its products, and my recent customer conversations since taking the role have further reinforced this perspective. Third, Dynatrace's financial performance is exceptional and positions us in a very elite group of companies with similar results. With growth in excess of 30% and strong profitability, we are in excellent position to continue investing to deliver ever-increasing value to our customers. I enjoy building market-leading, multi-billion-dollar businesses, and this is precisely the opportunity we have in front of us at Dynatrace. Finally, I joined Dynatrace because of the expertise and talent of our people. I admire the vibrancy of the Dynatrace culture, celebrating innovation, collaboration, and customer orientation. In short, this is a company I'm thrilled to be a part of, and my passion and enthusiasm have only grown since starting in mid-December. I'm fired up and looking forward to this next phase of growth. Moving on to our Q3 performance. Let me start by sharing how extremely pleased I am with the team's execution. Once again, beating guidance across all our key operating metrics. ARR finished at $930 million, up a very strong 32% year-over-year in constant currency. Subscription revenue was $226 million, up 34% year-over-year in constant currency. People often speak of the rule of 40 as exemplifying strong performance in a highly successful SaaS business, with a combination of ARR growth and free cash flow being greater than 40%. On a trailing 12-month basis, we've been operating at a rule of nearly 60, with 32% ARR growth and 27% unlevered free cash flow margins, and this remains the case for our FY 2022 guidance. Our foundation for sustainable long-term ARR growth continues to be the combination of adding new logos to the Dynatrace platform, plus the ongoing expansion of existing customers. We continue to see strength in both areas. We have added more than 500 new logos to the Dynatrace platform over the past nine months, which at 22% growth is above our historical 15%-20% goal. During the quarter, we continue to add industry leaders from diverse industries such as Varian Medical Systems, Janus Capital, the State of Arkansas, and Wendy's. Of equal importance, we are closing larger initial transactions driven by multi-module sales, a key indicator of the value our customers are deriving from our observability platform. Year to date, our new logo ARR is up 37% over last year, and 50% of these were 3+ module sales. As to existing customers, Secretaría General de Administración, Marathon Petroleum, and General Motors are a few examples of companies that expanded their Dynatrace investments, contributing to our net expansion rate being above 120% for the 15th consecutive quarter. The consistent execution against the two building blocks of new logo acquisition and net expansion rate has resulted in a sustained 30%+ ARR growth business over the past couple of years, which is a tremendous accomplishment. At the same time, we continued to see healthy bottom-line performance in Q3, with 25% non-GAAP operating margins and non-GAAP EPS of $0.18 per diluted share, reflecting our commitment to running a balanced business even as we invest for future growth. With the strength of our Q3 results and positive outlook ahead, we are increasing our guidance for FY 2022, as I mentioned, which Kevin will provide more detail on shortly. Now I'd like to shift to how I think about our business moving forward. It would come as no surprise to any of you that digital transformation is at the heart of many global businesses today, with IDC forecasting global spending in this area to exceed $10 trillion over a five-year period. The result, if executed well, is an organization that is better suited to meet its customers' needs, can compete more effectively in an online world, and is equipped to do so more efficiently at lower cost. Digital transformation has become ubiquitous in driving corporate strategy, from customer relationships to supply chain, to internal processes and beyond. To execute digital transformation initiatives, organizations are often leveraging modern, ever-changing multi-cloud environments that deliver efficiency and flexibility. These environments also bring a scale and complexity that's well beyond that of the data center world. Teams need assistance in simplifying the overwhelming volume and complexity of data. To innovate quickly, organizations need what we think of at Dynatrace as answer-driven automation. Not just data, but rather answers from the data that drive automated action. They want to optimize all aspects of their business at every moment in time, anywhere around the globe. If there is an issue, they need to know it in real time before their customers or partners do. They need to be able to pinpoint the origin of the problem to enable rapid or even automatic resolution. They want to go further to gain insights into user experiences and use the wealth of information flowing through their systems to understand customer behavior and drive better business results, such as increased conversions, higher revenue, and profit optimization. This is the power of Dynatrace. Instead of requiring multiple disparate and disconnected tools and providing petabytes upon petabytes of data, Dynatrace provides a software intelligence platform that makes sense of it all, even in the most complex hybrid and multi-cloud environments. These modern environments demand more than serving up data on dashboards for manual analysis and action. Rather, we provide deep situational awareness to keep businesses operating and to radically improve innovation, efficiency, and responsiveness. Powered by our unique AIOps engine, unified with the deep and broad observability provided by the Dynatrace platform, we deliver the answers companies need to run their businesses most effectively and the automation to do it efficiently. In so doing, we have gone well beyond the capabilities of other in-house or competitive tools to become an indispensable part of our customers' cloud ecosystems. Let me share a couple of examples of how the power of our platform translated into several strategic customer wins for Dynatrace during Q3. One of the largest insurance providers in the U.S. has a goal to digitally transform the insurance industry and make it easier for customers to buy, their distribution teams to sell, and their employees to work. In the midst of their transformation, they found the previous siloed multi-tool approach required far too much manual work and did not provide the answers to allow them to innovate at the speed and quality the business demanded. With Dynatrace, they moved to a single source of truth and AI-driven answers. This freed time for innovation, accelerated their digital transformation, and enabled them to optimize every step of their biggest client-facing application to ensure that their software performed precisely as internal and external customers expected. Another customer, a Fortune 500 global oil and gas company based in Asia, is reshaping its operations to ensure a sustainable future. Their previous monitoring tools and approaches were not designed for modern environments. The scale, speed of change, and complexity of the multi-cloud architecture that is powering their transformation had surpassed these tools' ability to keep up. The customer came to Dynatrace to tame cloud complexity and provide end-to-end visibility and root cause analysis to reduce manual work. By delivering intelligence and automation at enormous scale, we eliminated thousands of alerts in innumerable war rooms, resulting in greater simplification, faster innovation, and more efficient collaboration. As a result, Dynatrace has now become the blueprint for observability across the organization. These are just a couple customer examples. I learn of more each day, and with each successful engagement, it reinforces my enthusiasm for Dynatrace and the value we bring to our customers. Near term, our focus will be on continued execution, leveraging what we're doing well, and then finding ways to grow even faster. Consequently, we believe there's an opportunity to modestly increase investment in both sales and marketing as well as R&D to accelerate growth while maintaining healthy profitability, which Kevin will say more about shortly. We've already made great strides in these areas with quota-carrying reps growing over 30% year-over-year, partners now influencing more than 50% of our transactions, and brand awareness increasing. The level of interest generated for our Perform conference next week is a great indicator of these efforts, with more than 32,000 registered attendees expected, representing over 8,500 organizations, more than half new to Dynatrace. You can also expect that we'll continue to fuel our innovation engine with existing module expansion, new module creation, and platform innovation to enable even more comprehensive views of our customer ecosystems. Our cloud application security module is a great example of our focus on continued innovation to produce substantial customer value as a fundamental element of our software intelligence platform. We're seeing positive early signs of traction, and our differentiated approach is worth highlighting. Back in December, as the world raced to protect systems from the Log4j vulnerability, our application security module was able to detect it within minutes of being published. Not only did we detect all instances of the vulnerability across highly distributed multi-cloud environments, but through our AI engine, as well as our associated understanding of the topology and transaction patterns, we helped our customers prioritize application updates and mitigation strategies. Customers using alternative tools had to go through the painful and largely manual process of upgrading their agents and restarting their applications to mitigate Log4Shell. One customer said, "Other tools tell us we have a vulnerability, but Dynatrace AppSec tells us everything about it, what, where, and how to fix it." Another customer told us, "It's mind-blowing how Dynatrace Application Security found the Log4j vulnerability before any of our other numerous security products." Yet another said, "We've spent hundreds of hours trying to understand our exposure, and once Dynatrace AppSec was enabled, we immediately understood it." With this level of clear value add to customers, it's no surprise that we saw an over 10x jump in POCs during this time. While we don't hope for more vulnerabilities, they have become an unfortunate and common reality. It is still early in Dynatrace's AppSec journey, but I was delighted with the performance of the module, as well as our customers' engagement and response. It offers a strong proof point of our unique offering and leads to our plan to drive ARR growth in this area in FY 2023 and beyond. It is worth also noting my personal enthusiasm for our opportunity in this area, given my background in application security over the past decade. Before I turn it over to Kevin, I am very pleased to welcome Ambika Kapur to the Dynatrace board. Ambika has extensive product marketing knowledge and experience from her work at VMware, Rackable Systems, and Cisco, and her expertise in this area represents a valuable addition to the already strong breadth of knowledge and experience across this group. In summary, I am delighted with our continued strong performance in Q3 and for the first three quarters of this fiscal year. We are putting our growth, profitability, and cash generation to good use in our investments in innovation, go-to-market, and the world-class talent needed to fuel future growth. I couldn't be more delighted to be part of Dynatrace, and I look forward to meeting many of you in the future. Now, I'll turn the call over to Kevin for more on our Q3 financials and our outlook for the fourth quarter. Kevin? Thank you, Rick, and good morning, everyone. As Rick mentioned, we delivered another outstanding quarter on both the top and bottom line, setting us up for a solid finish to fiscal 2022 with the building blocks in place for sustained ARR growth of 30%+. Our investments in sales and commercial expansion continue to result in strong top line performance with ARR, revenue, and subscription revenue exceeding our guidance and resulting in another increase in our annual guidance. ARR for Q3 was $930 million. That's an increase of $66 million sequentially or $208 million year-over-year, representing 29% year-over-year growth. Sequentially, this includes a $15 million FX headwind. On a year-over-year basis, this is a 21 million FX headwind, or roughly 300 basis points. Given the fact that we focus on the needs of global enterprises, approximately half of our business is conducted in currencies other than the U.S. dollar. This means that our ARR and financial results are subject to foreign currency fluctuations. Given the strengthening of the U.S. dollar, this is creating an ongoing headwind to our reported growth. As a result, we believe investors should focus on our constant currency growth rates as these reflect the true strength of the business. On a constant currency basis, total ARR was $951 million, an increase of 229 million, representing 32% growth over last year. Backing out the $34 million of perpetual license headwind to ARR, which negatively impacted year-over-year growth rates by about 450 basis points, our constant currency adjusted ARR growth rate was 36% year-over-year. This represents the fourth quarter in a row with sustained growth rates above 35% and is reflective of the increased investments we have been making in our commercial organization. As we wind down the perpetual license revenue included in ARR, we believe the constant currency adjusted ARR growth reflects the sustained and durability growth rate of the business. Expanding on this further, when looking at ARR, excluding the impact of the perpetual license headwind, we added $263 million of new ARR over the last 12 months compared to $176 million for the prior 12 months, an increase of nearly 50%. We included a quarterly historical chart of new ARR expansion normalized for currency and perpetual runoff in our investor deck and data trends table that are available on our website. As Rick mentioned, the building blocks for sustained ARR growth remain the same, the addition of new logos combined with the ability to expand existing customer relationships as measured by our net expansion rate. New logo growth continues to be healthy. We added 206 new logos in the quarter, an increase of 9% over last year. Year to date, we added 501 new logos, up 22% compared to the same period last year. Given the changes in seasonality of our business last year, where we had a much stronger back half due to the COVID headwind in the first half, we believe the year to date view is the best way to look at new logo additions as it normalizes for these quarterly fluctuations. As observability becomes the primary driver for new sales, we continue to see positive momentum with a higher percentage of customers landing with three or more modules. On a year to date basis, the number of new logos landing with three or more modules was 44% compared to 33% for the same period last year. In addition, over the last year, new logos have continued to land at a very healthy level with initial ARR lands of $116,000 on a trailing 12-month basis. Given the observability landing zone, we're starting to see a healthy increase in our average land size. At this point, nearly half of our customers are now using three or more modules, demonstrating that Dynatrace's open and unified platform is an indispensable part of their ecosystem. With over 3,200 customers on the platform, that's an increase of more than 450 customers from a year ago, when about one-third of our customers used three or more modules. Average ARR for three-plus module customers has increased to nearly $500,000, almost twice the size of the average ARR per Dynatrace customer at $287,000. Underlying this healthy average ARR for three-plus module customers is the ARR contribution from our infrastructure module, which increased over 75% from Q3 of last year. Moving on to revenue. Total revenue for Q3 was $241 million, up 33% year-over-year in constant currency and exceeding the high end of our guidance range by $6 million. Subscription revenue for Q3 was $226 million, up 34% in constant currency, a $5 million beat versus the high end of our guidance. As I move forward in prepared remarks, I will be using non-GAAP measures unless otherwise noted. With respect to margins, gross margin for Q3 was 85%, in line with last quarter and Q3 of last year. As we have said before, a very healthy margin reflecting the value and efficiency of the Dynatrace platform. Overall, we are extremely pleased with the strength of both our ARR growth and associated revenue performance. We believe that this further validates our strategy to continue to accelerate investments to grow the top line, as Rick discussed. You will continue to see us lean in on both commercial expansion and technology innovation to capture the large and growing market opportunity ahead of us. For Q3, we invested $34 million in R&D, up 37% from last year. We continue to successfully attract and retain talent in our R&D organization, consistent with our expectations. On the go-to-market side, we invested $84 million in sales and marketing, up 45% over last year, and within our current target investment zone of 34%-36% of revenue. Our operating income for Q3 was $61 million, 5 million above the high end of our guidance range, primarily due to the revenue upside that flowed through to the bottom line. This resulted in an operating margin of 25% compared to 29% in Q3 of last year. Again, keep in mind that we saw significant savings last year related to the COVID shutdown, and we began to re-accelerate investments starting in Q3 of last year. On the bottom line, net income was $52 million or 0.18 per share. Turning to the balance sheet. As of December 31, we had $409 million of cash, an increase of 109 million compared to the same period last year. We are pleased with our continued healthy cash generation and believe this puts us in a strong position to consider strategic business investments where there's opportunity to accelerate growth in selected areas. Year to date, our unlevered free cash flow was $152 million, consistent with the same period last year. As a reminder, due to changes in billing patterns, we believe it's best to view unlevered free cash flow over time. On a trailing 12-month basis, our unlevered free cash flow was $238 million, or 27% of revenue. The last financial measure that I would like to discuss is our remaining performance obligation. RPO was approximately $1.4 billion at the end of the quarter, an increase of 37% on a constant currency basis over Q3 of last year. The current portion of RPO, which we expect to recognize as revenue over the next four quarters, was $804 million, an increase of 35% year-over-year on a constant currency basis. We are very pleased with the growth in RPO. However, we continue to believe ARR is the best metric to understand the business's performance as it removes variability associated with billings and contracting. Moving on to guidance. As a reminder, when we talk about margins and profitability, I will be referring to non-GAAP measures. Since the end of Q3, the U.S. dollar has further strengthened, resulting in a growing Q4 FX headwind. To provide investors better visibility into the fundamental strength of our business, I'll share and recommend that investors focus on constant currency growth rates. Once again, we believe our investments in commercial expansion and product innovation will enable us to maintain 120% net expansion rate and 15%-20% new logo growth over the midterm. These are the core building blocks that deliver sustained ARR growth of 30%+ over time. With that in mind, we're once again raising our FY 2022 ARR guidance to 30%-31% growth year-over-year on a constant currency basis, up 100 basis points from our prior guidance. We expect as-reported ARR to be between $990 and 996 million, up 28%-29% year-over-year. In addition, our ARR guidance assumes roughly 300 basis points of headwind to ARR growth rates in fiscal 2022 due to the associated perpetual license wind down. Therefore, we expect that our constant currency adjusted ARR growth will be 33%-34%. Again, an increase of 100 basis points from prior guidance. We are also raising our constant currency revenue guidance by 100 basis points for the year. We now expect total revenue to be between $922- 924 million, representing 31% year-over-year growth, or 30%-31% year-over-year growth on a constant currency basis. Underlying that, we are also raising our subscription revenue guidance for the year by 150 basis points in constant currency. We now expect subscription revenue to be between $866- 867.5 million, up 32% year-over-year, both as reported and in constant currency. We continue to expect subscription revenue to be 94% of total revenue, driven by the size and strength of ARR and associated subscription revenue growth. Moving down to P&L, we expect full year operating income to be between $228 and 230 million. As Rick mentioned earlier, and consistent with our stated goals over the last year, we plan to lean in on investments to fuel additional ARR expansion and top line growth. However, it will take time to ramp additional investments before we further move the needle on ARR expansion. For the year, we expect sales and marketing to be in a range of 35%-36% of revenue and R&D to be around 15% of revenue, resulting in an operating margin of nearly 25% of revenue. As we plan beyond fiscal 2022 and continue to lean in on our investments, we expect to layer in another 200-300 basis points between R&D and sales and marketing throughout fiscal 2023. For the full year, we expect EPS of $0.66-0.67 per share, up $0.02 on the high end of our previous guidance. Our net income and EPS calculations assume an effective cash tax rate of 12%, consistent with prior guidance. At these investment levels, we are able to continue delivering strong unlevered free cash flow margins. We are raising unlevered free cash flow slightly to be $268- 275 million, or approximately 29%-30% of revenue for the year. To summarize our full year guidance, it is a continuation of our durable balance of growth and profitability, guiding to a rule of 60 business when combining ARR growth and unlevered free cash flow margin. Looking at Q4, we expect total revenue to be between $245- 247 million, up 25%-26% year-over-year, or 27%-28% in constant currency. In addition, subscription revenue is expected to be between $230.5- 232 million, up 26%-27% year-over-year, or 29%-30% in constant currency. From a profit standpoint, operating income is expected to be between $51.5- 53.5 million, resulting in an operating margin of 21%-22% of revenue as we continue to execute on our investment strategy, combined with the incremental spend related to our Perform conference next week. Finally, we expect EPS to be between $0.15-0.16 cents per share. In summary, we are once again very pleased with the overall momentum of our Q3 performance with strong ARR and top line growth, combined with healthy margins. As we have outlined, we have a solid foundation for sustained growth. With that, we'll open the line for questions. Operator? Thank you. At this time, we'll now be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. So that we may address questions from as many participants as possible, we ask that you please limit yourself to one question. One moment, please, while we poll for questions. Thank you. Our first question is from the line of Matt Hedberg with RBC Capital Markets. Please proceed with your questions. Hey, guys. Good morning. Rick, welcome to Dynatrace, and we certainly look forward to working with you on an ongoing basis. So, congrats on that first and foremost. You know, guys, it seems like people are focused on the slight constant currency adjusted ARR deceleration this quarter, but I think your new disclosures on the net new ARR growth was super helpful this quarter. The way I look at it, if you exclude currency and the perpetual runoff, it looks like, you know, on a two-year stack basis, you continue to accelerate ARR growth. Is that the right way to think about this? I guess overall, can you characterize the spending patterns for those that worry about maybe a slowdown in digital transformation spending post-COVID? Sure. Hey, Matt, it's Kevin. Hope you're doing well. I think you're absolutely right. I think, you know, what we did provide in the talk track and also in our supplement that we filed in our 8-K, and it's on our website, is a disclosure about our new ARR expansion bookings. What this is, you know, the growth in the business. This year, on a trailing 12-month basis, we grew our ARR by $263 million, which, as we highlighted, was up 49% on a year-over-year basis. That really is the underlying growth of our expansion bookings, and we think that's a great indicator of the health of the business. I will also say, you know, it's important to look at our growth rate on a constant currency basis. Over the last four quarters, our ARR, excluding the perpetual licensing headwind, has been north of 35%. This quarter it's dropped slightly to 36%, but super healthy. Underlying the business, you know, the demand environment remains very, very robust. The company continues to perform, and we're hiring sales reps above plan. You know, we think the business is continuing to do extremely well. Between the combination of the 36% ARR adjusted growth and the 49% ARR expansion bookings, we're super excited and pleased with the results in Q3. Yeah. Thanks. Thanks very much for the welcome, Matt. Appreciate it. Look forward to meeting you. Very excited both on the new logo front as well as net expansion rates. Both look very strong and feel very good about the future. Thanks a lot, guys. Our next question is from the line of Sterling Auty with JPMorgan. Please proceed with your question. Yeah. Thanks. Hi, guys, and let me echo Matt's comments. Rick, welcome to Dynatrace. Just to further Matt's line of questions, 'cause, yes, that's what we're getting the most inbound interest from investors. On that ARR side, that slight or that 2% deceleration quarter-over-quarter, you know, can you give us a sense of any thoughts that you might have around what your market share might have done in the quarter or pricing, you know, trends or anything else that may have also contributed to, you know, to that two-point slowdown? No, no significant changes, Sterling, in market share. You know, we continue to have very healthy win rates across the board. I think that continues. You know, I'd say there is a slight change in seasonality. If you look at our ARR expansion in the first half of last year, and certainly on a year-to-date basis, it was impacted by COVID in the first half, which, you know, made a little bit of an easier comp in Q2 of 2022 compared to Q3 of 2022. Fundamentally, win rates remain very healthy across the board, and as I mentioned earlier, the demand environment remains robust and, you know, people are continuing to accelerate their digital transformation initiatives, and we think that bodes well for the future. Got it. Thank you. Yeah, I mean, what I would say, Sterling, is just that we continue to see the biggest opportunity as being replacement of DIY. It is. That is the biggest greenfield. As global 15,000 customers and companies move over to digital transformation initiatives, they just have a hodgepodge of tools that they need to replace with an integrated software intelligence platform, and that's what we're focused on delivering to that category of companies. Our next question comes from the line of Mike Cikos with Needham & Company. Please proceed with your question. Hey, guys. Thanks for taking the questions here. I did wanna circle back on some of the prepared remarks to make sure that I heard you properly, but I thought that the comment was that you guys are looking to layer in additional investments when we think about fiscal 2023, specifically in the sales and marketing and R&D. Can you remind us, I guess, where, how those investments are expected to layer into those two functions, as well as how long it takes a typical sales rep to ramp on Dynatrace? Thank you. Sure. Let me take the first part of that. Our expectation in what we're seeing in the market is that there is upside opportunity for growth, and that's what we're gonna be investing in. We're looking at a one, two point increase in R&D to drive innovation and additional product deployment in terms of new modules and module expansion, and one, two point expansion during FY 2023 in sales and marketing to drive awareness, new logo generation, and overall penetration with partners. Those are the areas that we're going to be focused on driving in order to generate that growth incremental opportunity. From a time to productivity, Mike, you know, it's fairly consistent over the last couple of quarters, you know. It's anywhere from four to five quarters for a sales rep to become productive. We continue, as I mentioned earlier, a very solid, healthy clip of growing our sales rep. As you probably know, last year, we grew our sales organization direct quota capacity 25%. This year, our goal is 30%. We did better than that in Q3 here. As Rick mentioned, we're gonna put some more money into sales and marketing, and one of the goals as well is to increase the number of direct sales reps as well across the board. Great. Thank you. The next question comes from the line of Raimo Lenschow with Barclays. Please proceed with your question. Yeah. Hey, thanks. Rick, all the best from me as well. Just if you think about the investments that you're doing there, and if I just do the math of the four to five quarters there, like, you know, we kind of get an idea how we think about growth as well. The question here is a little bit is like, how do you think fundamentally about the growth for you guys? You kind of, Kevin said you see upside in the growth opportunity or upside in growth in the market. Like, can you just frame it, you know, more, slightly more bigger picture of, you know, you've been a company that has been solidly growing in the mid-30s% now for several quarters. Like, how do you think this will evolve in the future against like a growing market opportunity? Thank you. Let me take that. Thanks for the question. The starting point here, as we articulated in our prepared remarks, is really around digital transformation. That really is the fundamental and primary market driver that is growing this and especially growing the opportunity in the market in the Global 15,000, because that is creating enormous complexity of everything from on-prem to hybrid cloud to multi-cloud environments that are untenable. That's where we start. Our linkage opportunity into these digital transformation projects is just enormous, which is why one of the areas we're leaning into is through partnerships, hyperscalers and others, because they're now generating a substantial percentage of new logo opportunity for us. That's the beginning. What we need to do is we need to provide an integrated software intelligence platform that provides situational awareness to allow for the monitoring and the observability of an entire infrastructure, not reactively, but proactively, to provide essentially answers to the questions that customers are asking about managing those infrastructures going forward, and automatic resolution. These are the kinds of areas in which we're investing to drive our opportunity into the future. Thank you. The next question comes from the line of Jonathan Ruykhaver with Baird. Please proceed with your question. Yeah. Good morning, everyone. Rick, I think this is more for you. When you look at the sales motion, I'm curious to hear your view on developer engagement versus the focus on targeting C-suite, particularly given the success some of your competitors are showing with a more bottoms-up approach. Great question. We are absolutely shifting left, as the terminology goes, into earlier in the development cycle. This is going to be a key aspect of our development opportunities and our marketing and sales opportunities as we look to the future. Not only are we doing elements and providing capabilities like code validation, but integrating through APIs, which are announcements that you'll see to come, directly into code bases to provide for an allowance of observability metrics to be integrated directly at the code level. This is a great question, and it is directly consistent with where we're headed in the future in terms of the shift-left motion back into the development process. Okay. Helpful. Thank you. The next question is from the line of Adam Tindle with Raymond James. Please proceed with your question. Okay, thanks, and good morning. Rick, I just wanted to double-click and take a step back on the increased investment notion. First, could you just maybe take us through the process that you went through in determining the need for the further investment? I understand you run a very efficient R&D organization, but already fairly healthy levels for sales and marketing spend. The process that you went through in determining that, and secondly, the framework that you thought about for earning a return on those investments. I imagine a lot of it's related to growth. If you could maybe double-click on the specific areas of growth that you're thinking about for payoff, that would be helpful. Thank you. Great question. On the R&D front, to take that one, we run a very efficient R&D organization, primarily out of Europe. It is incredible at how much they deliver. We believe that the market is right for further expansion in terms of both our existing modules and deployment, as well as new opportunities. For example, look at what we've been talking about with the AppSec module. We believe that we've hit a huge nerve in vulnerability analytics that provides us with immense capability to target a latent need that has only just begun. We're at the very early stages of AppSec ARR, and yet we think that has dramatic opportunity for growth into next year. That's one example of where we're investing in development. Logging associated with infrastructure and the infrastructure growth that we see of that module is also another area, substantial investment in the R&D side. Those have corollary investments, obviously, that need to happen in the sales and marketing side to grow our opportunity in infrastructure, grow our opportunity in AppSec, and grow awareness in the market about the brand overall. We're seeing this opportunity manifest itself through our customers and customer spend in terms of things like multi-module deployment and in terms of growth in the ARR per customer for those multi-module deployments. This is that's the analysis that we went through to evaluate that now is the time, and the new modules provide the fuel for us to be able to go after that additional wallet share. Very helpful. Thank you. Next question comes from the line of Kash Rangan with Goldman Sachs. Please proceed with your question. Thank you very much, and congratulations on your position. Curious to get at a high level any changes in the strategic direction for the company. Secondly, on a more tactical level, were you able to discern any changes in product contribution from the different silos? Any update on the competitive environment would also be very useful. Thank you so much. Sure. In terms of overall strategic direction, as we've said several times, this is a company that is, we believe, firing on all cylinders. Nothing is. In coming in, John did an amazing job of building the company to the point that we're at today. I am of great fortune in joining a company that is operating and performing exceptionally well. That is a great foundation. No major changes in strategy, certainly in the first six or seven weeks here for me. What I would say, and as we've indicated in the call, we believe that there's an opportunity to lean in further, especially with some of the new modules and new capabilities that we have in infrastructure as well as AppSec, for example. Those are our areas, both on the development side and on the sales and marketing side that we're leaning into. The other aspect that I would indicate is just on the partner front. As I've alluded to, partner opportunities are substantial. In my view, to create acceleration over the course of FY 2023, it has to be, to some extent, the power of the and, as I've heard in the past many times. It is not just the expansion at the 30% level of number of reps we have and going after the market in the same way that we've done so in the past, but also then expanding that opportunity to include partners to be able to canvass the market more completely. I would say that those are some of the areas that we'll look at. One other area that obviously we can't comment on in any detail, but I owned M&A and for the last 10 years at Akamai, and that was a tool that I used pretty extensively. We're gonna be active shoppers and very disciplined buyers, only leaning in where we see it appropriate. That's another tool that we have in our arsenal that we'll begin to look at as well. Things like the SpectX acquisition that we did to focus on continuous analytics at enormous scale. These are elements that we can integrate directly into our platform to drive further scale and growth. That's great. Just a quick follow-up. If all these initiatives were to bear fruit, are we making too much of the sequential deceleration that everybody's pointing out? If these initiatives bear fruit, could we see re-acceleration in the business? Because you are definitely investing for growth this year, as you said, on the research and development and the partnership and the sales and marketing side. Hi, Kash, it's Kevin. Yeah, as Rick said, we are firing on all cylinders, and these incremental investments, you know, are all focused on accelerating AR growth over, you know, the midterm and longer term. It'll take a few quarters for that to obviously kick into that AR top line. But, you know, the market opportunity is tremendous ahead of us. Our platform is amazing. We have some great modules that we're bringing to market here in the next 12 months as well. I think all those combined gets us pretty excited about, you know, that top line AR growth number accelerating over the longer term. Wonderful. Thank you so much, and congratulations. Thank you. Our next question is from the line of Kamil Mielczarek with William Blair. Please proceed with your question. Morning, everyone. Thanks for taking my question. Just wanna follow up on the comment that I think Rick made on M&A. Can you just maybe talk a little bit more about the framework behind your decision to acquire versus build new products? Given Dynatrace is now in a net cash position, and we're seeing digitization drive a secular tailwind for likely multi years, would you consider something more transformative? Well, look, we're not gonna comment on specific acquisitions and opportunities. What I would say, it's a great question. I figured I was gonna prompt a follow-up question out of that set of remarks, and I do appreciate the question. We're gonna be opportunistic, looking and scanning the market for M&A really across the gamut, and certainly I'm not gonna commit to transformational M&A or anything of that nature. What I will say is we'll be looking at M&A as accelerant growth. That's what was really my earlier comment, and we'll look at it at all shapes and sizes in evaluating it. We're gonna be very disciplined in our acquisition strategy as we look at it. Great. Thank you. Just a quick follow-up for Kevin. Can you maybe update us on how customer count growth came in relative to your expectations, and how should we think about the single product customer churn over the next few quarters? Yeah. It's playing out as we had anticipated and as we communicated on our Q4 call, I think. As a reminder, for folks, we had about 200 customers that were single module, sort of non-platform legacy customers that we do believe were gonna churn over the next four to six quarters. We've churned about half of them so far, and I think over the next, you know, three to four quarters, Kamil, we'll see the churn of the balance of those, you know, probably another 100 or so over the next three to four quarters-ish. That's great. Thanks again. Yep. Our next question is from the line of Fatima Boolani with Citi. Please proceed with your question. Good morning. Thank you for taking my questions. Rick, welcome to the team. Look forward to working with you. Maybe I'll start with you. You've got a tremendous pedigree in the security arena, and you spent, you know, a lot of time talking about how big the application security franchise could be for Dynatrace. I'm curious, in the reinvestment envelope that you've set out for fiscal 2023, can you talk to us a little bit about maybe the opportunities and challenges with selling to a much more different buyer in the security realm and sort of how we should think about that manifesting in your sales and marketing expenses and posture? Then I have a quick follow-up for Kevin. Okay, sure. In terms of the buyer, the good news is I think there's a ton of leverage in the buyer that we have today. In fact, we're with the Log4j situation that occurred back in December and evolved, obviously those discussions happened very rapidly in order to get our AppSec module deployed into POCs, and that of course wasn't a new buying process. That was through our existing buyers who had a very strong need to resolve the Log4j situation very rapidly. The good news is there's a lot of overlap. Now, as we move into AppSec even more deeply, clearly the buyer will morph a little bit, but we think that there is, as I say, enormous leverage there. In terms of the broader question on AppSec, yes, I think that this is an enormous growth opportunity for the company. I think it is very natural and logical for customers to be looking at managing their overall ecosystems and environments and wanting simultaneously to make sure that it's protected. The value proposition is extraordinary, and I think it is a very consistent story for our customers to expand in this sector. I appreciate that, Rick. Kevin, historically, or at least certainly in the last couple of quarters, we've certainly had some conversations about the buying and procurement behavior of, you know, quote-unquote, "economically sensitive industries." I'm curious, as you look at your pipeline just from a vertical perspective, where are we, in terms of business momentum and buying posture, in some of these economically sensitive industries that you've called out historically? you know, frankly, are we sort of back to, pre-pandemic levels of engagement and purchasing activity? Any updates there would be very helpful. Thank you. Sure. Hi, Fatima. Look, I think the punchline is we are seeing strength across all the different verticals. Certainly, obviously during the COVID era, we're getting some headwinds in COVID-related industries, but every company now is embarking or have embarked on digital transformation initiatives. It's critical to their success going forward. We're seeing strength across the board in all different verticals. Rick, anything to add on that? I certainly think that some of those protected verticals are gonna be important areas and avenues of evolution. Digital transformation isn't confined to be just in one or two verticals. It's obviously enormous in areas like banking and commerce, manufacturing, healthcare, where we see it driven first and foremost. The federal government, for example, a variety of others are all areas in which digital transformation is occurring and in which we have an opportunity for growth. Thank you. The next question comes from the line of DJ Hynes with Canaccord. Please proceed with your question. Hey, good morning, guys. Rick, I wanna ask a high-level question of you. As you did your diligence on Dynatrace, and have gotten to know the business better over the last, you know, month and a half or so, what was the KPI that stood out to you where you said, you know, "Man, this is really best in class. We can get a lot of leverage out of this"? Then conversely, and probably more interestingly to this crowd, what was the KPI where you thought, "Ah, this is okay, but, you know, we could probably do better"? Geez, that's a great question. Well, I started with the financial performance actually, because financial performance at nearly a rule of 60 is phenomenal. When I got a call to consider being CEO of a company that was operating at a rule of 60 for a bit of time and looked like it was gonna continue that into the future and had further opportunity for acceleration, I was all in and very excited to be in the seat now. Thrilled with the selection of our board to give me the opportunity to go drive it. That was that. In terms of KPIs that have surprised me on the downside, I would say none really. I would probably pivot the answer to the question to instead say, where can we lean in? I think the areas where we can lean in are the areas that we've been discussing, like for example, new modules and multi-module sales. I think they can be even bigger. Where Dynatrace really shines for our customers is when you do full deployment of the entire software intelligence platform. We've got an opportunity for further penetration into both our installed base as well as new customers with these multi-module sales and deployments. We're gonna continue to add new modules, new capabilities, and everywhere from infrastructure to AppSec, as we've been discussing. Those are areas for leaning in. I also think that we have an opportunity to lean in on the sales and marketing side as we've been discussing, so I won't belabor it other than to say that I think that there's substantial opportunity with hyperscaler expansion, global system integrators and other partners around the world in order to further accelerate. I view it as it's all good. No surprises on the downside and lots of opportunity for us to execute against on the upside. Yeah. Okay, great. That's great to hear. Thanks. Our next question is from the line of Gray Powell with BTIG. Please proceed with your question. Great, thanks. I really appreciate that. Yeah, I know you've received a lot of questions on the operating margin side, but I just had a couple of follow-up if that's okay. Yeah, Dynatrace has always delivered just a really compelling balance of high growth and strong margins. You just talked about how you know, the rule of 60 was one of the reasons you thought was really compelling to join Dynatrace. I’d just be curious, Rick, what, like, what do you think the right margin level is going forward such that you don't miss out on any potential growth opportunities? Well, great question. I think we'll tune it over time, but at least in our initial assessment, you sort of heard the focus around profitable growth. We are very much committed to maintaining this profitable growth approach. We believe that leaning in to the tune of, as I said, one to two points on the R&D side, one to two points in sales and marketing is the correct initial land to go after this opportunity, given the growth in the business at top line north of 30%. That obviously fuels a lot of incremental OpEx in and of itself as you're growing headcount and growing opportunity for spend in other areas. It's really the combination of those factors that we're leaning into. We'll continue to reassess this as we go through time. That certainly gives us the powder we believe to make the investments needed to be successful in driving this incremental growth. Got it. Thanks. Our next question is from the line of Keith Bachman with Bank of Montreal. Please go ahead with your question. Hi. Thank you. For you, Kevin, I wanted to ask a clarification and then a question. The clarification first. When you talk about the incremental investments, is that an FY-over-FY, or is that a Q4 run rate when we think about our FY? And if you could also clarify, is there a similar impact that we should be thinking about to the free cash flow margins, or is there some offsets on working capital? The question I had, Kevin, also is for you. I just wanted to review the growth algorithm as we think about FY 2023 for you. And coming off your Analyst Day, we think about, you know, kind of 120+ on the net retention rate and 15-20 new customer logo adds. Is that still the right kinda algorithm? What I'd particularly like to hear your comments in, 'cause I think there is broad investor concern, is there anything changed as you approach the new fiscal year on win rates, and/or net retention rate? If you could also just comment on anything specific on how you think, the security offering that you have may be contributing, in the new fiscal year in terms of that growth algorithm. Thank you. Okay. You have a couple different questions there, Keith. From an OpEx standpoint, Rick sort of outlined one to two basis points in both R&D and sales and marketing, and we're gonna step into these investments over the next couple of quarters. It's not something that we just turn the spigot on and, you know, we can increase hiring overnight. You will see the margin impact over the next couple of quarters throughout fiscal 2023. Bringing that down to free cash flow, again, you know, not trying to provide guidance on this call at this point, but certainly, you know, that will reduce cash flow by a couple hundred basis points. However, our cash has also been negatively impacted by the perpetual license runoff over the last couple of years, so that can be an offset as well. We're not thinking as big of an impact on the unlevered free cash flow side, as........ Okay ... compared to the operating income side. Hopefully that was helpful. When I think about the building blocks for FY 2023, you're absolutely right, 120% net expansion and 15%-20% new logo growth. If you do the math on that, just on sort of those base numbers, 120% net expansion adds about $200 million of ARR next year. If you do new logo growth and you grow 20% and your average land is $125,000, you know, that's another 80 million-ish of ARR. Between those two, you know, sort of core building blocks, we're growing the business by $280 million. Again, not trying to provide guidance on the call and, you know, I sort of think of those as the base numbers. Obviously, if you look at our net expansion rate, right now it's impacted by the perpetual license headwind and, you know, that's started to wind down as well. We have a pretty healthy net expansion rate, you know, nicely above that 120% rate. Hopefully that was helpful, Keith, in terms of how we think about just the core basic building blocks of the business next year. They haven't changed and, you know, I think as Rick outlined, you know, we're putting some other programs in place that we think can boost, you know, boost and grow, and accelerate the business as well. I'll wrap it up. Any specific comments on security? I know I'm at the end of the lineup, so apologies for asking a long question, but any comments on security? Security, I would say is very early, as I said, but an area in which we're leaning into. We'll be driving it aggressively, and you'll hear more. The good news is, Log4j is a great example of vulnerability analytics and how critical it is to the market. As we said in our prepared remarks, we've increased by 10x in one month, really from December to January, the number of POCs that we're driving there that we are now evaluating, our customers are evaluating and going through that process. Early days, but excited about the opportunity for growth and very committed to AppSec leadership over time. Thank you. Thank you. Our last question is coming from the line of Koji Ikeda with Bank of America. Please proceed with your question. Oh, great, guys. Thanks for squeezing me in here. Question for Rick. You've been there for a couple of months now. You know, you saw some big deal expansion. I mean, the business is operating in a big TAM. Business is investing in sales and technology. You know, APM observability is super important for organizations of all sizes out there. Thinking about the legacy runoff too. You know, the question is: How do you think about the potential or the commentary on NRR? You know, it goes up to 125%+ or maybe even better, you know, up from the 120%+, the company has been delivering so consistently for such a long time now. Well, NRR is a huge metric for us, and the fact that we've delivered it now for 15 straight quarters at north of 120%, I think is demonstrable of just the power of the platform that our customers see and the fact that they are leaning in aggressively to things like multi-module deployments, increased host units, full stack spend, infrastructure and new modules. All of these elements are driving that NRR northward in terms of the installed base of existing customers. Then once we deploy new customers, the other good piece of news is that those new customers are increasingly likely to deploy multiple modules as well. We're seeing the power of the platform really across the board. It is certainly my expectation as we add more module capabilities in the existing modules, plus new modules, such as AppSec, that we're gonna see even further expansion of multi-module deployments and further increases in spend. I believe that there's an opportunity to have some accretion in NRR as we look forward, but still early in that regard. In the meantime, we look to continue to operate the business at north of 120% in NRR as we look ahead. Thank you. Thank you. Thanks very much for joining for my first call as a CEO. I really appreciate it. The summary message I guess I would leave with you coming out of the call is as follows. Number one, we are a company firing on all cylinders. To some of the questions and remarks that came through the Q&A session, that's why I'm here, and that's why I'm excited about it. I do think that there is an opportunity for accelerating growth, which is why we're leaning in here even more aggressively in some of the areas like R&D and sales and marketing. Those are opportunities for further expansion as we look to the future, and it's why we increased the guide for the fiscal year. We're leaned in. Also, super excited about our Perform conference to come next week, where we've got over 30,000 expected registrants. That's another area where we look forward to seeing some of you on that session as well. Thank you. Thank you all very much for participating in our call. As I said at the outset, I look forward to meeting many of you in the future. Thanks very much. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.