Hey, welcome to our next session. I'm really happy to have the team from Dynatrace here. Two East Coast teams coming together for the West Coast to kind of deliver, but that's good. Rick, I'm starting with you. Like, to get everyone back on the same page, and kind of like a lot of events happened a lot. Again, we had a lot of off-cycle earnings as well, just to kind of bring everyone back on track, like you had really good Q2 results. What were the highlights from your perspective? Thanks, Raimo, for having us. We're delighted to be here. We had an outstanding fiscal Q2. We delivered 24%, constant currency, ARR growth, 30% operating margins, very strong free cash flow, so the numbers were good. We beat and raised. This was an environment before the latest month or so that wasn't quite as common. Yeah. Yeah, yeah. This, this was a good set of results we're very proud of. In, on the development side, we continue to innovate at, at, good speed with new releases, new capabilities. Go-to-market front, we announced partnerships with Accenture and Kyndryl. So those, we also viewed were very positive. And the market overall for observability continues to be very vibrant and growing rapidly, and I imagine you'll, you'll ask some more questions about- Yeah, yeah, yeah ... about that as we go, but overall, very, very strong quarter. Very pleased with it. Yeah. Okay. And then, I know, Jim has us very well trained in terms of thinking about the growth drivers, in terms of, existing customers expanding and the new logos. Rick, staying with you, like, a little bit, like, what are we seeing on the new logo front? And I'm, I'm asking as well, like, you know, given then that the market are a little bit uneven, like, you know, new customers making still new decisions, like, how do I think about it? It is very much the case that an increasing number of larger customers are making what I would call architecture decisions. They're making tool consolidation decisions. They're discovering that one department or one business unit is using one tool for observability, another one's using another tool, another one's using another tool. Yeah. It doesn't result in very good cost economics, but it also doesn't result in a very good outcome for observability benefit. Yeah. If you can really centralize around getting the answers, not just dashboards, not just alerts, but true answers based on an architecture-wide or enterprise-wide decision for observability, that's incredibly impactful. We see, I would say, more CIOs, more CXOs, wanting to make these consolidating decisions. Raimo, from our perspective, observability generally is gaining more and more momentum, interest, and knowledge as a market. Mm-hmm. Whereas before it was an internal development team could have deployed a dashboard built on open source. It is... That's not enough anymore. Frankly, GenAI initiatives are making it even harder because GenAI, as it gets infused into code development, is gonna result in more applications, more infrastructure to manage and observe. And automation and AI oversight, these expanding workflows will be increased. Yeah. Yeah. And Jim, do you want to add some numbers? Like, where on terms of new logo, what are we seeing here? So I guess what I'd add, one, I completely agree, agree with Rick, that we're seeing much more in the way of new logo pipeline related to customers, that their existing tools, could be DIY tools, could be competitive tools, just couldn't scale. And so they reached a point where they needed to make a decision around some level, either tool consolidation or, to Rick's point, architectural consolidation. And one of the things we've seen, Raimo, that we've kind of shared over the last several quarters is our average land size- Mm-hmm ... for new logos continues to grow. So you know, within 4 quarters ago, our average land size was a little bit less than $120K. Yeah. Now over $140K. So we're seeing growing land sizes, and we're seeing it, one, because I think we're focusing more where our sweet spot is, and our sweet spot really is large, complex environments. And to Rick's point, we're starting to land very large deals, and so we talked in the quarter that we landed 10 seven-figure TCV deals, eight of which were competitive takeouts. So, I'd say the theme of, consolidation Rick said is very true. We're seeing it manifest itself in growing ASPs, per deal, and in particular, a growing number of very large deals. And it's not always a competitive takeout, but in this case, of the top 10 deals that we had, over $1 million, eight of them were competitive takeouts. Yeah. And then, Rick, are you doing anything different? I mean, like there's one is the market is moving, and one is like, what you as a company do to kind of entice movement or like, you know, just do more in terms of new logo. Like, how are you? Are you setting up the sales force slightly differently, the marketing message changing for you? Like, how are you kind of getting this type of market? Maybe, just to give you a couple of examples, Raimo. The first is, it is, pretty clear that the big get bigger, in terms of customers. And so the expand motion- Yeah. The expansion motion of large customers is even bigger than smaller customers, as you might imagine. So the increased focus, sales force around continuing to foster the evolution of major accounts, global accounts is one key element. A second key element is just the partner activity. We talked about global system integrators. Yeah. I mentioned our announcement with Accenture and Kyndryl. These are additive to the relationships we have with Deloitte, DXC. So, these are exceptional opportunities. In each of the cases that I just mentioned, the reference architectures for observability for these organizations have been constructed around Dynatrace. Mm-hmm. That's really powerful. One might imagine that the sales process that we used to go through, even a couple of years ago when I first started, was a cloud modernization, cloud migration initiative would happen through say a GSI in conjunction with a hyperscaler, and years later, we would come back and say, "Well, I really need observability. This isn't, I'm not... too many incidents, too long to fix issues, so I've got to get my arms around it." The engagement with these partners, GSIs in particular, we expect to radically accelerate the observability decision to the point where the cloud migration decision is made at first. We have an opportunity to lean upward the decision for observability, and I think that's quite powerful. Obviously, in your space, there has been quite a bit of consolidation over the last few kind of quarters now, like, you know, with Splunk. I noticed. Yeah, yeah. Yeah. Yeah, that's the question in a way, like, do you see an impact from that already, or does it take time to work out? Like, obviously, you know, like, Yes, I mean, I would say, I certainly don't wanna get ahead of our skis here and that this has resulted in substantially increased pipeline. That's, you know, that's definitely not the case. Way too premature for that. What I would say is that disruption creates opportunity- Mm. and as uncertainty, and clearly, these kinds of events for New Relic, for Splunk, and others create some uncertainty. Yeah, yeah, yeah. And then, yeah, you talked a little bit about observability and customers thinking more broader in that respect. How do you think about, like, your landing spot? Like, you know, we would have talked 2, 3, 4 years ago, it would have been like, yeah, you're the APM guys, and you're trying something else. Like, how has that evolved over the last few years? I mean, I think certainly you're right. We started kind of in the space of APM and kind of branched out, that maybe started in infrastructure and then kind of branched out. Mm. I'd say right now, when we're dealing with customers, that it is a bit of a full package when they're buying something. You know, two-thirds of our customers are buying three modules or more, and those modules tend to be, you know, APM, infrastructure, and some level of digital experience monitoring. Mm. Maybe you'll get some AppSec. So I think what you're starting to see is, and it's continued, is just growing. They're landing with multiple modules. Mm. They're not landing just with one and then expanding. I think what they're doing, they're landing with multiple modules, and then from there, they're growing. You're either growing existing workloads or you're adding new workloads based on whatever their cloud migration journey is, and I think that's the new, that's the new norm. Yeah, yeah, yeah. And then, Rick, and out of that success of being broader is obviously product evolution for you guys. Like, talk a little bit about, like, what you guys are seeing in terms of, like, maturity around infrastructure, Grail, like, you know, how are you kind of doing more on logs as well, et cetera. Like, you know, talk a little bit how the product has evolved there to be able to address all these products. Sure. Well, infrastructure managed to get to $100 million in eight quarters. Mm. This was quite a strong evolution of our product base and continues to grow at on the order of double our APM business, which is obviously much bigger. Yeah. So it continues to be very strong. Application security is clearly an area of strength. It's now well over 400 customers. We believe that there's an area of ongoing penetration, opportunity, log management on Grail or Logs on Grail, as we call it, is the other avenue toward acceleration. So the way that we see the lens with the NRR for expansion of the installed base is, number one, in existing workloads. Mm. Number two is the extension of what people are buying today, new workloads, and then the third pillar is expansion to new modules, like Logs on Grail or AppSec. And we see each of those representing strong pillars for future growth. Yeah. And, Jim, theme on, you know, are a little bit... If you think about it, like, you have more cross-selling, but also then you have macro where they have been on top of that. Like, just talk a little bit, maybe you unpack the NRR number a little bit, but where we are on that journey, obviously everyone is kind of then thinking, where does it come from, where we, where we go again? Yeah, I mean, I'll start with, you know, the environment that we are in is kind of an uncertain environment. Yeah. It's not worse, not better. It's all been consistent, I would say, probably for the last 3-4 quarters. Mm. Consistent means, you know, a lot of deal scrutiny, a lot of budget scrutiny, sales cycle elongation, deals maybe get longer as they go through the funnel, and so that's just the environment we're in. The good news is that we have a sales organization that's adjusted to that, so their ability to call the ball, so to speak, around pipeline coverage, things of that- Yeah. So predictability is pretty good. But relative to your question around expansion, not surprising that it has pressured expansion. And the priority for our existing customers is, especially as they have their own budget pressures, to Rick's point around the growth pillars. They're prioritizing their existing workloads. Those existing workloads are growing. More than likely, they're very mission-critical applications that we're monitoring, and those applications and that volume is growing as far as usage, and so they need to buy more from us to support that growth. So if you think about it from a customer perspective, there are a finite amount of budget to spend. Yes, there are a lot of dollars for observability, it's important, but the first priority is growth with existing workloads. And then, as there's budget dollars available, that's where it's like, all right, I can add new workloads, or I can introduce and cross-sell. Now, that, I'd say that is, that those last two areas are the areas that obviously are pressured from an expansion perspective, because you have to prioritize your existing workloads first. And so the opportunity to kind of grow beyond that is significant. It's just, I think, the kind of cycle through the environment we're in, where there is just continued scrutiny. The one thing I think that's in favor is we've proven from a use case, we continue to work on this with customers, that when you deploy Dynatrace, you can actually get cost benefits. Now, it's obviously there's a lag effect between introducing Dynatrace, getting information, getting insight that makes your IT operations seem much more productive, but you need less of them over time. Mm-hmm. And so there is, you know, and we've seen customers that they actually, as they business cases, Raimo, that getting more use cases that they realize that when you introduce Dynatrace, there can actually be some cost benefits thereafter. So it's a bit of investment upfront, and maybe the return comes later. So I think we're cautiously optimistic that, you know, we're in a really good place, you know, that we're highly differentiated. And once we kind of work through this cycle, that we believe there's significant room to expand on the expansion side. And the, if you look at obviously the mechanics are, you know, are like, you know, like this, an element of being lagging- Yes. The number is like... So like, if you think about, like, the, what, what you see in there and what we are seeing is probably slightly different, do you think we're already at trough or like, like, you know, that's ahead? Yeah, I know. I hate to use the term trough, whatever word you want to use. I would say that we look deeply at expansion, right? And expansion has slowed. But we also need to remember, you know, from your point, mathematical expansion is somewhat of a trailing metric. Yeah. So you're lopping off kind of orders in the past that were quite significant from an expansion perspective. So but we also look in quarter. Yeah. We'll look at in-quarter and, you know, I don't want to call it it's a trend, but the last couple of quarters would have suggested that the in-quarter trends have actually improved. So Q1 and Q2, even though those tend to be light expansion quarters, and they are because expansions tend to happen around renewal. Yeah. Both of our renewals happen in Q3 and Q4. So, but looking just at Q1 and Q2 for that cohort, and you annualize that, we actually saw an improvement from Q1 to expansion rate. Yeah. So I don't want to call that a trend, but I would say that, we're cautiously optimistic that, you know, what we're seeing is customers continuing to apply dollars to observability a bit more of a budget-contributed way. And then you talked about the broader product set that you have. So in theory, once we come out, how do you think about the level of NR you want to kind of achieve again? Well, I mean, I'm not going to provide guidance here, but one of the things, just to level set, you'll probably talk about it too. Further is we did step up some investments. Oh. We had to step up some investments in the back half of the year around go-to-market, and I think that's something that we might want to cover a little further. So specifically, investments in more sales reps, investments in these GSI partnerships that Rick mentioned, investments in better customer success to drive more adoption. And so we have decreased investments in those areas. And we did that because we saw our pipeline health continue to improve. So our pipeline is growing faster than the rate of ARR on the company. And so then some signals that would suggest that the environment, I wouldn't say we're like go, go days by any means- Yeah, yeah. But it's improving. And oh, by the way, to Rick's point about tool consolidation, architectural decisions, we want to make sure we're in a position to be able to capitalize on that. So we had always planned to do this, just so you know, within our internal plan. We, and we had planned to do it in the back half, but then we said, "Hey, you know, there's a bit of uncertainty in the macro environment, so let's kind of, you know, at least stabilize things in the first half." We have a new CRO who now has an—he's been in the seat 120 days. Sure. - and he has a kind of view around where he wants to apply, resources. So we're, we're increasing the investment there. To your point about expansion rate, our expectation is once we lapse kind of, some of the headwinds on the macro side, we should be able to get an acceleration. Mm. I'm not gonna call what that specifically is- Yeah. but, there's certainly significant opportunity in the market. I can... You know, we're not nearly penetrating. We talk about our global 15,000 customers. We have less than 4,000- Mm. -customers. So significant opportunity to grow new customers. And then within our existing customers, even some of our largest customers, they only have, call it 20-25% of their applications having some level of observability. And so a huge opportunity to grow within the existing customers, then we have a huge opportunity to grow new customers. So you look at these two things, I don't think we're opportunity constrained. And as you know, ... One of the benefits that you get from Dynatrace, and it's always been the case, and it was one of the reasons why I came here, is this consistency of balanced growth and profitability you get both. We're very mindful of that. We're very disciplined. Then the... I mean, the other thing to think about is, I guess, is also if you do sales hires, they take 9-12 months to get productive, so you kind of really need to think ahead a little bit. Well, this is a really good point, Raimo, because from our perspective, too, our fiscal year begins April first. Yeah, yeah. It's easier to do things like territory planning, partner account allocations, these things at the beginning of a fiscal year. Yeah. We're not calling the end of the macro challenges that we've been in by any stretch. At some point, it's going to improve. Yeah. Yeah, yeah. And we clearly want to be positioned for success when that happens. And the good news is we are making these investments. This is a really important point, I think. Making these investments while having increased our operating margin guidance. Yeah, yeah. Yeah, I know. We're not, we're not investing ahead of future growth to reduce operating margins. We actually improved the operating margin guidance by 125 basis points while making these incremental investments. Yeah. Yeah, yeah, yeah. That's a good point. Yeah, that's a really good point. Well, it's a season management, so you need to think ahead. Yeah. Balanced growth and profitability is what it's all about. I wanted to switch gear a little bit, and AI has come up a lot. You mentioned it as, like, potentially like a tailwind. I'd like to think about it because, like, AI short term might also take investment away because everyone's like, "Oh, I need to do AI stuff now." How do you see that playing out? Like, first of all, like short-term budgeting kind of thing, but then more like longer term, like, how do you - how is AI playing out for you? What are you doing here? Let me start with the answer at a modestly higher level, which is, what are the biggest differentiators at Dynatrace, and what have they been for a long time? Yeah, yeah. First is a broadly unified platform. We integrate through Grail all observability data types, logs, traces, metrics, routes, behavioral analytics, real user data, et cetera, that we use in process through our second major differentiator, which is our AI engine called Davis. And this is not something that we devised six months ago, nine months ago, 12 months ago, with the advent of GenAI. This is something that we've had for well more than a decade. Yeah. Then the third is automation. We need to deliver automated results. Now, let's double-click on AI. So from our perspective, AI is a really major factor in doing observability right, and we are, in our view, quite uniquely situated in this area. The reason that that is, is we have three different AI techniques that are critical. We have causal AI, predictive AI, and generative AI. causal AI and Predictive AI have been around for a very long time, very mature for us. causal AI is fine at determining cause and analysis. Analyzing your environment, evaluates an outage, tells you precisely where that outage occurred without going through dashboards and manual tagging and all sorts of other challenging approaches. AI then takes that one step further to apply machine learning to anticipate issues before they happen and then resolve them. Generative AI, then, is really all about productivity. But generative AI is oriented to only be as good as the underlying data source. Mm-hmm. In our case, in many cases, if you use a ChatGPT, it's—you're relying upon the underlying data source. In our case, the underlying data source is the data we store and we produce through causal and predictive AI. It is deterministic, so therefore it can be trusted. So the natural language interface is accessing, interacting with these other forms of AI, and it is this iterative notion through these three different AI techniques makes the Dynatrace AI platform so powerful, and it's such a big differentiator for us. You, you mentioned Davis, and I think the Copilot is going GA next year. Like, what, what, what are you doing there, and why is that so important? Davis, Davis Copilot is the generative AI piece of what I just described. Yeah. Davis is causal AI and predictive AI. We're adding generative AI. It is called Davis Copilot. It's coming out at the first half of next year. Yeah. And be in limited availability in tech preview well before. And then, so there you basically then, that helps you to run queries, et cetera. Yes. Like, one thing that comes up a lot from other vendors is, like, that we might see, like, an explosion of AI apps coming at us, which basically means the old model, cloud, et cetera, that kind of need to get kind of an observed or monitored order. Is that kind of also something I get you exciting, or like, is that kind of more slightly later? Hugely excited, yes. Just to be clear, I think you sort of have to avoid conflating two areas- Yeah ... at least two areas of Generative AI. One is, it has nothing to do, in some sense, with us producing a Generative AI solution in scope. It has to do with the explosion of workloads in AI- Mm-hmm or because of Generative AI. That is gonna result in more workloads that need observability. Yeah. So we were whether we did Generative AI with Davis Copilot, and just the explosion of applications driven at least in part by Generative AI initiatives to observe, make sure that they all work. And if you've got a customer support bot that is running, which enables the company to reduce the number of customer support, and that's providing end-user customer service, imagine if that goes down. Yeah, yeah, yeah. You've got a major crisis. Yeah. So that has to work, and observability can enable that to happen. So that's sort of one category, just observing Generative AI in the workloads. The second thing is in the observability space, making observability data more accessible. So instead of writing Dynatrace Query Language queries, which a trained professional might have to currently- Mm. Now all of a sudden, imagine if I can just ask through natural language, Davis CoPilot, show me all of the servers in AWS that are running at 80% or faster. You didn't have to write a query. It's a- It wrote the query for you. Yeah, yeah. Gave you the answer. It's going to expand quite radically the, and productively, the number of people who actually can efficiently access data within the Dynatrace- Yeah of the Dynatrace platform. Then, Jim, that's the CFO question now, like, how do you monetize all of that then, if you think about that? We're still evaluating the monetization model. I'd say initially, the monetization model, for all the things that Rick just said, everything that he just said is about leveraging the tool. Leveraging the tool means you're, you're working with the tool, easier to work with the tool, you're querying. We're gonna get, we're gonna monetize based on query. Mm. And so I'd say the, initially, you know, you're gonna see volume. We actually want people to be leveraging the tool. You can actually have a tool, to Rick's point, that even non-technical can start to leverage it. You'll be able to get more people leveraging the tool. More leverage of the tool means more queries, more queries that we do monetize. Mm. Now, whether we then charge separately for that, I think, seems like, you know, is it all at a premium charge for, for being able to access it? I think more than likely, initially, I want to have access to the tool, and so this is not going to be something that, initially, I think it'll be monetized, monetized on a query, and then from there, we'll evaluate whether or not there's a separate monetization, like, specifically for, like, just some upcharge, just being able to leverage it. Could that fit into... Sorry, I'm not doing the pricing, but, you know, but, like- Yeah Does that fit into, you know, you're, you're kind of doing a lot more platform pricing? Okay. How do you call-- I can't remember how you call your platform now. The, like- DPS. DPS, yeah, there we go. Yeah. Like, connected in the other way. Jim, you talk about that as well. It is. So just to level set, the Dynatrace Platform Subscription is effectively a model where customers, somewhat similar to the hyperscaler model, where you commit to 1 year or 3 years, a dollar amount, and then what you get is you get access to the full platform, and you get a rate card for every one of our capabilities. What we just talking about, one of those capabilities, obviously, is leveraging, whether it be, you know, let's use logs as an example. So you know, you're gonna get a capability that will allow you to use the logs. Mm. You're gonna get a capability that will allow you to store the logs. You're gonna get a capability that will allow you to do queries. So these are all monetization components with a rate card. So everything that we're talking about with a Dynatrace platform subscription will allow you to get a consumption model with that. So think of it as you commit to a full year or three years, and then you consume on the platform, frictionless experience, you don't have to have a recontracting process. And then as the customer consumes their allotted dollars, that ultimately will give them alerts around, you know, you're consuming faster, or slower, or whatever. And then ultimately, the expectation is that as customers consume, they'll recontract, you know, because if they consume faster, they'll recontract because they'll get better unit prices ramp. Yeah. We actually think it's the best of both worlds. It's a consumption model, but it provides us and customers consistency and flexibility. Yeah. I really enjoyed our conversation. I'll give you a 30-second question, and then my time is up. Thoma Bravo was, like, a big shareholder, and it's now pretty much out. I'm not going to ask you when they sell the last stake, but it's more, what are you seeing in terms of other shareholder conversations, you know, now that that situation has kind of been resolved? Do you see a pickup of people showing more interest, or has that kind of come up in conversations at all? I mean, I think there's, you know... I'd say holistically, there's general interest in the company. Yeah, yeah. Growing interest in the company. I don't think Thoma's position is- The market. Yeah, yeah. The market. So I don't think Thoma's position has really affected that in any way. Yeah. Okay, perfect. Hey, our time's up. Thanks very much. Thank you, guys. I really appreciate it.