Greetings. Welcome to the Dynatrace Fiscal First Quarter 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Noelle Faris, Vice President of Invest Relations. You may begin.

Good morning, and thank you for joining Dynatrace's first quarter fiscal 2025 earnings conference call. Joining me today are Rick McConnell, Chief Executive Officer, and Jim Benson, Chief Financial Officer. Before we get started, please note that today's comments include forward-looking statements such as statements regarding revenue, earnings guidance, and economic conditions. Actual results may differ materially from our expectations due to a number of risks and uncertainties discussed in Dynatrace's SEC filings, including our most recent quarterly report on Form 10-Q that we filed earlier today. The forward-looking statements contained in this call represent the company's views on August 7, 2024. We assume no obligation to update these statements as a result of new information, future events, or circumstances. Unless otherwise noted, the growth rates we discuss today are non-GAAP, reflecting constant currency growth rate, and per share amounts are on a diluted basis. We will also discuss other non-GAAP financial measures on today's call. To see reconciliations between non-GAAP and GAAP measures, please refer to today's earnings press release and supplemental presentation, which are both posted in the financial results section of our IR website. And with that, let me turn the call over to our Chief Executive Officer, Rick McConnell.

Thanks Noelle, and good morning, everyone. Thank you for joining us for today's call. Our first quarter results are a compelling example of our team's disciplined execution and dedicated focus on delivering exceptional customer value. ARR grew 20% year-over-year in constant currency. Subscription revenue increased 21% year-over-year in constant currency, and free cash flow was 30% of revenue on a trailing 12-month basis. These results continue to demonstrate our ability to deliver a powerful combination of top-line growth and profitability. Now more than ever, given recent industry-wide outages that have impacted billions of end users globally, observability software has become mandatory in helping organizations minimize impact. The strength of our end-to-end observability platform resonates with our customers as they look to maximize software availability and deliver mission-critical business resilience. Jim will share more details about our Q1 performance in a moment. In the meantime, I'd like to share my thoughts on the evolution of the market and why I believe we are well positioned to win. To start, the observability market is large and growing, fueled by the tailwinds of cloud migration and the promise of AI. The TAM of the observability and application security market is estimated to be $50 billion and growing, and IDC expects businesses to spend more than $0.5 trillion on AI over the next three years. CIOs continue to prioritize IT budgets toward digital transformation efforts as organizations seek new ways to build competitive advantage. But as they drive cloud modernization and generative AI initiatives, organizations often confront significant challenges. These efforts create an explosion of data and massive increase in complexity, often resulting in a lack of proper visibility into application performance problems, user experience issues, and cybersecurity threats. Observability solutions are needed to provide the required visibility to manage cloud environments effectively. Moreover,…

Thank you, Rick, and good morning, everyone. Q1 was indeed a strong start to fiscal 2025. Once again, we surpassed the high end of our top-line growth and profitability guidance metrics. Our continued ability to successfully execute in this dynamic macro environment is a testament to the growing criticality of observability and application security in the market, our product and platform differentiation, the value proposition we provide to customers, and the ongoing durability of our business model that continues to deliver a balance of strong growth and profitability. Now, let's review the first quarter results in more detail. Please note the growth rates mentioned will be year-over-year and in constant currency, unless otherwise stated. Annual recurring revenue, or ARR, was $1.54 billion, up 20% year-over-year. This is an increase of $247 million compared to the same period last year. Q1 net new ARR on a constant currency basis was $46 million, up 23% year-over-year. In Q1, we added 162 new logos to the Dynatrace platform, up 5% from the year ago quarter. We continue to target quality new logos that have a greater propensity to expand. In Q1, average ARR per new logo came in at roughly $140,000 on a trailing 12-month basis and consistent with Q4. Our value proposition continues to resonate with enterprise customers that are outgrowing their existing DIY or commercial tooling solutions. They are seeking business value and tool consolidation and coming to Dynatrace for the depth, breadth, and automation of our end-to-end observability platform. Once customers experience the benefits of the Dynatrace platform, they are quick to expand their usage. Our average ARR per customer continues to increase and is approaching $400,000, highlighting the mission-critical value we provide to customers. Churn continues to be low, with gross retention rates stable in the mid-90s, best-in-class in…

[Operator Instructions] Our first question comes from the line of Patrick Colville with Scotiabank. Please proceed with your question.

Morning, team. Congrats on a really good set of results. I guess I want to ask about the commentary at the top of the call, Rick and Jim, about the CrowdStrike incident. Very helpful color you provided as to kind of how Dynatrace was critical for your customers in remediating that major issue. But this on the line, I'm sure, of your thinking, will this possibly drive incremental business? And if so, would you mind kind of talking about the levers there? Thank you so much.

Thanks, Patrick. It's Rick. I'll take that. The short form is, I think it's premature to attribute any future ARR growth to CrowdStrike and the incident, but what I would say is the feedback from customers was overwhelmingly positive. It's clear that we wouldn't have helped avoid the incident for customers, given the nature of this particular incident, but we absolutely did materially accelerate getting customers back online rapidly by enabling them to prioritize their software workloads and what needed to be brought up most rapidly. And this was very consistent feedback across the board, which is why I wanted to share it in our prepared remarks. A last point on this I would say is simply that these outages are just further evidence of the mission-criticality of and observability software. In cases where it took customers, even customers of ours, longer to get on board or back up to speed and running with their software workloads, what we typically found was that they weren't using us end-to-end. And so, some of the workloads were not captured in their analytics. And when we did have customers that were looking at observability end-to-end across a complete data flow, that's where we saw the best results.

Terrific. Well, thanks so much.

Thank you. Our next question comes from the line of Pinjalim Bora with J.P. Morgan. Please proceed with your question.

Great. Thank you so much. Congrats on the quarter. Jim, one question for you. The 112% NRR seems to suggest that maybe the in-quarter retention rate likely improved quite a bit sequentially. So, wondering if you can talk about the drivers of that. Have you seen any change in the base of new workloads or kind of base of adoption of some of the newer modules? Is the inclusion of the DPS customers added a year ago helping that metric? Any color would be great. Thank you so much.

Sure. It's a good question, Pinjalim. I'd start with, it was a modest improvement from Q4. So, we're pleased with 112%, but to be very frank, it's effectively going from kind of 111% and change to kind of something that rounds up to 112%. So, while we're pleased, I don't want to suggest that we think this means that we're going to now start to see NRR improve in future quarters. And obviously, our guide does not suggest that. Having said that, we had a very strong expansion quarter, and one of the things we talked about in the prepared remarks is, we continue to get customers and see customer interest in our DPS contracting vehicle, which now represents over 40% of our ARR. And those customers are consuming more of the platform at a much more significant rate than non-DPS customers. So, we're starting to see it manifest itself in consumption and if the consumption trends for growth continue, we should be able to see, one, a stabilization in NRR, and then hopefully if the thesis proves out, we will start to see an acceleration in NRR. So, I'd say early days. We're pleased with the Q1 performance. It wasn't any particular module. I did specifically talk about logs as being kind of one case with a large hotel chain, and I think it's just a great example. The reason I shared it is it's a great example of customers when they're on DPS, they can try something. In that case, they tried our log solution, and it ultimately landed a very, very significant expansion. And so, I'd say it's effectively across the board, but we are starting to see interest in the newer solutions and customers starting to expand even further.

Thank you very much.

Thank you. Our next question comes from the line of Will Power with Baird. Please proceed what your question.

Okay, great. Thank you. Congratulations on the results. Hey Jim, I just want to circle back on the full-year guidance, just in light of, you had a nice Q1 upside. Q2 guidance looks good. And it sounds like it's principally probably prudent, given you’re early in the year and you've had some of the sales changes, but I just wonder if you could comment on anything you're seeing in terms of any changes you're seeing with respect to macro, large deal timing. I mean, some of that's - I think you've already started to bake in some questions on timing and macro impacts. Have there been any changes over the last three months, I guess, since you last reported with respect to some of those trends that might be impacting guidance?

Thanks for the question, Will, and actually it's a good question. Nothing has changed from three months ago. What we had shared three months ago was we said, hey, the first quarter is less than 20% of our year from a net new ARR. That's certainly the driver of our business across all of our metrics. We said secondly, hey, the market from a macro perspective, certainly we don't believe has worsened, but we certainly didn't expect that it was going to change. And that means customers have multiple levels of approval. None of that has changed. It hasn't gotten worse, hasn't gotten better. I'd say, the other thing we talked about is that we are seeing a growing theme of customers considering tool consolidation initiatives, and when that happens, these deal cycles take a little bit longer. Nothing has changed in that regard either. And then lastly, we talked about the go-to market changes, and Rick outlined it in his prepared remarks. The good news is you've seen no disruption. We actually had a very solid start to the year. So, the go-to market changes are settling in, and we're just trying to be measured. Given that it's early in the year, we felt that it made more sense to see another quarter of traction on the go-to-market side. We'll have certainly much better visibility to the back half of the year. So, I wouldn't read anything into the guide being maintained, other than building in just a continued level of kind of prudence, and that we will update you on the November call with what we're seeing at that time.

Okay. That's helpful. Thank you.

Thanks. Our next question comes from the line of Matt Hedberg with RBC. Please proceed with your question.

Great. Thanks for taking my questions, and I'll offer my congrats again, team. I guess for either of you, just double-clicking on the go-to-market changes, I guess, have you been able to hire and, I guess, internally promote all the sales executives you've intended to better target the Global 500? And I guess, how do you think about the risk to close rates as the year progresses for some of those accounts that may have been reassigned as a result of the go-to-market changes?

You want me to take that?

Go.

So, I would say the changes that we made are complete. So, we've effectively assigned all the accounts. So, while we'll continue to do hiring of sales reps, I'd say the hiring is going to happen more substantively in the back half of the year. So, I think we're at a good place as far as the accounts settling in with reps. And just to remind you, I think we talked about it last quarter, but even though there's been a reassignment of reps, and in particular on the very large, call it strategic IT 500 accounts, in most cases, those were not accounts that we had significant either traction in from an ARR perspective, or significant pipeline in. So, from our perspective, there wasn't a huge risk in moving some of these accounts from reps. We had talked about those accounts or those - that kind of customer segmentation had eight to 10 accounts. Now they have four to five accounts. So, the accounts that moved were accounts that have a significant propensity to spend, but they were not accounts that we had huge traction in. So, we're not worried about there being disruption of accounts moving from one rep to the other. We're actually encouraged that we now have an ability for new reps to spend more time with those accounts, go deeper with those accounts. And given that the sales cycles are kind of six to nine months, our expectation is, you'll see that manifest itself in traction in the back half of the year.

I would just add Matt, that very, very excited about our sales and marketing leadership teams. They are ready for prime time and ready to take the company to the next level of scale. So, that's exciting. And to Jim's point on risk, I think that's very much manageable based upon the parameters that we set forth as part of the go-to-market changes.

Super helpful, guys. Thanks a lot. Best of luck.

Thank you. Our next question comes from the line of Sanjit Singh with Morgan Stanley. Please proceed with your question.

Yes. Thank you for taking the questions and congrats on another quarter of positive net ARR growth. I wanted to come back to sort of the DPS update that you guys provided, now accounting for 40% of revenue. Is there any sort of pattern in terms of the capabilities that customers are turning on upon moving to DPS? I imagine logs on Grail is pretty popular, but I'd be interested to see if there's any other sort of capabilities or modules that are becoming more popular. And sort of in addition to that, from a sales perspective, is the team sort of being opinionated on how customers sort of turn on capabilities? Is there a sales motion or a playbook that you guys prefer that customers go down, or you sort of just leave that up to the customer?

I'll take that. That's two good questions. So, on the DPS traction, we are very pleased with where we're at. It's becoming more and more the norm for customers to move to that. In particular, new logos, call it roughly 70% of our new logos continue to land on DPS. So, we continue to get existing customers moving. Relative to modules, it does vary, but I would say that there's been significant interest in logs, and there's been significant interest in application security. Obviously, they're looking at their full stack of workloads. They're trying to assess where do they want to move relative to observability. So, certainly, there's a fair amount of that that they probably look at that, first and foremost, what's the growth that we want to see with existing workloads, new workloads, and then, oh, by the way, what new capabilities might we want to take advantage of? So, every customer varies a bit based on the pain point that they're currently dealing with, but I'd say certainly significant interest in logs in particular and also application security. And relative to the go-to-market playbook, one of the things we talked about last quarter, it's not unique to DPS necessarily, although DPS does benefit, is that we’ve become much more precise in the playbook. The playbook before was largely a land and expand model with applications. So, you try to find an application owner, you'd land for application observability after a POC and you'd expand from there. The sales leadership has now defined three plays, that being one, which is still a very effective play. The other is a play around end-to-end observability, because we started to see more traction in that area, more interested in that area. So, there are plays that we're running on end-to-end observability, and then there's plays that we're running on cloud modernization, looking at new personas in customers’ environments that maybe are not leveraging Dynatrace. We tend to be heavy in the IT ops area and maybe getting more into the developer personas. So, there's very precise plays. Those plays do play to the strengths a bit of DPS. You get customers on a DPS contract vehicle, and they have a significant flexibility to leverage what they want, trial what they want. And so, we're very pleased with the traction we're getting in that area, and actually we're very pleased with what I would say is a growing level of sophistication in the way sales is going to market.

That's super helpful, Jim. I appreciate the thoughts.

Thank you. Our next question comes from the line of Raimo Lenschow with Barclays. Please proceed with your question.

Hey, congrats for me as well. Rick, or maybe Jim as well, the question for me is around the partner ecosystem. You talked about how partners are a lot more involved on, I think it's two thirds of the ARR. If you think about the partner evolution in terms of how they dealing with you and what they want to do with you, is that still on a kind of APM infrastructure, et cetera? Or do you see the partners also positioning themselves more broad into that whole observability space and hence it becomes more of a strategic position that they can drive towards you? Thank you.

Hi there, Raimo, I'll take that. I would say that it depends on the partner. If you're looking at hyperscalers, that tends to be more opportunistic contract vehicle with some origination built in. If you're looking at GSIs, they're looking at end-to-end observability deals, typically larger transactions, and they're focused on services deployment, process re-engineering, cloud migration, cloud native movement and other elements. And then we have various partners in between ranging from managed services providers to others. So, it depends on the partners, but I would say that generally you heard a theme in our call this morning around end-to-end observability. This is where we believe that we deliver the most value to customers, and this is where we're promoting the most partner access, because the services loads and the services increment that they can provide is material in helping organizations structure for success around end-to-end observability deployments.

Okay. Perfect. Thank you.

Thank you. 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. And I just want to continue that theme on the partners here following Raimo’s question, but a bit of a two-parter. The first, can you help us think about, have we seen any noticeable changes since you guys have changed or overhauled the partner economic model as far as deals originating with partners at this point? Or is there still - are we still hanging out around 30% or so? And then the second point is in relation to that changed partner economic model, are you seeing an acceleration potentially in the number of partners that are now entering the Dynatrace ecosystem? Any color on either of those items would be beneficial. Thank you so much.

I'll take that, Mike. So, I will say, on the partner economic model side, that we only put that in place at the beginning of our fiscal year. So, we're kind of 90 days in. As you can imagine, you probably had a bunch of deals that were already in flight. So, I'd probably - it'd probably be insincere to say that we're getting significant traction because of the partner economic model. I would say qualitatively, customers are very happy with the change in the economic model. It provides much more certainty for them around how and what they're going to get paid. So, in that regard qualitatively, there is significant customer - partner satisfaction with the changes we've made. We did see an uptick in deal origination above the 30% level that we've historically had in the quarter. It is our seasonally lightest quarter of the year. So, I hate to call that a trend. I think it's promising in the sense that I do think we've removed some friction in some of the changes that we made on the partner front. We've removed friction for our direct reps wanting to leverage partners than what we had in the past. I think we now have this partner economic model that provides more certainty in what they're going to get paid. And then I'd say there's other work that the new partner leader is driving around developing teaming agreements for partners and actually having very specific plans for partners. I'd say our approach to partners before was a bit of one-size-fits-all, and I think we've navigated to a much better place that partners are different. How you manage and work with GSIs are different than how you work with hyperscalers, different than how you work with regional partners. So, I'd say we've made a lot of changes. And I'd say the early proof points are that we are getting traction, but I think we need a little bit more time to see whether or not that this continues to play out.

Thank you very much.

Thank you. Our next question comes from the line of Jake Roberge with William Blair. Please proceed with your question.

Yes, thanks for taking the question and congrats on the results. Great to hear the example of the large expansion for that Grail - the logs on Grail customer. I know most of the customers are landing with logs, or just moving new workloads over to Dynatrace today, but for that type of subset of customers that are actually starting to rip and replace competing solutions, how large is that uplift for the platform, and how long does that typical migration process take to get fully up and running?

So, I'll take that. I think it varies. I think we've talked before, in particular for logs, that there's usually a journey with logs where it starts with a POC, then assuming that's successful, it starts with lighter workloads in production and bigger workloads in production, and then you moving existing. I think it varies based on customer and the pain point they're having with their existing log supplier. And so, you can ramp up pretty quickly that it - so there's no scaling challenge on our part being able to do that. I think it's just the customers’ ability to move and desire to move. So, it varies by customer. What's great about, as I mentioned, our DPS contracting vehicle is it just allows customers to trial a bunch of things. And in that case, they were able to trial it before because they were a DPS customer. And for that particular customer, I don't recall how long they were trialing our log solution, but they can ramp up pretty quickly when they do that. And I'd say, the more and more we can get customers on vehicles like that, you can then leverage our customer success teams and our services teams in helping customers in the journey around the differing offerings we have.

Jake, I would just add to the answer to say that our logs consumption continues to grow very nicely. It's well above 100% year-over-year in terms of consumption growth. So, that's an exciting metric to watch, and we do see the kind of traction that we're expecting on the logs front out of Grail.

Very helpful. Thanks for taking the question.

Thank you. Our next question comes from the line of Fatima Boolani with Citi. Please proceed with your question.

Good morning. Thank you for taking my question. This is for both Rick and Jim. I wanted to zero in on the new logo acquisition in the quarter. So, that was up 5% year-on-year, I believe. And I think that snaps trends we've seen in the last couple of quarters where we've had new logo growth down. I wanted to get your sense of what has been the contributing force for that sort of return to growth, especially in first quarter, and what are some of the specific and maybe more deliberate efforts and initiatives you're taking to continue to rehabilitate new logo growth? Thank you.

Thank you for the question. Yes, we are very pleased with our new logo traction. I think we've mentioned before that new logo units are going to vary a bit from quarter to quarter, just the nature of kind of our pipeline. But we were pleased, we had roughly 162, I think, new logos in the quarter. You're right, up 5%. And I'd say more notably is we really are focusing, and I said this on multiple calls, we're really focusing on the quality of the new logo lands. We have found that if you land north of $100,000 on average, those customers expand at a much more rapid clip. So, it isn't just the number of new logos, even though we're pleased with the number. It's also, we want to make sure we're landing them at the right size. It's just - that's equally important. And so, I'd say there are certainly plays. The plays that I outlined before that the sales team is running is they're very similar that in many cases you could be landing with an application owner, and you do a POC and they have a need for a particular workload being monitored. And in other cases, it's a customer that we mentioned last quarter, a very large global airline that we won a new logo for that was not a Dynatrace customer. And literally, we landed a tool consolidation deal. We weren't even one of the vendors. And so, it does vary, which is why I talk a little bit about, while I'm happy with the number of units, I'm actually more focused on the quality of the units and it's part of the sales plays. We still expect, Fatima, about 30% of our net new ARR to come from new logos and about 70% from expansions, give or take a point or two. So, I think what we want is we want a motion that continues to attract new customers. We have over 4,000 customers today. However, we've targeted the top 15,000 global companies. So, we have a lot of runway to go as well. So, it's a motion that we're going to continue to refine. I think some of the partner work that we're doing, once we see that manifest itself with additional traction, you're going to be able to have partners drive more logos, new logos for us as well.

Just to connect the dots, Fatima, I would say that we see new logo lands in each of the sales use cases that I discussed in the prepared remarks. We see it in land and expand. We see it in end-to-end observability. We see it in cloud modernization, and these are the sales use cases or go-to-market use cases that we have the team focused on.

Thank you.

Thank you. Our next question comes from the line of Adam Tindle with Raymond James. Please proceed with your question.

Okay, thanks. Good morning. I wanted to ask a question on net new ARR. Looking at the financial data table, it grew over 20% in Q1, and congrats on that. For the rest of the year, I understand you're not updating today and it makes sense, so it's on us to set expectations, but as I try to level-set for rest of the year on net new ARR, if we were to maintain this, we'd be tracking down double digits year-over-year in the remaining quarters. Curious why that would be a reasonable assumption for now? And I'm asking because I understand the sales changes are potentially impacting you, but it sounds like you made those - or those were done in April. Would there be something that would cause more impact from here on that? And secondly, maybe you could touch on the state of the pipeline. I'm wondering if maybe some large deals are reflected here in Q1 that may have impacted the rest of the year from a pipeline perspective. Thanks, and congrats.

So, Adam, it's a very fair question. I wouldn't read anything into the guide for the remainder of the year. You're absolutely right, we had a very solid start to the year. Net new ARR in constant currency was up 23%. So, no doubt, good start to the year. And then your comment is fair, if you just do kind of the math, or does that imply that we're worried about the back half of the year? And the answer is no. We just - for simplicity, we said we're not going to increase the guidance this quarter, that it's, call it, 18% of the way through the year. We certainly are - we said we're going to maintain it. I think we tried to convey qualitatively in our remarks that we are bullish on the opportunities in front of us, but we want to maintain a level of prudence in our approach here that it still is a choppy market, and we want to make sure that - we don't want to get ahead of ourselves. And so, that's - I wouldn’t read any more into it other than that. And I would say, we are quite bullish though on the opportunities that are in front of us. The pipeline still remains healthy. The demand environment remains healthy. To Rick's point, I think the recent outages are a reminder to customers that they need to have an ability to detect issues and hopefully prevent issues. Our solution is purpose-built for that and the enterprise. So, we're very optimistic about the opportunities. I'd say we're just guarded a little bit that we want to make sure we're prudent in the near-term.

That's fair. Thank you.

Thank you. Our next question comes from the line of Kash Rangan with Goldman Sachs. Please proceed with your question.

Hi. Thank you very much. You have my congratulations as well. So, when you look at the old formula of new customer growth plus existing customer growth, I think it was 15% to 20% each, potentially 30% to 40%. That was kind of the aspirational target. As you look at the improvements in DPS and the changes to go-to-market coverage and expanded product footprint, Rick, when do you think we could get back to the old formula of adding that 15, 20 points each from new customers and existing customers, the past reacceleration? What does that look like? Thank you so much.

Thanks, Kash. Thanks for getting up early on the west coast for us. In terms of sort of long-term guidance, I'm not going to provide any update on that. What I would simply say is that our expectation during the course of the year is that we stabilize ARR growth for this year, and then we increase it into the future, which we expect elements like go-to-market changes such as customer segmentation, the partner lean-in, some of the other elements around use cases, the movement toward end-to-end observability. We believe all of these elements contribute to acceleration, both in new logos as well as NRR. And so, the expectation is that we are leaning in. We have a market that is coming our way. The end-to-end absorbability opportunity is substantial. We believe that our platform plays better to that than any other competitors in our industry. And we're focused on doing precisely what we suggested in an effort to drive toward the objectives that you align of increased growth.

Thank you. Our next question comes from the line of Koji Ikeda with Bank of America. Please proceed with your question. Please proceed with your question.

Hey guys, thanks for taking the questions. I wanted to circle back to app sec and logs, and the question is around, how did it go with app sec and logs as contributors to growth in the fiscal first quarter? Any update to the consumption trends with these two emerging solutions? Did the consumption come in as expected, maybe better than expected? Do realize this $100 million milestone for those two products are somewhat of a moving target, but did it move much after this quarter? Thank you.

Yes, I'd say that again, we had very good consumption in Q1 in both logs and application security. Logs is growing faster than application security, which is not surprising given the nature of logs and how customers leverage logs, given the journey that I mentioned. But we're very pleased with the growth rates that we ended Q4 in and that we continued with in Q1. So, I'd say no real change in those particular areas. Those areas continue to grow at a very rapid rate.

Thank you. Our next question comes from the line of Keith Bachman with BMO Capital Markets. Please proceed with your question.

Hi, thank you very much. I first wanted to acknowledge that the (TBNR) certainly was better than we were thinking, even if it was only up modestly. And I did want to drill down on that a bit. And so, I know Rick, you mentioned your target is 70/30 in terms of existing versus new logo. If we superpose either the net retention rate from the last fiscal year on the net new ARR, it looked like it was closer to 60% was existing customers, if not a little bit below. And I'm just trying to understand, while the net retention rate was certainly better than we were thinking, it still is a relatively subdued number if we think about the breadth of software. And so, I'm just thinking about, A, is it more reflection of market dynamics in that customers in the markets you serve or prioritizing other areas, even at a 112%? Or that B, specific factors impacting Dynatrace? And so, something asked about last quarter, if you could talk a little bit about price. Is there share leakage for open-source solutions for more commodity workloads or anything on the competitive dynamics more broadly that's impacting that 112% number? That would be great. And just - I guess just to finish the thought is, you mentioned that - I think you said, Jim, that you thought net retention rate could be flattish from these levels. I just want confirm that I heard that correctly and what would be helping or hurting as we should think about over the next couple of quarters. I know that's a lot. Thanks very much.

Yes, I'll start and then maybe Rick can comment. So, I didn't mean to imply that I thought it would be flat from the current levels. Actually, if you look at the guide, the guide would actually suggest that it'll moderate from here. So, I do want to be clear on that. My point is, I do think our goal is to stabilize NRR this year. And we think that DPS as a contracting vehicle is a great way to have customers leverage more of the platform, which will be kind of one of the catalysts for that. Obviously, you have to have the products, which we think we do, to be able to fuel that. So, just to clarify on that, but your observation is fair. I would say where we're at is there has been a moderation in NRR over time. You’ve got to stabilize before you accelerate. I would say relative to the demand environment, the demand environment is healthy. However, when you look at existing customers maybe versus new logos, but does - existing customers tend to do an expansion close to a renewal period. That's just the nature of how customers operate. And so, expansions tend to coincide very closely with a renewal or close to a renewal. And so, there's going to be a level of variability of when expansions happen. And because we don't have a huge renewal component in the first quarter that - I say there's only - even if you have significant expansion for those customers in the quarter, it's not going to move the metric in a material way just because you don't have the volume of renewal activity. So, I'd say more in the back half of the year, we have a much more substantive set of renewal activity in Q3 and Q4, that our expectation is if we continue to see traction and consumption grow at these trends, that we could be in a good position for expansion. Again, we're being cautious, but hopefully that provides a little bit of color. And Rick, I don't know if you have anything else to offer

Just on the open-source point, Keith, I would say we haven't really seen any price pressure to speak of from open-source at this juncture.

And just Rick, more broadly, is there pricing pressure on - incremental pricing pressure on the markets you serve, whether it's APM, infra, what have you?

No, I would say generally not, Keith. It is obviously in a deal specific - on a deal-specific basis, you can periodically see it, but in a broader sense, I would say no.

Okay. Many thanks.

Yep. So, just to close out our call, all great start to FY ‘25 with Q1. We're very enthusiastic about the balance of the year, and in particular as we look to the opportunity to land these go-to-market changes and drive toward the second half of the year, we absolutely believe the market is playing to our strengths in end-to-end observability and the benefits that it provides in terms of productivity, cost containment, and end user experience. And we look forward to speaking with you all on the road this quarter. Thanks very much for joining,

And this concludes today's conference, and you may disconnect your line at this time. Thank you for your participation.