Dynatrace, Inc. (DT) Earnings Call Transcript & Summary

Hello everyone, day 2 of the BofA Conference. My name is Koji Ikeda. I am one of the software analysts on the enterprise software team. Absolutely thrilled to have Dynatrace, Rick McConnell, CEO here with us today. So I guess just to kick it off, maybe a little bit of introduction of yourself, your background, maybe for those not familiar with the Dynatrace story in the room. What do you guys do? How do you think about the opportunity that you're disrupting?

Great. So first of all, thanks very much for coming. My name is Rick McConnell, been in the CEO spot for Dynatrace for about 6 months now, was at Akamai as President for about 10 years prior to that. So thrilled to be at Dynatrace. Great opportunity in the observability space as we refer to it. It is -- as we think about Dynatrace clouds done right, we try to figure out how to make sure that your cloud environment -- your cloud native environment is always working to perfection. And in fact, that's what we're after a world in when software works perfectly. So that's what we set our sights on to.

Got it. Thanks, Rick. And I guess for a little housekeeping. I'm going to ask Rick questions for about 15 to 20 minutes, and then I want to open it up to the floor to see if you guys have any questions for the investors that are out there. I think there's a mic lying around somewhere, we'll get it to you. So you guys, can ask your question through the microphone. So Rick, I'm asking every company, CEO or whoever is up here as CEO, CFO, three questions standard across the board: One on macro...

There's a question about the macro environment, how's going?

One on hiring and kind of one on stock comp and cash comp, kind of that balance. So first question on the macro. Lots of things going on. Russia/Ukraine war, European macro, China slowdown fears, interest rate fears, inflation fears, all that kind of stuff. So what sort of impacts, if at any, is Dynatrace seeing? And how are you guys preparing for internally for any sort of potential future disruption that could happen?

I would say a few things. First of all, we are targeted to Global 15,000. This is -- it certainly doesn't make us resilient by any stretch from a macro slowdown, but it does help these companies have been through before, especially when digital transformation continues to be such a high priority for IT spend and IT budgets. And in fact, the argument we would make at Dynatrace is that we actually end up saving you money because if you've got better uptime, faster mean time to repair, if there is an issue, an ability to reduce your number of IT resources to make sure your cloud environment is always working. These are elements that actually are productive in a slowdown type environment. And a good portion of our added ARR, in fact, comes from an expansion of our installed base, selling which we've already proved or where we've already proven the value of Dynatrace. So that's part of it. So we haven't seen any notable slowdown, I would say, in the macro environment in terms of pipeline generation even out of Europe as of yet. Having said that, we certainly read the news and check in on a daily basis. We are really still navigating to 30% growth in our sales force, which is what we delivered last year, what we committed to do this year. So that is our current game plan, but we're certainly being very cautious about hiring in other areas.

Got it. Got it. And you mentioned kind of the hiring plan on your sales force for this year. Next question for you. Six months ago or maybe a year ago to 6 months ago, all the questions out there was gosh, or the sentiment out there definitely felt like the hiring environment was tough and things have changed. So what is the hiring looking like for you guys right now?

It certainly seems that way, was that way, I would say, at the end of last year, at the beginning of this year. If anything, we've seen an acceleration of our ability to recruit over the last 2 or 3 months. So we -- in April and May, we saw in those months, some of our best recruitment performance was really, really strong. My sense of it, and I'd like to think that it is going to be less frothy going forward amidst concerns about the macro environment that we just talked about. And if that's true, then Dynatrace is a great, great place to be. It is a company that's at about $1 billion in ARR, growing an adjusted ARR growth rate of 35% with 23% to 25% operating margins, spinning off an estimated 29% to 30% cash flow. So the combination of those factors make us, I'd like to think, a high-quality property and the recruitment has followed as a result of that.

Got it. Got it. And the last one on the standard questions that I'm asking everyone is kind of this debate that I've been hearing from investors a lot over the past few weeks is the debate on comp structure, the cash versus stock comp. So how do you guys think about the cash versus stock comp question? Is there any changes that you guys are doing? Or -- and if there are any changes, how could that potentially impact the margin?

We actually, in the past, have been a bit lower in stock-based comp than many of our peers, around 10%, 11%. So we are, this year, during FY '23, for us, which began on April 1, taking that up a little bit into more of the 12% to 13% range. So we're actually leaning in a bit to stock-based comp to make sure that we're consistent with market. And frankly, that we've got a lot of retention power in that, but we're just moving up to averages, if you will.

So you actually have the ability to raise stock comp where maybe other companies haven't and it's because of your margin structure. So the next question here is why are you able to have? Or what is it that's maybe differentiated with the Dynatrace model that enables you to have such great margins?

Well, let me come back to the base comp first because I think that there's another advantage of it. We never were at those high rates of stock-based comp when the stock price was much higher. So when the slowdown in software happened, stock prices came down. And I think that's what led to a lot of people at those companies looking at opportunities to go elsewhere, get all of a sudden, the value that they had and the companies was drastically lowered. We didn't have as much of that issue. Meanwhile, we've got a lot of people coming in, and those people have an opportunity to take on some stock-based comp as a method of long-term compensation, which we think is valuable. In terms of the overall model for Dynatrace, we have always operated this company and even longer for my tenure began, we've always operated the company with balance, and the balance has been toward profitable growth. And profitable growth has meant operating roughly in the mid-20s for operating margin despite growing at north of 30% in terms of ARR. And it is our expectation that the guidance we put forth for FY'23 was prudent in factoring in some of these macro considerations that we talked about earlier. So we believe that there's some buffer in there for some of the macro uncertainty. And in the event that the macro certainly leads to more of a top line slowdown than we expect internally or that we perhaps might see in the market as a whole, our expectation is that we will continue to manage top line to bottom line. So we'll adjust our hiring and spend profile to be managing to that operating margin profile as we've always done. So that's our expectation.

Got it. Got it. So Rick, in your introduction, you talked about Dynatrace disrupting the observability category. And I think it's a big -- it's an interesting category, and we're big fans of the observability category. But one thing I hear a lot is that it's a crowded category. There's a lot of publics that talk about it. There's privates that are there. There's platform vendors that offer observability solution. So how do you think about the observability space from a competitive standpoint?

Well, the biggest takeaway, I would say, in terms of the competitive environment, the biggest competitor by far in observability is DIY. It is companies that are imminent of digital transformation and moved to the cloud or moving to the cloud in terms of workflow, after workflow, after workflow, and they're trying to do it themselves. They're using open-source tools. They're building it internally out of engineering teams or what have you. And the result is that they get to the cloud, but they don't really have the sophistication of tools that -- and capabilities that say Dynatrace can break. What Dynatrace brings is the ability to deliver answers and intelligent automation from data, not just data. So as we portray Dynatrace in our value add, indeed, our differentiation, it really is about not just delivering what we refer to data to class or dashboards. We deliver precise answers to enable companies to manage their cloud infrastructures and ecosystems better. And in doing that, it really gives them using our AIOps capability, our artificial intelligence capabilities, a way of managing those cloud ecosystems in a way that they cannot do internally, and that's what's driving our market opportunity and the growth that you see in the company.

Got it. Got it. Big picture question on the observability category. Is it a winner take all? Or can you have multiple winners there over the next 5 years?

This is a huge market. We estimate -- we look at the industry analysts, we look at our estimates. We think it's a $50 billion-plus market. It's absolutely enormous. One way to think about it is look at the cloud spend on the major hyperscalers and look at the growth rate there. Observability should have a natural attach rate to those kinds of wallet share elements. And those are continuing to grow in the mid-30s or higher through AWS, GCP and Azure, and the observability category is going to continue to grow in the context of those hyperscaler growth numbers. So I think it's absolutely enormous. This is not a winner-take-all type scenario. The other factor though, of course, is that as you start to bifurcate the market, we would look at Dynatrace as being the leader in the Global 15,000 part of that space, and it is our expectation to maintain that leadership role. In fact, where Dynatrace really shines where we differentiate most is in the large workload multi-cloud, hybrid-cloud environments where the more complex your data flow, the more complex your data set, the more value Dynatrace adds. And so the bigger the organization, the more of the workloads, the more you're going to get value from Dynatrace as we look at.

Got it. Got it. So when you talk about the enterprise and you talk about more complex. But you also mentioned earlier kind of ease of use, quick to value, and I think about your Davis AI product. So I guess could you talk a little bit about Dynatrace's ease-of-use value proposition? And when you're going into these large enterprises, how are they viewing maybe that value proposition from new products and Davis AI specifically.

Well, first of all, it sounds like we talk a lot about complexity and data complexity, and it makes sense to some extent, wow, how does Dynatrace do that? It must be a super complex solution. And the answer is that we don't see it that way. It is elegant in a solution. It often is a single line of code that you put on servers that enable our agent to run on those server type environments. And that enables you to create what we view as a Smartscape type approach to use our verbiage way where you have a map of your entire IT ecosystem. And that then enables observability to work across traces, logs, metrics, metadata, behavioral analytics, real user metrics and other data and it gives you a comprehensive picture of what's happening in your ecosystem. And by having a comprehensive picture what's happening in your ecosystem and then applying our AIOps to it, that's where you get the precision of answers that we deliver that don't just provide correlation of activity of what's happening in your cloud, but rather provide causation. And everything correlation and causation is really -- it sounds simplistic, but it actually is really quite significant because that difference means it can mean hours of downtime potential.

Got it. Got it. Got it. I'm going to ask you one more question, then I wanted to open up to the floor to the investors outdoor to see if they had any questions. So my next question kind of going back to the competitive landscape. The observability category, even your roots in APM continues to evolve. So just trying to think about the landscape, how has it evolved over the past 12 to 24 months? Is it accelerating? Is it beginning to consolidate, or kind of the winners and losers being established out there? Just curious to hear your thoughts on how you view the competitive landscape.

Sure. Well, the -- it's interesting. If you look back sort of to observability 1.0, perhaps, which maybe began in, I don't know, 2005 to 2010 in that range. When Dynatrace got started, it was really about monitoring. And it really was just about a compilation of data and then putting them up on dashboards, being able to see alerts and then being able to deal with those alerts. Where the sophistication of the market has evolved to is, look, we now think of it as observability, which is not just monitoring of that data, but really getting down to an isolation of what that data means and that's really where we are today. The result of that evolution is that it's no longer just about application monitoring or infrastructure monitoring, it is around application monitoring, infrastructure monitoring, real user monitoring. It is bringing in elements of application security in a more fundamental way, log monitoring is another aspect. So all of these pieces are beginning to come together and the evolution that's happening in the market is that the winners in this environment, I believe, are going to be the ones that have a platform, a software intelligence platform as we do that then provides that visibility across all of those elements and being isolated around only 1 or 2 of those pillars is not going to work in the environment that our customers want to see.

Got it. Before asking any more questions, I just want to open it up to the floor to see if any questions from the audience, just raise your hand and we can get the mic over to you. Any questions from the audience?

So you talked about the platform. Can you talk a bit about your approach to it? And it seems like a lot of the players started off with one thing that they were great at and now everybody is kind of moving into trying to be a platform. And so I'd love to hear your unique take on it and what it takes to be successful at building one? Or are we going to see 5 or 6 platforms to evolve overtime?

I -- Koji asked the question earlier, is there room for more than one winner in the space? And my answer to that was yes. But if you asked me if I thought there was room for 5 winners in this space or is it likely that there will be 5 winners in this space, I would say no. I don't think so. At least that's not the dynamic that's playing out in the market these days. You have us really leading in the higher end of the space, others leading in the lower end of the space and organizations that we're taking share from and hire in the space and missed technology transformations or technology evolution like with Kubernetes, containerization and other elements that we provide. The amazing evolution of Dynatrace, in my view, and one of the reasons actually I joined the company 6 months ago is that just 3 or 4 years ago, we evolved our platform notably. We updated the entire platform to be an integrated software intelligence platform with a comprehensive refresh of that platform. And that has made an enormous difference because we did so with the insight to all forms of data types whether it was logs, application data, infrastructure data, security data. And so when we updated our AI engine, just a few years back, we were, in some sense, creating the evolution of that platform, to enable us to construct modules on top of it that evolved and leverage that platform. So we believe that, that really does make us unique in the market that we really began platform first with clearly an APM focus in application performance, but then it's evolved rapidly from there.

[indiscernible] customer reception to platform versus [indiscernible].

So I just repeat the question, it is about is it moving toward best of breed or is it moving to a breath? My view is it is going to move toward a breadth of platform deployment. That's what we're seeing, and we're actually seeing it in the numbers. So for example, we were strong initially in application performance monitoring. A couple of years ago, we added infrastructure monitoring in earnest. And that, in some sense, was a follow-on module, but leveraging the software intelligence platform underneath it. The infrastructure monitoring business is now $100 million that grew to be that over 8 quarters. That is growing at -- on the order of double our average ARR growth. So -- and this is not happening because all of a sudden, infrastructure is a new market. This is happening because our customers are increasingly migrating to multi-module deployment. So you have our customers more and more deploying APM. They're deploying infrastructure. They're deploying application security. They're deploying digital experience and perhaps others. And the ARR goes along with that. So we'll lay in the typical new logo -- new customers, we call them, about 115,000 to 120,000 on average. An average customer for us is doing about $300,000 in ARR. A multimodule customer, which is now comprised of more than half of our installed base, is doing $500,000. So that -- it is not just that the market is evolving that way. That is also our focus from a go-to-market standpoint is to make sure that we've got multi-module deployments because that's where our customers are driving the most value.

Other questions from the audience? All right, Rick, I got a question for you. So when you go to Gartner and you look at Dynatrace, you guys show up in APM first. The way up and to the right, you're clearly a leader there, but now you're also in the observability category. So maybe help us understand how you guys think about APM versus observability?

I think what Gartner would tell you just to start there is that they would tell you that the category is moving to observability that they are -- I don't know I can't speak for them, but I can't say that they're going to stop looking at APM or stop looking in infrastructure or other modules. But what I can say, I think, with good about uncertainty is that they are beginning to field more and more questions from customers, prospects, et cetera, in the market that are oriented out of their clients towards observability as a category as a whole. And the way that we think of observability is really a combination of application performance, infrastructure monitoring, digital experience management as well as other elements like increasingly things like log monitoring. So if you put all those together, you get sort of the quintessential view of traces, logs and metrics which are sort of the big 3, but then you add a collection of a lot of other data like real user metrics that you want to incorporate process and have an AI system that really does find the needle in haystack. And the objective is to find issues in infrastructure, find issues during your ecosystem before they bring that ecosystem down or cause issues in performance. Because we all know if we just make it tangible for us these days that we have totally lost patience with infrastructures or software that doesn't work perfectly. And I need to look no further than my kids to evaluate that, that you're trying to get something done. You can't get done, you move on to another way to get it done. And so companies realize patience is low and the result of it is they need to know precisely what's happening in their ecosystem as a whole, not just one module or another. Nobody thinks about it that way. The way you think about it is I might have an issue in a back-end server, front-end application and they see it in my logs, they see it in my traces. You don't know. You got to amalgamate all of that together to get the best possible view of what's happening in your ecosystem, and that's why the market is evolving from either an APM focus or an infrastructure focus to an observability focus as a whole.

Got it. Got it. Got it. Earlier today, sat on the fire side or the keynote this morning with the BofA CTO, and he was talking about BofA's strategy going towards multi-cloud And I'm beginning to hear about this more and more with the enterprises out there. So what does multi-cloud mean to Dynatrace? How much more complexity does this bring to an organization? And what is Dynatrace doing to really address that opportunity?

Well, we -- the good news is we address it naturally because we are looking at your ecosystem as a whole. It doesn't matter if you're using one or multiple cloud providers. We're going to be analyzing your workflows and workloads across those providers, how many there are, whatever the complexity is. So there's no incremental work that you have to do with Dynatrace once you get set up to be observing across multiple different platforms. So that's good news. The other piece of news is that by doing that, by being able to pull that into our ops engine and evaluate those complex workflows, you can produce value even in these environments that -- the observability platform on Dynatrace that you've deployed is not a constraint to you moving multi-cloud. Now why do you want to move multi-cloud? Well, it could be for compliance reasons, could be for resilience reasons, redundancy, whatever it might be. I've seen numerous cases, especially in FSI industries where it simply is becoming more mandatory that you're using multiple clouds. If you've got an issue with one of the cloud providers in a particular area and it brings down access to your applications, that's not a good thing, it's not acceptable to regulators, and you need a way around that to not have that happen again. That's leading companies to go out multi-cloud and that plays directly to Dynatrace's strength.

Is the multi-cloud something you really see only in the top 15,000 enterprises out there, the Global 15,000 that you're addressing? Or are other companies maybe below that level that are looking at it, that could become potential Dynatrace customers too?

I think the latter is clearly more pervasive in the upper echelon, where you've got companies that simply can't afford a second of downtime or they try to avoid that second of downtime. And so the result of it is that multi-cloud becomes more critical, but that's filtering down, clearly down the pyramid because of the criticality of companies looking at the need to have software work perfectly to come back to sort of the theme maybe of the session is, in fact, that. our passion, our goal, our commitment, our focus on everything we do is to enable software to work perfectly. And it is in that understanding of our ecosystem that enables to do that. And multi-cloud is one way to facilitate the achievement of that, but it adds complexity. And with complexity forces you have tools like Dynatrace to be able to deal with that complexity elegantly.

Got it. Got it. Got it. I wanted to maybe switch the conversation a little bit over to AIML. You guys are one of the leaders out there incorporating AI into your platform, one of your products is Davis AI. I mean, how do you guys think about the use of AI and observability? Where are you taking AI in the future with your platform?

Well, the software intelligence platform that we've constructed, the way that I think of it is that it is focused on assembling data from a variety of sources and then imagining we're driving the utilization and access and discovery of that data through the AIOps engine that we built. And then from there, evaluating what to do about that data, how do you communicate it to customers, how do they leverage that information. And by leveraging that information, how are they making their ecosystems work better. So AI is our -- in many ways, our biggest differentiator in our software intelligence platform that enables us to span the gamut of these various different data types. And you think about companies that do primarily logs. We believe that the log opportunity is norms for Dynatrace as we look forward. But even a log opportunity is not -- we don't look at it in isolation and say, well, we're just going to do logs. We're going to add a module in logs and we're going to do logs. We think about logs as a data type that gets integrated into various use cases. It might be for compliance reasons. It might be for security reasons. It might be for a wide variety of reasons, but we want logs to be another data type. We are, over the course of the next 6 to 9 months, about to deliver a very sophisticated next-generation log opportunity that will be directly integrated into our core platform. We're incredibly excited about this because it's going to provide enormous performance, incredible scale at much lower cost since in the market with no data rehydration. So no cold storage, hot storage distinction. A result of all that is that it's going to give us uneven further expansion to the platform and the leverage of AIOps against that data type.

Got it. Got it. Just kind of digging in on that log comment that you just had. What was it about the log opportunity, I guess, you guys saw that was attractive to you? And how do we think about the competitive landscape with this product that you're talking about for the future?

For logs, the -- I just simply believe that in the customers that I speak to. They are frustrated with their log vendors. I think Splunk being one of the -- as an example. And they're just -- they are priced very high in many cases, and they're not they're not getting the level of coverage and service that they want. We don't want to take that on -- as I indicated earlier, we don't want to take that out just by doing logs. That sort of is playing to where the puck is today. We believe that where the puck is going is that log simply become an incremental data type integrated into an observability mix. And that's what we're focused on is making sure that we can do that at amazing scale through data lakes that bring us access to logs as part of an observability next year that enables us to be successful by applying it and managing it through our AIOps engine. So this is just a very sophisticated, I think, a next-generation approach to it. I had the pleasure of spending last week in our -- with our team in linz, Austria, which is where we've got a lot of our developers, and it is incredible to see the amount of passion and engagement and opportunity that we have in the space.

Got it. Got it. Got it. So -- and good luck with the launch. I guess it's coming in 6 to 9 months. So good luck with that. So I wanted to dig in a little bit about security. Definitely a big topic out there, security with everything going on in the world. But also within the category, observability, monitoring, taking about security, even DevSecOps. I think it's a term that's thrown there a lot. And I think that there's a lot of conversations of what the differentiation is between the vendors. So maybe help us understand what is the security offering from Dynatrace that is specifically differentiated versus the other vendors out there.

Sure. Today, what we do is we primarily do vulnerability management with our application security capabilities. It's a fairly small business for us, but this is one that we believe over the coming few years can grow sort of like infrastructure [ dev ], talked about infrastructure and becoming $100 million business, growing it double the rate of our ARR growth over the last couple of years and AppSec probably won't grow quite that fast because it's sale to marginally different buyer. But we think we can get there to $100 million, let's say, over a few years span instead. And I believe that the AppSec space and the observability space are going to increasingly overlap in the sense that companies are going to want to use the incredible wealth of data that they have not just for observability purposes but also for security purposes. And that's precisely what we're doing with AppSec. So when Log4j came as a vulnerability that impacted so many companies in the market, back in December, we were there. And if you were using as a company, you were using Dynatrace, we could tell you within 15 minutes, all the places where you were calling the Log4j library throughout your ecosystem. And many of our customers were telling us that what would have taken days, maybe even weeks to assess they were able to do in under an hour. And that sort of visibility, in fact, observability, if you think about it, was invaluable because it enabled them to not only know where they were making the Log4j calls. It enabled them to know where they were using the most, where were the calls -- the most luminous, for example. And in so doing, they could then prioritize their fixes going out to their code. So it really became invaluable. And we went from, I don't know, a few dozen POCs to a few hundred POCs in a couple of weeks back in December, and that sort of interest has continued in the product as a result of it. So it's been strong. In security, generally, the security, gosh, with all I say this week, securities everywhere. Everybody is doing security in one form or another, it seems. And where we're focused is on the security elements that leverage the Dynatrace software intelligence platform. So it is not our objective to become an independent security company that is not leveraging the data and the platform that we've got. There is so much of wealth of data though, that we believe there is a very strong opportunity to create an AppSec business that's material. When I was at Akamai, we built a $1.3 billion security business from scratch over a 10-year span by being very precise about how we were investing in the space and obviously can't predict that far in the future of Dynatrace. But what I can say is that I do believe that AppSec and observability are very, very complementary and highly synergistic.

Got it. Got it. And just digging in a little bit on AppSec more. You recently acquired SpectX. How did that expand the capabilities? How much did it accelerate? Or what does that mean for this acquisition to, I guess, bolster the security offering?

SpectX has proven to be an immensely valuable acquisition. It enabled us to essentially move our time line forward in the log area by managing complex log environments at enormous scale. And that's essentially the value that we've gotten out of it. And that team continues to be very motivated as part of our Dynatrace R&D team overall and is providing incredible value toward our log launch. That's a good example of the kinds of tech tuck-ins that we'll look at generally to potentially accelerate road maps. We're not looking at transformational M&A, but where applicable and where prudent from a valuation perspective, we'll look at these kinds of tech tuck-ins to accelerate road maps.

Got it. Got it. We've got about 5 minutes left. I just want to make sure if there's any other questions from the audience. Feel free to raise your hand, and we'll get the mic over to you if you have any questions. Questions from the audience? Well, I got more for you. No problem. I wanted to ask you kind of about the growth strategy from here. Thinking about the ARR growth that you did last year and the guidance of this year. Kind of last year, you had 35% growth. The guidance right around 29%, 30%. So how do you think about the levers for growth from here and really kind of incorporating 2 quarters ago, you kind of increased the spend, the kind of the investment profile for the business. So how do we think about ARR growth, leverage for growth and maybe the ROI on that spend -- increased spend a couple of quarters -- 2 quarters ago?

Yes. So to be clear, the expectation for the increased spend was interesting, say, 25% operating margin guidance and 23% operating margin guidance. So this couple of hundred basis points is not that substantial. Our expectation is it is a pretty short-term increase in spend at modest rate, focusing on specific areas. And the specific areas on the product side are really around infrastructure logs and AppSec. Those are the areas where we believe that there is incremental opportunity for acceleration in ARR growth as we look to the future. So that's where we're making some of those investments. We talked about infrastructure and logs and AppSec really at length so far today already. In the -- but there are also opportunities, we think, in the go-to-market space. We announced, for example, a very seminal partnership with Deloitte just with our earnings announcement back on May 18. It is a very important signal to the market, not just an announcement with Deloitte. It is a signal to the market that the global system integrators, like Deloitte, that are doing cloud observability -- that are doing cloud migrations, here about observability at an increasing rate because it is no longer okay just to have dashboards. You need to have answers. And those answers come from the AI engine we provide. So the focus around global system integrators, around hyperscalers and around brand awareness and the association of the Dynatrace brand with cloud done right that if you are operating your environment in the cloud, you should be using Dynatrace. If you're a Global 15,000 company and probably even below that is really, in my view, quite critical to the success of Dynatrace as we look at. So those are the kinds of areas where we're investing both on the product side as well as the bit market side.

Got it. Got it. Rick, I wanted to -- kind of as one of my last questions here is, is get your high-level thoughts on maybe the catalysts in the end markets that could potentially drive much faster growth for you. Let's use 30% ARR guide. What would it take from an end market perspective to kind of get that 40% or greater? But on the other side, what would have to happen in the end markets where ARR maybe would grow 10 points slower at 20%, thinking from a big end market catalyst perspective.

I like the first question. The -- it really is -- the acceleration for growth, I think, comes from leverage. Because if you think about it, we added 30% to our sales force last year and add 30% by projection to our sales force this year as we've communicated publicly in the market. And the expectation is that, that growth is going to enable us to achieve the levels of growth that we put in our annual guidance that we came out with in mid-May. In order to get an acceleration from that, you need more leverage. And the areas of leverage are areas like global system integrators, like hyperscalers, where you get partners that are more engaged in bringing you just greater deal flow and more visibility to Dynatrace as an answer for cloud deployment, cloud migration, digital transformation, which is what we're associating Dynatrace brand to become. So those sorts of elements become really, really critical in us delivering against that acceleration. Slowdown, I think, happens, at least in part due to macro trends. And that's where you manage top line to bottom line. But at this stage, we're focused on delivering to the upside and doing so by driving some of the investments that we've discussed both on product and the go-to-market side.

Got it. Rick, this has been great. Thank you so much. We're all out of time. So thank you so much.