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

For the period ending December 31, 2022

February 1, 2023 8:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to Dynatrace’s Fiscal Third Quarter 2023 Earnings Call. [Operator Instructions] Please note this conference is being recorded. At this time, I will now turn the conference over to Noelle Faris, Vice President of Investor Relations. Noelle, you may now begin.

Noelle Faris

Good morning and thank you for joining Dynatrace’s third quarter fiscal 2023 earnings conference call. Joining me on today’s call 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 and earnings guidance and economic conditions. These forward-looking statements are subject to risks and uncertainties depending on a number of factors that could cause actual results to differ materially from those expressed or implied by such statements. Additional information concerning these uncertainties and risk factors is contained in Dynatrace’s filing with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q. The forward-looking statements included in this call represent the company’s view on February 1, 2023. Dynatrace disclaims any obligation to update these statements to reflect future events or circumstances.

As a reminder, we will be referring to some non-GAAP financial measures during today’s call. A detailed reconciliation of GAAP and non-GAAP measures can be found on the Investor Relations section of our website. Unless otherwise noted, the growth rates we discuss today are non-GAAP, reflecting constant currency growth. To see the reconciliation between these non-GAAP and GAAP measures, please refer to today’s earnings press release and financial presentation under the Events section of our website.

And with that, let me turn the call over to our Chief Executive Officer, Rick McConnell. Rick?

Rick McConnell

Thanks, Noelle and good morning everyone. Thank you for joining us on today’s call. I am very pleased with the team’s execution this past quarter amidst a difficult macro backdrop. Dynatrace’s strong third quarter results solidly beat expectations on the top and bottom line. Adjusted ARR growth and constant currency subscription revenue growth were both 29% year-over-year. Non-GAAP operating margin in the third quarter was 27% and free cash flow margin on a trailing 12-month basis was also 27% of revenue. These results continue to demonstrate our ability to run a balanced business that delivers high growth, coupled with strong bottom line performance. They are a testament to the strength of our market, the significant customer value of our platform and the ongoing durability of our business model. Jim will share more details about our Q3 performance and guidance in a moment. In the meantime, I’d like to share my view of the current market environment, our platform leadership and differentiation and our investment priorities to support future growth.