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Dynatrace Reports Second Quarter of Fiscal Year 2023 Financial Results

Delivers Adjusted ARR growth of 33% year-over-year

Software intelligence company Dynatrace (NYSE: DT) today released financial results for the second quarter of its fiscal 2023 ended September 30, 2022.

“Dynatrace delivered strong second quarter results, demonstrating top to bottom line performance exceeding guidance across all of our key metrics," said Rick McConnell, Chief Executive Officer. “Observability solutions are becoming increasingly mandatory as digital transformation, in particular cloud modernization, remains one of the most durable areas of investment for enterprises. At the same time, we are not immune to the macro-environment and believe it is appropriate to take a more cautious approach to ARR growth in the back half of fiscal 2023. We'll continue to invest in product innovation and go-to-market initiatives that position us well for the long-term. Expanding the Dynatrace Platform with our Grail technology exemplifies this and represents a major leap forward for customers looking to cost effectively address log management and analytics."

Second Quarter Fiscal 2023 and Other Recent Business Highlights:

All growth rates are compared to the second quarter of fiscal 2022, unless otherwise noted.

Financial Highlights:

  • Total ARR of $1,065 million, Adjusted ARR growth of 33% year-over-year
  • Total Revenue of $279 million, up 30% on a constant currency basis
  • Subscription Revenue of $261 million, up 29% on a constant currency basis
  • Operating Income of $20 million and Non-GAAP Operating Income of $73 million
  • EPS of $0.04 and Non-GAAP EPS of $0.22, both on a dilutive basis

Business Highlights:

  • Platform Innovation: Launched our core Grail™ technology within the Dynatrace Platform, a major advancement in data analytics. It simplifies cloud complexity through unifying observability, as well as security, and business data to deliver answers and intelligent automation with the scale, speed, and cost-effectiveness demanded by modern digital transformation.
  • Market Leadership: The 2022 ISG Provider Lens™ named Dynatrace a Leader with the top overall position in cloud-native observability and a Leader in cloud-native security. This recognition reflects our strong position as the trend of converging the observability and security markets continues.
  • Go-to-market Success: Expanded partnership with DXC Technology, embedding Dynatrace as the preferred observability solution within DXC Platform X™, helping DXC customers to optimize and automate their clouds and digital services. Added 164 new logos to the Dynatrace® platform in the second quarter, up slightly from the second quarter of last fiscal year. Delivered a net expansion rate above 120% for the eighteenth consecutive quarter.

Second Quarter 2023 Financial Highlights

(Unaudited – In thousands, except per share data)

 

 

Three Months Ended September 30,

 

2022

 

2021

Key Operating Metric:

 

 

 

Annualized recurring revenue

$

1,064,951

 

 

$

863,863

 

Year-over-Year Increase

 

23

%

 

 

Year-over-Year Increase - constant currency

 

30

%

 

 

Adjusted ARR Growth

 

33

%

 

 

 

 

 

 

Revenue:

 

 

 

Total revenue

$

279,326

 

 

$

226,354

 

Year-over-Year Increase

 

23

%

 

 

Year-over-Year Increase - constant currency (*)

 

30

%

 

 

 

 

 

 

Subscription revenue

$

261,306

 

 

$

212,601

 

Year-over-Year Increase

 

23

%

 

 

Year-over-Year Increase - constant currency (*)

 

29

%

 

 

 

 

 

 

Non-GAAP Financial Measures:

 

 

 

Non-GAAP operating income (*)

$

72,888

 

 

$

61,468

 

Non-GAAP operating margin (*)

 

26

%

 

 

27

%

 

 

 

 

Non-GAAP net income (*)

$

64,454

 

 

$

52,165

 

 

 

 

 

Non-GAAP net income per share - diluted

$

0.22

 

 

$

0.18

 

 

 

 

 

Non-GAAP shares outstanding - diluted

 

290,601

 

 

 

291,177

 

 

 

 

 

Free Cash Flow (*)

$

25,067

 

 

$

13,638

 

* Use of Non-GAAP Financial Measures

In our earnings press releases, conference calls, slide presentations, and webcasts, we may use or discuss non-GAAP financial measures, as defined by Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure, are included in this press release after the consolidated financial statements. Our earnings press releases containing such non-GAAP reconciliations can be found in the Investors section of our website at https://ir.dynatrace.com.

Financial Outlook

Since March 31, 2022, Dynatrace has seen an incremental strengthening of the U.S. dollar resulting in a foreign exchange ("FX") headwind in fiscal 2023. Total FY23 FX impact on a constant currency basis is expected to be approximately $60 million on ARR, up from prior quarter expectations of approximately $40 million. Total FY23 FX impact is expected to be approximately $60 million on Revenue, up from prior quarter expectations of approximately $47 million.

Growth rates for Adjusted ARR, Total revenue, and Subscription revenue are presented in constant currency in the table below to provide better visibility into the underlying growth of the business.

Based on information available, as of November 2, 2022, Dynatrace is issuing guidance for the third quarter and updating guidance for full year fiscal 2023 as follows:

(In millions, except per share data)

Q3 Fiscal 2023

Guidance

Total revenue

$283 - $286

As reported

18% - 19%

Constant currency

24% - 25%

Subscription revenue

$266.5 - $268.5

As reported

18% - 19%

Constant currency

24% - 25%

Non-GAAP operating income

$71.5 - $73.5

Non-GAAP operating margin

25.5%

Non-GAAP net income

$62 - $63.5

Non-GAAP net income per diluted share

$0.21 - $0.22

Diluted weighted average shares outstanding

292 - 293

(In millions, except per share data)

Current Guidance

Fiscal 2023

 

Prior Guidance

Fiscal 2023

 

Guidance Change

at Midpoint*

Total ARR

$1,164 - $1,172

 

$1,213 - $1,226

 

$(52)

As reported

17% - 18%

 

22% - 23%

 

(500) bps

Constant currency

23% - 24%

 

26% - 27%

 

(300) bps

Adjusted ARR growth

24%

 

27% - 28%

 

(300) bps

Total revenue

$1,119 - $1,126

 

$1,125 - $1,136

 

$(8)

As reported

20% - 21%

 

21% - 22%

 

(100) bps

Constant currency

27%

 

26% - 27%

 

50 bps

Subscription revenue

$1,047 - $1,052

 

$1,053 - $1,062

 

$(8)

As reported

20% - 21%

 

21% - 22%

 

(100) bps

Constant currency

27%

 

26% - 27%

 

50 bps

Non-GAAP operating income

$273 - $279

 

$252 - $261

 

$20

Non-GAAP operating margin

24.5%

 

22.5% - 23%

 

175 bps

Non-GAAP net income

$237.5 - $242.5

 

$214.5 - $223

 

$21

Non-GAAP net income per diluted share

$0.81 - $0.83

 

$0.73 - $0.76

 

$0.07

Diluted weighted average shares outstanding

292 - 293

 

292 - 294

 

0.5

Free cash flow

$308 - $321

 

$310 - $325

 

$(3)

Free cash flow margin

27.5% - 28.5%

 

27.5%- 28.5%

 

0 bps

*Changes in our guidance for ARR and Revenue metrics are rounded to the nearest 50 bps

Our guidance is based on foreign exchange rates as of the end of September.

Reconciliation of non-GAAP operating income, non-GAAP net income, non-GAAP net income per diluted share and free cash flow guidance to the most directly comparable GAAP measures is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from these non-GAAP measures; in particular, the measures and effects of share-based compensation expense, employer taxes and tax deductions specific to equity compensation awards that are directly impacted by future hiring, turnover and retention needs, as well as unpredictable fluctuations in our stock price. We expect the variability of the above charges to have a significant, and potentially unpredictable, impact on our future GAAP financial results.

Conference Call and Webcast Information

Dynatrace will host a conference call and live webcast to discuss its results and business outlook for investors and analysts at 8:00 a.m. Eastern Time today, November 2, 2022. To access the conference call from the U.S. and Canada, dial (866) 405-1247, or internationally, dial (201) 689-8045 with conference ID# 13733395. The call will also be available live via webcast on the company’s website, ir.dynatrace.com.

An audio replay of the call will also be available until 11:59 p.m. Eastern Time on November 16, 2022, by dialing (877) 660-6853 from the U.S. or Canada, or for international callers by dialing (201) 612-7415 and entering conference ID# 13733395. In addition, an archived webcast will be available at ir.dynatrace.com.

The company has used, and intends to continue to use, the investor relations portion of its website as a means of disclosing material non-public information and for complying with disclosure obligations under Regulation FD.

Non-GAAP Financial Measures & Key Metrics

In addition to disclosing financial measures prepared in accordance with GAAP, this press release and the accompanying tables contain certain non-GAAP financial measures.

Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similarly titled measures presented by other companies. Dynatrace considers these non-GAAP financial measures to be important because they provide useful indicators of its performance and liquidity measures. These are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short and long-term operational plans. In addition, investors often use similar measures to evaluate the performance of a company. Non-GAAP financial measures are presented for supplemental informational purposes only for understanding the company’s operating performance. The non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from non-GAAP financial measures presented by other companies. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure, are included in this press release after the consolidated financial statements.

Dynatrace presents constant currency amounts for Revenue and Annual Recurring Revenue to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods. All growth comparisons relate to the corresponding period in the last fiscal year. Dynatrace provides this non-GAAP financial information to aid investors in better understanding our performance.

Annual Recurring Revenue “ARR” is defined as the daily revenue of all subscription agreements that are actively generating revenue as of the last day of the reporting period multiplied by 365. We exclude from our calculation of Total ARR any revenues derived from month-to-month agreements and/or product usage overage billings.

Adjusted ARR is defined as ARR excluding the impact of foreign exchange rate fluctuations that occurred over the trailing twelve month period. This calculation also excludes the headwind associated with the Dynatrace® perpetual license ARR that rolled off in the trailing twelve month period.

Adjusted ARR Growth is defined as year-over-year growth in Adjusted ARR divided by ARR as reported.

Dynatrace® Net Expansion Rate is defined as the Dynatrace® ARR at the end of a reporting period for the cohort of Dynatrace® accounts as of one year prior to the date of calculation, divided by the Dynatrace® ARR one year prior to the date of calculation for that same cohort. This calculation excludes the benefit of Dynatrace® ARR resulting from the conversion of Classic products to the Dynatrace® platform. Effective the first quarter of fiscal year 2023, we began to exclude the headwind associated with the Dynatrace perpetual license ARR given diminishing impact of perpetual license ARR. We believe that eliminating the perpetual license headwind will result in a Net Expansion Rate metric that better reflects Dynatrace’s ability to expand existing customer relationships. We present Dynatrace® net expansion rate on a constant currency basis to provide a framework for assessing how our business performed excluding the effects of foreign currency rate fluctuations.

Dynatrace customers are defined as accounts, as identified by a unique account identifier, that generate at least $10,000 of Dynatrace® ARR as of the reporting date. In infrequent cases, a single large organization may comprise multiple customer accounts when there are distinct divisions, departments or subsidiaries that operate and make purchasing decisions independently from the parent organization. In cases where multiple customer accounts exist under a single organization, each customer account is counted separately based on a mutually exclusive accounting of ARR.

Free Cash Flow is defined as net cash provided by (used in) operating activities less capital expenditures.

About Dynatrace

Dynatrace exists to make the world's software work perfectly. Our unified software intelligence platform combines broad and deep observability and continuous runtime application security with the most advanced AIOps to provide answers and intelligent automation from data at an enormous scale. This enables innovators to modernize and automate cloud operations, deliver software faster and more securely, and ensure flawless digital experiences. That is why the world's largest organizations trust Dynatrace® to accelerate digital transformation.

Cautionary Language Concerning Forward-Looking Statements

This press release includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding management’s expectations of future financial and operational performance and operational expenditures, expected growth, and business outlook, including our financial guidance for the third fiscal quarter and full year 2023, and statements regarding the size of our market and our positioning for capturing a larger share of our market. These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts and statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” or words of similar meaning. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that the plans, intentions, expectations or strategies will be attained or achieved. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation, the effect of the COVID-19 pandemic on our business operations and demand for our products as well as its impact on general economic and financial market conditions, a potential downturn in or instability of general economic conditions including currency fluctuations, our ability to maintain our subscription revenue growth rates in future periods, our ability to service our indebtedness, market adoption of software intelligence solutions for application performance monitoring, digital experience monitoring, infrastructure monitoring, AIOps, business intelligence and analytics and application security, continued spending on and demand for software intelligence solutions, our ability to maintain and acquire new customers, our ability to differentiate our platform from competing products and technologies, our ability to successfully recruit and retain highly-qualified personnel, the price volatility of our common stock, and other risks set forth under the caption “Risk Factors” in our Form 10-K filed on May 26, 2022 and our other SEC filings. We assume no obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.

DYNATRACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited – In thousands, except per share data)

 

 

Three Months Ended

September 30,

 

Six Months Ended

September 30,

 

2022

 

2021

 

2022

 

2021

Revenue:

 

 

 

 

 

 

 

Subscription

$

261,306

 

 

$

212,601

 

 

$

510,864

 

 

$

409,121

 

License

 

 

 

 

 

 

 

 

 

 

50

 

Service

 

18,020

 

 

 

13,753

 

 

 

35,735

 

 

 

26,923

 

Total revenue

 

279,326

 

 

 

226,354

 

 

 

546,599

 

 

 

436,094

 

Cost of revenue:

 

 

 

 

 

 

 

Cost of subscription

 

35,764

 

 

 

27,135

 

 

 

68,502

 

 

 

52,117

 

Cost of service

 

16,052

 

 

 

10,668

 

 

 

31,220

 

 

 

20,689

 

Amortization of acquired technology

 

3,888

 

 

 

3,864

 

 

 

7,780

 

 

 

7,694

 

Total cost of revenue

 

55,704

 

 

 

41,667

 

 

 

107,502

 

 

 

80,500

 

Gross profit

 

223,622

 

 

 

184,687

 

 

 

439,097

 

 

 

355,594

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

51,907

 

 

 

37,908

 

 

 

100,389

 

 

 

72,633

 

Sales and marketing

 

104,669

 

 

 

86,301

 

 

 

209,684

 

 

 

166,783

 

General and administrative

 

40,074

 

 

 

31,689

 

 

 

76,395

 

 

 

58,611

 

Amortization of other intangibles

 

6,573

 

 

 

7,539

 

 

 

13,146

 

 

 

15,079

 

Restructuring and other

 

 

 

 

(1

)

 

 

(10

)

 

 

25

 

Total operating expenses

 

203,223

 

 

 

163,436

 

 

 

399,604

 

 

 

313,131

 

Income from operations

 

20,399

 

 

 

21,251

 

 

 

39,493

 

 

 

42,463

 

Interest expense, net

 

(513

)

 

 

(2,651

)

 

 

(2,688

)

 

 

(5,508

)

Other (expense) income, net

 

(1,214

)

 

 

(1,299

)

 

 

(3,464

)

 

 

12

 

Income before income taxes

 

18,672

 

 

 

17,301

 

 

 

33,341

 

 

 

36,967

 

Income tax (expense) benefit

 

(8,146

)

 

 

6,340

 

 

 

(20,701

)

 

 

(32

)

Net income

$

10,526

 

 

$

23,641

 

 

$

12,640

 

 

$

36,935

 

Net income per share:

 

 

 

 

 

 

 

Basic

$

0.04

 

 

$

0.08

 

 

$

0.04

 

 

$

0.13

 

Diluted

$

0.04

 

 

$

0.08

 

 

$

0.04

 

 

$

0.13

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

287,190

 

 

 

283,923

 

 

 

286,699

 

 

 

283,295

 

Diluted

 

290,601

 

 

 

291,177

 

 

 

290,433

 

 

 

290,254

 

UNAUDITED SHARE-BASED COMPENSATION

 

 

Three Months Ended

September 30,

 

Six Months Ended

September 30,

 

2022

 

2021

 

2022

 

2021

Cost of revenue

$

5,235

 

$

3,485

 

$

9,125

 

$

6,137

Research and development

 

10,997

 

 

5,456

 

 

18,282

 

 

9,423

Sales and marketing

 

13,938

 

 

9,612

 

 

24,014

 

 

17,220

General and administrative

 

10,484

 

 

7,022

 

 

17,928

 

 

12,047

Total share-based compensation

$

40,654

 

$

25,575

 

$

69,349

 

$

44,827

DYNATRACE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

September 30, 2022

 

March 31, 2022

 

(unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

563,430

 

 

$

462,967

 

Accounts receivable, net

 

185,728

 

 

 

350,666

 

Deferred commissions, current

 

62,861

 

 

 

62,601

 

Prepaid expenses and other current assets

 

39,259

 

 

 

72,188

 

Total current assets

 

851,278

 

 

 

948,422

 

Property and equipment, net

 

45,717

 

 

 

45,271

 

Operating lease right-of-use assets, net

 

61,374

 

 

 

58,849

 

Goodwill

 

1,279,535

 

 

 

1,281,876

 

Other intangible assets, net

 

84,380

 

 

 

105,736

 

Deferred tax assets, net

 

24,958

 

 

 

28,106

 

Deferred commissions, non-current

 

60,292

 

 

 

63,435

 

Other assets

 

14,451

 

 

 

9,615

 

Total assets

$

2,421,985

 

 

$

2,541,310

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

4,587

 

 

$

22,715

 

Accrued expenses, current

 

129,976

 

 

 

141,556

 

Deferred revenue, current

 

561,474

 

 

 

688,554

 

Operating lease liabilities, current

 

12,876

 

 

 

12,774

 

Total current liabilities

 

708,913

 

 

 

865,599

 

Deferred revenue, non-current

 

16,950

 

 

 

25,783

 

Accrued expenses, non-current

 

25,243

 

 

 

19,409

 

Operating lease liabilities, non-current

 

54,255

 

 

 

52,070

 

Deferred tax liabilities

 

 

 

 

85

 

Long-term debt, net

 

214,947

 

 

 

273,918

 

Total liabilities

 

1,020,308

 

 

 

1,236,864

 

 

 

 

 

Shareholders' equity:

 

 

 

Common shares, $0.001 par value, 600,000,000 shares authorized, 287,812,653 and 286,053,276 shares issued and outstanding at September 30, 2022 and March 31, 2022, respectively

 

288

 

 

 

286

 

Additional paid-in capital

 

1,874,488

 

 

 

1,792,197

 

Accumulated deficit

 

(448,708

)

 

 

(461,348

)

Accumulated other comprehensive loss

 

(24,391

)

 

 

(26,689

)

Total shareholders' equity

 

1,401,677

 

 

 

1,304,446

 

Total liabilities and shareholders' equity

$

2,421,985

 

 

$

2,541,310

 

DYNATRACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited – In thousands)

 

 

Six Months Ended

September 30,

 

2022

 

2021

Cash flows from operating activities:

 

 

 

Net income

$

12,640

 

 

$

36,935

 

Adjustments to reconcile net income to cash provided by operations:

 

 

 

Depreciation

 

5,746

 

 

 

5,049

 

Amortization

 

21,068

 

 

 

23,057

 

Share-based compensation

 

69,349

 

 

 

44,827

 

Other

 

4,484

 

 

 

1,010

 

Net change in operating assets and liabilities:

 

 

 

Accounts receivable

 

153,512

 

 

 

92,314

 

Deferred commissions

 

(3,618

)

 

 

(6,347

)

Prepaid expenses and other assets

 

25,128

 

 

 

(16,456

)

Accounts payable and accrued expenses

 

(14,428

)

 

 

(9,118

)

Operating leases, net

 

44

 

 

 

401

 

Deferred revenue

 

(101,429

)

 

 

(69,904

)

Net cash provided by operating activities

 

172,496

 

 

 

101,768

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Purchase of property and equipment

 

(11,237

)

 

 

(7,612

)

Acquisition of businesses, net of cash acquired

 

 

 

 

(13,004

)

Net cash used in investing activities

 

(11,237

)

 

 

(20,616

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Repayment of term loans

 

(60,000

)

 

 

(60,000

)

Proceeds from employee stock purchase plan

 

8,627

 

 

 

6,593

 

Proceeds from exercise of stock options

 

4,332

 

 

 

18,339

 

Equity repurchases

 

(15

)

 

 

(30

)

Net cash used in financing activities

 

(47,056

)

 

 

(35,098

)

 

 

 

 

Effect of exchange rates on cash and cash equivalents

 

(13,740

)

 

 

(697

)

 

 

 

 

Net increase in cash and cash equivalents

 

100,463

 

 

 

45,357

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

462,967

 

 

 

324,962

 

Cash and cash equivalents, end of period

$

563,430

 

 

$

370,319

 

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except percentages)

 

 

Three Months Ended September 30, 2022

 

GAAP

 

Share-based

compensation

 

Employer

payroll taxes

on employee

stock

transactions

 

Amortization

of other

intangibles

 

Restructuring

& other

 

Non-GAAP

Non-GAAP operating income:

Cost of revenue

$

55,704

 

 

$

(5,235

)

 

$

(128

)

 

$

(3,888

)

 

$

(30

)

 

$

46,423

 

Gross profit

 

223,622

 

 

 

5,235

 

 

 

128

 

 

 

3,888

 

 

 

30

 

 

 

232,903

 

Gross margin

 

80

%

 

 

 

 

 

 

 

 

 

 

83

%

Research and development

 

51,907

 

 

 

(10,997

)

 

 

(381

)

 

 

 

 

 

 

 

 

40,529

 

Sales and marketing

 

104,669

 

 

 

(13,938

)

 

 

(300

)

 

 

 

 

 

 

 

 

90,431

 

General and administrative

 

40,074

 

 

 

(10,484

)

 

 

(231

)

 

 

 

 

 

(304

)

 

 

29,055

 

Amortization of other intangibles

 

6,573

 

 

 

 

 

 

 

 

 

(6,573

)

 

 

 

 

 

 

Restructuring and other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

$

20,399

 

 

$

40,654

 

 

$

1,040

 

 

$

10,461

 

 

$

334

 

 

$

72,888

 

Operating margin

 

7

%

 

 

 

 

 

 

 

 

 

 

26

%

 

Three Months Ended September 30, 2021

 

GAAP

 

Share-based

compensation

 

Employer

payroll taxes

on employee

stock

transactions

 

Amortization

of other

intangibles

 

Restructuring

& other

 

Non-GAAP

Non-GAAP operating income:

Cost of revenue

$

41,667

 

 

$

(3,485

)

 

$

(452

)

 

$

(3,864

)

 

$

 

 

$

33,866

 

Gross profit

 

184,687

 

 

 

3,485

 

 

 

452

 

 

 

3,864

 

 

 

 

 

 

192,488

 

Gross margin

 

82

%

 

 

 

 

 

 

 

 

 

 

85

%

Research and development

 

37,908

 

 

 

(5,456

)

 

 

(501

)

 

 

 

 

 

 

 

 

31,951

 

Sales and marketing

 

86,301

 

 

 

(9,612

)

 

 

(785

)

 

 

 

 

 

 

 

 

75,904

 

General and administrative

 

31,689

 

 

 

(7,022

)

 

 

(253

)

 

 

 

 

 

(1,249

)

 

 

23,165

 

Amortization of other intangibles

 

7,539

 

 

 

 

 

 

 

 

 

(7,539

)

 

 

 

 

 

 

Restructuring and other

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

Operating income

$

21,251

 

 

$

25,575

 

 

$

1,991

 

 

$

11,403

 

 

$

1,248

 

 

$

61,468

 

Operating margin

 

9

%

 

 

 

 

 

 

 

 

 

 

27

%

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share data)

 

 

Three Months Ended

September 30,

 

2022

 

2021

Non-GAAP net income:

 

 

 

Net income

$

             10,526

 

 

$

             23,641

 

Income tax expense (benefit)

 

                8,146

 

 

 

               (6,340

)

Non-GAAP effective cash tax

 

               (7,967

)

 

 

               (7,113

)

Interest expense, net

 

                   513

 

 

 

                2,651

 

Cash paid for interest, net

 

                  (467

)

 

 

               (2,190

)

Share-based compensation

 

              40,654

 

 

 

              25,575

 

Employer payroll taxes on employee stock transactions

 

                1,040

 

 

 

                1,991

 

Amortization of other intangibles

 

                6,573

 

 

 

                7,539

 

Amortization of acquired technology

 

                3,888

 

 

 

                3,864

 

Transaction, restructuring, and other

 

                   334

 

 

 

                1,248

 

Loss on currency translation

 

                1,214

 

 

 

                1,299

 

Non-GAAP net income

$

             64,454

 

 

$

             52,165

 

 

 

 

 

Share count:

 

 

 

Weighted-average shares outstanding - basic

 

             287,190

 

 

 

             283,923

 

Weighted-average shares outstanding - diluted

 

             290,601

 

 

 

             291,177

 

 

 

��

 

Shares used in non-GAAP per share calculations:

 

 

 

Weighted-average shares outstanding - basic

 

             287,190

 

 

 

             283,923

 

Weighted-average shares outstanding - diluted

 

             290,601

 

 

 

             291,177

 

 

 

 

 

Net income per share:

 

 

 

Net income per share - basic

$

                0.04

 

 

$

                0.08

 

Net income per share - diluted

$

                0.04

 

 

$

                0.08

 

Non-GAAP net income per share - basic

$

                0.22

 

 

$

                0.18

 

Non-GAAP net income per share - diluted

$

                0.22

 

 

$

                0.18

 

 
 

 

Three Months Ended

September 30,

 

2022

 

2021

Free Cash Flow ("FCF"):

 

 

 

Net cash provided by operating activities

$

             29,398

 

 

$

             18,296

 

Purchase of property and equipment

 

               (4,331

)

 

 

               (4,658

)

FCF

$

             25,067

 

 

$

             13,638

 

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except percentages)

 

 

Six Months Ended September 30, 2022

 

GAAP

 

Share-based

compensation

 

Employer

payroll taxes

on employee

stock

transactions

 

Amortization

of other

intangibles

 

Restructuring

& other

 

Non-GAAP

Non-GAAP operating income:

Cost of revenue

$

107,502

 

 

$

(9,125

)

 

$

(412

)

 

$

(7,780

)

 

$

(380

)

 

$

89,805

 

Gross profit

 

439,097

 

 

 

9,125

 

 

 

412

 

 

 

7,780

 

 

 

380

 

 

 

456,794

 

Gross margin

 

80

%

 

 

 

 

 

 

 

 

 

 

84

%

Research and development

 

100,389

 

 

 

(18,282

)

 

 

(930

)

 

 

 

 

 

 

 

 

81,177

 

Sales and marketing

 

209,684

 

 

 

(24,014

)

 

 

(898

)

 

 

 

 

 

 

 

 

184,772

 

General and administrative

 

76,395

 

 

 

(17,928

)

 

 

(442

)

 

 

 

 

 

(383

)

 

 

57,642

 

Amortization of other intangibles

 

13,146

 

 

 

 

 

 

 

 

 

(13,146

)

 

 

 

 

 

 

Restructuring and other

 

(10

)

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 

Operating income

$

39,493

 

 

$

69,349

 

 

$

2,682

 

 

$

20,926

 

 

$

753

 

 

$

133,203

 

Operating margin

 

7

%

 

 

 

 

 

 

 

 

 

 

24

%

 

Six Months Ended September 30, 2021

 

GAAP

 

Share-based

compensation

 

Employer

payroll taxes

on employee

stock

transactions

 

Amortization

of other

intangibles

 

Restructuring

& other

 

Non-GAAP

Non-GAAP operating income:

Cost of revenue

$

80,500

 

 

$

(6,137

)

 

$

(767

)

 

$

(7,694

)

 

$

 

 

$

65,902

 

Gross profit

 

355,594

 

 

 

6,137

 

 

 

767

 

 

 

7,694

 

 

 

 

 

 

370,192

 

Gross margin

 

82

%

 

 

 

 

 

 

 

 

 

 

85

%

Research and development

 

72,633

 

 

 

(9,423

)

 

 

(1,127

)

 

 

 

 

 

 

 

 

62,083

 

Sales and marketing

 

166,783

 

 

 

(17,220

)

 

 

(1,370

)

 

 

 

 

 

 

 

 

148,193

 

General and administrative

 

58,611

 

 

 

(12,047

)

 

 

(454

)

 

 

 

 

 

(1,202

)

 

 

44,908

 

Amortization of other intangibles

 

15,079

 

 

 

 

 

 

 

 

 

(15,079

)

 

 

 

 

 

 

Restructuring and other

 

25

 

 

 

 

 

 

 

 

 

 

 

 

(25

)

 

 

 

Operating income

$

42,463

 

 

$

44,827

 

 

$

3,718

 

 

$

22,773

 

 

$

1,227

 

 

$

115,008

 

Operating margin

 

10

%

 

 

 

 

 

 

 

 

 

 

26

%

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share data)

 

 

Six Months Ended September 30,

 

2022

 

2021

Non-GAAP net income:

 

 

 

Net income

$

                 12,640

 

 

$

                 36,935

 

Income tax expense

 

                  20,701

 

 

 

                         32

 

Non-GAAP effective cash tax

 

                 (14,374

)

 

 

                 (13,254

)

Interest expense, net

 

                    2,688

 

 

 

                    5,508

 

Cash paid for interest, net

 

                   (2,533

)

 

 

                   (4,560

)

Share-based compensation

 

                  69,349

 

 

 

                  44,827

 

Employer payroll taxes on employee stock transactions

 

                    2,682

 

 

 

                    3,718

 

Amortization of other intangibles

 

                  13,146

 

 

 

                  15,079

 

Amortization of acquired technology

 

                    7,780

 

 

 

                    7,694

 

Transaction, restructuring, and other

 

                       753

 

 

 

                    1,227

 

Loss (gain) on currency translation

 

                    3,464

 

 

 

                        (12

)

Non-GAAP net income

$

               116,296

 

 

$

                97,194

 

 

 

 

 

Share count:

 

 

 

Weighted-average shares outstanding - basic

 

                 286,699

 

 

 

                 283,295

 

Weighted-average shares outstanding - diluted

 

                 290,433

 

 

 

                 290,254

 

 

 

 

 

Shares used in non-GAAP per share calculations:

 

 

 

Weighted-average shares outstanding - basic

 

                 286,699

 

 

 

                 283,295

 

Weighted-average shares outstanding - diluted

 

                 290,433

 

 

 

                 290,254

 

 

 

 

 

Net income per share:

 

 

 

Net income per share - basic

$

                    0.04

 

 

$

                    0.13

 

Net income per share - diluted

$

                    0.04

 

 

$

                    0.13

 

Non-GAAP net income per share - basic

$

                    0.41

 

 

$

                    0.34

 

Non-GAAP net income per share - diluted

$

                    0.40

 

 

$

                    0.33

 

 
 

 

Six Months Ended September 30,

 

2022

 

2021

Free Cash Flow ("FCF"):

 

 

 

Net cash provided by operating activities

$

               172,496

 

 

$

               101,768

 

Purchase of property and equipment

 

                 (11,237

)

 

 

(7,612

)

FCF

$

               161,259

 

 

$

                 94,156

 

 

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