Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Dynatrace Reports First Quarter of Fiscal Year 2023 Financial Results By: Dynatrace via Business Wire August 03, 2022 at 06:30 AM EDT Delivers Adjusted ARR growth of 34% year-over-year Software intelligence company Dynatrace (NYSE: DT) today released financial results for the first quarter of its fiscal 2023 ended June 30, 2022. “Q1 was yet another quarter of solid execution with balanced growth and profitability highlighting the durability of our business in the current environment,” said Rick McConnell, Chief Executive Officer. “We continue to see digital transformation initiatives with clear and measurable ROI as a top priority for the global 15,000 organizations that we target. Automation and AIOps are requirements for companies looking to do more with less time, resource, and cost. Our platform is rooted in these capabilities, which differentiate us from our competitors and position us well for continued growth and success in the future. First Quarter Fiscal 2023 and Other Recent Business Highlights: All growth rates are compared to the first quarter of fiscal 2022 unless otherwise noted. Financial Highlights: Total ARR of $1,031 million, Adjusted ARR growth of 34% year-over-year Total Revenue of $267 million, up 32% on a constant currency basis Subscription Revenue of $250 million, up 32% on a constant currency basis Operating Income of $19 million and Non-GAAP Operating Income of $60 million EPS of $0.01 and Non-GAAP EPS of $0.18, both on a dilutive basis Business Highlights: Market Leadership: Named Leader in the 2022 Gartner Magic Quadrant for APM and Observability. Ranked highest in 4 of 6 Gartner Critical Capabilities for APM and Observability. Platform Innovation: Extended the Dynatrace® platform with automatic release validation capabilities and unified its log analytics and digital experience monitoring (DEM) capabilities, enabling development teams to ensure the highest quality user experience and accelerate innovation. Go-to-market Success: Added 135 new logos to the Dynatrace® platform in the first quarter, consistent with the first quarter of last fiscal year. Delivered a net expansion rate above 120% for the seventeenth consecutive quarter. On a trailing-twelve-month basis, business transacted through hyperscaler partnerships, including AWS, Google, Microsoft, is nearly 3x compared to the same period last year. First Quarter 2023 Financial Highlights (Unaudited – In thousands, except per share data) Three Months Ended June 30, 2022 2021 Key Operating Metric: Annualized recurring revenue $ 1,031,284 $ 823,222 Year-over-Year Increase 25 % Year-over-Year Increase - constant currency 31 % Adjusted ARR Growth 34 % Revenue: Total revenue $ 267,273 $ 209,740 Year-over-Year Increase 27 % Year-over-Year Increase - constant currency (*) 32 % Subscription revenue $ 249,558 $ 196,520 Year-over-Year Increase 27 % Year-over-Year Increase - constant currency (*) 32 % Non-GAAP Financial Measures: Non-GAAP operating income (*) $ 60,315 $ 53,540 Non-GAAP operating margin (*) 23 % 26 % Non-GAAP net income (*) $ 51,842 $ 45,030 Non-GAAP net income per share - diluted $ 0.18 $ 0.16 Non-GAAP shares outstanding - diluted 290,024 288,988 Free Cash Flow (*) $ 136,192 $ 80,518 * 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 $40 million on ARR, up from prior quarter expectations of $20 million. Total FY23 FX impact is expected to be approximately $47 million on Revenue, up from prior quarter expectations of $33 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 August 3, 2022, Dynatrace is issuing guidance for the second quarter and updating guidance for full year fiscal 2023 as follows: (In millions, except per share data) Q2 Fiscal 2023 Guidance Total revenue $272 - $275 As reported 20% - 21% Constant currency 26% - 28% Subscription revenue $255 - $257 As reported 20% - 21% Constant currency 26% - 27% Non-GAAP operating income $62 - $64.5 Non-GAAP operating margin 23% - 23.5% Non-GAAP net income $52.5 - $55 Non-GAAP net income per diluted share $0.18 - $0.19 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 $1,213 - $1,226 $1,250 - $1,265 $(38) As reported 22% - 23% 26% - 27% -400 bps Constant currency 26% - 27% 28% - 29% -200 bps Adjusted ARR growth 27% - 28% 29% - 30% -200 bps Total revenue $1,125 - $1,136 $1,142 - $1,158 $(20) As reported 21% - 22% 23% - 25% -250 bps Constant currency 26% - 27% 27% - 28% -100 bps Subscription revenue $1,053 - $1,062 $1,071 - $1,086 $(21) As reported 21% - 22% 23% - 25% -250 bps Constant currency 26% - 27% 27% - 28% -100 bps Non-GAAP operating income $252 - $261 $257 - $266 $(5) Non-GAAP operating margin 22.5% - 23% 22.5% - 23% 0 bps Non-GAAP net income $214.5 - $223 $216 - $225 $(2) Non-GAAP net income per diluted share $0.73 - $0.76 $0.74 - $0.77 $(0.01) Diluted weighted average shares outstanding 292 - 294 292 - 294 0 Free cash flow $310 - $325 $330 - $345 $(20) Free cash flow margin 27.5% - 28.5% 29% - 30% -150 bps Our guidance is based on foreign exchange rates as of the end of July. 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, August 3, 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# 13731310. 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 August 17, 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# 13731310. 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. 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 second 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 June 30, 2022 2021 Revenue: Subscription $ 249,558 $ 196,520 License — 50 Service 17,715 13,170 Total revenue 267,273 209,740 Cost of revenue: Cost of subscription 32,738 24,982 Cost of service 15,168 10,021 Amortization of acquired technology 3,892 3,830 Total cost of revenue 51,798 38,833 Gross profit 215,475 170,907 Operating expenses: Research and development 48,482 34,725 Sales and marketing 105,015 80,482 General and administrative 36,321 26,922 Amortization of other intangibles 6,573 7,540 Restructuring and other (10 ) 26 Total operating expenses 196,381 149,695 Income from operations 19,094 21,212 Interest expense, net (2,175 ) (2,857 ) Other (expense) income, net (2,250 ) 1,311 Income before income taxes 14,669 19,666 Income tax expense (12,555 ) (6,372 ) Net income $ 2,114 $ 13,294 Net income per share: Basic $ 0.01 $ 0.05 Diluted $ 0.01 $ 0.05 Weighted average shares outstanding: Basic 286,203 282,661 Diluted 290,024 288,988 UNAUDITED SHARE-BASED COMPENSATION Three Months Ended June 30, 2022 2021 Cost of revenue $ 3,890 $ 2,652 Research and development 7,285 3,967 Sales and marketing 10,076 7,608 General and administrative 7,444 5,025 Total share-based compensation $ 28,695 $ 19,252 DYNATRACE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) June 30, 2022 March 31, 2022 (unaudited) Assets Current assets: Cash and cash equivalents $ 571,345 $ 462,967 Accounts receivable, net 191,836 350,666 Deferred commissions, current 61,182 62,601 Prepaid expenses and other current assets 35,439 72,188 Total current assets 859,802 948,422 Property and equipment, net 45,782 45,271 Operating lease right-of-use assets, net 53,369 58,849 Goodwill 1,280,511 1,281,876 Other intangible assets, net 95,008 105,736 Deferred tax assets, net 26,368 28,106 Deferred commissions, non-current 59,245 63,435 Other assets 10,564 9,615 Total assets $ 2,430,649 $ 2,541,310 Liabilities and shareholders' equity Current liabilities: Accounts payable $ 4,795 $ 22,715 Accrued expenses, current 114,214 141,556 Deferred revenue, current 617,969 688,554 Operating lease liabilities, current 12,402 12,774 Total current liabilities 749,380 865,599 Deferred revenue, non-current 16,352 25,783 Accrued expenses, non-current 28,182 19,409 Operating lease liabilities, non-current 46,682 52,070 Deferred tax liabilities — 85 Long-term debt, net 244,427 273,918 Total liabilities 1,085,023 1,236,864 Shareholders' equity: Common shares, $0.001 par value, 600,000,000 shares authorized, 287,259,306 and 286,053,276 shares issued and outstanding at June 30, 2022 and March 31, 2022, respectively 287 286 Additional paid-in capital 1,830,782 1,792,197 Accumulated deficit (459,234 ) (461,348 ) Accumulated other comprehensive loss (26,209 ) (26,689 ) Total shareholders' equity 1,345,626 1,304,446 Total liabilities and shareholders' equity $ 2,430,649 $ 2,541,310 DYNATRACE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited – In thousands) Three Months Ended June 30, 2022 2021 Cash flows from operating activities: Net income $ 2,114 $ 13,294 Adjustments to reconcile net income to cash provided by operations: Depreciation 2,798 2,475 Amortization 10,571 11,512 Share-based compensation 28,695 19,252 Other 2,748 (796 ) Net change in operating assets and liabilities: Accounts receivable 151,404 110,079 Deferred commissions 2,079 (2,631 ) Prepaid expenses and other assets 33,096 (1,453 ) Accounts payable and accrued expenses (29,815 ) (27,376 ) Operating leases, net (142 ) 131 Deferred revenue (60,450 ) (41,015 ) Net cash provided by operating activities 143,098 83,472 Cash flows from investing activities: Purchase of property and equipment (6,906 ) (2,954 ) Acquisition of businesses, net of cash acquired — (3,543 ) Net cash used in investing activities (6,906 ) (6,497 ) Cash flows from financing activities: Repayment of term loans (30,000 ) (30,000 ) Proceeds from employee stock purchase plan 8,627 6,593 Proceeds from exercise of stock options 1,275 7,886 Equity repurchases (11 ) (14 ) Net cash used in financing activities (20,109 ) (15,535 ) Effect of exchange rates on cash and cash equivalents (7,705 ) 816 Net increase in cash and cash equivalents 108,378 62,256 Cash and cash equivalents, beginning of period 462,967 324,962 Cash and cash equivalents, end of period $ 571,345 $ 387,218 DYNATRACE, INC. GAAP to Non-GAAP Reconciliations (Unaudited - In thousands, except percentages) Three Months Ended June 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 $ 51,798 $ (3,890 ) $ (284 ) $ (3,892 ) $ (350 ) $ 43,382 Gross profit 215,475 3,890 284 3,892 350 223,891 Gross margin 81 % 84 % Research and development 48,482 (7,285 ) (549 ) — — 40,648 Sales and marketing 105,015 (10,076 ) (598 ) — — 94,341 General and administrative 36,321 (7,444 ) (211 ) — (79 ) 28,587 Amortization of other intangibles 6,573 — — (6,573 ) — — Restructuring and other (10 ) — — — 10 — Operating income $ 19,094 $ 28,695 $ 1,642 $ 10,465 $ 419 $ 60,315 Operating margin 7 % 23 % Three Months Ended June 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 $ 38,833 $ (2,652 ) $ (315 ) $ (3,830 ) $ — $ 32,036 Gross profit 170,907 2,652 315 3,830 — 177,704 Gross margin 81 % 85 % Research and development 34,725 (3,967 ) (627 ) — — 30,131 Sales and marketing 80,482 (7,608 ) (585 ) — — 72,289 General and administrative 26,922 (5,025 ) (200 ) — 47 21,744 Amortization of other intangibles 7,540 — — (7,540 ) — — Restructuring and other 26 — — — (26 ) — Operating income $ 21,212 $ 19,252 $ 1,727 $ 11,370 $ (21 ) $ 53,540 Operating margin 10 % 26 % DYNATRACE, INC. GAAP to Non-GAAP Reconciliations (Unaudited - In thousands, except per share data) Three Months Ended June 30, 2022 2021 Non-GAAP net income: Net income $ 2,114 $ 13,294 Income tax expense 12,555 6,372 Non-GAAP effective cash tax (6,407 ) (6,140 ) Interest expense, net 2,175 2,857 Cash paid for interest (2,066 ) (2,370 ) Share-based compensation 28,695 19,252 Employer payroll taxes on employee stock transactions 1,642 1,727 Amortization of other intangibles 6,573 7,540 Amortization of acquired technology 3,892 3,830 Transaction, restructuring, and other 419 (21 ) Loss (gain) on currency translation 2,250 (1,311 ) Non-GAAP net income $ 51,842 $ 45,030 Share count: Weighted-average shares outstanding - basic 286,203 282,661 Weighted-average shares outstanding - diluted 290,024 288,988 Shares used in non-GAAP per share calculations: Weighted-average shares outstanding - basic 286,203 282,661 Weighted-average shares outstanding - diluted 290,024 288,988 Net income per share: Net income per share - basic $ 0.01 $ 0.05 Net income per share - diluted $ 0.01 $ 0.05 Non-GAAP net income per share - basic $ 0.18 $ 0.16 Non-GAAP net income per share - diluted $ 0.18 $ 0.16 Three Months Ended June 30, 2022 2021 Free Cash Flow ("FCF"): Net cash provided by operating activities $ 143,098 $ 83,472 Purchase of property and equipment (6,906 ) (2,954 ) FCF $ 136,192 $ 80,518 View source version on businesswire.com: https://www.businesswire.com/news/home/20220803005057/en/Contacts Investor Contact: Noelle Faris VP, Investor Relations Noelle.Faris@dynatrace.com Media Relations: Jerome Stewart VP, Communications Jerome.Stewart@dynatrace.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. 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Dynatrace Reports First Quarter of Fiscal Year 2023 Financial Results By: Dynatrace via Business Wire August 03, 2022 at 06:30 AM EDT Delivers Adjusted ARR growth of 34% year-over-year Software intelligence company Dynatrace (NYSE: DT) today released financial results for the first quarter of its fiscal 2023 ended June 30, 2022. “Q1 was yet another quarter of solid execution with balanced growth and profitability highlighting the durability of our business in the current environment,” said Rick McConnell, Chief Executive Officer. “We continue to see digital transformation initiatives with clear and measurable ROI as a top priority for the global 15,000 organizations that we target. Automation and AIOps are requirements for companies looking to do more with less time, resource, and cost. Our platform is rooted in these capabilities, which differentiate us from our competitors and position us well for continued growth and success in the future. First Quarter Fiscal 2023 and Other Recent Business Highlights: All growth rates are compared to the first quarter of fiscal 2022 unless otherwise noted. Financial Highlights: Total ARR of $1,031 million, Adjusted ARR growth of 34% year-over-year Total Revenue of $267 million, up 32% on a constant currency basis Subscription Revenue of $250 million, up 32% on a constant currency basis Operating Income of $19 million and Non-GAAP Operating Income of $60 million EPS of $0.01 and Non-GAAP EPS of $0.18, both on a dilutive basis Business Highlights: Market Leadership: Named Leader in the 2022 Gartner Magic Quadrant for APM and Observability. Ranked highest in 4 of 6 Gartner Critical Capabilities for APM and Observability. Platform Innovation: Extended the Dynatrace® platform with automatic release validation capabilities and unified its log analytics and digital experience monitoring (DEM) capabilities, enabling development teams to ensure the highest quality user experience and accelerate innovation. Go-to-market Success: Added 135 new logos to the Dynatrace® platform in the first quarter, consistent with the first quarter of last fiscal year. Delivered a net expansion rate above 120% for the seventeenth consecutive quarter. On a trailing-twelve-month basis, business transacted through hyperscaler partnerships, including AWS, Google, Microsoft, is nearly 3x compared to the same period last year. First Quarter 2023 Financial Highlights (Unaudited – In thousands, except per share data) Three Months Ended June 30, 2022 2021 Key Operating Metric: Annualized recurring revenue $ 1,031,284 $ 823,222 Year-over-Year Increase 25 % Year-over-Year Increase - constant currency 31 % Adjusted ARR Growth 34 % Revenue: Total revenue $ 267,273 $ 209,740 Year-over-Year Increase 27 % Year-over-Year Increase - constant currency (*) 32 % Subscription revenue $ 249,558 $ 196,520 Year-over-Year Increase 27 % Year-over-Year Increase - constant currency (*) 32 % Non-GAAP Financial Measures: Non-GAAP operating income (*) $ 60,315 $ 53,540 Non-GAAP operating margin (*) 23 % 26 % Non-GAAP net income (*) $ 51,842 $ 45,030 Non-GAAP net income per share - diluted $ 0.18 $ 0.16 Non-GAAP shares outstanding - diluted 290,024 288,988 Free Cash Flow (*) $ 136,192 $ 80,518 * 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 $40 million on ARR, up from prior quarter expectations of $20 million. Total FY23 FX impact is expected to be approximately $47 million on Revenue, up from prior quarter expectations of $33 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 August 3, 2022, Dynatrace is issuing guidance for the second quarter and updating guidance for full year fiscal 2023 as follows: (In millions, except per share data) Q2 Fiscal 2023 Guidance Total revenue $272 - $275 As reported 20% - 21% Constant currency 26% - 28% Subscription revenue $255 - $257 As reported 20% - 21% Constant currency 26% - 27% Non-GAAP operating income $62 - $64.5 Non-GAAP operating margin 23% - 23.5% Non-GAAP net income $52.5 - $55 Non-GAAP net income per diluted share $0.18 - $0.19 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 $1,213 - $1,226 $1,250 - $1,265 $(38) As reported 22% - 23% 26% - 27% -400 bps Constant currency 26% - 27% 28% - 29% -200 bps Adjusted ARR growth 27% - 28% 29% - 30% -200 bps Total revenue $1,125 - $1,136 $1,142 - $1,158 $(20) As reported 21% - 22% 23% - 25% -250 bps Constant currency 26% - 27% 27% - 28% -100 bps Subscription revenue $1,053 - $1,062 $1,071 - $1,086 $(21) As reported 21% - 22% 23% - 25% -250 bps Constant currency 26% - 27% 27% - 28% -100 bps Non-GAAP operating income $252 - $261 $257 - $266 $(5) Non-GAAP operating margin 22.5% - 23% 22.5% - 23% 0 bps Non-GAAP net income $214.5 - $223 $216 - $225 $(2) Non-GAAP net income per diluted share $0.73 - $0.76 $0.74 - $0.77 $(0.01) Diluted weighted average shares outstanding 292 - 294 292 - 294 0 Free cash flow $310 - $325 $330 - $345 $(20) Free cash flow margin 27.5% - 28.5% 29% - 30% -150 bps Our guidance is based on foreign exchange rates as of the end of July. 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, August 3, 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# 13731310. 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 August 17, 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# 13731310. 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. 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 second 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 June 30, 2022 2021 Revenue: Subscription $ 249,558 $ 196,520 License — 50 Service 17,715 13,170 Total revenue 267,273 209,740 Cost of revenue: Cost of subscription 32,738 24,982 Cost of service 15,168 10,021 Amortization of acquired technology 3,892 3,830 Total cost of revenue 51,798 38,833 Gross profit 215,475 170,907 Operating expenses: Research and development 48,482 34,725 Sales and marketing 105,015 80,482 General and administrative 36,321 26,922 Amortization of other intangibles 6,573 7,540 Restructuring and other (10 ) 26 Total operating expenses 196,381 149,695 Income from operations 19,094 21,212 Interest expense, net (2,175 ) (2,857 ) Other (expense) income, net (2,250 ) 1,311 Income before income taxes 14,669 19,666 Income tax expense (12,555 ) (6,372 ) Net income $ 2,114 $ 13,294 Net income per share: Basic $ 0.01 $ 0.05 Diluted $ 0.01 $ 0.05 Weighted average shares outstanding: Basic 286,203 282,661 Diluted 290,024 288,988 UNAUDITED SHARE-BASED COMPENSATION Three Months Ended June 30, 2022 2021 Cost of revenue $ 3,890 $ 2,652 Research and development 7,285 3,967 Sales and marketing 10,076 7,608 General and administrative 7,444 5,025 Total share-based compensation $ 28,695 $ 19,252 DYNATRACE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) June 30, 2022 March 31, 2022 (unaudited) Assets Current assets: Cash and cash equivalents $ 571,345 $ 462,967 Accounts receivable, net 191,836 350,666 Deferred commissions, current 61,182 62,601 Prepaid expenses and other current assets 35,439 72,188 Total current assets 859,802 948,422 Property and equipment, net 45,782 45,271 Operating lease right-of-use assets, net 53,369 58,849 Goodwill 1,280,511 1,281,876 Other intangible assets, net 95,008 105,736 Deferred tax assets, net 26,368 28,106 Deferred commissions, non-current 59,245 63,435 Other assets 10,564 9,615 Total assets $ 2,430,649 $ 2,541,310 Liabilities and shareholders' equity Current liabilities: Accounts payable $ 4,795 $ 22,715 Accrued expenses, current 114,214 141,556 Deferred revenue, current 617,969 688,554 Operating lease liabilities, current 12,402 12,774 Total current liabilities 749,380 865,599 Deferred revenue, non-current 16,352 25,783 Accrued expenses, non-current 28,182 19,409 Operating lease liabilities, non-current 46,682 52,070 Deferred tax liabilities — 85 Long-term debt, net 244,427 273,918 Total liabilities 1,085,023 1,236,864 Shareholders' equity: Common shares, $0.001 par value, 600,000,000 shares authorized, 287,259,306 and 286,053,276 shares issued and outstanding at June 30, 2022 and March 31, 2022, respectively 287 286 Additional paid-in capital 1,830,782 1,792,197 Accumulated deficit (459,234 ) (461,348 ) Accumulated other comprehensive loss (26,209 ) (26,689 ) Total shareholders' equity 1,345,626 1,304,446 Total liabilities and shareholders' equity $ 2,430,649 $ 2,541,310 DYNATRACE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited – In thousands) Three Months Ended June 30, 2022 2021 Cash flows from operating activities: Net income $ 2,114 $ 13,294 Adjustments to reconcile net income to cash provided by operations: Depreciation 2,798 2,475 Amortization 10,571 11,512 Share-based compensation 28,695 19,252 Other 2,748 (796 ) Net change in operating assets and liabilities: Accounts receivable 151,404 110,079 Deferred commissions 2,079 (2,631 ) Prepaid expenses and other assets 33,096 (1,453 ) Accounts payable and accrued expenses (29,815 ) (27,376 ) Operating leases, net (142 ) 131 Deferred revenue (60,450 ) (41,015 ) Net cash provided by operating activities 143,098 83,472 Cash flows from investing activities: Purchase of property and equipment (6,906 ) (2,954 ) Acquisition of businesses, net of cash acquired — (3,543 ) Net cash used in investing activities (6,906 ) (6,497 ) Cash flows from financing activities: Repayment of term loans (30,000 ) (30,000 ) Proceeds from employee stock purchase plan 8,627 6,593 Proceeds from exercise of stock options 1,275 7,886 Equity repurchases (11 ) (14 ) Net cash used in financing activities (20,109 ) (15,535 ) Effect of exchange rates on cash and cash equivalents (7,705 ) 816 Net increase in cash and cash equivalents 108,378 62,256 Cash and cash equivalents, beginning of period 462,967 324,962 Cash and cash equivalents, end of period $ 571,345 $ 387,218 DYNATRACE, INC. GAAP to Non-GAAP Reconciliations (Unaudited - In thousands, except percentages) Three Months Ended June 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 $ 51,798 $ (3,890 ) $ (284 ) $ (3,892 ) $ (350 ) $ 43,382 Gross profit 215,475 3,890 284 3,892 350 223,891 Gross margin 81 % 84 % Research and development 48,482 (7,285 ) (549 ) — — 40,648 Sales and marketing 105,015 (10,076 ) (598 ) — — 94,341 General and administrative 36,321 (7,444 ) (211 ) — (79 ) 28,587 Amortization of other intangibles 6,573 — — (6,573 ) — — Restructuring and other (10 ) — — — 10 — Operating income $ 19,094 $ 28,695 $ 1,642 $ 10,465 $ 419 $ 60,315 Operating margin 7 % 23 % Three Months Ended June 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 $ 38,833 $ (2,652 ) $ (315 ) $ (3,830 ) $ — $ 32,036 Gross profit 170,907 2,652 315 3,830 — 177,704 Gross margin 81 % 85 % Research and development 34,725 (3,967 ) (627 ) — — 30,131 Sales and marketing 80,482 (7,608 ) (585 ) — — 72,289 General and administrative 26,922 (5,025 ) (200 ) — 47 21,744 Amortization of other intangibles 7,540 — — (7,540 ) — — Restructuring and other 26 — — — (26 ) — Operating income $ 21,212 $ 19,252 $ 1,727 $ 11,370 $ (21 ) $ 53,540 Operating margin 10 % 26 % DYNATRACE, INC. GAAP to Non-GAAP Reconciliations (Unaudited - In thousands, except per share data) Three Months Ended June 30, 2022 2021 Non-GAAP net income: Net income $ 2,114 $ 13,294 Income tax expense 12,555 6,372 Non-GAAP effective cash tax (6,407 ) (6,140 ) Interest expense, net 2,175 2,857 Cash paid for interest (2,066 ) (2,370 ) Share-based compensation 28,695 19,252 Employer payroll taxes on employee stock transactions 1,642 1,727 Amortization of other intangibles 6,573 7,540 Amortization of acquired technology 3,892 3,830 Transaction, restructuring, and other 419 (21 ) Loss (gain) on currency translation 2,250 (1,311 ) Non-GAAP net income $ 51,842 $ 45,030 Share count: Weighted-average shares outstanding - basic 286,203 282,661 Weighted-average shares outstanding - diluted 290,024 288,988 Shares used in non-GAAP per share calculations: Weighted-average shares outstanding - basic 286,203 282,661 Weighted-average shares outstanding - diluted 290,024 288,988 Net income per share: Net income per share - basic $ 0.01 $ 0.05 Net income per share - diluted $ 0.01 $ 0.05 Non-GAAP net income per share - basic $ 0.18 $ 0.16 Non-GAAP net income per share - diluted $ 0.18 $ 0.16 Three Months Ended June 30, 2022 2021 Free Cash Flow ("FCF"): Net cash provided by operating activities $ 143,098 $ 83,472 Purchase of property and equipment (6,906 ) (2,954 ) FCF $ 136,192 $ 80,518 View source version on businesswire.com: https://www.businesswire.com/news/home/20220803005057/en/Contacts Investor Contact: Noelle Faris VP, Investor Relations Noelle.Faris@dynatrace.com Media Relations: Jerome Stewart VP, Communications Jerome.Stewart@dynatrace.com
Software intelligence company Dynatrace (NYSE: DT) today released financial results for the first quarter of its fiscal 2023 ended June 30, 2022. “Q1 was yet another quarter of solid execution with balanced growth and profitability highlighting the durability of our business in the current environment,” said Rick McConnell, Chief Executive Officer. “We continue to see digital transformation initiatives with clear and measurable ROI as a top priority for the global 15,000 organizations that we target. Automation and AIOps are requirements for companies looking to do more with less time, resource, and cost. Our platform is rooted in these capabilities, which differentiate us from our competitors and position us well for continued growth and success in the future. First Quarter Fiscal 2023 and Other Recent Business Highlights: All growth rates are compared to the first quarter of fiscal 2022 unless otherwise noted. Financial Highlights: Total ARR of $1,031 million, Adjusted ARR growth of 34% year-over-year Total Revenue of $267 million, up 32% on a constant currency basis Subscription Revenue of $250 million, up 32% on a constant currency basis Operating Income of $19 million and Non-GAAP Operating Income of $60 million EPS of $0.01 and Non-GAAP EPS of $0.18, both on a dilutive basis Business Highlights: Market Leadership: Named Leader in the 2022 Gartner Magic Quadrant for APM and Observability. Ranked highest in 4 of 6 Gartner Critical Capabilities for APM and Observability. Platform Innovation: Extended the Dynatrace® platform with automatic release validation capabilities and unified its log analytics and digital experience monitoring (DEM) capabilities, enabling development teams to ensure the highest quality user experience and accelerate innovation. Go-to-market Success: Added 135 new logos to the Dynatrace® platform in the first quarter, consistent with the first quarter of last fiscal year. Delivered a net expansion rate above 120% for the seventeenth consecutive quarter. On a trailing-twelve-month basis, business transacted through hyperscaler partnerships, including AWS, Google, Microsoft, is nearly 3x compared to the same period last year. First Quarter 2023 Financial Highlights (Unaudited – In thousands, except per share data) Three Months Ended June 30, 2022 2021 Key Operating Metric: Annualized recurring revenue $ 1,031,284 $ 823,222 Year-over-Year Increase 25 % Year-over-Year Increase - constant currency 31 % Adjusted ARR Growth 34 % Revenue: Total revenue $ 267,273 $ 209,740 Year-over-Year Increase 27 % Year-over-Year Increase - constant currency (*) 32 % Subscription revenue $ 249,558 $ 196,520 Year-over-Year Increase 27 % Year-over-Year Increase - constant currency (*) 32 % Non-GAAP Financial Measures: Non-GAAP operating income (*) $ 60,315 $ 53,540 Non-GAAP operating margin (*) 23 % 26 % Non-GAAP net income (*) $ 51,842 $ 45,030 Non-GAAP net income per share - diluted $ 0.18 $ 0.16 Non-GAAP shares outstanding - diluted 290,024 288,988 Free Cash Flow (*) $ 136,192 $ 80,518 * 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 $40 million on ARR, up from prior quarter expectations of $20 million. Total FY23 FX impact is expected to be approximately $47 million on Revenue, up from prior quarter expectations of $33 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 August 3, 2022, Dynatrace is issuing guidance for the second quarter and updating guidance for full year fiscal 2023 as follows: (In millions, except per share data) Q2 Fiscal 2023 Guidance Total revenue $272 - $275 As reported 20% - 21% Constant currency 26% - 28% Subscription revenue $255 - $257 As reported 20% - 21% Constant currency 26% - 27% Non-GAAP operating income $62 - $64.5 Non-GAAP operating margin 23% - 23.5% Non-GAAP net income $52.5 - $55 Non-GAAP net income per diluted share $0.18 - $0.19 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 $1,213 - $1,226 $1,250 - $1,265 $(38) As reported 22% - 23% 26% - 27% -400 bps Constant currency 26% - 27% 28% - 29% -200 bps Adjusted ARR growth 27% - 28% 29% - 30% -200 bps Total revenue $1,125 - $1,136 $1,142 - $1,158 $(20) As reported 21% - 22% 23% - 25% -250 bps Constant currency 26% - 27% 27% - 28% -100 bps Subscription revenue $1,053 - $1,062 $1,071 - $1,086 $(21) As reported 21% - 22% 23% - 25% -250 bps Constant currency 26% - 27% 27% - 28% -100 bps Non-GAAP operating income $252 - $261 $257 - $266 $(5) Non-GAAP operating margin 22.5% - 23% 22.5% - 23% 0 bps Non-GAAP net income $214.5 - $223 $216 - $225 $(2) Non-GAAP net income per diluted share $0.73 - $0.76 $0.74 - $0.77 $(0.01) Diluted weighted average shares outstanding 292 - 294 292 - 294 0 Free cash flow $310 - $325 $330 - $345 $(20) Free cash flow margin 27.5% - 28.5% 29% - 30% -150 bps Our guidance is based on foreign exchange rates as of the end of July. 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, August 3, 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# 13731310. 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 August 17, 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# 13731310. 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. 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 second 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 June 30, 2022 2021 Revenue: Subscription $ 249,558 $ 196,520 License — 50 Service 17,715 13,170 Total revenue 267,273 209,740 Cost of revenue: Cost of subscription 32,738 24,982 Cost of service 15,168 10,021 Amortization of acquired technology 3,892 3,830 Total cost of revenue 51,798 38,833 Gross profit 215,475 170,907 Operating expenses: Research and development 48,482 34,725 Sales and marketing 105,015 80,482 General and administrative 36,321 26,922 Amortization of other intangibles 6,573 7,540 Restructuring and other (10 ) 26 Total operating expenses 196,381 149,695 Income from operations 19,094 21,212 Interest expense, net (2,175 ) (2,857 ) Other (expense) income, net (2,250 ) 1,311 Income before income taxes 14,669 19,666 Income tax expense (12,555 ) (6,372 ) Net income $ 2,114 $ 13,294 Net income per share: Basic $ 0.01 $ 0.05 Diluted $ 0.01 $ 0.05 Weighted average shares outstanding: Basic 286,203 282,661 Diluted 290,024 288,988 UNAUDITED SHARE-BASED COMPENSATION Three Months Ended June 30, 2022 2021 Cost of revenue $ 3,890 $ 2,652 Research and development 7,285 3,967 Sales and marketing 10,076 7,608 General and administrative 7,444 5,025 Total share-based compensation $ 28,695 $ 19,252 DYNATRACE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) June 30, 2022 March 31, 2022 (unaudited) Assets Current assets: Cash and cash equivalents $ 571,345 $ 462,967 Accounts receivable, net 191,836 350,666 Deferred commissions, current 61,182 62,601 Prepaid expenses and other current assets 35,439 72,188 Total current assets 859,802 948,422 Property and equipment, net 45,782 45,271 Operating lease right-of-use assets, net 53,369 58,849 Goodwill 1,280,511 1,281,876 Other intangible assets, net 95,008 105,736 Deferred tax assets, net 26,368 28,106 Deferred commissions, non-current 59,245 63,435 Other assets 10,564 9,615 Total assets $ 2,430,649 $ 2,541,310 Liabilities and shareholders' equity Current liabilities: Accounts payable $ 4,795 $ 22,715 Accrued expenses, current 114,214 141,556 Deferred revenue, current 617,969 688,554 Operating lease liabilities, current 12,402 12,774 Total current liabilities 749,380 865,599 Deferred revenue, non-current 16,352 25,783 Accrued expenses, non-current 28,182 19,409 Operating lease liabilities, non-current 46,682 52,070 Deferred tax liabilities — 85 Long-term debt, net 244,427 273,918 Total liabilities 1,085,023 1,236,864 Shareholders' equity: Common shares, $0.001 par value, 600,000,000 shares authorized, 287,259,306 and 286,053,276 shares issued and outstanding at June 30, 2022 and March 31, 2022, respectively 287 286 Additional paid-in capital 1,830,782 1,792,197 Accumulated deficit (459,234 ) (461,348 ) Accumulated other comprehensive loss (26,209 ) (26,689 ) Total shareholders' equity 1,345,626 1,304,446 Total liabilities and shareholders' equity $ 2,430,649 $ 2,541,310 DYNATRACE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited – In thousands) Three Months Ended June 30, 2022 2021 Cash flows from operating activities: Net income $ 2,114 $ 13,294 Adjustments to reconcile net income to cash provided by operations: Depreciation 2,798 2,475 Amortization 10,571 11,512 Share-based compensation 28,695 19,252 Other 2,748 (796 ) Net change in operating assets and liabilities: Accounts receivable 151,404 110,079 Deferred commissions 2,079 (2,631 ) Prepaid expenses and other assets 33,096 (1,453 ) Accounts payable and accrued expenses (29,815 ) (27,376 ) Operating leases, net (142 ) 131 Deferred revenue (60,450 ) (41,015 ) Net cash provided by operating activities 143,098 83,472 Cash flows from investing activities: Purchase of property and equipment (6,906 ) (2,954 ) Acquisition of businesses, net of cash acquired — (3,543 ) Net cash used in investing activities (6,906 ) (6,497 ) Cash flows from financing activities: Repayment of term loans (30,000 ) (30,000 ) Proceeds from employee stock purchase plan 8,627 6,593 Proceeds from exercise of stock options 1,275 7,886 Equity repurchases (11 ) (14 ) Net cash used in financing activities (20,109 ) (15,535 ) Effect of exchange rates on cash and cash equivalents (7,705 ) 816 Net increase in cash and cash equivalents 108,378 62,256 Cash and cash equivalents, beginning of period 462,967 324,962 Cash and cash equivalents, end of period $ 571,345 $ 387,218 DYNATRACE, INC. GAAP to Non-GAAP Reconciliations (Unaudited - In thousands, except percentages) Three Months Ended June 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 $ 51,798 $ (3,890 ) $ (284 ) $ (3,892 ) $ (350 ) $ 43,382 Gross profit 215,475 3,890 284 3,892 350 223,891 Gross margin 81 % 84 % Research and development 48,482 (7,285 ) (549 ) — — 40,648 Sales and marketing 105,015 (10,076 ) (598 ) — — 94,341 General and administrative 36,321 (7,444 ) (211 ) — (79 ) 28,587 Amortization of other intangibles 6,573 — — (6,573 ) — — Restructuring and other (10 ) — — — 10 — Operating income $ 19,094 $ 28,695 $ 1,642 $ 10,465 $ 419 $ 60,315 Operating margin 7 % 23 % Three Months Ended June 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 $ 38,833 $ (2,652 ) $ (315 ) $ (3,830 ) $ — $ 32,036 Gross profit 170,907 2,652 315 3,830 — 177,704 Gross margin 81 % 85 % Research and development 34,725 (3,967 ) (627 ) — — 30,131 Sales and marketing 80,482 (7,608 ) (585 ) — — 72,289 General and administrative 26,922 (5,025 ) (200 ) — 47 21,744 Amortization of other intangibles 7,540 — — (7,540 ) — — Restructuring and other 26 — — — (26 ) — Operating income $ 21,212 $ 19,252 $ 1,727 $ 11,370 $ (21 ) $ 53,540 Operating margin 10 % 26 % DYNATRACE, INC. GAAP to Non-GAAP Reconciliations (Unaudited - In thousands, except per share data) Three Months Ended June 30, 2022 2021 Non-GAAP net income: Net income $ 2,114 $ 13,294 Income tax expense 12,555 6,372 Non-GAAP effective cash tax (6,407 ) (6,140 ) Interest expense, net 2,175 2,857 Cash paid for interest (2,066 ) (2,370 ) Share-based compensation 28,695 19,252 Employer payroll taxes on employee stock transactions 1,642 1,727 Amortization of other intangibles 6,573 7,540 Amortization of acquired technology 3,892 3,830 Transaction, restructuring, and other 419 (21 ) Loss (gain) on currency translation 2,250 (1,311 ) Non-GAAP net income $ 51,842 $ 45,030 Share count: Weighted-average shares outstanding - basic 286,203 282,661 Weighted-average shares outstanding - diluted 290,024 288,988 Shares used in non-GAAP per share calculations: Weighted-average shares outstanding - basic 286,203 282,661 Weighted-average shares outstanding - diluted 290,024 288,988 Net income per share: Net income per share - basic $ 0.01 $ 0.05 Net income per share - diluted $ 0.01 $ 0.05 Non-GAAP net income per share - basic $ 0.18 $ 0.16 Non-GAAP net income per share - diluted $ 0.18 $ 0.16 Three Months Ended June 30, 2022 2021 Free Cash Flow ("FCF"): Net cash provided by operating activities $ 143,098 $ 83,472 Purchase of property and equipment (6,906 ) (2,954 ) FCF $ 136,192 $ 80,518 View source version on businesswire.com: https://www.businesswire.com/news/home/20220803005057/en/
Investor Contact: Noelle Faris VP, Investor Relations Noelle.Faris@dynatrace.com Media Relations: Jerome Stewart VP, Communications Jerome.Stewart@dynatrace.com