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Dynatrace Reports Third Quarter of Fiscal Year 2023 Financial Results

Delivers Adjusted ARR growth of 29% year-over-year

Software intelligence company Dynatrace (NYSE: DT) today released financial results for the third quarter of its fiscal 2023 ended December 31, 2022.

“Dynatrace delivered another strong quarter, beating expectations across the board and demonstrating the durability of our business model that supports a balance of growth and profitability,” said Rick McConnell, Chief Executive Officer. “The secular tailwinds of digital transformation and particularly cloud modernization are driving an explosion in data, making observability increasingly mandatory across all industries as companies look to realize greater value from their IT spend. We remain focused on driving innovation to meet customers' evolving needs, managing the business prudently, and investing thoughtfully in strategic priorities.”

Third Quarter Fiscal 2023 and Other Recent Business Highlights:

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

Financial Highlights:

  • Total ARR of $1,163 million, Adjusted ARR growth of 29% year-over-year
  • Total Revenue of $297 million, up 29% on a constant currency basis
  • Subscription Revenue of $279 million, up 29% on a constant currency basis
  • Operating Income of $34 million and Non-GAAP Operating Income of $81 million
  • EPS of $0.05 and Non-GAAP EPS of $0.25, both on a dilutive basis

Business Highlights:

  • Analyst and Customer recognition: Dynatrace was named a Leader in The Forrester Wave™: Artificial Intelligence for IT Operations (AIOps), Q4 2022 report with the top scores in both the Current Offering and Strategy categories. In addition, Dynatrace is a Leader in the Gartner® 2022 Magic Quadrant™ for Application Performance Monitoring and Observability1. In the last quarter, we were also named a Customers’ Choice in the 2022 Gartner Peer Insights™ ‘Voice of the Customer’: Application Performance Monitoring and Observability2. We are the only provider with Industry and Customer recognition in this market.
  • Expanded partnerships: Dynatrace is working closely with ten strategic Global System Integrators (GSIs) to help customers digitally transform their businesses and reduce cloud complexity. We continue to see a robust technical readiness investment from our key strategic GSIs resulting in over 500 individuals trained or certified on the Dynatrace platform. We are beginning to see early traction with these partnerships, including a recent seven-figure deal in Latin America. And as more workloads move to the cloud, we continue to gain leverage from the frictionless go-to-market motion of our hyperscaler relationships. On a trailing-twelve-month basis, business transacted through these partners, including AWS, Google Cloud, and Microsoft, is more than 1.6x compared to the same period last year.
  • Ongoing platform expansion: We expanded the Dynatrace Grail data lakehouse to power business analytics. This builds on existing support for log analytics and management and is designed to drive accurate, reliable, and cost-effective automation and analytics covering a wide range of business use cases, including order fulfillment, customer service activation, and the impact on revenue from new digital services.

Third Quarter 2023 Financial Highlights

(Unaudited – In thousands, except per share data)

 

 

Three Months Ended

December 31,

 

2022

 

2021

Key Operating Metric:

 

 

Annualized recurring revenue

$

1,162,591

 

$

929,906

 

Year-over-Year Increase

 

25

%

 

Year-over-Year Increase - constant currency

 

28

%

 

Adjusted ARR Growth

 

29

%

 

 

 

 

Revenue:

 

 

Total revenue

$

297,456

 

$

240,766

 

Year-over-Year Increase

 

24

%

 

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

 

29

%

 

 

 

 

Subscription revenue

$

279,152

 

$

226,290

 

Year-over-Year Increase

 

23

%

 

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

 

29

%

 

 

 

 

GAAP Financial Measures:

 

 

GAAP operating income

$

33,887

 

$

21,215

 

GAAP operating margin

 

11

%

 

9

%

 

 

 

GAAP net income

$

15,026

 

$

14,587

 

 

 

 

GAAP net income per share - diluted

$

0.05

 

$

0.05

 

 

 

 

GAAP share outstanding - diluted

 

291,228

 

 

291,845

 

 

 

 

Net cash provided by operating activities

$

61,962

 

$

60,844

 

 

 

 

Non-GAAP Financial Measures:

 

 

Non-GAAP operating income (*)

$

80,653

 

$

61,102

 

Non-GAAP operating margin (*)

 

27

%

 

25

%

 

 

 

Non-GAAP net income (*)

$

73,469

 

$

52,020

 

 

 

 

Non-GAAP net income per share - diluted

$

0.25

 

$

0.18

 

 

 

 

Non-GAAP shares outstanding - diluted

 

291,228

 

 

291,845

 

 

 

 

Free Cash Flow (*)

$

57,574

 

$

56,688

 

* 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 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 $30 million on ARR, down from prior quarter expectations of approximately $60 million. Total FY23 FX impact is expected to be approximately $45 million on Revenue, down from prior quarter expectations of approximately $60 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 February 1, 2023, Dynatrace is issuing guidance for the fourth quarter and updating guidance for full year fiscal 2023 as follows:

(In millions, except per share data)

Q4 Fiscal 2023

Guidance

 

 

 

 

Total revenue

$304 - $307

 

 

 

 

As reported

20% - 22%

 

 

 

 

Constant currency

24% - 25%

 

 

 

 

Subscription revenue

$285 - $287

 

 

 

 

As reported

21% - 22%

 

 

 

 

Constant currency

24% - 25%

 

 

 

 

Non-GAAP operating income

$71.5 - $73.5

 

 

 

 

Non-GAAP operating margin

24%

 

 

 

 

Non-GAAP net income

$65 - $67

 

 

 

 

Non-GAAP net income per diluted share

$0.22 - $0.23

 

 

 

 

Diluted weighted average shares outstanding

293 - 294

 

 

 

 

 

 

 

 

 

(In millions, except per share data)

Current Guidance

Fiscal 2023

 

Prior Guidance

Fiscal 2023

 

Guidance Change

at Midpoint*

Total ARR

$1,216 - $1,221

 

$1,164 - $1,172

 

$51

As reported

22% - 23%

 

17% - 18%

 

500 bps

Constant currency

25%

 

23% - 24%

 

200 bps

Adjusted ARR growth

26%

 

24%

 

200 bps

Total revenue

$1,148 - $1,151

 

$1,119 - $1,126

 

$27

As reported

24%

 

20% - 21%

 

300 bps

Constant currency

28% - 28.5%

 

27%

 

150 bps

Subscription revenue

$1,075 - $1,077

 

$1,047 - $1,052

 

$27

As reported

24%

 

20% - 21%

 

300 bps

Constant currency

28% - 28.5%

 

27%

 

150 bps

Non-GAAP operating income

$285 - $287

 

$273 - $279

 

$10

Non-GAAP operating margin

25%

 

24.5%

 

50 bps

Non-GAAP net income

$255 - $257

 

$237.5 - $242.5

 

$16

Non-GAAP net income per diluted share

$0.87 - $0.88

 

$0.81 - $0.83

 

$0.06

Diluted weighted average shares outstanding

292 - 293

 

292 - 293

 

0

Free cash flow

$315 - $321

 

$308 - $321

 

$4

Free cash flow margin

27.5% - 28%

 

27.5%- 28.5%

 

-25 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 December.

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, February 1, 2023. To access the conference call from the U.S. and Canada, dial (866) 405-1247, or internationally, dial (201) 689-8045 with conference ID# 13735452. The call will also be available live via webcast on the company’s website, https://ir.dynatrace.com/.

An audio replay of the call will also be available until 11:59 p.m. Eastern Time on February 15, 2023, by dialing (877) 660-6853 from the U.S. or Canada, or for international callers by dialing (201) 612-7415 and entering conference ID# 13735452. In addition, an archived webcast will be available at https://ir.dynatrace.com/.

The company has used, and intends to continue to use, the investor relations portion of its website, its Twitter account and LinkedIn page as 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 fourth fiscal quarter and full year 2023, and statements regarding future customer requirements, product innovation, 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 on our business of 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.

___________________________

1 Gartner, Magic Quadrant for Application Performance Monitoring and Observability, June 2022.

2 Gartner, Peer Insights ‘Voice of the Customer’: Application Performance Monitoring and Observability, 30 November 2022.

Gartner, Magic Quadrant and Peer Insights are trademarks of Gartner, Inc. and/or its affiliates and is used herein with permission. All rights reserved. Gartner Peer Insights Customers’ Choice constitute the subjective opinions of individual end-user reviews, ratings, and data applied against a documented methodology; they neither represent the views of, nor constitute an endorsement by, Gartner or its affiliates.

Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

DYNATRACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited – In thousands, except per share data)

 

 

Three Months Ended

December 31,

 

Nine Months Ended

December 31,

 

2022

 

2021

 

2022

 

2021

Revenue:

 

 

 

 

 

 

 

Subscription

$

279,152

 

 

$

226,290

 

 

$

790,016

 

 

$

635,411

 

License

 

 

 

 

2

 

 

 

 

 

 

52

 

Service

 

18,304

 

 

 

14,474

 

 

 

54,039

 

 

 

41,397

 

Total revenue

 

297,456

 

 

 

240,766

 

 

 

844,055

 

 

 

676,860

 

Cost of revenue:

 

 

 

 

 

 

 

Cost of subscription

 

36,891

 

 

 

28,284

 

 

 

105,393

 

 

 

80,401

 

Cost of service

 

15,044

 

 

 

12,232

 

 

 

46,264

 

 

 

32,921

 

Amortization of acquired technology

 

3,889

 

 

 

3,944

 

 

 

11,669

 

 

 

11,638

 

Total cost of revenue

 

55,824

 

 

 

44,460

 

 

 

163,326

 

 

 

124,960

 

Gross profit

 

241,632

 

 

 

196,306

 

 

 

680,729

 

 

 

551,900

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

53,411

 

 

 

40,876

 

 

 

153,800

 

 

 

113,509

 

Sales and marketing

 

111,524

 

 

 

94,033

 

 

 

321,208

 

 

 

260,816

 

General and administrative

 

36,242

 

 

 

32,643

 

 

 

112,637

 

 

 

91,254

 

Amortization of other intangibles

 

6,573

 

 

 

7,539

 

 

 

19,719

 

 

 

22,618

 

Restructuring and other

 

(5

)

 

 

 

 

 

(15

)

 

 

25

 

Total operating expenses

 

207,745

 

 

 

175,091

 

 

 

607,349

 

 

 

488,222

 

Income from operations

 

33,887

 

 

 

21,215

 

 

 

73,380

 

 

 

63,678

 

Interest expense, net

 

(4,787

)

 

 

(2,450

)

 

 

(7,475

)

 

 

(7,958

)

Other income (expense), net

 

1,617

 

 

 

(1,357

)

 

 

(1,847

)

 

 

(1,345

)

Income before income taxes

 

30,717

 

 

 

17,408

 

 

 

64,058

 

 

 

54,375

 

Income tax expense

 

(15,691

)

 

 

(2,821

)

 

 

(36,392

)

 

 

(2,853

)

Net income

$

15,026

 

 

$

14,587

 

 

$

27,666

 

 

$

51,522

 

Net income per share:

 

 

 

 

 

 

 

Basic

$

0.05

 

 

$

0.05

 

 

$

0.10

 

 

$

0.18

 

Diluted

$

0.05

 

 

$

0.05

 

 

$

0.10

 

 

$

0.18

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

287,957

 

 

 

284,722

 

 

 

287,120

 

 

 

283,773

 

Diluted

 

291,228

 

 

 

291,845

 

 

 

290,803

 

 

 

290,895

 

 

UNAUDITED SHARE-BASED COMPENSATION

 

 

Three Months Ended

December 31,

 

Nine Months Ended

December 31,

 

2022

 

2021

 

2022

 

2021

Cost of revenue

$

4,285

 

 

$

3,405

 

 

$

13,410

 

 

$

9,542

 

Research and development

 

11,057

 

 

 

5,908

 

 

 

29,339

 

 

 

15,331

 

Sales and marketing

 

13,385

 

 

 

9,267

 

 

 

37,399

 

 

 

26,487

 

General and administrative

 

6,777

 

 

 

8,543

 

 

 

24,705

 

 

 

20,590

 

Total share-based compensation

$

35,504

 

 

$

27,123

 

 

$

104,853

 

 

$

71,950

 

DYNATRACE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

December 31,

2022

 

March 31,

2022

 

(unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

422,451

 

 

$

462,967

 

Accounts receivable, net

 

304,411

 

 

 

350,666

 

Deferred commissions, current

 

71,001

 

 

 

62,601

 

Prepaid expenses and other current assets

 

33,034

 

 

 

72,188

 

Total current assets

 

830,897

 

 

 

948,422

 

Property and equipment, net

 

50,528

 

 

 

45,271

 

Operating lease right-of-use assets, net

 

68,730

 

 

 

58,849

 

Goodwill

 

1,281,507

 

 

 

1,281,876

 

Other intangible assets, net

 

74,073

 

 

 

105,736

 

Deferred tax assets, net

 

23,726

 

 

 

28,106

 

Deferred commissions, non-current

 

69,150

 

 

 

63,435

 

Other assets

 

15,268

 

 

 

9,615

 

Total assets

$

2,413,879

 

 

$

2,541,310

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

14,687

 

 

$

22,715

 

Accrued expenses, current

 

154,081

 

 

 

141,556

 

Deferred revenue, current

 

647,259

 

 

 

688,554

 

Operating lease liabilities, current

 

14,990

 

 

 

12,774

 

Total current liabilities

 

831,017

 

 

 

865,599

 

Deferred revenue, non-current

 

25,778

 

 

 

25,783

 

Accrued expenses, non-current

 

30,449

 

 

 

19,409

 

Operating lease liabilities, non-current

 

59,589

 

 

 

52,070

 

Deferred tax liabilities

 

23

 

 

 

85

 

Long-term debt, net

 

 

 

 

273,918

 

Total liabilities

 

946,856

 

 

 

1,236,864

 

 

 

 

 

Shareholders' equity:

 

 

 

Common shares, $0.001 par value, 600,000,000 shares authorized, 288,961,064 and 286,053,276 shares issued and outstanding at December 31, 2022 and March 31, 2022, respectively

 

289

 

 

 

286

 

Additional paid-in capital

 

1,929,940

 

 

 

1,792,197

 

Accumulated deficit

 

(433,682

)

 

 

(461,348

)

Accumulated other comprehensive loss

 

(29,524

)

 

 

(26,689

)

Total shareholders' equity

 

1,467,023

 

 

 

1,304,446

 

Total liabilities and shareholders' equity

$

2,413,879

 

 

$

2,541,310

 

DYNATRACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited – In thousands)

 

 

Nine Months Ended

December 31,

 

2022

 

2021

Cash flows from operating activities:

 

 

 

Net income

$

27,666

 

 

$

51,522

 

Adjustments to reconcile net income to cash provided by operations:

 

 

 

Depreciation

 

9,012

 

 

 

7,788

 

Amortization

 

31,566

 

 

 

34,682

 

Share-based compensation

 

104,853

 

 

 

71,950

 

Loss on extinguishment of debt

 

5,925

 

 

 

 

Other

 

5,171

 

 

 

2,906

 

Net change in operating assets and liabilities:

 

 

 

Accounts receivable

 

40,314

 

 

 

(22,362

)

Deferred commissions

 

(17,198

)

 

 

(19,581

)

Prepaid expenses and other assets

��

29,616

 

 

 

(17,508

)

Accounts payable and accrued expenses

 

19,365

 

 

 

10,987

 

Operating leases, net

 

(36

)

 

 

683

 

Deferred revenue

 

(21,796

)

 

 

41,545

 

Net cash provided by operating activities

 

234,458

 

 

 

162,612

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Purchase of property and equipment

 

(15,625

)

 

 

(11,768

)

Acquisition of businesses, net of cash acquired

 

 

 

 

(13,195

)

Net cash used in investing activities

 

(15,625

)

 

 

(24,963

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Repayment of term loans

 

(281,125

)

 

 

(90,000

)

Debt issuance costs

 

(1,949

)

 

 

 

Proceeds from employee stock purchase plan

 

17,806

 

 

 

13,913

 

Proceeds from exercise of stock options

 

15,102

 

 

 

23,650

 

Equity repurchases

 

(15

)

 

 

(51

)

Net cash used in financing activities

 

(250,181

)

 

 

(52,488

)

 

 

 

 

Effect of exchange rates on cash and cash equivalents

 

(9,168

)

 

 

(1,400

)

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

(40,516

)

 

 

83,761

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

462,967

 

 

 

324,962

 

Cash and cash equivalents, end of period

$

422,451

 

 

$

408,723

 

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except percentages)

 

 

Three Months Ended December 31, 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

$

55,824

 

 

$

(4,285

)

 

$

(114

)

 

$

(3,889

)

 

$

 

 

$

47,536

 

Gross profit

 

241,632

 

 

 

4,285

 

 

 

114

 

 

 

3,889

 

 

 

 

 

 

249,920

 

Gross margin

 

81

%

 

 

 

 

 

 

 

 

 

 

84

%

Research and development

 

53,411

 

 

 

(11,057

)

 

 

(329

)

 

 

 

 

 

 

 

 

42,025

 

Sales and marketing

 

111,524

 

 

 

(13,385

)

 

 

(297

)

 

 

 

 

 

 

 

 

97,842

 

General and administrative

 

36,242

 

 

 

(6,777

)

 

 

(68

)

 

 

 

 

 

3

 

 

 

29,400

 

Amortization of other intangibles

 

6,573

 

 

 

 

 

 

 

 

 

(6,573

)

 

 

 

 

 

 

Restructuring and other

 

(5

)

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

Operating income

$

33,887

 

 

$

35,504

 

 

$

808

 

 

$

10,462

 

 

$

(8

)

 

$

80,653

 

Operating margin

 

11

%

 

 

 

 

 

 

 

 

 

 

27

%

 

 

Three Months Ended December 31, 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

$

44,460

 

 

$

(3,405

)

 

$

(149

)

 

$

(3,944

)

 

$

 

 

$

36,962

 

Gross profit

 

196,306

 

 

 

3,405

 

 

 

149

 

 

 

3,944

 

 

 

 

 

 

203,804

 

Gross margin

 

82

%

 

 

 

 

 

 

 

 

 

 

85

%

Research and development

 

40,876

 

 

 

(5,908

)

 

 

(493

)

 

 

 

 

 

 

 

 

34,475

 

Sales and marketing

 

94,033

 

 

 

(9,267

)

 

 

(511

)

 

 

 

 

 

 

 

 

84,255

 

General and administrative

 

32,643

 

 

 

(8,543

)

 

 

(124

)

 

 

 

 

 

(4

)

 

 

23,972

 

Amortization of other intangibles

 

7,539

 

 

 

 

 

 

 

 

 

(7,539

)

 

 

 

 

 

 

Restructuring and other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

$

21,215

 

 

$

27,123

 

 

$

1,277

 

 

$

11,483

 

 

$

4

 

 

$

61,102

 

Operating margin

 

9

%

 

 

 

 

 

 

 

 

 

 

25

%

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share data)

 

 

 

 

 

Three Months Ended

December 31,

 

 

2022

 

2021

Non-GAAP net income:

 

 

 

Net income

$

15,026

 

 

$

14,587

 

Income tax expense

 

15,691

 

 

 

2,821

 

Non-GAAP effective cash tax

 

(9,080

)

 

 

(7,093

)

Interest expense, net

 

4,787

 

 

 

2,450

 

Cash received from (paid for) interest, net

 

1,896

 

 

 

(1,989

)

Share-based compensation

 

35,504

 

 

 

27,123

 

Employer payroll taxes on employee stock transactions

 

808

 

 

 

1,277

 

Amortization of other intangibles

 

6,573

 

 

 

7,539

 

Amortization of acquired technology

 

3,889

 

 

 

3,944

 

Transaction, restructuring, and other

 

(8

)

 

 

4

 

(Gain) loss on currency translation

 

(1,617

)

 

 

1,357

 

Non-GAAP net income

$

73,469

 

 

$

52,020

 

 

 

 

 

Share count:

 

 

 

Weighted-average shares outstanding - basic

 

287,957

 

 

 

284,722

 

Weighted-average shares outstanding - diluted

 

291,228

 

 

 

291,845

 

 

 

 

 

Shares used in non-GAAP per share calculations:

 

 

 

Weighted-average shares outstanding - basic

 

287,957

 

 

 

284,722

 

Weighted-average shares outstanding - diluted

 

291,228

 

 

 

291,845

 

 

 

 

 

Net income per share:

 

 

 

Net income per share - basic

$

0.05

 

 

$

0.05

 

Net income per share - diluted

$

0.05

 

 

$

0.05

 

Non-GAAP net income per share - basic

$

0.26

 

 

$

0.18

 

Non-GAAP net income per share - diluted

$

0.25

 

 

$

0.18

 

 

 

Three Months Ended

December 31,

 

2022

 

2021

Free Cash Flow ("FCF"):

 

 

 

Net cash provided by operating activities

$

61,962

 

 

$

60,844

 

Purchase of property and equipment

 

(4,388

)

 

 

(4,156

)

FCF

$

57,574

 

 

$

56,688

 

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except percentages)

 

 

Nine Months Ended December 31, 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

$

163,326

 

 

$

(13,410

)

 

$

(526

)

 

$

(11,669

)

 

$

(380

)

 

$

137,341

 

Gross profit

 

680,729

 

 

 

13,410

 

 

 

526

 

 

 

11,669

 

 

 

380

 

 

 

706,714

 

Gross margin

 

81

%

 

 

 

 

 

 

 

 

 

 

84

%

Research and development

 

153,800

 

 

 

(29,339

)

 

 

(1,259

)

 

 

 

 

 

 

 

 

123,202

 

Sales and marketing

 

321,208

 

 

 

(37,399

)

 

 

(1,195

)

 

 

 

 

 

 

 

 

282,614

 

General and administrative

 

112,637

 

 

 

(24,705

)

 

 

(510

)

 

 

 

 

 

(380

)

 

 

87,042

 

Amortization of other intangibles

 

19,719

 

 

 

 

 

 

 

 

 

(19,719

)

 

 

 

 

 

 

Restructuring and other

 

(15

)

 

 

 

 

 

 

 

 

 

 

 

15

 

 

 

 

Operating income

$

73,380

 

 

$

104,853

 

 

$

3,490

 

 

$

31,388

 

 

$

745

 

 

$

213,856

 

Operating margin

 

9

%

 

 

 

 

 

 

 

 

 

 

25

%

 

 

Nine Months Ended December 31, 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

$

124,960

 

 

$

(9,542

)

 

$

(916

)

 

$

(11,638

)

 

$

 

 

$

102,864

 

Gross profit

 

551,900

 

 

 

9,542

 

 

 

916

 

 

 

11,638

 

 

 

 

 

 

573,996

 

Gross margin

 

82

%

 

 

 

 

 

 

 

 

 

 

85

%

Research and development

 

113,509

 

 

 

(15,331

)

 

 

(1,620

)

 

 

 

 

 

 

 

 

96,558

 

Sales and marketing

 

260,816

 

 

 

(26,487

)

 

 

(1,881

)

 

 

 

 

 

 

 

 

232,448

 

General and administrative

 

91,254

 

 

 

(20,590

)

 

 

(578

)

 

 

 

 

 

(1,206

)

 

 

68,880

 

Amortization of other intangibles

 

22,618

 

 

 

 

 

 

 

 

 

(22,618

)

 

 

 

 

 

 

Restructuring and other

 

25

 

 

 

 

 

 

 

 

 

 

 

 

(25

)

 

 

 

Operating income

$

63,678

 

 

$

71,950

 

 

$

4,995

 

 

$

34,256

 

 

$

1,231

 

 

$

176,110

 

Operating margin

 

9

%

 

 

 

 

 

 

 

 

 

 

26

%

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share data)

 

 

Nine Months Ended

December 31,

 

2022

 

2021

Non-GAAP net income:

 

 

Net income

$

27,666

 

$

51,522

 

Income tax expense

 

36,392

 

 

2,853

 

Non-GAAP effective cash tax

 

(23,454

)

 

(20,346

)

Interest expense, net

 

7,475

 

 

7,958

 

Cash paid for interest, net

 

(637

)

 

(6,549

)

Share-based compensation

 

104,853

 

 

71,950

 

Employer payroll taxes on employee stock transactions

 

3,490

 

 

4,995

 

Amortization of other intangibles

 

19,719

 

 

22,618

 

Amortization of acquired technology

 

11,669

 

 

11,638

 

Transaction, restructuring, and other

 

745

 

 

1,231

 

Loss on currency translation

 

1,847

 

 

1,345

 

Non-GAAP net income

$

189,765

 

$

149,215

 

 

 

 

Share count:

 

 

Weighted-average shares outstanding - basic

 

287,120

 

 

283,773

 

Weighted-average shares outstanding - diluted

 

290,803

 

 

290,895

 

 

 

 

Shares used in non-GAAP per share calculations:

 

 

Weighted-average shares outstanding - basic

 

287,120

 

 

283,773

 

Weighted-average shares outstanding - diluted

 

290,803

 

 

290,895

 

 

 

 

Net income per share:

 

 

Net income per share - basic

$

0.10

 

$

0.18

 

Net income per share - diluted

$

0.10

 

$

0.18

 

Non-GAAP net income per share - basic

$

0.66

 

$

0.53

 

Non-GAAP net income per share - diluted

$

0.65

 

$

0.51

 

 

 

Nine Months Ended

December 31,

 

2022

 

2021

Free Cash Flow ("FCF"):

 

 

Net cash provided by operating activities

$

234,458

 

$

162,612

 

Purchase of property and equipment

 

(15,625

)

 

(11,768

)

FCF

$

218,833

 

$

150,844

 

 

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