false2022Q200017733833/31http://fasb.org/us-gaap/2021-01-31#AccountingStandardsUpdate201602Member43P3YP3YP1YP3YP3YP3YP6M33.333.333.300017733832021-04-012021-09-30xbrli:shares00017733832021-10-25iso4217:USD00017733832021-09-3000017733832021-03-31iso4217:USDxbrli:shares0001773383us-gaap:SubscriptionAndCirculationMember2021-07-012021-09-300001773383us-gaap:SubscriptionAndCirculationMember2020-07-012020-09-300001773383us-gaap:SubscriptionAndCirculationMember2021-04-012021-09-300001773383us-gaap:SubscriptionAndCirculationMember2020-04-012020-09-300001773383us-gaap:LicenseMember2021-07-012021-09-300001773383us-gaap:LicenseMember2020-07-012020-09-300001773383us-gaap:LicenseMember2021-04-012021-09-300001773383us-gaap:LicenseMember2020-04-012020-09-300001773383us-gaap:ServiceMember2021-07-012021-09-300001773383us-gaap:ServiceMember2020-07-012020-09-300001773383us-gaap:ServiceMember2021-04-012021-09-300001773383us-gaap:ServiceMember2020-04-012020-09-3000017733832021-07-012021-09-3000017733832020-07-012020-09-3000017733832020-04-012020-09-300001773383us-gaap:CommonStockMember2021-06-300001773383us-gaap:AdditionalPaidInCapitalMember2021-06-300001773383us-gaap:RetainedEarningsMember2021-06-300001773383us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-3000017733832021-06-300001773383us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-012021-09-300001773383us-gaap:CommonStockMember2021-07-012021-09-300001773383us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001773383us-gaap:RetainedEarningsMember2021-07-012021-09-300001773383us-gaap:CommonStockMember2021-09-300001773383us-gaap:AdditionalPaidInCapitalMember2021-09-300001773383us-gaap:RetainedEarningsMember2021-09-300001773383us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-09-300001773383us-gaap:CommonStockMember2020-06-300001773383us-gaap:AdditionalPaidInCapitalMember2020-06-300001773383us-gaap:RetainedEarningsMember2020-06-300001773383us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-3000017733832020-06-300001773383us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-012020-09-300001773383us-gaap:CommonStockMember2020-07-012020-09-300001773383us-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-300001773383us-gaap:RetainedEarningsMember2020-07-012020-09-300001773383us-gaap:CommonStockMember2020-09-300001773383us-gaap:AdditionalPaidInCapitalMember2020-09-300001773383us-gaap:RetainedEarningsMember2020-09-300001773383us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-3000017733832020-09-300001773383us-gaap:CommonStockMember2021-03-310001773383us-gaap:AdditionalPaidInCapitalMember2021-03-310001773383us-gaap:RetainedEarningsMember2021-03-310001773383us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001773383us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-09-300001773383us-gaap:CommonStockMember2021-04-012021-09-300001773383us-gaap:AdditionalPaidInCapitalMember2021-04-012021-09-300001773383us-gaap:RetainedEarningsMember2021-04-012021-09-300001773383us-gaap:CommonStockMember2020-03-310001773383us-gaap:AdditionalPaidInCapitalMember2020-03-310001773383us-gaap:RetainedEarningsMember2020-03-310001773383us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-3100017733832020-03-310001773383us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-012020-09-300001773383us-gaap:CommonStockMember2020-04-012020-09-300001773383us-gaap:AdditionalPaidInCapitalMember2020-04-012020-09-3000017733832019-04-012020-03-310001773383srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2020-03-310001773383srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-03-310001773383us-gaap:RetainedEarningsMember2020-04-012020-09-300001773383srt:NorthAmericaMember2021-07-012021-09-30xbrli:pure0001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMembersrt:NorthAmericaMember2021-07-012021-09-300001773383srt:NorthAmericaMember2020-07-012020-09-300001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMembersrt:NorthAmericaMember2020-07-012020-09-300001773383srt:NorthAmericaMember2021-04-012021-09-300001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMembersrt:NorthAmericaMember2021-04-012021-09-300001773383srt:NorthAmericaMember2020-04-012020-09-300001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMembersrt:NorthAmericaMember2020-04-012020-09-300001773383us-gaap:EMEAMember2021-07-012021-09-300001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMemberus-gaap:EMEAMember2021-07-012021-09-300001773383us-gaap:EMEAMember2020-07-012020-09-300001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMemberus-gaap:EMEAMember2020-07-012020-09-300001773383us-gaap:EMEAMember2021-04-012021-09-300001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMemberus-gaap:EMEAMember2021-04-012021-09-300001773383us-gaap:EMEAMember2020-04-012020-09-300001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMemberus-gaap:EMEAMember2020-04-012020-09-300001773383srt:AsiaPacificMember2021-07-012021-09-300001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMembersrt:AsiaPacificMember2021-07-012021-09-300001773383srt:AsiaPacificMember2020-07-012020-09-300001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMembersrt:AsiaPacificMember2020-07-012020-09-300001773383srt:AsiaPacificMember2021-04-012021-09-300001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMembersrt:AsiaPacificMember2021-04-012021-09-300001773383srt:AsiaPacificMember2020-04-012020-09-300001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMembersrt:AsiaPacificMember2020-04-012020-09-300001773383srt:LatinAmericaMember2021-07-012021-09-300001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMembersrt:LatinAmericaMember2021-07-012021-09-300001773383srt:LatinAmericaMember2020-07-012020-09-300001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMembersrt:LatinAmericaMember2020-07-012020-09-300001773383srt:LatinAmericaMember2021-04-012021-09-300001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMembersrt:LatinAmericaMember2021-04-012021-09-300001773383srt:LatinAmericaMember2020-04-012020-09-300001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMembersrt:LatinAmericaMember2020-04-012020-09-300001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMembercountry:US2021-07-012021-09-300001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMembercountry:US2020-07-012020-09-300001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMembercountry:US2021-04-012021-09-300001773383us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMembercountry:US2020-04-012020-09-300001773383us-gaap:BilledRevenuesMember2021-09-300001773383us-gaap:UnbilledRevenuesMember2021-09-3000017733832021-10-012021-09-3000017733832022-10-012021-09-300001773383us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2021-04-012021-09-300001773383us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2021-09-300001773383us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2021-03-310001773383us-gaap:CustomerRelationshipsMember2021-04-012021-09-300001773383us-gaap:CustomerRelationshipsMember2021-09-300001773383us-gaap:CustomerRelationshipsMember2021-03-310001773383us-gaap:TrademarksAndTradeNamesMember2021-04-012021-09-300001773383us-gaap:TrademarksAndTradeNamesMember2021-09-300001773383us-gaap:TrademarksAndTradeNamesMember2021-03-3100017733832021-08-310001773383us-gaap:SecuredDebtMemberdt:FirstLienTermLoanMember2021-09-300001773383us-gaap:SecuredDebtMemberdt:FirstLienTermLoanMember2021-03-310001773383dt:RevolvingFacilityMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2021-09-300001773383dt:RevolvingFacilityMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2021-03-310001773383dt:RevolvingFacilityMemberus-gaap:LetterOfCreditMemberus-gaap:LineOfCreditMember2021-09-300001773383dt:RevolvingFacilityMemberus-gaap:LetterOfCreditMemberus-gaap:LineOfCreditMember2021-03-310001773383us-gaap:SecuredDebtMemberus-gaap:BaseRateMemberdt:FirstLienTermLoanMember2021-04-012021-09-300001773383us-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:SecuredDebtMemberdt:FirstLienTermLoanMember2021-04-012021-09-300001773383dt:RevolvingFacilityMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2021-04-012021-09-300001773383srt:MinimumMember2021-09-300001773383srt:MaximumMember2021-09-300001773383dt:EquityIncentivePlan2019Member2019-07-310001773383dt:EquityIncentivePlan2019Member2019-07-012019-07-310001773383dt:EquityIncentivePlan2019Member2021-09-3000017733832020-04-012021-03-310001773383us-gaap:EmployeeStockOptionMember2021-04-012021-09-300001773383us-gaap:EmployeeStockOptionMember2021-07-012021-09-300001773383us-gaap:EmployeeStockOptionMember2020-07-012020-09-300001773383us-gaap:EmployeeStockOptionMember2020-04-012020-09-300001773383dt:RestrictedStockAndRestrictedStockUnitsMember2021-04-012021-09-300001773383dt:RestrictedStockAndRestrictedStockUnitsTimeBasedFourYearInstallmentVestingMember2021-04-012021-09-300001773383us-gaap:ShareBasedCompensationAwardTrancheOneMemberdt:RestrictedStockAndRestrictedStockUnitsTimeBasedFourYearInstallmentVestingMember2021-04-012021-09-300001773383us-gaap:ShareBasedCompensationAwardTrancheTwoMemberdt:RestrictedStockAndRestrictedStockUnitsTimeBasedFourYearInstallmentVestingMember2021-04-012021-09-300001773383dt:RestrictedStockAndRestrictedStockUnitsTimeBasedVestingByAugust262022Member2021-04-012021-09-300001773383dt:PerformanceBasedRestrictedStockUnitsIncentivePSUsMember2021-04-012021-09-300001773383us-gaap:ShareBasedCompensationAwardTrancheOneMemberdt:PerformanceBasedRestrictedStockUnitsIncentivePSUsMember2021-04-012021-09-300001773383dt:PerformanceBasedRestrictedStockUnitsIncentivePSUsMemberus-gaap:ShareBasedCompensationAwardTrancheThreeMember2021-04-012021-09-300001773383us-gaap:ShareBasedCompensationAwardTrancheTwoMemberdt:PerformanceBasedRestrictedStockUnitsIncentivePSUsMember2021-04-012021-09-300001773383dt:PerformanceBasedRestrictedStockUnitsAnnualPSUsMember2021-04-012021-09-300001773383us-gaap:ShareBasedCompensationAwardTrancheOneMemberdt:PerformanceBasedRestrictedStockUnitsAnnualPSUsMember2021-04-012021-09-300001773383us-gaap:ShareBasedCompensationAwardTrancheTwoMemberdt:PerformanceBasedRestrictedStockUnitsAnnualPSUsMember2021-04-012021-09-30dt:installment0001773383us-gaap:RestrictedStockMember2021-03-310001773383us-gaap:RestrictedStockUnitsRSUMember2021-03-310001773383us-gaap:RestrictedStockMember2021-04-012021-09-300001773383us-gaap:RestrictedStockUnitsRSUMember2021-04-012021-09-300001773383us-gaap:RestrictedStockMember2021-09-300001773383us-gaap:RestrictedStockUnitsRSUMember2021-09-300001773383dt:RestrictedStockAndRestrictedStockUnitsMember2021-07-012021-09-300001773383dt:RestrictedStockAndRestrictedStockUnitsMember2020-07-012020-09-300001773383dt:RestrictedStockAndRestrictedStockUnitsMember2020-04-012020-09-300001773383us-gaap:EmployeeStockMember2019-07-012019-07-310001773383us-gaap:CommonClassAMemberus-gaap:EmployeeStockMember2019-07-012019-07-310001773383us-gaap:CommonClassAMemberdt:A2019EmployeeStockPurchasePlanMember2021-04-012021-09-300001773383us-gaap:CommonClassAMemberdt:A2019EmployeeStockPurchasePlanMember2021-09-300001773383dt:A2019EmployeeStockPurchasePlanMember2021-09-300001773383dt:A2019EmployeeStockPurchasePlanMember2021-07-012021-09-300001773383dt:A2019EmployeeStockPurchasePlanMember2020-07-012020-09-300001773383dt:A2019EmployeeStockPurchasePlanMember2021-04-012021-09-300001773383dt:A2019EmployeeStockPurchasePlanMember2020-04-012020-09-300001773383us-gaap:CostOfSalesMember2021-07-012021-09-300001773383us-gaap:CostOfSalesMember2020-07-012020-09-300001773383us-gaap:CostOfSalesMember2021-04-012021-09-300001773383us-gaap:CostOfSalesMember2020-04-012020-09-300001773383us-gaap:ResearchAndDevelopmentExpenseMember2021-07-012021-09-300001773383us-gaap:ResearchAndDevelopmentExpenseMember2020-07-012020-09-300001773383us-gaap:ResearchAndDevelopmentExpenseMember2021-04-012021-09-300001773383us-gaap:ResearchAndDevelopmentExpenseMember2020-04-012020-09-300001773383us-gaap:SellingAndMarketingExpenseMember2021-07-012021-09-300001773383us-gaap:SellingAndMarketingExpenseMember2020-07-012020-09-300001773383us-gaap:SellingAndMarketingExpenseMember2021-04-012021-09-300001773383us-gaap:SellingAndMarketingExpenseMember2020-04-012020-09-300001773383us-gaap:GeneralAndAdministrativeExpenseMember2021-07-012021-09-300001773383us-gaap:GeneralAndAdministrativeExpenseMember2020-07-012020-09-300001773383us-gaap:GeneralAndAdministrativeExpenseMember2021-04-012021-09-300001773383us-gaap:GeneralAndAdministrativeExpenseMember2020-04-012020-09-300001773383us-gaap:EmployeeStockOptionMember2021-07-012021-09-300001773383us-gaap:EmployeeStockOptionMember2020-07-012020-09-300001773383us-gaap:EmployeeStockOptionMember2021-04-012021-09-300001773383us-gaap:EmployeeStockOptionMember2020-04-012020-09-300001773383dt:RestrictedStockAndRestrictedStockUnitsMember2021-07-012021-09-300001773383dt:RestrictedStockAndRestrictedStockUnitsMember2020-07-012020-09-300001773383dt:RestrictedStockAndRestrictedStockUnitsMember2021-04-012021-09-300001773383dt:RestrictedStockAndRestrictedStockUnitsMember2020-04-012020-09-300001773383srt:NorthAmericaMember2021-09-300001773383srt:NorthAmericaMember2021-03-310001773383us-gaap:EMEAMember2021-09-300001773383us-gaap:EMEAMember2021-03-310001773383srt:AsiaPacificMember2021-09-300001773383srt:AsiaPacificMember2021-03-310001773383srt:LatinAmericaMember2021-09-300001773383srt:LatinAmericaMember2021-03-31

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q  
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                      TO                      

Commission File Number 001-39010 
Dynatrace, Inc.
(Exact name of Registrant as specified in its Charter)  
Delaware47-2386428
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1601 Trapelo Road, Suite 11602451
WalthamMA
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (617530-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)
Name of each exchange on which registered
Common stock, par value $0.001 per shareDTNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes     No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes      No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No  

The registrant had 285,071,209 shares of common stock outstanding as of October 25, 2021.



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. All statements of historical fact included in this Quarterly Report regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading “Risk Factors” included elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the year ended March 31, 2021 (“Annual Report”). These forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:
our future financial performance, including our expectations regarding our revenue, annual recurring revenue, gross profit or gross margin, operating expenses, ability to generate cash flow, revenue mix and ability to maintain future profitability;
our expectations regarding the potential impact of the novel coronavirus (“COVID-19”), pandemic on our business, operations, and the markets in which we and our partners and customers operate;
anticipated trends and growth rates in our business and in the markets in which we operate;
our ability to maintain and expand our customer base and our partner network;
our ability to sell our applications and expand internationally;
our ability to anticipate market needs and successfully develop new and enhanced solutions to meet those needs;
our ability to hire and retain necessary qualified employees to grow our business and expand our operations;
the evolution of technology affecting our applications, platform and markets;
our ability to adequately protect our intellectual property; and
our ability to service our debt obligations.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” in the Annual Report and as filed with the SEC and “Risk Factors” in Part II, Item 1A in this Quarterly Report and elsewhere in this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.




1


PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DYNATRACE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
September 30, 2021March 31, 2021
(unaudited)
Assets
Current assets:
Cash and cash equivalents$370,319 $324,962 
Accounts receivable, net149,801 242,079 
Deferred commissions, current52,525 48,986 
Prepaid expenses and other current assets80,065 64,255 
Total current assets652,710 680,282 
Property and equipment, net40,197 36,916 
Operating lease right-of-use assets, net60,473 42,959 
Goodwill1,282,631 1,271,195 
Other intangible assets, net128,514 149,484 
Deferred tax assets, net16,492 16,811 
Deferred commissions, non-current50,766 48,638 
Other assets11,114 9,933 
Total assets$2,242,897 $2,256,218 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable$16,013 $9,621 
Accrued expenses, current105,423 119,527 
Deferred revenue, current461,443 509,272 
Operating lease liabilities, current11,214 9,491 
Total current liabilities594,093 647,911 
Deferred revenue, non-current22,630 47,504 
Accrued expenses, non-current16,533 16,072 
Operating lease liabilities, non-current54,371 38,203 
Deferred tax liabilities1,361 1,014 
Long-term debt332,907 391,913 
Total liabilities1,021,895 1,142,617 
Commitments and contingencies (Note 8)
Shareholders' equity:
Common shares, $0.001 par value, 600,000,000 shares authorized, 285,025,237 and 283,130,238 shares issued and outstanding at September 30, 2021 and March 31, 2021, respectively
285 283 
Additional paid-in capital1,723,056 1,653,328 
Accumulated deficit(476,864)(513,799)
Accumulated other comprehensive loss(25,475)(26,211)
Total shareholders' equity1,221,002 1,113,601 
Total liabilities and shareholders' equity$2,242,897 $2,256,218 
The accompanying notes are an integral part of these condensed consolidated financial statements.
2


DYNATRACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited – In thousands, except per share data)
Three Months Ended September 30,Six Months Ended September 30,
2021202020212020
Revenue:
Subscription$212,601 $157,673 $409,121 $302,030 
License 442 50 1,080 
Service13,753 10,471 26,923 20,984 
Total revenue226,354 168,586 436,094 324,094 
Cost of revenue:
Cost of subscription27,135 18,327 52,117 35,033 
Cost of service10,668 8,554 20,689 16,564 
Amortization of acquired technology3,864 3,830 7,694 7,656 
Total cost of revenue41,667 30,711 80,500 59,253 
Gross profit184,687 137,875 355,594 264,841 
Operating expenses:
Research and development37,908 27,512 72,633 51,017 
Sales and marketing86,301 56,690 166,783 105,853 
General and administrative31,689 22,110 58,611 43,637 
Amortization of other intangibles7,539 8,686 15,079 17,372 
Restructuring and other(1)46 25 25 
Total operating expenses163,436 115,044 313,131 217,904 
Income from operations21,251 22,831 42,463 46,937 
Interest expense, net(2,651)(3,602)(5,508)(7,715)
Other (expense) income, net(1,299)199 12 218 
Income before income taxes17,301 19,428 36,967 39,440 
Income tax benefit (expense)
6,340 (1,949)(32)(9,096)
Net income$23,641 $17,479 $36,935 $30,344 
Net income per share:
Basic
$0.08 $0.06 $0.13 $0.11 
Diluted
$0.08 $0.06 $0.13 $0.11 
Weighted average shares outstanding:
Basic
283,923 280,077 283,295 279,577 
Diluted
291,177 286,252 290,254 285,423 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3


DYNATRACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited - In thousands)
Three Months Ended September 30,Six Months Ended September 30,
2021202020212020
Net income$23,641 $17,479 $36,935 $30,344 
Other comprehensive income (loss)
Foreign currency translation adjustment2,394 (2,792)736 (5,134)
Total other comprehensive income (loss)2,394 (2,792)736 (5,134)
Comprehensive income$26,035 $14,687 $37,671 $25,210 
The accompanying notes are an integral part of these condensed consolidated financial statements.

4


DYNATRACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited - In thousands)
Three Months Ended September 30, 2021
Common SharesAdditional 
Paid-In Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Shareholders' Equity
SharesAmount
Balance, June 30, 2021284,218 $284 $1,687,044 $(500,505)$(27,869)$1,158,954 
Foreign currency translation2,394 2,394 
Restricted stock units vested301 — — 
Restricted stock awards forfeited(19)— — 
Exercise of stock options525 1 10,453 10,454 
Share-based compensation25,575 25,575 
Equity repurchases(16)(16)
Net income23,641 23,641 
Balance, September 30, 2021285,025 $285 $1,723,056 $(476,864)$(25,475)$1,221,002 
Three Months Ended September 30, 2020
Common SharesAdditional 
Paid-In Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Shareholders’ Equity
SharesAmount
Balance, June 30, 2020281,056 $281 $1,589,598 $(576,648)$(20,447)$992,784 
Foreign currency translation(2,792)(2,792)
Restricted stock units vested674 — — 
Restricted stock awards forfeited(8)— — 
Exercise of stock options302 — 4,829 4,829 
Share-based compensation14,831 14,831 
Equity repurchases(12)(12)
Net income17,479 17,479 
Balance, September 30, 2020282,024 $281 $1,609,246 $(559,169)$(23,239)$1,027,119 
The accompanying notes are an integral part of these condensed consolidated financial statements.


5


DYNATRACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited - In thousands)
Six Months Ended September 30, 2021
Common SharesAdditional 
Paid-In Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Shareholders' Equity
SharesAmount
Balance, March 31, 2021283,130 $283 $1,653,328 $(513,799)$(26,211)$1,113,601 
Foreign currency translation736 736 
Restricted stock units vested797 1 (1) 
Restricted stock awards forfeited(19)— — 
Issuance of common stock related to employee stock purchase plan204 — 6,593 6,593 
Exercise of stock options913 1 18,339 18,340 
Share-based compensation44,827 44,827 
Equity repurchases(30)(30)
Net income36,935 36,935 
Balance, September 30, 2021285,025 $285 $1,723,056 $(476,864)$(25,475)$1,221,002 
Six Months Ended September 30, 2020
Common SharesAdditional 
Paid-In Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Shareholders’ Equity
SharesAmount
Balance, March 31, 2020280,853 $281 $1,573,347 $(589,819)$(18,105)$965,704 
Foreign currency translation(5,134)(5,134)
Restricted stock units vested806 — — 
Restricted stock awards forfeited(96)— — 
Issuance of common stock related to employee stock purchase plan159— 3,592 3,592 
Exercise of stock options302— 4,829 4,829 
Share-based compensation27,503 27,503 
Equity repurchases(25)(25)
Cumulative effects adjustment for ASU 2016-02 adoption306 306 
Net income30,344 30,344 
Balance, September 30, 2020282,024 $281 $1,609,246 $(559,169)$(23,239)$1,027,119 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6


DYNATRACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited – In thousands)
Six Months Ended September 30,
20212020
Cash flows from operating activities:
Net income$36,935 $30,344 
Adjustments to reconcile net income to cash provided by operations:
Depreciation
5,049 3,797 
Amortization
23,057 26,032 
Share-based compensation
44,827 27,503 
Deferred income taxes
3 (3,160)
Other
1,007 802 
Net change in operating assets and liabilities:
Accounts receivable
92,314 49,353 
Deferred commissions
(6,347)1,250 
Prepaid expenses and other assets
(16,456)(4,944)
Accounts payable and accrued expenses
(9,118)(7,862)
Operating leases, net
401 523 
Deferred revenue
(69,904)(62,789)
Net cash provided by operating activities
101,768 60,849 
Cash flows from investing activities:
Purchase of property and equipment
(7,612)(6,400)
Capitalized software additions
 (184)
Acquisition of businesses, net of cash acquired(13,004) 
Net cash used in investing activities
(20,616)(6,584)
Cash flows from financing activities:
Repayment of term loans
(60,000)(30,000)
Proceeds from employee stock purchase plan
6,593 3,592 
Proceeds from exercise of stock options18,339 4,829 
Equity repurchases
(30)(25)
Net cash used in financing activities
(35,098)(21,604)
Effect of exchange rates on cash and cash equivalents(697)2,606 
Net increase in cash and cash equivalents45,357 35,267 
Cash and cash equivalents, beginning of period324,962 213,170 
Cash and cash equivalents, end of period$370,319 $248,437 
Supplemental cash flow data:
Cash paid for interest$4,560 $6,923 
Cash paid for tax, net$8,431 $22,545 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7


DYNATRACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.    Description of the Business
Business
Dynatrace, Inc. (“Dynatrace”, or the “Company”) offers an observability platform, purpose-built for modern multicloud environments. The Company designed its all-in-one Dynatrace® Software Intelligence Platform to address the growing complexity faced by technology and digital business teams as these enterprises further embrace the cloud to effect their digital transformation. The Company’s platform does so by utilizing artificial intelligence at its core and continuous automation to deliver precise answers about the performance and security of applications, the underlying infrastructure, and the experience of its customers’ users that enables organizations to innovate faster, operate more efficiently, and improve user experiences for consistently better business outcomes.
Fiscal year
The Company’s fiscal year ends on March 31. References to fiscal 2022, for example, refer to the fiscal year ended March 31, 2022.
2.    Significant Accounting Policies
Basis of presentation and consolidation
The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. All intercompany balances and transactions have been eliminated in the accompanying condensed consolidated financial statements.
Unaudited interim consolidated financial information
The accompanying interim condensed consolidated balance sheet as of September 30, 2021 and the interim condensed consolidated statements of operations, statements of comprehensive income, and statements of shareholders’ equity for the three and six months ended September 30, 2021 and 2020, statements of cash flows for the six months ended September 30, 2021 and 2020, and the related disclosures, are unaudited. In management’s opinion, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and includes all normal and recurring adjustments necessary for the fair presentation of the Company’s financial position as of September 30, 2021, its results of operations for the three and six months ended September 30, 2021 and 2020, and its cash flows for the six months ended September 30, 2021 and 2020 in accordance with U.S. GAAP. The results for the three and six months ended September 30, 2021 are not necessarily indicative of the results to be expected for the full fiscal year or any other interim period.
These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2021 (“Annual Report”).
Use of estimates
The preparation of unaudited condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, the disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Management periodically evaluates such estimates and assumptions for continued reasonableness. In particular, the Company makes estimates with respect to the stand-alone selling price for each distinct performance obligation in customer contracts with multiple performance obligations, the uncollectible accounts receivable, the fair value of tangible and intangible assets acquired, valuation of long-lived assets, the period of benefit for deferred commissions and material rights, share-based compensation expense, income taxes, and the determination of the incremental borrowing rate used for operating lease liabilities, among other things. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. Actual results could differ from those estimates.
Significant accounting policies
The Company’s significant accounting policies are discussed in Note 2, “Significant Accounting Policies” in the Company’s Annual Report. There have been no changes to the Company’s significant accounting policies described in the Company’s Annual Report that have had a material impact on its condensed consolidated financial statements and related notes.
8


Recently adopted accounting pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions for investments, intraperiod allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. ASU 2019-12 is effective for annual periods, and interim periods within those years, beginning after December 15, 2020. The Company adopted the new standard on a prospective basis as of April 1, 2021. The adoption did not have a material impact on the consolidated financial statements.
3.    Revenue Recognition
Disaggregation of revenue
The following table is a summary of the Company’s total revenues by geographic region (in thousands, except percentages):
Three Months Ended September 30,Six Months Ended September 30,
2021202020212020
Amount%Amount%Amount%Amount%
North America$123,892 54 %$93,511 56 %$236,664 54 %$180,888 56 %
Europe, Middle East and Africa69,347 31 %51,852 31 %136,391 31 %98,923 31 %
Asia Pacific23,939 11 %19,271 11 %46,075 11 %36,211 11 %
Latin America9,176 4 %3,952 2 %16,964 4 %8,072 2 %
Total revenue$226,354 $168,586 $436,094 $324,094 
For the three and six months ended September 30, 2021 and 2020, the United States was the only country that represented more than 10% of the Company’s revenues in any period, constituting $115.1 million and 51% and $87.1 million and 52% of total revenue during the three months ended September 30, 2021 and 2020, respectively, and $219.6 million and 50% and $169.1 million and 52% of total revenue for the six months ended September 30, 2021 and 2020, respectively.
Deferred revenue
Revenues recognized during the three months ended September 30, 2021 and 2020, which was included in the deferred revenue balances at the beginning of each respective period, was $186.4 million and $137.0 million, respectively. Revenues recognized during the six months ended September 30, 2021 and 2020 which was included in the deferred revenue balances at the beginning of each respective period, was $385.9 million and $283.3 million, respectively.
Remaining performance obligations
As of September 30, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was $1,253.4 million, which consists of both billed consideration in the amount of $484.1 million and unbilled consideration in the amount of $769.3 million that the Company expects to recognize as subscription and service revenue. The Company expects to recognize 57% of this amount as revenue over the next twelve months and the remainder thereafter.
4.    Goodwill and Other Intangible Assets, Net
Changes in the carrying amount of goodwill on a consolidated basis for the six months ended September 30, 2021 consists of the following (in thousands):
September 30, 2021
Balance, beginning of period$1,271,195 
Goodwill from acquisitions (1)
11,542 
Foreign currency impact(106)
Balance, end of period$1,282,631 
_________________
(1) The initial allocation of the purchase price from acquisitions was based on preliminary valuations and assumptions and is subject to change. The Company expects to finalize the allocation of the purchase prices within the measurement period.
9


Other intangible assets, net excluding goodwill consists of the following (in thousands):
Weighted
Average 
Useful Life
(in months)
September 30, 2021March 31, 2021
Capitalized software107$191,484 $189,398 
Customer relationships120351,555 351,555 
Trademarks and tradenames12055,003 55,003 
Total intangible assets598,042 595,956 
Less: accumulated amortization(469,528)(446,472)
Total other intangible assets, net$128,514 $149,484 
Amortization of other intangible assets totaled $11.6 million and $13.0 million for the three months ended September 30, 2021 and 2020, respectively, and $23.1 million and $26.0 million for the six months ended September 30, 2021 and 2020, respectively.
5.    Income Taxes
The Company computes its interim provision for income taxes by applying the estimated annual effective tax rate to income from operations and adjusts the provision for discrete tax items occurring in the period. The Company’s effective tax rate for the three months ended September 30, 2021 was negative 36.6% compared to 10.0% for the three months ended September 30, 2020. The Company’s effective tax rate for the six months ended September 30, 2021 was 0.1% compared to 23.1% for the six months ended September 30, 2020. The decrease in the effective tax rate for both the three months ended September 30, 2021 and 2020 and six months ended September 30, 2021 and 2020 is primarily due to additional share-based compensation tax windfall benefits and a $2.1 million one-time benefit related to anticipated tax refunds resulting from a favorable Polish research and development ruling received by the Company in August.
Based on the Company’s review of both positive and negative evidence regarding the realizability of deferred tax assets at September 30, 2021, a valuation allowance continues to be recorded against certain deferred tax assets based upon the conclusion that it was more likely than not that these assets would not be realized. The valuation allowance at September 30, 2021 relates primarily to accrued interest, capitalized development costs, and foreign tax credits. Given the Company’s current earnings and anticipated future earnings, it is reasonably possible that within the next twelve months sufficient positive evidence may become available to allow the Company to conclude that a significant portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain deferred tax assets. However, the exact timing and amount of the valuation allowance release are subject to change based on the Company’s growth and profitability.
6.    Long-term Debt
Long-term debt consists of the following (in thousands, except percentages):
September 30, 2021March 31, 2021
AmountEffective RateAmountEffective Rate
First Lien Term Loan $341,125 2.3 %$401,125 2.4 %
Revolving credit facility  
Total principal341,125 401,125 
Unamortized discount and debt issuance costs(8,218)(9,212)
Total debt332,907 391,913 
Less: Current portion of long-term debt  
Long-term debt$332,907 $391,913 
First lien credit facilities
The Company’s First Lien Credit Agreement, as amended, provides for a term loan facility, or the First Lien Term Loan, in an aggregate principal amount of $950.0 million and a senior secured revolving credit facility, or the Revolving Facility, in an aggregate amount of $60.0 million. The Revolving Facility includes a $25.0 million letter of credit sub-facility. The First Lien Term Loan and Revolving Facility mature on August 23, 2025 and August 23, 2023, respectively. There were $15.5 million and $15.6 million letters of credit issued as of September 30, 2021 and March 31, 2021, respectively. The Company had $44.5 million and $44.4 million of availability under the Revolving Facility as of September 30, 2021 and March 31, 2021, respectively.
10


Borrowings under the First Lien Term Loan and the Revolving Facility currently bear interest, at the Company’s election, at either (i) the Alternative Base Rate, as defined per the credit agreement, plus 1.25% per annum, or (ii) LIBOR plus 2.25% per annum. The Company has satisfied all required principal payments under the First Lien Term Loan and the remainder is due at maturity. Interest payments are due quarterly, or more frequently, based on the terms of the credit agreement.
The Company incurs fees with respect to the Revolving Facility, including (i) a commitment fee of 0.25% per annum of unused commitments under the Revolving Facility, (ii) facility fees equal to the applicable margin in effect for Eurodollar Rate Loans, as defined per the credit agreement, times the average daily stated amount of letters of credit, (iii) a fronting fee equal to either (a) 0.125% per annum on the stated amount of each letter of credit or (b) such other rate per annum as agreed to by the parties subject to the letters of credit, and (iv) customary administrative fees.
All of the indebtedness under the First Lien Credit Agreement is and will be guaranteed by the Company’s existing and future material domestic subsidiaries and is and will be secured by substantially all of the assets of the Company and such guarantors. The First Lien Credit Agreement contains customary negative covenants. At September 30, 2021, the Company was in compliance with all applicable covenants.
7.    Leases
The Company leases office space under non-cancelable operating leases which expire at various dates from fiscal 2022 to 2032. As of September 30, 2021, the weighted average remaining lease term was 6.4 years and the weighted average discount rate was 5.8%. The Company does not have any finance leases as of September 30, 2021.
The Company also has subleases of former offices which expire at various dates from fiscal 2022 to fiscal 2025. Sublease income from operating leases, which is recorded as a reduction of rental expense, was $0.5 million and $1.1 million for the three months ended September 30, 2021 and 2020, respectively, and $1.1 million and $2.3 million for the six months ended September 30, 2021 and 2020, respectively.
The following table presents information about leases on the condensed consolidated statements of operations (in thousands):
Three Months Ended September 30,Six Months Ended September 30, 2021

2021202020212020
Operating lease expense (1)
$2,612 $2,739 $5,081 $5,382 
Short-term lease expense$238 $158 $433 $312 
Variable lease expense $386 $206 $547 $381 
_________________
(1) Presented gross of sublease income.
The following table presents supplemental cash flow information about the Company’s leases (in thousands):
Six Months Ended September 30,
20212020
Cash paid for amounts included in the measurement of lease liabilities$6,513 $6,796 
Operating lease assets obtained in exchange for new operating lease liabilities (1)
$22,877 $150 
_________________
(1) Includes the impact of new leases as well as remeasurements and modifications of existing leases.
11


As of September 30, 2021, remaining maturities of lease liabilities were as follows (in thousands):
Fiscal Years Ending March 31,Amount
2022$6,913 
202314,902 
202413,842 
202510,574 
20267,684 
Thereafter22,128 
Total operating lease payments (1)
76,043 
Less: imputed interest(10,458)
Total operating lease liabilities$65,585 
_________________
(1) Presented gross of sublease income.
As of September 30, 2021, the Company had commitments of $3.4 million for operating leases that have not yet commenced, and therefore are not included in the right-of-use assets or operating lease liabilities. These operating leases are expected to commence during the fiscal years ended March 31, 2022 and March 31, 2023, with lease terms ranging from 3 to 6 years.
8.    Commitments and Contingencies
Legal matters
From time to time, the Company may be a party to lawsuits and legal proceedings arising in the ordinary course of business. In the opinion of the Company’s management, these matters, individually and in the aggregate, will not have a material adverse effect on the financial condition and results of the future operations of the Company.
9.    Share-based Compensation
Amended and Restated 2019 Equity Incentive Plan
In July 2019, the Company’s board of directors (the “Board”), upon the recommendation of the compensation committee of the board of directors, adopted the 2019 Equity Incentive Plan, as amended and restated (the “2019 Plan”) which was subsequently approved by the Company’s shareholders and was later amended and restated by the Board in January 2021.
The Company initially reserved 52,000,000 shares of common stock, or the Initial Limit, for the issuance of awards under the 2019 Plan. The 2019 Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase each April 1, beginning on April 1, 2020, by 4% of the outstanding number of shares of the Company’s common stock on the immediately preceding March 31 or such lesser number determined by the compensation committee. This number is subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization. As of September 30, 2021, 38,435,666 shares of common stock were available for future issuance under the 2019 Plan.
12


Stock options
The following table summarizes activity for stock options during the period ended September 30, 2021:
Number of Options
Weighted Average
Exercise Price
Weighted Average Remaining Contractual Term Aggregate Intrinsic Value
(in thousands)(per share)(years)(in thousands)
Balance, March 31, 20218,393 $21.31 8.6$226,438 
Granted114 52.86 
Exercised(913)20.05 
Forfeited(190)22.64 
Balance, September 30, 20217,404 $21.92 8.1$363,138 
Options vested and expected to vest at September 30, 20217,404 $21.92 8.1$363,138 
Options vested and exercisable at September 30, 20212,376 $19.53 8.0$122,226 
As of September 30, 2021, the total unrecognized compensation expense related to non-vested stock options is $42.2 million and is expected to be recognized over a weighted average period of 2.2 years. The Company recognized $4.6 million and $4.4 million of share-based compensation expense related to stock options for the three months ended September 30, 2021 and 2020, respectively, and $9.3 million and $7.8 million of share-based compensation expense related to stock options for the six months ended September 30, 2021 and 2020, respectively.
Restricted shares and units
During the first six months of fiscal 2022, the Company granted an aggregate of 2,651,777 restricted stock units (“RSUs”) to certain key employees and non-employee directors. The total grants consisted of: (i) 1,826,397 time-based restricted stock units that vest 25% one year after the grant date and the remaining 75% vest ratably on a quarterly basis over three years, (ii) 21,580 time-based restricted shares that vest on August 26, 2022 or at the annual shareholder meeting, if earlier, (iii) 295,900 performance-based restricted stock units that are subject to vest 33.3% on a yearly basis over three years (the “Incentive PSUs”), and (iv) 507,900 performance-based restricted stock units that are subject to vest 25% one year after the grant date and the remaining 75% vest ratably on a quarterly basis over the following three years (the “Annual PSUs”).
The Incentive PSUs vest in three equal installments, with one-third of the Incentive PSUs eligible to vest on each of the first three anniversaries of the date of grant, subject to the Company’s achievement of specific company metrics, and provided that the executive officer remains employed by the Company through the applicable vesting date. No Incentive PSUs will vest with respect to any year if the Company fails to achieve 95% of the applicable target for that year, and the overall number of shares that may be issued pursuant to the Incentive PSUs with respect to any year shall not exceed 150% of the target award for such year. The Incentive PSUs are not carried forward from year to year; if the Incentive PSUs are not earned in any given year, they are terminated for that year.
The number of shares that may be earned pursuant to the Annual PSUs is based on specific company metrics related to the Company’s fiscal year ending March 31, 2022. No Annual PSUs will be earned with respect to any metric if the applicable “threshold” percentage of the specific metric is not achieved, and the overall number of shares that may be earned shall not exceed 150% of the target award. Once the Annual PSUs are earned, they are then also subject to time-based vesting, with 25% of the earned Annual PSUs vesting on the first anniversary of the grant date, and with the remaining 75% vesting in twelve equal quarterly installments over the following three years, and provided that the executive officer remains employed by the Company through the applicable vesting date.
Compensation expense for the Incentive PSUs and Annual PSUs is measured using the fair value at the date of grant and recorded over the vesting period of three or four years, respectively, under the graded-vesting attribution method and may be adjusted over the vesting period based on interim estimates of performance against the pre-set objectives.
13


The following table provides a summary of the changes in the number of restricted shares for the period ended September 30, 2021:
Number of Shares of
Restricted Stock Awards
Weighted Average
Grant Date Fair Value
Number of Restricted Stock UnitsWeighted Average
Grant Date Fair Value
(in thousands)(per share)(in thousands)(per share)
Balance, March 31, 2021728 $16.00 3,041 $24.44 
Granted  2,652 48.92 
Vested(355)16.00 (797)24.99 
Forfeited(19)16.00 (169)30.30 
Balance, September 30, 2021354 $16.00 4,727 $37.87 
As of September 30, 2021, the total unrecognized compensation expense related to unvested restricted stock is $4.8 million and is expected to be recognized over a weighted average period of 1.0 year. As of September 30, 2021, the total unrecognized compensation expense related to unvested restricted stock units is $163.2 million and is expected to be recognized over a weighted average period of 2.7 years. The Company recognized $19.6 million and $9.9 million of share-based compensation expense related to restricted shares and units for the three months ended September 30, 2021 and 2020, respectively, and $33.1 million and $18.7 million of share-based compensation expense related to restricted shares and units for the six months ended September 30, 2021 and 2020, respectively.
Employee Stock Purchase Plan
In July 2019, the board of directors adopted, and the Company’s shareholders approved, the 2019 Employee Stock Purchase Plan (“ESPP”). The Company expects to offer, sell and issue shares of common stock under this ESPP from time to time based on various factors and conditions, although the Company is under no obligation to sell any shares under this ESPP. The ESPP provides for six-month offering periods beginning May 15 and November 15 of each year, and each offering period will consist of six-month purchase periods. On each purchase date, eligible employees will purchase shares of the Company’s common stock at a price per share equal to 85% of the lesser of (1) the fair market value of the Company’s common stock on the offering date or (2) the fair market value of the Company’s common stock on the purchase date. For the six months ended September 30, 2021, 204,016 shares of common stock were purchased under the ESPP. As of September 30, 2021, 11,355,078 shares of common stock were available for future issuance under the ESPP.
As of September 30, 2021, there was approximately $0.8 million of unrecognized share-based compensation related to the ESPP that is expected to be recognized over the remaining term of the current offering period. The Company recognized $1.3 million and $0.5 million of share-based compensation expense related to the ESPP for the three months ended September 30, 2021 and 2020, respectively, and $2.4 million and $1.0 million of share-based compensation expense related to the ESPP for the six months ended September 30, 2021 and 2020, respectively.
Share-based compensation
The following table summarizes the components of total share-based compensation expense included in the condensed consolidated financial statements for each period presented (in thousands):
Three Months Ended September 30,Six Months Ended September 30,
2021202020212020
Cost of revenue$3,485 $1,866 $6,137 $3,364 
Research and development5,456 2,989 9,423 5,407 
Sales and marketing9,612 6,122 17,220 11,527 
General and administrative7,022 3,854 12,047 7,205 
Total share-based compensation expense$25,575 $14,831 $44,827 $27,503 
10.    Net Income Per Share
Basic net income per share is calculated by dividing the net income for the period by the weighted-average number of common shares outstanding during the period, without consideration of potentially dilutive securities. Diluted net income per share includes the dilutive effect of common share equivalents and is calculated using the weighted-average number of common shares and the common share equivalents outstanding during the reporting period. An anti-dilutive impact is an increase in net income per share or a reduction in net loss per share resulting from the conversion, exercise, or contingent issuance of certain securities.
14


The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share data):
Three Months Ended September 30,Six Months Ended September 30,
2021202020212020
Numerator:
Net income$23,641 $17,479 $36,935 $30,344 
Denominator:
Weighted average shares outstanding, basic283,923 280,077 283,295 279,577 
Dilutive effect of stock-based awards7,254 6,175 6,959 5,846 
Weighted average shares outstanding, diluted291,177 286,252 290,254 285,423 
Net income per share, basic$0.08 $0.06 $0.13 $0.11 
Net income per share, diluted$0.08 $0.06 $0.13 $0.11 
The effect of certain common share equivalents were excluded from the computation of weighted average diluted shares outstanding for the three and six months ended September 30, 2021 and 2020 as inclusion would have resulted in anti-dilution. A summary of these weighted-average anti-dilutive common share equivalents is provided in the table below (in thousands):
Three Months Ended September 30,Six Months Ended September 30,
2021202020212020
Stock options 148 2,101 159 1,572 
Unvested restricted stock and RSUs23 24 27 30 
11.    Geographic Information
Revenue
Revenues by geography are based on legal jurisdiction. Refer to Note 3, “Revenue Recognition” for a disaggregation of revenue by geographic region.
Property and equipment, net
The following tables present property and equipment by geographic region for the periods presented (in thousands):
September 30, 2021March 31, 2021
North America$13,133 $12,129 
Europe, Middle East and Africa25,583 23,124 
Asia Pacific1,406 1,619 
Latin America75 44 
Total property and equipment, net$40,197 $36,916 











15


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business. In particular, we encourage you to review the risks and uncertainties described in the section titled “Risk Factors” included elsewhere in this Form 10-Q and our Annual Report on Form 10-K. These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this report or implied by past results and trends. Our fiscal year ends on March 31. Our historical results are not necessarily indicative of the results that may be expected for any period in the future, and our interim results are not necessarily indicative of the results we expect for the full fiscal year or any other period.
OVERVIEW
We offer the market-leading software intelligence platform, purpose-built for dynamic multicloud environments. As organizations embrace the cloud to effect their digital transformation, our all-in-one intelligence platform is designed to address the growing complexity faced by technology and digital business teams. With automation and intelligence at its core, our platform delivers precise answers about the performance and security of applications, the underlying infrastructure and the experience of all users to enable teams to innovate faster, simplify cloud complexity, collaborate more efficiently, and secure cloud-native applications. We designed our platform to allow our customers to modernize and automate IT operations, develop and release high quality software faster, and improve user experiences for consistently better business outcomes. As a result, as of September 30, 2021, our products are trusted by approximately 3,100 Dynatrace customers in over 90 countries in diverse industries such as banking, insurance, retail, manufacturing, travel and software.
We market Dynatrace® through a combination of our global direct sales team and a network of partners, including cloud service providers (Amazon, Microsoft, and Google), resellers, and system integrators. We target the largest 15,000 global accounts, which generally have annual revenues in excess of $1 billion.
We generate revenue primarily by selling subscriptions, which we define as (i) Software-as-a-service (“SaaS”) agreements, (ii) Dynatrace® term-based licenses, for which revenue is recognized ratably over the contract term, (iii) Dynatrace® perpetual licenses, which are recognized ratably over the term of the expected optional maintenance renewals, which is generally three years, and (iv) maintenance and support agreements.
We deploy our platform as a SaaS solution, with the option of retaining the data in the cloud, or at the edge in customer-provisioned infrastructure, which we refer to as Dynatrace® Managed. The Dynatrace® Managed offering allows customers to maintain control of the environment where their data resides, whether in the cloud or on-premises, combining the simplicity of SaaS with the ability to adhere to their own data security and sovereignty requirements. Our Mission Control functionality automatically upgrades all Dynatrace® instances and offers on-premise cluster customers auto-deployment options that suit their specific enterprise management processes.
Dynatrace® is an all-in-one platform, which is typically purchased by our customers with the full-stack Application Performance Module and extended with our Infrastructure Monitoring, Digital Experience Monitoring, Digital Business Analytics, Application Security, or Cloud Automation Modules. Customers also have the option to purchase the infrastructure monitoring module where the full-stack APM is not required, with the ability to upgrade to the full-stack APM when necessary. Our Dynatrace® platform has been commercially available since 2016 and is the primary offering we sell. Dynatrace® customers increased to more than 3,100 as of September 30, 2021 from approximately 2,600 as of September 30, 2020.
Our Classic products include AppMon, Classic Real User Monitoring, or RUM, Network Application Monitoring, or NAM, and Synthetic Classic. These products were sunset as of April 1, 2021.
COVID-19 Update
In March 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic. The pandemic has had significant impacts around the globe and in many locations in which we operate. While the impacts have not caused a material adverse financial impact to our business to date, the future impacts remain uncertain. The extent to which the COVID-19 pandemic may impact our business going forward will depend on numerous evolving factors that we cannot reliably predict. These factors may adversely impact business spending on technology as well as customers’ ability to pay for our products and services on an ongoing basis. While our revenue, customer retention, and earnings are relatively predictable as a result of our subscription-based business model, the effect, if any, of the COVID-19 pandemic would not be fully reflected in our results of operations and overall financial performance until future periods.
16


Throughout the pandemic we have continued to make investments to support business growth and product development, including investments in research and development as we continue to introduce new products and applications to extend the functionality of our products, sales and marketing to support customer growth, and other critical functions to ensure the highest levels of customer service and support as well as ensuring that we maintain the required infrastructure to be a public company. We expect to continue to make these investments.
See the section titled “Risk Factors” included under Part II, Item 1A for further discussion of the possible impact of the COVID-19 pandemic on our business.
Key Factors Affecting Our Performance
Our historical financial performance has been, and we expect our financial performance in the future to be, driven by our ability to:
Extend our technology and market leadership position. We intend to maintain our position as the market-leading software intelligence platform through increased investment in research and development and continued innovation. We expect to focus on expanding the functionality of Dynatrace® and investing in capabilities that address new market opportunities. We believe this strategy will enable new growth opportunities and allow us to continue to deliver differentiated high-value outcomes to our customers.
Grow our customer base. We intend to drive new customer growth by expanding our direct sales force focused on the largest 15,000 global accounts, which generally have annual revenues in excess of $1 billion. In addition, we expect to leverage our global partner ecosystem to add new customers in geographies where we have direct coverage and work jointly with our partners. In other geographies, such as Africa, Japan, the Middle East, Russia and South Korea, we utilize a multi-tier “master reseller” model.
Increase penetration within existing customers. We plan to continue to increase penetration within our existing customers by expanding the breadth of our platform capabilities to provide for continued cross-selling opportunities. In addition, we believe the ease of implementation for Dynatrace® provides us the opportunity to expand adoption within our existing customers, across new customer applications, and into additional business units or divisions. Our Dynatrace® net expansion rate has been above 120% for the last 14 quarters.
Enhance our strategic partner ecosystem. Our strategic partners include industry-leading system integrators, software vendors, and cloud and technology providers. We intend to continue to invest in our partner ecosystem, with a particular emphasis on expanding our strategic alliances and cloud-focused partnerships, such as AWS, Azure, Google Cloud Platform, Red Hat OpenShift, and Atlassian.
Key Metrics
In addition to our U.S. GAAP financial information, we monitor the following key metrics to help us measure and evaluate the effectiveness of our operations:
September 30,
20212020
Total ARR (in thousands)$863,863 $638,063 
Dynatrace® Net Expansion Rate
120%+