Dynatrace Reports Third Quarter of Fiscal Year 2023 Financial Results
Delivers Adjusted ARR growth of 29% year-over-year
WALTHAM, Mass, February 1, 2023 (Business Wire) - 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 at https://ir.dynatrace.com.
Financial Outlook
Since March 31, 2022, Dynatrace has seen an incremental strengthening of the U.S. dollar resulting in a foreign exchange ("FX") headwind in fiscal 2023. Total FY23 FX impact on a constant currency basis is expected to be approximately $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, 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 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 | |
Contacts
Investor Contact:
Noelle Faris
VP, Investor Relations
Noelle.Faris@dynatrace.com
Media Relations:
Jerome Stewart
VP, Communications
Jerome.Stewart@dynatrace.com
