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Dynatrace Reports Fourth Quarter and Full Year Fiscal 2023 Financial Results

Adjusted ARR growth of 29% year-over-year

Dynatrace (NYSE: DT), the leader in unified observability and security, today announced financial results for the fourth quarter and full year ended March 31, 2023.

“Dynatrace delivered a great finish to the year with strong fourth quarter results that exceeded expectations across the board, demonstrating the durability of our business model,” said Rick McConnell, Chief Executive Officer. “Observability is quickly moving from optional to mandatory as customers look to tame the explosion of data and increased complexity that's driven by their cloud migration and digital transformation initiatives. As we begin fiscal 2024, we remain focused on driving innovation to meet customers' evolving needs, managing the business prudently, and investing thoughtfully in strategic priorities to capture the substantial opportunities we see ahead.”

All growth rates are compared to the fourth quarter and full year of fiscal 2022 unless otherwise noted.

Fourth Quarter Fiscal 2023 Financial Highlights:

  • Total ARR of $1,247 million, Adjusted ARR growth of 29% year-over-year
  • Total Revenue of $314 million, up 27% on a constant currency basis
  • Subscription Revenue of $293 million, up 28% on a constant currency basis
  • GAAP Operating Income of $19 million and Non-GAAP Operating Income of $78 million
  • GAAP EPS of $0.27 and non-GAAP EPS of $0.31, on a dilutive basis

Full Year Fiscal 2023 Financial Highlights:

  • Total Revenue of $1,159 million, up 29% on a constant currency basis
  • Subscription Revenue of $1,083 million, up 29% on a constant currency basis
  • GAAP Operating Income of $93 million and Non-GAAP Operating Income of $292 million
  • GAAP EPS of $0.37 and non-GAAP EPS of $0.97, on a dilutive basis
  • GAAP Operating Cash Flow of $355 million and Free Cash Flow of $333 million

Business Highlights:

  • Platform Expansion: Innovations from the last quarter include an expanded GrailTM data lakehouse and a new user experience for Dynatrace products, both designed to enable exploratory analytics and deliver precise answers and intelligent automation from petabytes of unified observability and security data. In addition, the new Dynatrace AutomationEngine and AppEngine allow customers to automate nearly unlimited BizDevSecOps workflows and easily build custom, compliant, and data-driven apps and integrations.
  • Analyst Recognition: The 2023 GigaOm Radar for Cloud Observability Solutions recently named Dynatrace a "Leader" and positioned the company as the closest of all vendors to the center of the radar. Enterprise Management Associates (EMA) recognized Dynatrace as one of the top ten leading security visionaries exhibiting at the 2023 RSA Conference.
  • Expanded Partnerships: In fiscal 2023, business transacted through hyperscaler partners, including AWS, Google Cloud, and Microsoft Azure, led to several seven-figure deals in the fourth quarter. New business transacted through our largest hyperscaler partner grew by more than 80% compared to last year. In addition, we commenced the rollout of Dynatrace to DXC PlatformX customers, with many expected to migrate within the next 12 months. In Q4, we also saw continued expansion of our customer relationship with a major global system integrator (GSI). In addition to using the Dynatrace platform to power its observability practice, this GSI also uses Dynatrace for its internal observability and digital transformation initiatives.

     

 

Fourth Quarter 2023 Financial Highlights

(Unaudited – In thousands, except per share data)

 

 

Three Months Ended March 31,

 

 

2023

 

 

 

2022

 

Key Operating Metric:

 

 

 

Annualized recurring revenue (ARR)

$

1,246,681

 

 

$

995,121

 

Year-over-Year Increase

 

25

%

 

 

Year-over-Year Increase - constant currency

 

28

%

 

 

Adjusted ARR Growth

 

29

%

 

 

 

 

 

 

Revenue:

 

 

 

Total revenue

$

314,475

 

 

$

252,585

 

Year-over-Year Increase

 

25

%

 

 

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

 

27

%

 

 

 

 

 

 

Subscription revenue

$

293,314

 

 

$

234,976

 

Year-over-Year Increase

 

25

%

 

 

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

 

28

%

 

 

 

 

 

 

GAAP Financial Measures:

 

 

 

GAAP operating income

$

19,431

 

 

$

17,629

 

GAAP operating margin

 

6

%

 

 

7

%

 

 

 

 

GAAP net income

$

80,293

 

 

$

929

 

 

 

 

 

GAAP net income per share - diluted

$

0.27

 

 

$

0.00

 

 

 

 

 

GAAP shares outstanding - diluted

 

293,917

 

 

 

290,339

 

 

 

 

 

Net cash provided by operating activities

$

120,427

 

 

$

88,305

 

 

 

 

 

Non-GAAP Financial Measures:

 

 

 

Non-GAAP operating income (*)

$

77,935

 

 

$

57,656

 

Non-GAAP operating margin (*)

 

25

%

 

 

23

%

 

 

 

 

Non-GAAP net income (*)

$

92,459

 

 

$

48,287

 

 

 

 

 

Non-GAAP net income per share - diluted (*)

$

0.31

 

 

$

0.17

 

 

 

 

 

Non-GAAP shares outstanding - diluted (*)

 

293,917

 

 

 

290,339

 

 

 

 

 

Free Cash Flow (*)

$

114,512

 

 

$

82,378

 

 

Full Year 2023 Financial Highlights

(Unaudited – In thousands, except per share data)

 

 

Year Ended March 31,

 

 

2023

 

 

 

2022

 

Revenue:

 

 

 

Total revenue

$

1,158,530

 

 

$

929,445

 

Year-over-Year Increase

 

25

%

 

 

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

 

29

%

 

 

 

 

 

 

Subscription revenue

$

1,083,330

 

 

$

870,439

 

Year-over-Year Increase

 

24

%

 

 

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

 

29

%

 

 

 

 

 

 

GAAP Financial Measures:

 

 

 

GAAP operating income

$

92,811

 

 

$

81,307

 

GAAP operating margin

 

8

%

 

 

9

%

 

 

 

 

GAAP net income

$

107,959

 

 

$

52,451

 

 

 

 

 

GAAP net income per share - diluted

$

0.37

 

 

$

0.18

 

 

 

 

 

GAAP shares outstanding - diluted

 

291,617

 

 

 

290,903

 

 

 

 

 

Net cash provided by operating activities

$

354,885

 

 

$

250,917

 

 

 

 

 

Non-GAAP Financial Measures:

 

 

 

Non-GAAP operating income (*)

$

291,791

 

 

$

233,766

 

Non-GAAP operating margin (*)

 

25

%

 

 

25

%

 

 

 

 

Non-GAAP net income (*)

$

282,224

 

 

$

197,502

 

 

 

 

 

Non-GAAP net income per share - diluted (*)

$

0.97

 

 

$

0.68

 

 

 

 

 

Non-GAAP shares outstanding - diluted (*)

 

291,617

 

 

 

290,903

 

 

 

 

 

Free Cash Flow (*)

 

333,345

 

 

 

233,222

 

* 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 Investor Relations section of our website at https://ir.dynatrace.com.

Financial Outlook

Based on information available as of May 17, 2023, Dynatrace is issuing guidance for the first quarter and full year fiscal 2024 in the table below. This guidance is based on foreign exchange rates as of April 28, 2023. The total foreign exchange tailwind for fiscal 2024 is expected to be approximately $10 million on ARR and $13 million on revenue. Growth rates for ARR, Total revenue, and Subscription revenue are presented in constant currency to provide better visibility into the underlying growth of the business.

All growth rates are compared to the first quarter and full year of fiscal 2023 unless otherwise noted.

(In millions, except per share data)

First Quarter

Fiscal 2024

 

Full Year

Fiscal 2024

ARR

-

 

$1,475 - $1,490

As reported

-

 

18% - 20%

Constant currency

-

 

18% - 19%

Total revenue

$325 - $328

 

$1,388 - $1,406

As reported

22% - 23%

 

20% - 21%

Constant currency

22% - 23%

 

19% - 20%

Subscription revenue

$306 - $309

 

$1,311 - $1,327

As reported

23% - 24%

 

21% - 22%

Constant currency

23% - 24%

 

20% - 21%

Non-GAAP operating income

$76.5 - $78.5

 

$348 - $358

Non-GAAP operating margin

23.5% - 24%

 

25% - 25.5%

Non-GAAP net income

$64 - $66

 

$295 - $307

Non-GAAP net income per diluted share

$0.22

 

$0.98 - $1.02

Diluted weighted average shares outstanding

296 - 297

 

300 - 301

Free cash flow

-

 

$303 - $312

Free cash flow margin

-

 

22%

Reconciliation of non-GAAP operating income, non-GAAP net income, non-GAAP net income per 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 at 8:00 a.m. Eastern Time today, May 17, 2023. To access the conference call from the U.S. and Canada, dial (866) 405-1247, or internationally, dial (201) 689-8045 with event confirmation #: 13737836. 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 May 31, 2023, by dialing (877) 660-6853 from the U.S. or Canada, or for international callers by dialing (201) 612-7415 and entering event confirmation #: 13737836. In addition, an archived webcast will be available at ir.dynatrace.com.

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

Non-GAAP Financial Measures & Key Metrics

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

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

Dynatrace presents constant currency amounts for Revenue and Annual Recurring Revenue to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. 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.

Constant Currency amounts for ARR, Total Revenue and Subscription Revenue are presented to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign exchange 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.

Dollar-Based Gross Retention Rate is defined as the ARR from all customers as of one year prior, less contraction and customer churn, divided by the total ARR from one year prior. This metric reflects the percentage of ARR from all customers as of the year prior that has been retained.

Dollar-Based Net Retention 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. Our dollar-based net retention rate reflects customer renewals, expansion, contraction and churn, and 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 results in a dollar-based net retention rate metric that better reflects Dynatrace’s ability to expand existing customer relationships. Dollar-based net retention rate is presented on a constant currency basis.

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 (reflected as "purchase of property and equipment" in our financial statements).

About Dynatrace

Dynatrace exists to make the world’s software work perfectly. Our unified 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 Mr. McConnell's remarks and statements regarding management’s expectations of future financial and operational performance and operational expenditures, expected growth, and business outlook, including our financial outlook for the first quarter and full year of fiscal 2024. 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, our ability to maintain our revenue growth rates in future periods; market adoption of our product offerings; continued demand for, and spending on, our solutions; our ability to innovate and develop solutions that meet customer needs; the ability of our platform and solutions to effective interoperate with customers’ IT infrastructures; our ability to acquire new customers and retain and expand our relationships with existing customers; our ability to expand our sales and marketing capabilities; our ability to compete; our ability to maintain successful relationships with partners; security breaches, other security incidents and any real or perceived errors, failures, defects or vulnerabilities in our solutions; our ability to protect our intellectual property; the effect on our business of the macroeconomic environment, associated global economic conditions and geopolitical disruption; and other risks set forth under the caption “Risk Factors” in our most recent Form 10-Q filed on February 1, 2023 and our other SEC filings, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, which we plan to file later this month. We assume no obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.

 

DYNATRACE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

 

 

Three Months Ended

March 31,

 

Twelve Months Ended

March 31,

 

 

2023

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

(unaudited)

 

 

 

 

Revenue:

 

 

 

 

 

 

 

Subscription

$

293,314

 

$

234,976

 

 

$

1,083,330

 

 

$

870,439

 

Service

 

21,161

 

 

17,609

 

 

 

75,200

 

 

 

59,006

 

Total revenue

 

314,475

 

 

252,585

 

 

 

1,158,530

 

 

 

929,445

 

Cost of revenue:

 

 

 

 

 

 

 

Cost of subscription

 

39,052

 

 

31,245

 

 

 

144,445

 

 

 

111,646

 

Cost of service

 

16,618

 

 

12,796

 

 

 

62,882

 

 

 

45,717

 

Amortization of acquired technology

 

3,895

 

 

3,875

 

 

 

15,564

 

 

 

15,513

 

Total cost of revenue

 

59,565

 

 

47,916

 

 

 

222,891

 

 

 

172,876

 

Gross profit

 

254,910

 

 

204,669

 

 

 

935,639

 

 

 

756,569

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development (1)

 

61,502

 

 

42,833

 

 

 

218,349

 

 

 

156,342

 

Sales and marketing (1)

 

124,702

 

 

101,300

 

 

 

448,015

 

 

 

362,116

 

General and administrative (1)

 

42,546

 

 

35,368

 

 

 

150,031

 

 

 

126,622

 

Amortization of other intangibles

 

6,573

 

 

7,539

 

 

 

26,292

 

 

 

30,157

 

Restructuring and other

 

156

 

 

 

 

 

141

 

 

 

25

 

Total operating expenses

 

235,479

 

 

187,040

 

 

 

842,828

 

 

 

675,262

 

Income from operations

 

19,431

 

 

17,629

 

 

 

92,811

 

 

 

81,307

 

Interest income (expense), net

 

4,066

 

 

(2,234

)

 

 

(3,409

)

 

 

(10,192

)

Other income, net

 

2,412

 

 

1,889

 

 

 

565

 

 

 

544

 

Income before income taxes

 

25,909

 

 

17,284

 

 

 

89,967

 

 

 

71,659

 

Income tax benefit (expense)

 

54,384

 

 

(16,355

)

 

 

17,992

 

 

 

(19,208

)

Net income

$

80,293

 

$

929

 

 

$

107,959

 

 

$

52,451

 

Net income per share:

 

 

 

 

 

 

 

Basic

$

0.28

 

$

0.00

 

 

$

0.38

 

 

$

0.18

 

Diluted

$

0.27

 

$

0.00

 

 

$

0.37

 

 

$

0.18

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

289,751

 

 

285,349

 

 

 

287,700

 

 

 

284,161

 

Diluted

 

293,917

 

 

290,339

 

 

 

291,617

 

 

 

290,903

 

(1) During the three months ended March 31, 2023, we began allocating depreciation expense to operating expenses based upon location and headcount, whereas previously it was included primarily in general and administrative expense. This has been retrospectively applied to the twelve months ended March 31, 2023.

 

SHARE-BASED COMPENSATION

 

 

Three Months Ended

March 31,

 

Twelve Months Ended

March 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

(unaudited)

 

 

 

 

Cost of revenue

$

4,973

 

$

3,321

 

$

18,383

 

$

12,863

Research and development

 

12,067

 

 

5,985

 

 

41,406

 

 

21,316

Sales and marketing

 

13,748

 

 

9,470

 

 

51,147

 

 

35,957

General and administrative

 

11,233

 

 

8,810

 

 

35,938

 

 

29,400

Total share-based compensation expense

$

42,021

 

$

27,586

 

$

146,874

 

$

99,536

 

 

DYNATRACE, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

March 31,

 

 

2023

 

 

 

2022

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

555,348

 

 

$

462,967

 

Accounts receivable, net

 

442,518

 

 

 

350,666

 

Deferred commissions, current

 

83,029

 

 

 

62,601

 

Prepaid expenses and other current assets

 

37,289

 

 

 

72,188

 

Total current assets

 

1,118,184

 

 

 

948,422

 

Property and equipment, net

 

53,576

 

 

 

45,271

 

Operating lease right-of-use asset, net

 

68,074

 

 

 

58,849

 

Goodwill

 

1,281,812

 

 

 

1,281,876

 

Other intangible assets, net

 

63,599

 

 

 

105,736

 

Deferred tax assets, net

 

79,822

 

 

 

28,106

 

Deferred commissions, non-current

 

86,232

 

 

 

63,435

 

Other assets

 

14,048

 

 

 

9,615

 

Total assets

$

2,765,347

 

 

$

2,541,310

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

21,953

 

 

$

22,715

 

Accrued expenses, current

 

188,380

 

 

 

141,556

 

Deferred revenue, current

 

811,058

 

 

 

688,554

 

Operating lease liabilities, current

 

15,652

 

 

 

12,774

 

Total current liabilities

 

1,037,043

 

 

 

865,599

 

Deferred revenue, non-current

 

34,423

 

 

 

25,783

 

Accrued expenses, non-current

 

29,212

 

 

 

19,409

 

Operating lease liabilities, non-current

 

59,520

 

 

 

52,070

 

Deferred tax liabilities

 

280

 

 

 

85

 

Long-term debt, net

 

 

 

 

273,918

 

Total liabilities

 

1,160,478

 

 

 

1,236,864

 

Shareholders' equity:

 

 

 

Common shares, $0.001 par value, 600,000,000 shares authorized, 290,411,108 and 286,053,276 shares issued and outstanding at March 31, 2023 and 2022, respectively

 

290

 

 

 

286

 

Additional paid-in capital

 

1,989,797

 

 

 

1,792,197

 

Accumulated deficit

 

(353,389

)

 

 

(461,348

)

Accumulated other comprehensive loss

 

(31,829

)

 

 

(26,689

)

Total shareholders' equity

 

1,604,869

 

 

 

1,304,446

 

Total liabilities and shareholders' equity

$

2,765,347

 

 

$

2,541,310

 

 

DYNATRACE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

Year Ended March 31,

 

 

2023

 

 

 

2022

 

Cash flows from operating activities:

 

 

 

Net income

$

107,959

 

 

$

52,451

 

Adjustments to reconcile net income to cash provided by operations:

 

 

 

Depreciation

 

12,541

 

 

 

10,638

 

Amortization

 

42,070

 

 

 

46,238

 

Share-based compensation

 

146,874

 

 

 

99,536

 

Loss on extinguishment of debt

 

5,925

 

 

 

 

Deferred income taxes

 

(53,534

)

 

 

(12,401

)

Other

 

988

 

 

 

1,486

 

Net change in operating assets and liabilities:

 

 

 

Accounts receivable

 

(94,910

)

 

 

(108,848

)

Deferred commissions

 

(45,191

)

 

 

(29,533

)

Prepaid expenses and other assets

 

26,753

 

 

 

(8,108

)

Accounts payable and accrued expenses

 

58,680

 

 

 

35,946

 

Operating leases, net

 

1,186

 

 

 

1,353

 

Deferred revenue

 

145,544

 

 

 

162,159

 

Net cash provided by operating activities

 

354,885

 

 

 

250,917

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Purchase of property and equipment

 

(21,540

)

 

 

(17,695

)

Acquisition of businesses, net of cash acquired

 

 

 

 

(13,195

)

Net cash used in investing activities

 

(21,540

)

 

 

(30,890

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Repayment of term loans

 

(281,125

)

 

 

(120,000

)

Debt issuance costs

 

(1,949

)

 

 

 

Proceeds from employee stock purchase plan

 

17,806

 

 

 

13,913

 

Proceeds from exercise of stock options

 

32,939

 

 

 

25,489

 

Equity repurchases

 

(15

)

 

 

(66

)

Net cash used in financing activities

 

(232,344

)

 

 

(80,664

)

 

 

 

 

Effect of exchange rates on cash and cash equivalents

 

(8,620

)

 

 

(1,358

)

 

 

 

 

Net increase in cash and cash equivalents

 

92,381

 

 

 

138,005

 

 

 

 

 

Cash and cash equivalents, beginning of year

 

462,967

 

 

 

324,962

 

Cash and cash equivalents, end of year

$

555,348

 

 

$

462,967

 

 

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands)

 

 

Three Months Ended March 31, 2023

 

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

$

59,565

 

 

$

(4,973

)

 

$

(272

)

 

$

(3,895

)

 

$

 

 

$

50,425

 

Gross profit

 

254,910

 

 

 

4,973

 

 

 

272

 

 

 

3,895

 

 

 

 

 

 

264,050

 

Gross margin

 

81

%

 

 

 

 

 

 

 

 

 

 

84

%

Research and development

 

61,502

 

 

 

(12,067

)

 

 

(445

)

 

 

 

 

 

 

 

 

48,990

 

Sales and marketing

 

124,702

 

 

 

(13,748

)

 

 

(1,143

)

 

 

 

 

 

(1,332

)

 

 

108,479

 

General and administrative

 

42,546

 

 

 

(11,233

)

 

 

(841

)

 

 

 

 

 

(1,826

)

 

 

28,646

 

Amortization of other intangibles

 

6,573

 

 

 

 

 

 

 

 

 

(6,573

)

 

 

 

 

 

 

Restructuring and other

 

156

 

 

 

 

 

 

 

 

 

 

 

 

(156

)

 

 

 

Operating income

$

19,431

 

 

$

42,021

 

 

$

2,701

 

 

$

10,468

 

 

$

3,314

 

 

$

77,935

 

Operating margin

 

6

%

 

 

 

 

 

 

 

 

 

 

25

%

 

Three Months Ended March 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

$

47,916

 

 

$

(3,321

)

 

$

(143

)

 

$

(3,875

)

 

$

 

 

$

40,577

 

Gross profit

 

204,669

 

 

 

3,321

 

 

 

143

 

 

 

3,875

 

 

 

 

 

 

212,008

 

Gross margin

 

81

%

 

 

 

 

 

 

 

 

 

 

84

%

Research and development

 

42,833

 

 

 

(5,985

)

 

 

(259

)

 

 

 

 

 

 

 

 

36,589

 

Sales and marketing

 

101,300

 

 

 

(9,470

)

 

 

(424

)

 

 

 

 

 

 

 

 

91,406

 

General and administrative

 

35,368

 

 

 

(8,810

)

 

 

(123

)

 

 

 

 

 

(78

)

 

 

26,357

 

Amortization of other intangibles

 

7,539

 

 

 

 

 

 

 

 

 

(7,539

)

 

 

 

 

 

 

Restructuring and other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

$

17,629

 

 

$

27,586

 

 

$

949

 

 

$

11,414

 

 

$

78

 

 

$

57,656

 

Operating margin

 

7

%

 

 

 

 

 

 

 

 

 

 

23

%

 

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share data)

 

 

Three Months Ended March 31,

 

 

2023

 

 

 

2022

 

Non-GAAP net income:

 

 

 

Net income

$

80,293

 

 

$

929

 

Income tax (benefit) expense

 

(54,384

)

 

 

16,355

 

Non-GAAP effective cash tax

 

10,084

 

 

 

(7,543

)

Interest (income) expense, net

 

(4,066

)

 

 

2,234

 

Cash received from (paid for) interest, net

 

4,440

 

 

 

(1,826

)

Share-based compensation

 

42,021

 

 

 

27,586

 

Employer payroll taxes on employee stock transactions

 

2,701

 

 

 

949

 

Amortization of other intangibles

 

6,573

 

 

 

7,539

 

Amortization of acquired technology

 

3,895

 

 

 

3,875

 

Transaction, restructuring, and other

 

3,314

 

 

 

78

 

Gain on currency translation

 

(2,412

)

 

 

(1,889

)

Non-GAAP net income

$

92,459

 

 

$

48,287

 

 

 

 

 

Share count:

 

 

 

Weighted-average shares outstanding - basic

 

289,751

 

 

 

285,349

 

Weighted-average shares outstanding - diluted

 

293,917

 

 

 

290,339

 

 

 

 

 

Shares used in non-GAAP per share calculations:

 

 

 

Weighted-average shares outstanding - basic

 

289,751

 

 

 

285,349

 

Weighted-average shares outstanding - diluted

 

293,917

 

 

 

290,339

 

 

 

 

 

Net income per share:

 

 

 

Net income per share - basic

$

0.28

 

 

$

0.00

 

Net income per share - diluted

$

0.27

 

 

$

0.00

 

Non-GAAP net income per share - basic

$

0.32

 

 

$

0.17

 

Non-GAAP net income per share - diluted

$

0.31

 

 

$

0.17

 

 

Three Months Ended March 31,

 

 

2023

 

 

 

2022

 

Free Cash Flow ("FCF"):

 

 

 

Net cash provided by operating activities

$

120,427

 

 

$

88,305

 

Purchase of property and equipment

 

(5,915

)

 

 

(5,927

)

FCF

$

114,512

 

 

$

82,378

 

 

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands)

 

 

Year Ended March 31, 2023

 

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

$

222,891

 

 

$

(18,383

)

 

$

(798

)

 

$

(15,564

)

 

$

(380

)

 

$

187,766

 

Gross profit

 

935,639

 

 

 

18,383

 

 

 

798

 

 

 

15,564

 

 

 

380

 

 

 

970,764

 

Gross margin

 

81

%

 

 

 

 

 

 

 

 

 

 

84

%

Research and development (1)

 

218,349

 

 

 

(41,406

)

 

 

(1,704

)

 

 

 

 

 

 

 

 

175,239

 

Sales and marketing (1)

 

448,015

 

 

 

(51,147

)

 

 

(2,338

)

 

 

 

 

 

(1,332

)

 

 

393,198

 

General and administrative (1)

 

150,031

 

 

 

(35,938

)

 

 

(1,351

)

 

 

 

 

 

(2,206

)

 

 

110,536

 

Amortization of other intangibles

 

26,292

 

 

 

 

 

 

 

 

 

(26,292

)

 

 

 

 

 

 

Restructuring and other

 

141

 

 

 

 

 

 

 

 

 

 

 

 

(141

)

 

 

 

Operating income

$

92,811

 

 

$

146,874

 

 

$

6,191

 

 

$

41,856

 

 

$

4,059

 

 

$

291,791

 

Operating margin

 

8

%

 

 

 

 

 

 

 

 

 

 

25

%

(1) During the three months ended March 31, 2023, we began allocating depreciation expense to operating expenses based upon location and headcount, whereas previously it was included primarily in general and administrative expense. This has been retrospectively applied to the year ended March 31, 2023.

 

Year Ended March 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

$

172,876

 

 

$

(12,863

)

 

$

(1,059

)

 

$

(15,513

)

 

$

 

 

$

143,441

 

Gross profit

 

756,569

 

 

 

12,863

 

 

 

1,059

 

 

 

15,513

 

 

 

 

 

 

786,004

 

Gross margin

 

81

%

 

 

 

 

 

 

 

 

 

 

85

%

Research and development

 

156,342

 

 

 

(21,316

)

 

 

(1,879

)

 

 

 

 

 

 

 

 

133,147

 

Sales and marketing

 

362,116

 

 

 

(35,957

)

 

 

(2,305

)

 

 

 

 

 

 

 

 

323,854

 

General and administrative

 

126,622

 

 

 

(29,400

)

 

 

(701

)

 

 

 

 

 

(1,284

)

 

 

95,237

 

Amortization of other intangibles

 

30,157

 

 

 

 

 

 

 

 

 

(30,157

)

 

 

 

 

 

 

Restructuring and other

 

25

 

 

 

 

 

 

 

 

 

 

 

 

(25

)

 

 

 

Operating income

$

81,307

 

 

$

99,536

 

 

$

5,944

 

 

$

45,670

 

 

$

1,309

 

 

$

233,766

 

Operating margin

 

9

%

 

 

 

 

 

 

 

 

 

 

25

%

 

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share data)

 

 

Year Ended March 31,

 

 

2023

 

 

 

2022

 

Non-GAAP net income:

 

 

 

Net income

$

107,959

 

 

$

52,451

 

Income tax (benefit) expense

 

(17,992

)

 

 

19,208

 

Non-GAAP effective cash tax

 

(13,370

)

 

 

(27,889

)

Interest expense, net

 

3,409

 

 

 

10,192

 

Cash received from (paid for) interest, net

 

3,803

 

 

 

(8,375

)

Share-based compensation

 

146,874

 

 

 

99,536

 

Employer payroll taxes on employee stock transactions

 

6,191

 

 

 

5,944

 

Amortization of other intangibles

 

26,292

 

 

 

30,157

 

Amortization of acquired technology

 

15,564

 

 

 

15,513

 

Transaction, restructuring, and other

 

4,059

 

 

 

1,309

 

Gain on currency translation

 

(565

)

 

 

(544

)

Non-GAAP net income

$

282,224

 

 

$

197,502

 

 

 

 

 

Share count:

 

 

 

Weighted-average shares outstanding - basic

 

287,700

 

 

 

284,161

 

Weighted-average shares outstanding - diluted

 

291,617

 

 

 

290,903

 

 

 

 

 

Shares used in non-GAAP per share calculations:

 

 

 

Weighted-average shares outstanding - basic

 

287,700

 

 

 

284,161

 

Weighted-average shares outstanding - diluted

 

291,617

 

 

 

290,903

 

 

 

 

 

Net income per share:

 

 

 

Net income per share - basic

$

0.38

 

 

$

0.18

 

Net income per share - diluted

$

0.37

 

 

$

0.18

 

Non-GAAP net income per share - basic

$

0.98

 

 

$

0.70

 

Non-GAAP net income per share - diluted

$

0.97

 

 

$

0.68

 

 

Year Ended March 31,

 

 

2023

 

 

 

2022

 

Free Cash Flow ("FCF"):

 

 

 

Net cash provided by operating activities

$

354,885

 

 

$

250,917

 

Purchase of property and equipment

 

(21,540

)

 

 

(17,695

)

FCF

 

333,345

 

 

 

233,222

 

 

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