- Subscription revenue of $144.4 million, up 34% year-over-year,
37% on a constant currency basis
- ARR of $601.4 million, up 37% year-over-year, 39% on a constant
currency basis
- GAAP EPS of $0.05 and non-GAAP EPS of $0.13
Dynatrace (NYSE: DT), the market-leading software intelligence
provider, purpose-built for dynamic multiclouds, today released
financial results for the first quarter of its fiscal 2021 ended
June 30, 2020.
“Dynatrace reported strong first quarter results across our key
operating measures,” said John Van Siclen, Dynatrace’s CEO. “We
continued to see digital transformation projects accelerate as
customers drive to do much more with less time, resource and cost.
Our essential role in providing intelligent observability into the
dynamic multicloud ecosystems underpinning these transformations
differentiates us from our competitors and positions us well for
continued growth and success moving forward.”
First Quarter Fiscal 2021 and Other Recent Business
Highlights: All growth rates are compared to the first quarter
of fiscal 2020 unless otherwise noted.
Financial Highlights:
- Total Revenue of $155.5 million, an increase of 27% as
reported, and 30% on a constant currency basis
- Total ARR of $601.4 million, an increase of 37% as reported,
and 39% on a constant currency basis
- Subscription revenue of $144.4 million, an increase of 34% as
reported, and 37% on a constant currency basis, and representing
93% of total revenue
- GAAP Operating Income of $24.1 million and Non-GAAP Operating
Income of $50.8 million
- GAAP EPS of $0.05 and non-GAAP EPS of $0.13
Business Highlights:
- Enhanced Kubernetes support with full-stack infrastructure and
cloud native application observability unified and analyzed by
Davis®, the Dynatrace® AI-engine. Now, dynamic, multicloud
Kubernetes clusters can be easily understood, managed and optimized
for smoother migrations, greater scalability, and faster
application innovation.
- Achieved FedRAMP authorization at Moderate Impact Level opening
wider access to US government digital transformation projects.
According to IDC1, the US government is expected to spend $94B on
digital transformation by 2023.
- Rated the observability platform leader by G2 reviewers -
including #1 rankings across Cloud Infrastructure Monitoring, AIOps
Platforms, Application Performance Monitoring, Container
Monitoring, Digital Experience Monitoring, and Session Replay
categories.
First Quarter 2021 Financial
Highlights
(Unaudited – in thousands,
except per share amounts)
Three Months Ended June
30,
2020
2019
Annualized recurring revenue
$
601,376
$
437,622
Year-over-Year Increase
37%
Annualized recurring revenue - constant
currency (*)
$
609,011
$
437,622
Year-over-Year Increase
39%
Revenues:
Total revenue
$
155,508
$
122,550
Year-over-Year Increase
27%
Total revenue - constant currency (*)
$
159,084
$
122,550
Year-over-Year Increase
30%
Subscription revenue
$
144,357
$
108,128
Year-over-Year Increase
34%
Subscription revenue - constant currency
(*)
$
147,681
108,128
Year-over-Year Increase
37%
Non-GAAP operating income (*)
$
50,828
$
27,097
Non-GAAP operating margin (*)
33%
22%
Non-GAAP net income (*)
$
36,938
$
9,307
Non-GAAP net income per share -
diluted
$
0.13
$
0.04
Non-GAAP shares outstanding - diluted
284,309
238,619
Unlevered Free Cash Flow (*)
$
36,950
$
45,798
* 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
Based on information available, as of July 29, 2020, Dynatrace
is issuing guidance for the second quarter and raising full year
fiscal 2021 as follows:
Second Quarter of Fiscal Year 2021:
- Total revenue is expected to be in the range of $159.0 million
to $161.0 million, 23% to 24% growth as reported, and 25% to 26% on
a constant currency basis
- Subscription revenue is expected to be in the range of $149.0
million to $150.5 million, 29% to 30% growth as reported, 30% to
32% on a constant currency basis
- Non-GAAP operating income is expected to be in the range of
$43.0 million to $45.0 million
- Non-GAAP net income is expected to be in the range of $27.0
million to $28.5 million
- Non-GAAP net income per diluted share is expected to be in the
range of $0.09 to $0.10, based on a range of 288 million to 289
million diluted weighted-average shares outstanding
Full Year Fiscal 2021:
- Total revenue is expected to be in the range of $646.0 million
to $656.0 million, 18% to 20% growth as reported, and 20% to 22% on
a constant currency basis
- Subscription revenue is expected to be in the range of $603.0
million to $612.0 million, 24% to 25% growth as reported, 26% to
27% on a constant currency basis
- Total ARR is expected to be in the range of $698.0 million to
$708.0 million, 22% to 24% growth as reported, 23% to 25% on a
constant currency basis
- Non-GAAP operating income is expected to be in the range of
$166.0 million to $175.0 million
- Non-GAAP net income is expected to be in the range of $133.0
million to $141.0 million
- Non-GAAP net income per diluted share is expected to be in the
range of $0.46 to $0.49, based on a range of 288 million to 290
million diluted weighted-average shares outstanding
- Total unlevered free cash flow is expected to be in the range
of $187.0 million to $195.0 million, 29% to 30% of revenue
Our guidance is based on foreign exchange rates as of June 30,
2020 for entities reporting in currencies other than U.S.
Dollars.
While we believe we are in a strong financial position to
weather the impact to our business from COVID-19, many of our
customers and prospects are operating under very challenging
circumstances and may reduce or re-evaluate their spend. As such,
in our second quarter and full year 2021 guidance we factor in the
expected impacts of COVID-19 on our business and results of
operations based on information available to us today. Our outlook
assumes a continued challenging economic environment and
incorporates a wider range of outcomes for the remainder of the
fiscal year. Significant variation from these assumptions could
cause us to raise, lower or modify our expectations and our
guidance, and we undertake no obligation to update our assumptions,
expectations or our guidance. These statements are forward-looking,
and actual results may differ materially, as further discussed
below under the heading “Cautionary Language Concerning
Forward-Looking Statements”.
Reconciliation of non-GAAP operating income, non-GAAP net
income, non-GAAP net income per share and unlevered 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 stock-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.
These statements are forward-looking and actual results may
differ materially. Refer to the section under the heading
Forward-Looking Statements below for information on the factors
that could cause our actual results to differ materially.
Conference Call and Webcast Information
Dynatrace will host a conference call today, July 29, 2020, to
discuss its results and business outlook at 8:00 a.m. Eastern Time.
The call will be accessible by telephone at 833-714-0933 (domestic)
or 833-714-0959 (international). The call will also be available
live via webcast on the Company’s website at
https://ir.dynatrace.com. A telephone replay of the conference call
will be available at 800-585-8367 or 416-621-4642 (access code
1137277) until August 12, 2020. A webcast replay will be available
at https://ir.dynatrace.com.
The company has used, and intends to continue to use, the
investor relations portion of its website as a means of disclosing
material non-public information and for complying with disclosure
obligations under Regulation FD.
Non-GAAP Financial Measures & Key Metrics
In addition to disclosing financial measures prepared in
accordance with GAAP, this press release and the accompanying
tables contain certain non-GAAP financial measures.
Non-GAAP financial measures do not have any standardized meaning
and are therefore unlikely to be comparable to similarly titled
measures presented by other companies. Dynatrace considers these
non-GAAP financial measures to be important because they provide
useful indicators of its performance and liquidity measures. These
are key measures used by our management and board of directors to
understand and evaluate our core operating performance and trends,
to prepare and approve our annual budget and to develop short and
long-term operational plans. In addition, investors often use
similar measures to evaluate the performance of a company. Non-GAAP
financial measures are presented for supplemental informational
purposes only for understanding the company’s operating
performance. The non-GAAP financial measures should not be
considered a substitute for financial information presented in
accordance with GAAP, and may be different from non-GAAP financial
measures presented by other companies. The GAAP financial measure
most directly comparable to each non-GAAP financial measure used or
discussed, and a reconciliation of the differences between each
non-GAAP financial measure and the comparable GAAP financial
measure, are included in this press release after the consolidated
financial statements.
Dynatrace presents constant currency amounts for Revenue and
Annual Recurring Revenue to provide a framework for assessing how
our underlying businesses performed excluding the effect of foreign
currency rate fluctuations. To present this information, current
and comparative prior period results for entities reporting in
currencies other than United States dollars are converted into
United States dollars using the average exchange rates from the
comparative period rather than the actual exchange rates in effect
during the respective periods. All growth comparisons relate to the
corresponding period in the last fiscal year. Dynatrace provides
this non-GAAP financial information to aid investors in better
understanding our performance.
Adjusted EBITDA is defined as Net Income (loss) adjusted
by removing the impact of our capital structure (net interest
income or expense from our outstanding debt), asset base
(depreciation and amortization), tax consequences, restructuring
and other gains and losses, transaction and sponsor related costs,
gains and losses on foreign currency and stock-based
compensation.
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.
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.
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.
Adjusted EBITDA/Net Debt Leverage Ratio is defined as our
Net Debt divided by our trailing twelve month Adjusted EBITDA. Net
Debt is defined as total principal less cash and cash
equivalents.
Unlevered Free Cash Flow is defined as net cash provided
by (used in) operating activities and adjusted to exclude cash paid
for interest (net of tax), non-recurring restructuring and
acquisition related costs, along with costs associated with
one-time offerings and filings, less cash used in investing
activities for acquisition of property and equipment. However,
given our debt obligations, unlevered free cash flow does not
represent residual cash flow available for discretionary
expenses.
About Dynatrace
Dynatrace provides software intelligence to simplify cloud
complexity and accelerate digital transformation. With advanced
observability, AI, and continuous automation, our all-in-one
platform provides precise answers about the performance of
applications, the underlying infrastructure and the experience of
all users to enable organizations to innovate faster, collaborate
efficiently, and deliver more value with dramatically less effort.
That’s why many of the world’s largest enterprises trust Dynatrace
to modernize and automate cloud operations, release better software
faster, and deliver unrivaled digital experiences. Curious to see
how you can simplify your cloud? Let us show you. Visit our trial
page for a free 15-day Dynatrace trial. To learn more about how
Dynatrace can help your business, visit https://www.dynatrace.com,
visit our blog and follow us on Twitter @dynatrace.
Cautionary Language Concerning Forward-Looking
Statements
This press release includes certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements regarding management’s expectations
of future financial and operational performance and operational
expenditures, expected growth, and business outlook, including our
financial guidance for the second fiscal quarter and full year
2021, and statements regarding the size of our market and our
positioning for capturing a larger share of our market. These
forward-looking statements include, but are not limited to, plans,
objectives, expectations and intentions and other statements
contained in this press release that are not historical facts and
statements identified by words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “seeks,” “estimates” or words of
similar meaning. These forward-looking statements reflect our
current views about our plans, intentions, expectations, strategies
and prospects, which are based on the information currently
available to us and on assumptions we have made. Although we
believe that our plans, intentions, expectations, strategies and
prospects as reflected in or suggested by those forward-looking
statements are reasonable, we can give no assurance that the plans,
intentions, expectations or strategies will be attained or
achieved. Furthermore, actual results may differ materially from
those described in the forward-looking statements and will be
affected by a variety of risks and factors that are beyond our
control including, without limitation, the effect of the COVID-19
pandemic on our business operations and demand for our products as
well as its impact on general economic and financial market
conditions, our ability to maintain our subscription revenue growth
rates in future periods, our ability to service our substantial
level of indebtedness, market adoption of software intelligence
solutions for application performance monitoring, digital
experience monitoring and infrastructure monitoring, 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 27, 2020 and our other SEC filings.
We assume no obligation to update any forward-looking statements
contained in this document as a result of new information, future
events or otherwise.
DYNATRACE, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited – In thousands,
except per share amounts)
Three Months Ended June
30,
2020
2019
Revenue:
Subscription
$
144,357
$
108,128
License
638
3,784
Service
10,513
10,638
Total revenue
155,508
122,550
Cost of revenue:
Cost of subscription
16,706
16,177
Cost of service
8,010
8,809
Amortization of acquired technology
3,826
4,557
Total cost of revenue
28,542
29,543
Gross profit
126,966
93,007
Operating expenses:
Research and development
23,505
25,659
Sales and marketing
49,163
58,215
General and administrative
21,527
31,882
Amortization of other intangibles
8,686
10,142
Restructuring and other
(21
)
115
Total operating expenses
102,860
126,013
Income (loss) from operations
24,106
(33,006
)
Interest expense, net
(4,113
)
(19,186
)
Other income, net
19
94
Income (loss) before income taxes
20,012
(52,098
)
Income tax (expense) benefit
(7,147
)
2,943
Net income (loss)
$
12,865
$
(49,155
)
Net income (loss) per share:
Basic
$
0.05
$
(0.21
)
Diluted
$
0.05
$
(0.21
)
Weighted average shares outstanding:
Basic
279,069
237,693
Diluted
284,309
237,693
UNAUDITED SHARE-BASED
COMPENSATION
Three Months Ended June
30,
2020
2019
Cost of revenue
$
1,498
$
3,309
Research and development
2,418
7,127
Sales and marketing
5,405
15,104
General and administrative
3,351
15,885
Total share-based compensation expense
$
12,672
$
41,425
DYNATRACE, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except share
data)
June 30, 2020
March 31, 2020
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
250,377
$
213,170
Accounts receivable, net
93,763
157,058
Deferred commissions, current
39,080
38,509
Prepaid expenses and other current
assets
58,716
61,188
Total current assets
441,936
469,925
Property and equipment, net
33,673
31,508
Operating lease right-of-use asset,
net
44,209
—
Goodwill
1,270,986
1,270,733
Other intangible assets, net
188,717
201,592
Deferred tax assets, net
21,181
20,460
Deferred commissions, non-current
37,778
39,736
Other assets
8,350
8,126
Total assets
$
2,046,830
$
2,042,080
Liabilities and shareholders'
equity
Current liabilities:
Accounts payable
$
3,767
$
11,112
Accrued expenses, current
74,907
93,728
Deferred revenue, current
352,803
384,060
Operating lease liabilities, current
9,712
—
Total current liabilities
441,189
488,900
Deferred revenue, non-current
49,580
60,711
Accrued expenses, non-current
18,062
20,987
Operating lease liabilities,
non-current
38,970
—
Long-term debt
510,452
509,985
Total liabilities
1,058,253
1,080,583
Commitments and contingencies
Shareholders' equity:
Common shares, $0.001 par value,
600,000,000 shares authorized, 281,055,994 and 280,853,040 shares
issued and outstanding at June 30, 2020 and March 31, 2020,
respectively
281
281
Additional paid-in capital
1,589,598
1,573,347
Accumulated deficit
(580,855
)
(594,026
)
Accumulated other comprehensive loss
(20,447
)
(18,105
)
Total shareholders' equity
988,577
961,497
Total liabilities and shareholders'
equity
$
2,046,830
$
2,042,080
DYNATRACE, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited – In
thousands)
Three Months Ended June
30,
2020
2019
Cash flows from operating
activities:
Net income (loss)
$
12,865
$
(49,155
)
Adjustments to reconcile net income (loss)
to cash provided by operations:
Depreciation
1,590
2,034
Amortization
13,019
15,081
Share-based compensation
12,672
41,425
Deferred income taxes
(175
)
(8,877
)
Other
466
416
Net change in operating assets and
liabilities:
Accounts receivable
64,265
34,116
Deferred commissions
2,229
(720
)
Prepaid expenses and other assets
275
(924
)
Accounts payable and accrued expenses
(23,212
)
(8,464
)
Operating leases, net
311
—
Deferred revenue
(47,297
)
9,235
Net cash provided by operating
activities
37,008
34,167
Cash flows from investing
activities:
Purchase of property and equipment
(4,418
)
(4,151
)
Capitalized software additions
(131
)
(333
)
Net cash used in investing activities
(4,549
)
(4,484
)
Cash flows from financing
activities:
Repayment of term loans
—
(19,000
)
Equity repurchases
(13
)
(53
)
Proceeds from employee stock purchase
plan
3,592
—
Installments related to acquisition
—
(4,694
)
Net cash provided by (used in) financing
activities
3,579
(23,747
)
Effect of exchange rates on cash and cash
equivalents
1,169
203
Net increase in cash and cash
equivalents
37,207
6,139
Cash and cash equivalents, beginning of
period
213,170
51,314
Cash and cash equivalents, end of
period
$
250,377
$
57,453
DYNATRACE, INC.
GAAP to Non-GAAP
Reconciliations
(Unaudited - In
thousands)
Three Months Ended June 30,
2020
GAAP
Share-based
compensation
Amortization of other
intangibles
Restructuring &
other
Non-GAAP
Non-GAAP operating income:
Cost of revenue
$
28,542
$
(1,498
)
$
(3,826
)
$
—
$
23,218
Gross profit
126,966
1,498
3,826
—
132,290
Gross margin
82
%
85
%
Research and development
23,505
(2,418
)
—
—
21,087
Sales and marketing
49,163
(5,405
)
—
—
43,758
General and administrative
21,527
(3,351
)
—
(1,559
)
16,617
Amortization of other intangibles
8,686
—
(8,686
)
—
—
Restructuring and other
(21
)
—
—
21
—
Operating income
24,106
12,672
12,512
1,538
50,828
Operating margin
16
%
33
%
Three Months Ended June 30,
2019
GAAP
Share-based
compensation
Amortization of other
intangibles
Restructuring &
other
Non-GAAP
Non-GAAP operating income:
Cost of revenue
$
29,543
$
(3,309
)
$
(4,557
)
$
—
$
21,677
Gross profit
93,007
3,309
4,557
—
100,873
Gross margin
76
%
82
%
Research and development
25,659
(7,127
)
—
—
18,532
Sales and marketing
58,215
(15,104
)
—
—
43,111
General and administrative
31,882
(15,885
)
—
(3,864
)
12,133
Amortization of other intangibles
10,142
—
(10,142
)
—
—
Restructuring and other
115
—
—
(115
)
—
Operating (loss) income
(33,006
)
41,425
14,699
3,979
27,097
Operating margin
(27
)%
22
%
DYNATRACE, INC.
GAAP to Non-GAAP
Reconciliations
(Unaudited - In thousands,
except per share amounts)
Three Months Ended June
30,
2020
2019
Non-GAAP net income:
Net income (loss)
$
12,865
$
(49,155
)
Income tax expense (benefit)
7,147
(2,943
)
Cash paid for tax
(10,127
)
(2,052
)
Interest expense, net
4,113
19,186
Cash paid for interest
(3,763
)
(15,738
)
Share-based compensation
12,672
41,425
Amortization of other intangibles
8,686
10,142
Amortization of acquired technology
3,826
4,557
Transaction and sponsor related costs
1,559
3,864
Restructuring and other
(21
)
115
Gain on currency translation
(19
)
(94
)
Non-GAAP net income
$
36,938
$
9,307
Share count:
Weighted-average shares outstanding -
basic
279,069
237,693
Weighted-average shares outstanding -
diluted
284,309
237,693
Shares used in non-GAAP per share
calculations:
Weighted-average shares outstanding -
basic
279,069
237,693
Weighted-average shares outstanding -
diluted
284,309
238,619
Net income (loss) per share:
Net income (loss) per share - basic
$
0.05
$
(0.21
)
Net income (loss) per share - diluted
$
0.05
$
(0.21
)
Non-GAAP net income per share - basic
$
0.13
$
0.04
Non-GAAP net income per share -
diluted
$
0.13
$
0.04
DYNATRACE, INC.
GAAP to Non-GAAP
Reconciliations
(Unaudited - In
thousands)
Three Months Ended June
30,
Trailing Twelve Months Ended
June 30, 2020
2020
2019
Adjusted EBITDA:
Net income (loss)
$
12,865
$
(49,155
)
$
(356,004
)
Income tax expense (benefit)
7,147
(2,943
)
209,581
Interest expense, net
4,113
19,186
30,324
Amortization
13,019
15,081
56,395
Depreciation
1,590
2,034
7,420
Restructuring and other
(21
)
115
956
Transaction and sponsor related costs
1,559
3,864
19,314
(Gain) loss on currency translation
(19
)
(94
)
1,272
Share-based compensation
12,672
41,425
193,725
Adjusted EBITDA
$
52,925
$
29,513
$
162,983
Three Months Ended June
30,
2020
2019
Unlevered Free Cash Flow ("uFCF")
(After tax adjustment):
Net cash provided by operating
activities
$
37,008
$
34,167
Cash paid for interest expense
3,763
15,738
Restructuring and other
(21
)
115
Purchase of property, plant, and
equipment
(4,418
)
(4,151
)
Transaction and sponsor related costs
1,559
3,864
Total uFCF
37,891
49,733
Interest tax adjustment
(941
)
(3,935
)
uFCF (After tax adjustment)
$
36,950
$
45,798
June 30, 2020
Adjusted EBITDA/Net Debt Leverage
Ratio:
Long-term debt
$
510,452
Cash
250,377
Net debt
260,075
TTM Adjusted EBITDA
$
162,983
Leverage Ratio
1.6
x
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200729005259/en/
Investor Contact: Noelle Faris VP, Investor Relations
Noelle.Faris@dynatrace.com
Media Relations: Jerome Stewart VP, Communications
Jerome.Stewart@dynatrace.com
Jack Murphy Jack.Murphy@icrinc.com
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