Business Wire | Feb 3, 2021 06:31AM EST

Dynatrace Reports Third Quarter of Fiscal Year 2021 Financial Results

Feb. 03, 2021

WALTHAM, Mass.--(BUSINESS WIRE)--Feb. 03, 2021--Software intelligence company Dynatrace (NYSE: DT) today released financial results for the third quarter of its fiscal 2021 ended December 31, 2020.

"The third quarter marked another strong performance for Dynatrace across all of our key operating metrics led by ARR growth of 35% year-over-year," stated John Van Siclen, Chief Executive Officer. "The value of the Dynatrace platform is resonating with customers, evidenced by strong new logo growth and net expansion rate again above 120%. The acceleration of digital transformation is driving the scale and complexity of the modern multicloud beyond the level that digital teams can handle efficiently. We believe the automation and AI capabilities embedded in our unified platform solve the challenges inherent in these ever-changing multicloud environments and positions us well for strong and sustained ARR growth."

Third Quarter Fiscal 2021 and Other Recent Business Highlights

All growth rates are compared to the third quarter of fiscal 2020 unless otherwise noted.

Financial Highlights

* Total ARR of $722.0 million, an increase of 35% as reported, and 32% on a constant currency basis * Total Revenue of $182.9 million, an increase of 28% as reported, and 25% on a constant currency basis * Subscription revenue of $170.3 million, an increase of 33% as reported, and 30% on a constant currency basis, and representing 93% of total revenue * GAAP Operating Income of $24.1 million and Non-GAAP Operating Income of $53.4 million * GAAP EPS of $0.06 and non-GAAP EPS of $0.17, on a dilutive basis

Business Highlights:

* Released Dynatrace's 4th generation of PurePath, providing the deepest, most complete distributed tracing for modern cloud environments. Extended support for OpenTelemetry and OpenTrace frameworks to provide advanced levels of distributed tracing and immediate actionability for troubleshooting, optimization and proactive remediation for the latest cloud-native architectures.

* Entered the Cloud Application Security market, extending the automation, AI and enterprise-grade robustness of the Dynatrace(r) Software Intelligence Platform to production and preproduction security use cases. The company estimates the cloud application security market TAM to be $18 billion over time.

* Expanded strategic partnerships with Google Cloud Platform and Microsoft Azure with collaborative go-to market-motions and co-selling arrangements creating frictionless buying experiences and enabling customers to leverage their pre-committed cloud spend. Dynatrace is now part of the co-development program for Microsoft Azure console integration and is the only observability platform with a private offering in the GCP, Microsoft Azure and AWS marketplace listings.

Third Quarter 2021 Financial Highlights

(Unaudited - in thousands, except per share amounts)

Three Months Ended December 31,

2020 2019

Key Operating Metric:

Annualized recurring revenue $ 721,995 $ 534,490

Year-over-Year Increase 35 %



Annualized recurring revenue - constant currency^ $ 703,621 $ 534,490 (*)

Year-over-Year Increase 32 %



Revenues:

Total revenue $ 182,911 $ 143,298

Year-over-Year Increase 28 %



Total revenue - constant currency^ (*) $ 179,494 $ 143,298

Year-over-Year Increase 25 %



Subscription revenue $ 170,308 $ 128,518

Year-over-Year Increase 33 %



Subscription revenue - constant currency ^(*) $ 167,201 $ 128,518

Year-over-Year Increase 30 %



Non-GAAP Financial Measures:

Non-GAAP operating income ^(*) $ 53,401 $ 37,720

Non-GAAP operating margin ^(*) 29 % 26 %



Non-GAAP net income ^(*) $ 47,645 $ 26,901



Non-GAAP net income per share - diluted $ 0.17 $ 0.10



Non-GAAP shares outstanding - diluted 286,427 280,156



Unlevered Free Cash Flow ^(*) $ 73,989 $ 13,287

* 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 February 3, 2021, Dynatrace is issuing guidance for the fourth quarter and raising guidance for full year fiscal 2021 as follows:

Fourth Quarter of Fiscal Year 2021

* Total revenue is expected to be in the range of $190 million to $192 million, 26% to 28% growth as reported, and 23% to 24% on a constant currency basis * Subscription revenue is expected to be in the range of $178 million to $180 million, 32% to 33% growth as reported, 28% to 29% on a constant currency basis * Non-GAAP operating income is expected to be in the range of $44 million to $46 million * Non-GAAP net income is expected to be in the range of $38 million to $40 million * Non-GAAP net income per diluted share is expected to be in the range of $0.13 to $0.14, based on a range of 288 million to 289 million diluted weighted-average shares outstanding

Full Year Fiscal 2021

* Total ARR is expected to be in the range of $756 million to $760 million, 32% to 33% growth as reported, and 29% on a constant currency basis * Total revenue is expected to be in the range of $697 million to $699 million, 28% growth as reported, and 27% growth on a constant currency basis * Subscription revenue is expected to be in the range of $650 million to $652 million, 33% to 34% growth as reported, and 32% growth on a constant currency basis * Non-GAAP operating income is expected to be in the range of $202 million to $204 million * Non-GAAP net income is expected to be in the range of $175 million to $178 million * Non-GAAP net income per diluted share is expected to be in the range of $0.61 to $0.62, based on a range of 287 million to 288 million diluted weighted-average shares outstanding * Total unlevered free cash flow is expected to be in the range of $220 million to $225 million, 32% of revenue

Our guidance is based on foreign exchange rates as of December 31, 2020.

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 fourth quarter and fiscal 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 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 3, 2021. To access the conference call from the U.S. and Canada, dial (866) 405-1247, or internationally, dial (201) 689-8045 with conference ID # 13714690. 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 18, 2021, by dialing (877) 660-6853 from the U.S. or Canada, or for international callers by dialing (201) 612-7415 and entering conference ID # 13714690. 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. As of the second quarter of Fiscal Year 2021, we adjusted certain of our non-GAAP metrics for employer payroll tax expense related to equity incentive plans, as the amount of employer payroll tax expense is dependent on our stock price and other factors that are beyond our control and does not correlate to the operation of our business. Our historical presentation of these metrics has been updated in the tables below to reflect these adjustments for consistency.

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, stock-based compensation and employer payroll tax expense related equity incentive plans.

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(r) ARR at the end of a reporting period for the cohort of Dynatrace(r) accounts as of one year prior to the date of calculation, divided by the Dynatrace(r) ARR one year prior to the date of calculation for that same cohort. This calculation excludes the benefit of Dynatrace(r) ARR resulting from the conversion of Classic products to the Dynatrace(r) platform.

Dynatrace customers are defined as accounts, as identified by a unique account identifier, that generate at least $10,000 of Dynatrace(r) 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 automatic and intelligent observability at scale, our all-in-one platform delivers precise answers about the performance and security of applications, the underlying infrastructure, and the experience of all users to enable organizations to innovate faster, collaborate more efficiently, and deliver more value with dramatically less effort. That's why many of the world's largest enterprises trust Dynatrace(r) to modernize and automate cloud operations, release better software faster, and deliver unrivalled digital experiences.

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 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, 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-Q filed on October 28, 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 Nine Months Ended December 31, December 31,

2020 2019 2020 2019

Revenue:

Subscription $ 170,308 $ 128,518 $ 472,338 $ 352,451

License 257 3,895 1,337 10,424

Service 12,346 10,885 33,330 32,351

Total revenue 182,911 143,298 507,005 395,226

Cost of revenue:

Cost of 20,382 16,297 55,415 55,930 subscription

Cost of service 8,907 8,584 25,471 29,240

Amortization ofacquired 3,831 3,824 11,487 12,624 technology

Total cost of 33,120 28,705 92,373 97,794 revenue

Gross profit 149,791 114,593 414,632 297,432



Operating expenses:

Research and 28,730 22,517 79,747 94,772 development

Sales and 64,829 52,400 170,682 210,581 marketing

General and 23,442 21,883 67,079 140,718 administrative

Amortization ofother 8,685 10,039 26,057 30,242 intangibles

Restructuring (2 ) 199 23 1,093 and other

Total operating 125,684 107,038 343,588 477,406 expenses

Income (loss) 24,107 7,555 71,044 (179,974 ) from operations

Interest (3,455 ) (5,995 ) (11,170 ) (39,715 ) expense, net

Other income, 2,526 67 2,744 307 net

Income (loss)before income 23,178 1,627 62,618 (219,382 ) taxes

Income tax(expense) (4,762 ) 136 (13,858 ) (245,344 ) benefit

Net income $ 18,416 $ 1,763 $ 48,760 $ (464,726 ) (loss)

Net income(loss) per share:

Basic $ 0.07 $ 0.01 $ 0.17 $ (1.78 )

Diluted $ 0.06 $ 0.01 $ 0.17 $ (1.78 )

Weighted averageshares outstanding:

Basic 281,010 277,926 280,057 260,383

Diluted 286,427 280,156 285,884 260,383

UNAUDITED SHARE-BASED COMPENSATION

Three Months EndedDecember 31,

Nine Months EndedDecember 31,

2020

2019

2020

2019

Cost of revenue

$

2,066

$

1,317

$

5,430

$

17,346

Research and development

3,259

2,173

8,666

36,679

Sales and marketing

6,480

6,707

18,007

78,592

General and administrative

3,783

3,316

10,988

77,067

Total share-based compensation expense

$

15,588

$

13,513

$

43,091

$

209,684

UNAUDITED SHARE-BASED COMPENSATION

Three Months Ended Nine Months Ended December 31, December 31,

2020 2019 2020 2019

Cost of revenue $ 2,066 $ 1,317 $ 5,430 $ 17,346

Research and development 3,259 2,173 8,666 36,679

Sales and marketing 6,480 6,707 18,007 78,592

General and administrative 3,783 3,316 10,988 77,067

Total share-based $ 15,588 $ 13,513 $ 43,091 $ 209,684 compensation expense

DYNATRACE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

December 31, 2020

March 31,2020

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

299,505

$

213,170

Accounts receivable, net

200,849

157,058

Deferred commissions, current

45,645

38,509

Prepaid expenses and other current assets

28,505

61,188

Total current assets

574,504

469,925

Property and equipment, net

35,384

31,508

Operating lease right-of-use asset, net

43,530

-

Goodwill

1,272,574

1,270,733

Other intangible assets, net

162,882

201,592

Deferred tax assets, net

25,259

20,460

Deferred commissions, non-current

43,575

39,736

Other assets

8,850

8,126

Total assets

$

2,166,558

$

2,042,080

Liabilities and shareholders' equity

Current liabilities:

Accounts payable

$

12,146

$

11,112

Accrued expenses, current

104,788

93,728

Deferred revenue, current

424,001

384,060

Operating lease liabilities, current

9,368

-

Total current liabilities

550,303

488,900

Deferred revenue, non-current

47,849

60,711

Accrued expenses, non-current

18,408

20,987

Operating lease liabilities, non-current

38,829

-

Long-term debt

451,427

509,985

Total liabilities

1,106,816

1,080,583

Commitments and contingencies

Shareholders' equity:

Common shares, $0.001 par value, 600,000,000 shares authorized, 282,542,649 and 280,853,040 shares issued and outstanding at December 31, 2020 and March 31, 2020, respectively

281

281

Additional paid-in capital

1,632,446

1,573,347

Accumulated deficit

(544,960

)

(594,026

)

Accumulated other comprehensive loss

(28,025

)

(18,105

)

Total shareholders' equity

1,059,742

961,497

Total liabilities and shareholders' equity

$

2,166,558

$

2,042,080

DYNATRACE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

December 31, March 31, 2020 2020

(unaudited)

Assets

Current assets:

Cash and cash equivalents $ 299,505 $ 213,170

Accounts receivable, net 200,849 157,058

Deferred commissions, current 45,645 38,509

Prepaid expenses and other current assets 28,505 61,188

Total current assets 574,504 469,925

Property and equipment, net 35,384 31,508

Operating lease right-of-use asset, net 43,530 -

Goodwill 1,272,574 1,270,733

Other intangible assets, net 162,882 201,592

Deferred tax assets, net 25,259 20,460

Deferred commissions, non-current 43,575 39,736

Other assets 8,850 8,126

Total assets $ 2,166,558 $ 2,042,080



Liabilities and shareholders' equity

Current liabilities:

Accounts payable $ 12,146 $ 11,112

Accrued expenses, current 104,788 93,728

Deferred revenue, current 424,001 384,060

Operating lease liabilities, current 9,368 -

Total current liabilities 550,303 488,900

Deferred revenue, non-current 47,849 60,711

Accrued expenses, non-current 18,408 20,987

Operating lease liabilities, non-current 38,829 -

Long-term debt 451,427 509,985

Total liabilities 1,106,816 1,080,583

Commitments and contingencies

Shareholders' equity:

Common shares, $0.001 par value, 600,000,000shares authorized, 282,542,649 and280,853,040 shares issued and outstanding at 281 281 December 31, 2020 and March 31, 2020,respectively

Additional paid-in capital 1,632,446 1,573,347

Accumulated deficit (544,960 ) (594,026 )

Accumulated other comprehensive loss (28,025 ) (18,105 )

Total shareholders' equity 1,059,742 961,497

Total liabilities and shareholders' equity $ 2,166,558 $ 2,042,080

DYNATRACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - In thousands)

Nine Months EndedDecember 31,

2020

2019

Cash flows from operating activities:

Net income (loss)

$

48,760

$

(464,726

)

Adjustments to reconcile net income (loss) to cash provided by (used in) operations:

Depreciation

6,589

5,977

Amortization

39,046

44,098

Share-based compensation

43,091

209,684

Deferred income taxes

(3,014

)

(45,686

)

Other

(1,240

)

4,006

Net change in operating assets and liabilities:

Accounts receivable

(37,693

)

(49,022

)

Deferred commissions

(6,380

)

(13,484

)

Prepaid expenses and other assets

25,920

(244

)

Accounts payable and accrued expenses

14,891

37,396

Operating leases, net

599

-

Deferred revenue

3,996

64,905

Net cash provided by (used in) operating activities

134,565

(207,096

)

Cash flows from investing activities:

Purchase of property and equipment

(8,868

)

(15,143

)

Capitalized software additions

(248

)

(729

)

Net cash used in investing activities

(9,116

)

(15,872

)

Cash flows from financing activities:

Proceeds from initial public offering, net of underwriters' discounts and commissions

-

590,297

Settlement of deferred offering costs

-

(5,000

)

Repayment of term loans

(60,000

)

(485,189

)

Contribution for tax associated with reorganization

-

265,000

Proceeds from employee stock purchase plan

9,195

-

Proceeds from exercise of stock options

6,849

-

Equity repurchases

(36

)

(150

)

Installments related to acquisition

-

(4,694

)

Net cash (used in) provided by financing activities

(43,992

)

360,264

Effect of exchange rates on cash and cash equivalents

4,878

(55

)

Net increase in cash and cash equivalents

86,335

137,241

Cash and cash equivalents, beginning of period

213,170

51,314

Cash and cash equivalents, end of period

$

299,505

$

188,555

DYNATRACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - In thousands)

Nine Months Ended December 31,

2020 2019

Cash flows from operating activities:

Net income (loss) $ 48,760 $ (464,726 )

Adjustments to reconcile net income (loss) to cash provided by (used in) operations:

Depreciation 6,589 5,977

Amortization 39,046 44,098

Share-based compensation 43,091 209,684

Deferred income taxes (3,014 ) (45,686 )

Other (1,240 ) 4,006

Net change in operating assets and liabilities:

Accounts receivable (37,693 ) (49,022 )

Deferred commissions (6,380 ) (13,484 )

Prepaid expenses and other assets 25,920 (244 )

Accounts payable and accrued expenses 14,891 37,396

Operating leases, net 599 -

Deferred revenue 3,996 64,905

Net cash provided by (used in) operating 134,565 (207,096 ) activities



Cash flows from investing activities:

Purchase of property and equipment (8,868 ) (15,143 )

Capitalized software additions (248 ) (729 )

Net cash used in investing activities (9,116 ) (15,872 )



Cash flows from financing activities:

Proceeds from initial public offering, net of - 590,297 underwriters' discounts and commissions

Settlement of deferred offering costs - (5,000 )

Repayment of term loans (60,000 ) (485,189 )

Contribution for tax associated with - 265,000 reorganization

Proceeds from employee stock purchase plan 9,195 -

Proceeds from exercise of stock options 6,849 -

Equity repurchases (36 ) (150 )

Installments related to acquisition - (4,694 )

Net cash (used in) provided by financing (43,992 ) 360,264 activities



Effect of exchange rates on cash and cash 4,878 (55 ) equivalents



Net increase in cash and cash equivalents 86,335 137,241



Cash and cash equivalents, beginning of period 213,170 51,314

Cash and cash equivalents, end of period $ 299,505 $ 188,555

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except percentages)

Three Months Ended December 31, 2020

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

$

33,120

$

(2,066

)

$

(82

)

$

(3,831

)

$

-

$

27,141

Gross profit

149,791

2,066

82

3,831

-

155,770

Gross margin

82

%

85

%

Research and development

28,730

(3,259

)

(288

)

-

-

25,183

Sales and marketing

64,829

(6,480

)

(288

)

-

-

58,061

General and administrative

23,442

(3,783

)

(34

)

-

(500

)

19,125

Amortization of other intangibles

8,685

-

-

(8,685

)

-

-

Restructuring and other

(2

)

-

-

-

2

-

Operating income

$

24,107

$

15,588

$

692

$

12,516

$

498

$

53,401

Operating margin

13

%

29

%

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except percentages)

Three Months Ended December 31, 2020

Employer payroll Amortization GAAP Share-based taxes of other Restructuring Non-GAAP compensation on employee intangibles & other stock transactions

Non-GAAP operating income:

Cost of revenue $ 33,120 $ (2,066 ) $ (82 ) $ (3,831 ) $ - $ 27,141

Gross profit 149,791 2,066 82 3,831 - 155,770

Gross margin 82 % 85 %

Research and 28,730 (3,259 ) (288 ) - - 25,183 development

Sales and marketing 64,829 (6,480 ) (288 ) - - 58,061

General and 23,442 (3,783 ) (34 ) - (500 ) 19,125 administrative

Amortization of other 8,685 - - (8,685 ) - - intangibles

Restructuring and (2 ) - - - 2 - other

Operating income $ 24,107 $ 15,588 $ 692 $ 12,516 $ 498 $ 53,401

Operating margin 13 % 29 %

Three Months Ended December 31, 2019(1)

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

$

28,705

$

(1,317

)

$

(37

)

$

(3,824

)

$

-

$

23,527

Gross profit

114,593

1,317

37

3,824

-

119,771

Gross margin

80

%

84

%

Research and development

22,517

(2,173

)

(115

)

-

-

20,229

Sales and marketing

52,400

(6,707

)

(51

)

-

-

45,642

General and administrative

21,883

(3,316

)

(3

)

-

(2,384

)

16,180

Amortization of other intangibles

10,039

-

-

(10,039

)

-

-

Restructuring and other

199

-

-

-

(199

)

-

Operating income

$

7,555

$

13,513

$

206

$

13,863

$

2,583

$

37,720

Operating margin

5

%

26

%

Three Months Ended December 31, 2019^(1)

Employer payroll Amortization GAAP Share-based taxes of other Restructuring Non-GAAP compensation on employee intangibles & other stock transactions

Non-GAAP operating income:

Cost of $ 28,705 $ (1,317 ) $ (37 ) $ (3,824 ) $ - $ 23,527 revenue

Gross profit 114,593 1,317 37 3,824 - 119,771

Gross margin 80 % 84 %

Research and 22,517 (2,173 ) (115 ) - - 20,229 development

Sales and 52,400 (6,707 ) (51 ) - - 45,642 marketing

General and 21,883 (3,316 ) (3 ) - (2,384 ) 16,180 administrative

Amortizationof other 10,039 - - (10,039 ) - - intangibles

Restructuring 199 - - - (199 ) - and other

Operating $ 7,555 $ 13,513 $ 206 $ 13,863 $ 2,583 $ 37,720 income

Operating 5 % 26 %margin

(1) Prior period results have been updated to include the employer payroll taxes on employee stock transactions.

^(1) Prior period results have been updated to include the employer payrolltaxes on employee stock transactions.

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share amounts)

Three Months Ended December 31,

2020

2019

Non-GAAP net income:

Net income

$

18,416

$

1,763

Income tax expense (benefit)

4,762

(136

)

Cash received from (paid for) tax

37,017

(4,209

)

Discrete tax items

(39,782

)

-

Interest expense, net

3,455

5,995

Cash paid for interest

(2,991

)

(6,610

)

Share-based compensation

15,588

13,513

Employer payroll taxes on employee stock transactions

692

206

Amortization of other intangibles

8,685

10,039

Amortization of acquired technology

3,831

3,824

Transaction and sponsor related costs

500

2,384

Restructuring and other

(2

)

199

Gain on currency translation

(2,526

)

(67

)

Non-GAAP net income

$

47,645

$

26,901

Share count:

Weighted-average shares outstanding - basic

281,010

277,926

Weighted-average shares outstanding - diluted

286,427

280,156

Shares used in non-GAAP per share calculations:

Weighted-average shares outstanding - basic

281,010

277,926

Weighted-average shares outstanding - diluted

286,427

280,156

Net income per share:

Net income per share - basic

$

0.07

$

0.01

Net income per share - diluted

$

0.06

$

0.01

Non-GAAP net income per share - basic

$

0.17

$

0.10

Non-GAAP net income per share - diluted

$

0.17

$

0.10

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share amounts)

Three Months Ended December 31,

2020 2019

Non-GAAP net income:

Net income $ 18,416 $ 1,763

Income tax expense (benefit) 4,762 (136 )

Cash received from (paid for) tax 37,017 (4,209 )

Discrete tax items (39,782 ) -

Interest expense, net 3,455 5,995

Cash paid for interest (2,991 ) (6,610 )

Share-based compensation 15,588 13,513

Employer payroll taxes on employee stock 692 206 transactions

Amortization of other intangibles 8,685 10,039

Amortization of acquired technology 3,831 3,824

Transaction and sponsor related costs 500 2,384

Restructuring and other (2 ) 199

Gain on currency translation (2,526 ) (67 )

Non-GAAP net income $ 47,645 $ 26,901



Share count:

Weighted-average shares outstanding - basic 281,010 277,926

Weighted-average shares outstanding - diluted 286,427 280,156



Shares used in non-GAAP per share calculations:

Weighted-average shares outstanding - basic 281,010 277,926

Weighted-average shares outstanding - diluted 286,427 280,156



Net income per share:

Net income per share - basic $ 0.07 $ 0.01

Net income per share - diluted $ 0.06 $ 0.01

Non-GAAP net income per share - basic $ 0.17 $ 0.10

Non-GAAP net income per share - diluted $ 0.17 $ 0.10

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands)

Three Months Ended December 31,

Trailing Twelve Months Ended December 31, 2020

2020

2019

Adjusted EBITDA:

Net income

$

18,416

$

1,763

$

95,462

Income tax expense (benefit)

4,762

(136

)

(31,995

)

Interest expense, net

3,455

5,995

16,852

Amortization

13,014

14,288

53,405

Depreciation

2,792

2,006

8,476

Restructuring and other

(2

)

199

22

Transaction and sponsor related costs

500

2,384

4,679

Gain on currency translation

(2,526

)

(67

)

(1,240

)

Share-based compensation

15,588

13,513

55,885

Employer payroll taxes on employee stock transactions

692

206

2,857

Adjusted EBITDA

$

56,691

$

40,151

$

204,403

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands)

Three Months Ended December Trailing 31, Twelve Months Ended December 31, 2020 2019 2020

Adjusted EBITDA:

Net income $ 18,416 $ 1,763 $ 95,462

Income tax expense (benefit) 4,762 (136 ) (31,995 )

Interest expense, net 3,455 5,995 16,852

Amortization 13,014 14,288 53,405

Depreciation 2,792 2,006 8,476

Restructuring and other (2 ) 199 22

Transaction and sponsor related costs 500 2,384 4,679

Gain on currency translation (2,526 ) (67 ) (1,240 )

Share-based compensation 15,588 13,513 55,885

Employer payroll taxes on employee 692 206 2,857 stock transactions

Adjusted EBITDA $ 56,691 $ 40,151 $ 204,403

Three Months Ended December 31,

2020

2019

Unlevered Free Cash Flow ("uFCF") (After tax adjustment):

Net cash provided by operating activities

$

73,716

$

11,132

Cash paid for interest expense

2,991

6,610

Restructuring and other

(2

)

199

Purchase of property, plant, and equipment

(2,468

)

(5,385

)

Transaction and sponsor related costs

500

2,384

Total uFCF

74,737

14,940

Interest tax adjustment

(748

)

(1,653

)

uFCF (After tax adjustment)

$

73,989

$

13,287

December 31, 2020

Adjusted EBITDA/Net Debt Leverage Ratio:

Long-term debt

$

451,427

Cash

299,505

Net debt

151,922

TTM Adjusted EBITDA

$

204,403

Leverage Ratio

0.7

x

Three Months Ended December 31,

2020 2019

Unlevered Free Cash Flow ("uFCF") (After tax adjustment):

Net cash provided by operating activities $ 73,716 $ 11,132

Cash paid for interest expense 2,991 6,610

Restructuring and other (2 ) 199

Purchase of property, plant, and equipment (2,468 ) (5,385 )

Transaction and sponsor related costs 500 2,384

Total uFCF 74,737 14,940

Interest tax adjustment (748 ) (1,653 )

uFCF (After tax adjustment) $ 73,989 $ 13,287

December 31, 2020

Adjusted EBITDA/Net Debt Leverage Ratio:

Long-term debt $ 451,427

Cash 299,505

Net debt 151,922

TTM Adjusted EBITDA $ 204,403

Leverage Ratio 0.7 x

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except percentages)

Nine Months Ended December 31, 2020

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

$

92,373

$

(5,430

)

$

(494

)

$

(11,487

)

$

-

$

74,962

Gross profit

414,632

5,430

494

11,487

-

432,043

Gross margin

82

%

85

%

Research and development

79,747

(8,666

)

(978

)

-

-

70,103

Sales and marketing

170,682

(18,007

)

(993

)

-

-

151,682

General and administrative

67,079

(10,988

)

(208

)

-

(3,398

)

52,485

Amortization of other intangibles

26,057

-

-

(26,057

)

-

-

Restructuring and other

23

-

-

-

(23

)

-

Operating income

$

71,044

$

43,091

$

2,673

$

37,544

$

3,421

$

157,773

Operating margin

14

%

31

%

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except percentages)

Nine Months Ended December 31, 2020

Employer payroll Amortization GAAP Share-based taxes of other Restructuring Non-GAAP compensation on employee intangibles & other stock transactions

Non-GAAP operating income:

Cost of $ 92,373 $ (5,430 ) $ (494 ) $ (11,487 ) $ - $ 74,962 revenue

Gross profit 414,632 5,430 494 11,487 - 432,043

Gross margin 82 % 85 %

Research and 79,747 (8,666 ) (978 ) - - 70,103 development

Sales and 170,682 (18,007 ) (993 ) - - 151,682 marketing

General and 67,079 (10,988 ) (208 ) - (3,398 ) 52,485 administrative

Amortizationof other 26,057 - - (26,057 ) - - intangibles

Restructuring 23 - - - (23 ) - and other

Operating $ 71,044 $ 43,091 $ 2,673 $ 37,544 $ 3,421 $ 157,773 income

Operating 14 % 31 %margin

Nine Months Ended December 31, 2019(1)

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

$

97,794

$

(17,346

)

$

(65

)

$

(12,624

)

$

-

$

67,759

Gross profit

297,432

17,346

65

12,624

-

327,467

Gross margin

75

%

83

%

Research and development

94,772

(36,679

)

(145

)

-

-

57,948

Sales and marketing

210,581

(78,592

)

(398

)

-

-

131,591

General and administrative

140,718

(77,067

)

(4

)

-

(20,338

)

43,309

Amortization of other intangibles

30,242

-

-

(30,242

)

-

-

Restructuring and other

1,093

-

-

-

(1,093

)

-

Operating (loss) income

$

(179,974

)

$

209,684

$

612

$

42,866

$

21,431

$

94,619

Operating margin

(46

%)

24

%

Nine Months Ended December 31, 2019^(1)

Employer payroll Amortization GAAP Share-based taxes of other Restructuring Non-GAAP compensation on employee intangibles & other stock transactions

Non-GAAP operating income:

Cost of $ 97,794 $ (17,346 ) $ (65 ) $ (12,624 ) $ - $ 67,759 revenue

Gross profit 297,432 17,346 65 12,624 - 327,467

Gross margin 75 % 83 %

Research and 94,772 (36,679 ) (145 ) - - 57,948 development

Sales and 210,581 (78,592 ) (398 ) - - 131,591 marketing

General and 140,718 (77,067 ) (4 ) - (20,338 ) 43,309 administrative

Amortizationof other 30,242 - - (30,242 ) - - intangibles

Restructuring 1,093 - - - (1,093 ) - and other

Operating $ (179,974 ) $ 209,684 $ 612 $ 42,866 $ 21,431 $ 94,619 (loss) income

Operating (46 %) 24 %margin

(1) Prior period results have been updated to include the employer payroll taxes on employee stock transactions.

^(1) Prior period results have been updated to include the employer payrolltaxes on employee stock transactions.

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share amounts)

Nine Months Ended December 31,

2020

2019

Non-GAAP net income:

Net income (loss)

$

48,760

$

(464,726

)

Income tax expense

13,858

245,344

Cash received from (paid for) tax

14,472

(268,281

)

Discrete tax items

(24,882

)

261,552

Interest expense, net

11,170

39,715

Cash paid for interest

(9,914

)

(34,001

)

Share-based compensation

43,091

209,684

Employer payroll taxes on employee stock transactions

2,673

612

Amortization of other intangibles

26,057

30,242

Amortization of acquired technology

11,487

12,624

Transaction and sponsor related costs

3,398

20,338

Restructuring and other

23

1,093

Gain on currency translation

(2,744

)

(307

)

Non-GAAP net income

$

137,449

$

53,889

Share count:

Weighted-average shares outstanding - basic

280,057

260,383

Weighted-average shares outstanding - diluted

285,884

260,383

Shares used in non-GAAP per share calculations:

Weighted-average shares outstanding - basic

280,057

260,383

Weighted-average shares outstanding - diluted

285,884

265,112

Net income (loss) per share:

Net income (loss) per share - basic

$

0.17

$

(1.78

)

Net income (loss) per share - diluted

$

0.17

$

(1.78

)

Non-GAAP net income per share - basic

$

0.49

$

0.21

Non-GAAP net income per share - diluted

$

0.48

$

0.20

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share amounts)

Nine Months Ended December 31,

2020 2019

Non-GAAP net income:

Net income (loss) $ 48,760 $ (464,726 )

Income tax expense 13,858 245,344

Cash received from (paid for) tax 14,472 (268,281 )

Discrete tax items (24,882 ) 261,552

Interest expense, net 11,170 39,715

Cash paid for interest (9,914 ) (34,001 )

Share-based compensation 43,091 209,684

Employer payroll taxes on employee stock 2,673 612 transactions

Amortization of other intangibles 26,057 30,242

Amortization of acquired technology 11,487 12,624

Transaction and sponsor related costs 3,398 20,338

Restructuring and other 23 1,093

Gain on currency translation (2,744 ) (307 )

Non-GAAP net income $ 137,449 $ 53,889



Share count:

Weighted-average shares outstanding - basic 280,057 260,383

Weighted-average shares outstanding - diluted 285,884 260,383



Shares used in non-GAAP per share calculations:

Weighted-average shares outstanding - basic 280,057 260,383

Weighted-average shares outstanding - diluted 285,884 265,112



Net income (loss) per share:

Net income (loss) per share - basic $ 0.17 $ (1.78 )

Net income (loss) per share - diluted $ 0.17 $ (1.78 )

Non-GAAP net income per share - basic $ 0.49 $ 0.21

Non-GAAP net income per share - diluted $ 0.48 $ 0.20

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands)

Nine Months Ended December 31,

2020

2019

Adjusted EBITDA:

Net income (loss)

$

48,760

$

(464,726

)

Income tax expense

13,858

245,344

Interest expense, net

11,170

39,715

Amortization

39,046

44,098

Depreciation

6,589

5,977

Restructuring and other

23

1,093

Transaction and sponsor related costs

3,398

20,338

Gain on currency translation

(2,744

)

(307

)

Share-based compensation

43,091

209,684

Employer payroll taxes on employee stock transactions

2,673

612

Adjusted EBITDA

$

165,864

$

101,828

Nine Months Ended December 31,

2020

2019

Unlevered Free Cash Flow ("uFCF") (After tax adjustment):

Net cash provided by (used in) operating activities

$

134,565

$

(207,096

)

Cash paid for interest expense

9,914

34,001

Restructuring and other

23

1,093

Purchase of property, plant, and equipment

(8,868

)

(15,143

)

Transaction and sponsor related costs

3,398

20,338

Discrete tax items

14,900

261,552

Total uFCF

153,932

94,745

Interest tax adjustment

(2,479

)

(8,500

)

uFCF (After tax adjustment)

$

151,453

$

86,245

View source version on businesswire.com: https://www.businesswire.com/news/home/20210203005201/en/

CONTACT: Investor Contact: Noelle Faris VP, Investor Relations Noelle.Faris@dynatrace.com

CONTACT: Media Relations: Jerome Stewart VP, Communications Jerome.Stewart@dynatrace.com