Business Wire | Oct 27, 2021 06:30AM EDT

Dynatrace Reports Second Quarter of Fiscal Year 2022 Financial Results

Oct. 27, 2021

WALTHAM, Mass.--(BUSINESS WIRE)--Oct. 27, 2021--Software intelligence company Dynatrace (NYSE: DT) today released financial results for the second quarter of its fiscal 2022 ended September 30, 2021.

"I am extremely proud of our team's performance, once again exceeding guidance across all our key operating metrics. ARR, our leading indicator for growth, was up 35% year-over-year, and Subscription Revenue was up 35% year-over-year," said John Van Siclen, Dynatrace's CEO. "We continue to see robust investment in digital transformation across all industries and all geographies. And our unique approach unifying AIOps capabilities with observability and application security continues to provide us with a powerful value advantage."

Second Quarter Fiscal 2022 and Other Recent Business Highlights

All growth rates are compared to the second quarter of fiscal 2021 unless otherwise noted.

Financial Highlights

* Total ARR of $864 million, an increase of 35%, or 34% on a constant currency basis * Total Revenue of $226 million, an increase of 34%, or 33% on a constant currency basis * Subscription revenue of $213 million, an increase of 35%, or 33% on a constant currency basis, and representing 94% of total revenue * GAAP Operating Income of $21 million and non-GAAP Operating Income of $61 million * GAAP EPS of $0.08 and non-GAAP EPS of $0.18, on a dilutive basis

Business Highlights:

* Deepened strategic partnerships with Microsoft and Google, making Dynatrace(r) available natively across all three hyperscale platforms - Microsoft Azure, Google Cloud Platform, and Amazon Web Services.

* Broadened Dynatrace(r) Application Security coverage to include applications running on .NET, in addition to Kubernetes, Java, and Node.js, allowing more organizations to use Dynatrace to gain precise answers about the source, nature, and severity of vulnerabilities in their production and pre-production environments.

* Completed acquisition of SpectX, a high-speed parsing and query analytics company, to help accelerate the convergence of observability and security.

* Continued recognition for superior product differentiation and value: ISG named Dynatrace the leader in cloud-native observability in the 2021 Provider Lens, Container Services and Solutions Report; GigaOm named Dynatrace "Leader and Outperformer" in the 2021 Radar for AIOps Solutions; Gartner rated Dynatrace highest in the 2021 Peer Insights Customers' Choice for Application Performance Monitoring[1].

[1] Gartner Peer Insights 'Voice of the Customer': Application Performance Monitoring, 9 September 2021. GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved. Gartner Peer Insights Customers' Choice constitute the subjective opinions of individual end-user reviews, ratings, and data applied against a documented methodology; they neither represent the views of, nor constitute an endorsement by, Gartner or its affiliates.

Second Quarter 2022 Financial Highlights

(Unaudited - in thousands, except per share data)

Three Months Ended September 30,

2021 2020

Key Operating Metric:

Annualized recurring revenue $ 863,863 $ 638,063

Year-over-Year Increase 35 %



Annualized recurring revenue - constant currency^ $ 856,146 $ 638,063 (*)

Year-over-Year Increase 34 %



Revenue:

Total revenue $ 226,354 $ 168,586

Year-over-Year Increase 34 %



Total revenue - constant currency^ (*) $ 223,576 $ 168,586

Year-over-Year Increase 33 %



Subscription revenue $ 212,601 $ 157,673

Year-over-Year Increase 35 %



Subscription revenue - constant currency ^(*) $ 209,995 $ 157,673

Year-over-Year Increase 33 %



Non-GAAP Financial Measures:

Non-GAAP operating income ^(*) $ 61,468 $ 53,259

Non-GAAP operating margin ^(*) 27 % 32 %



Non-GAAP net income ^(*) $ 52,165 $ 46,313



Non-GAAP net income per share - diluted $ 0.18 $ 0.16



Non-GAAP shares outstanding - diluted 291,177 286,252



Unlevered Free Cash Flow ^(*) $ 11,682 $ 33,004

* 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 October 27, 2021, Dynatrace is issuing guidance for the third quarter and raising guidance for full year fiscal 2022 as follows:

Third Quarter of Fiscal Year 2022

* Total revenue is expected to be in the range of $233 to $235 million, 27% to 28% growth as reported, or 28% to 29% on a constant currency basis * Subscription revenue is expected to be in the range of $219.5 to $221 million, 29% to 30% growth as reported, or 30% to 31% on a constant currency basis * Non-GAAP operating income is expected to be in the range of $54 to $56 million * Non-GAAP net income is expected to be in the range of $45.5 to $47.5 million * Non-GAAP net income per diluted share is expected to be $0.16, based on a range of 292 to 293 million diluted weighted-average shares outstanding

Full Year Fiscal 2022

* Total ARR is expected to be in the range of $986 to $996 million, 27% to 29% growth as reported, or 29% to 30% growth on a constant currency basis, an increase of 250 basis points from prior midpoint guidance * Total revenue is expected to be in the range of $913 to $919 million, 30% to 31% growth as reported, 29% to 30% growth on a constant currency basis, an increase of 250 basis points from prior midpoint guidance * Subscription revenue is expected to be in the range of $857.5 to $862.5 million, 31% to 32% growth as reported, 30% to 31% growth on a constant currency basis, an increase of 250 basis points from prior midpoint guidance * Non-GAAP operating income is expected to be in the range of $219 to $226 million * Non-GAAP net income is expected to be in the range of $185 to $191 million * Non-GAAP net income per diluted share is expected to be in the range of $0.63 to $0.65, based on a range of 292 to 293 million diluted weighted-average shares outstanding * Total unlevered free cash flow is expected to be in the range of $263 to $275 million, or 29% to 30% of revenue

Our guidance is based on foreign exchange rates as of September 30, 2021.

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, October 27, 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 # 13723986. 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 November 10, 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 # 13723986. 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. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods. All growth comparisons relate to the corresponding period in the last fiscal year. Dynatrace provides this non-GAAP financial information to aid investors in better understanding our performance.

Annual Recurring Revenue "ARR" is defined as the daily revenue of all subscription agreements that are actively generating revenue as of the last day of the reporting period multiplied by 365. We exclude from our calculation of Total ARR any revenues derived from month-to-month agreements and/or product usage overage billings.

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.

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 third fiscal quarter and full year 2022, 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-K filed on May 28, 2021 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 data)

Three Months Ended September Six Months Ended September 30, 30,

2021 2020 2021 2020

Revenue:

Subscription $ 212,601 $ 157,673 $ 409,121 $ 302,030

License - 442 50 1,080

Service 13,753 10,471 26,923 20,984

Total revenue 226,354 168,586 436,094 324,094

Cost of revenue:

Cost of 27,135 18,327 52,117 35,033 subscription

Cost of service 10,668 8,554 20,689 16,564

Amortization ofacquired 3,864 3,830 7,694 7,656 technology

Total cost of 41,667 30,711 80,500 59,253 revenue

Gross profit 184,687 137,875 355,594 264,841



Operating expenses:

Research and 37,908 27,512 72,633 51,017 development

Sales and 86,301 56,690 166,783 105,853 marketing

General and 31,689 22,110 58,611 43,637 administrative

Amortization of 7,539 8,686 15,079 17,372 other intangibles

Restructuring and (1 ) 46 25 25 other

Total operating 163,436 115,044 313,131 217,904 expenses

Income from 21,251 22,831 42,463 46,937 operations

Interest expense, (2,651 ) (3,602 ) (5,508 ) (7,715 ) net

Other (expense) (1,299 ) 199 12 218 income, net

Income before 17,301 19,428 36,967 39,440 income taxes

Income tax 6,340 (1,949 ) (32 ) (9,096 ) benefit (expense)

Net income $ 23,641 $ 17,479 $ 36,935 $ 30,344

Net income per share:

Basic $ 0.08 $ 0.06 $ 0.13 $ 0.11

Diluted $ 0.08 $ 0.06 $ 0.13 $ 0.11

Weighted averageshares outstanding:

Basic 283,923 280,077 283,295 279,577

Diluted 291,177 286,252 290,254 285,423

UNAUDITED SHARE-BASED COMPENSATION

Three Months Ended September 30,

Six Months Ended September 30,

2021

2020

2021

2020

Cost of revenue

$

3,485

$

1,866

$

6,137

$

3,364

Research and development

5,456

2,989

9,423

5,407

Sales and marketing

9,612

6,122

17,220

11,527

General and administrative

7,022

3,854

12,047

7,205

Total share-based compensation expense

$

25,575

$

14,831

$

44,827

$

27,503

UNAUDITED SHARE-BASED COMPENSATION

Three Months Ended Six Months Ended September 30, September 30,

2021 2020 2021 2020

Cost of revenue $ 3,485 $ 1,866 $ 6,137 $ 3,364

Research and development 5,456 2,989 9,423 5,407

Sales and marketing 9,612 6,122 17,220 11,527

General and administrative 7,022 3,854 12,047 7,205

Total share-based $ 25,575 $ 14,831 $ 44,827 $ 27,503 compensation expense

DYNATRACE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

September 30, 2021

March 31, 2021

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

370,319

$

324,962

Accounts receivable, net

149,801

242,079

Deferred commissions, current

52,525

48,986

Prepaid expenses and other current assets

80,065

64,255

Total current assets

652,710

680,282

Property and equipment, net

40,197

36,916

Operating lease right-of-use assets, net

60,473

42,959

Goodwill

1,282,631

1,271,195

Other intangible assets, net

128,514

149,484

Deferred tax assets, net

16,492

16,811

Deferred commissions, non-current

50,766

48,638

Other assets

11,114

9,933

Total assets

$

2,242,897

$

2,256,218

Liabilities and shareholders' equity

Current liabilities:

Accounts payable

$

16,013

$

9,621

Accrued expenses, current

105,423

119,527

Deferred revenue, current

461,443

509,272

Operating lease liabilities, current

11,214

9,491

Total current liabilities

594,093

647,911

Deferred revenue, non-current

22,630

47,504

Accrued expenses, non-current

16,533

16,072

Operating lease liabilities, non-current

54,371

38,203

Deferred tax liabilities

1,361

1,014

Long-term debt

332,907

391,913

Total liabilities

1,021,895

1,142,617

Shareholders' equity:

Common shares, $0.001 par value, 600,000,000 shares authorized, 285,025,237 and 283,130,238 shares issued and outstanding at September 30, 2021 and March 31, 2021, respectively

285

283

Additional paid-in capital

1,723,056

1,653,328

Accumulated deficit

(476,864

)

(513,799

)

Accumulated other comprehensive loss

(25,475

)

(26,211

)

Total shareholders' equity

1,221,002

1,113,601

Total liabilities and shareholders' equity

$

2,242,897

$

2,256,218

DYNATRACE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

September 30, March 31, 2021 2021

(unaudited)

Assets

Current assets:

Cash and cash equivalents $ 370,319 $ 324,962

Accounts receivable, net 149,801 242,079

Deferred commissions, current 52,525 48,986

Prepaid expenses and other current assets 80,065 64,255

Total current assets 652,710 680,282

Property and equipment, net 40,197 36,916

Operating lease right-of-use assets, net 60,473 42,959

Goodwill 1,282,631 1,271,195

Other intangible assets, net 128,514 149,484

Deferred tax assets, net 16,492 16,811

Deferred commissions, non-current 50,766 48,638

Other assets 11,114 9,933

Total assets $ 2,242,897 $ 2,256,218



Liabilities and shareholders' equity

Current liabilities:

Accounts payable $ 16,013 $ 9,621

Accrued expenses, current 105,423 119,527

Deferred revenue, current 461,443 509,272

Operating lease liabilities, current 11,214 9,491

Total current liabilities 594,093 647,911

Deferred revenue, non-current 22,630 47,504

Accrued expenses, non-current 16,533 16,072

Operating lease liabilities, non-current 54,371 38,203

Deferred tax liabilities 1,361 1,014

Long-term debt 332,907 391,913

Total liabilities 1,021,895 1,142,617



Shareholders' equity:

Common shares, $0.001 par value, 600,000,000shares authorized, 285,025,237 and283,130,238 shares issued and outstanding at 285 283 September 30, 2021 and March 31, 2021,respectively

Additional paid-in capital 1,723,056 1,653,328

Accumulated deficit (476,864 ) (513,799 )

Accumulated other comprehensive loss (25,475 ) (26,211 )

Total shareholders' equity 1,221,002 1,113,601

Total liabilities and shareholders' equity $ 2,242,897 $ 2,256,218

DYNATRACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - In thousands)

Six Months Ended September 30,

2021

2020

Cash flows from operating activities:

Net income

$

36,935

$

30,344

Adjustments to reconcile net income to cash provided by operations:

Depreciation

5,049

3,797

Amortization

23,057

26,032

Share-based compensation

44,827

27,503

Deferred income taxes

3

(3,160

)

Other

1,007

802

Net change in operating assets and liabilities:

Accounts receivable

92,314

49,353

Deferred commissions

(6,347

)

1,250

Prepaid expenses and other assets

(16,456

)

(4,944

)

Accounts payable and accrued expenses

(9,118

)

(7,862

)

Operating leases, net

401

523

Deferred revenue

(69,904

)

(62,789

)

Net cash provided by operating activities

101,768

60,849

Cash flows from investing activities:

Purchase of property and equipment

(7,612

)

(6,400

)

Capitalized software additions

-

(184

)

Acquisition of businesses, net of cash acquired

(13,004

)

-

Net cash used in investing activities

(20,616

)

(6,584

)

Cash flows from financing activities:

Repayment of term loans

(60,000

)

(30,000

)

Proceeds from employee stock purchase plan

6,593

3,592

Proceeds from exercise of stock options

18,339

4,829

Equity repurchases

(30

)

(25

)

Net cash used in financing activities

(35,098

)

(21,604

)

Effect of exchange rates on cash and cash equivalents

(697

)

2,606

Net increase in cash and cash equivalents

45,357

35,267

Cash and cash equivalents, beginning of period

324,962

213,170

Cash and cash equivalents, end of period

$

370,319

$

248,437

Supplemental cash flow data:

Cash paid for interest

$

4,560

$

6,923

Cash paid for tax, net

$

8,431

$

22,545

DYNATRACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - In thousands)

Six Months Ended September 30,

2021 2020

Cash flows from operating activities:

Net income $ 36,935 $ 30,344

Adjustments to reconcile net income to cash provided by operations:

Depreciation 5,049 3,797

Amortization 23,057 26,032

Share-based compensation 44,827 27,503

Deferred income taxes 3 (3,160 )

Other 1,007 802

Net change in operating assets and liabilities:

Accounts receivable 92,314 49,353

Deferred commissions (6,347 ) 1,250

Prepaid expenses and other assets (16,456 ) (4,944 )

Accounts payable and accrued expenses (9,118 ) (7,862 )

Operating leases, net 401 523

Deferred revenue (69,904 ) (62,789 )

Net cash provided by operating activities 101,768 60,849



Cash flows from investing activities:

Purchase of property and equipment (7,612 ) (6,400 )

Capitalized software additions - (184 )

Acquisition of businesses, net of cash acquired (13,004 ) -

Net cash used in investing activities (20,616 ) (6,584 )



Cash flows from financing activities:

Repayment of term loans (60,000 ) (30,000 )

Proceeds from employee stock purchase plan 6,593 3,592

Proceeds from exercise of stock options 18,339 4,829

Equity repurchases (30 ) (25 )

Net cash used in financing activities (35,098 ) (21,604 )



Effect of exchange rates on cash and cash (697 ) 2,606 equivalents



Net increase in cash and cash equivalents 45,357 35,267



Cash and cash equivalents, beginning of period 324,962 213,170

Cash and cash equivalents, end of period $ 370,319 $ 248,437



Supplemental cash flow data:

Cash paid for interest $ 4,560 $ 6,923

Cash paid for tax, net $ 8,431 $ 22,545

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except percentages)

Three Months Ended September 30, 2021

GAAP

Share-based compensation

Employer payroll taxes on employee stock transactions

Amortization of other intangibles

Restructuring & other

Non-GAAP

Non-GAAP operating income:

Cost of revenue

$

41,667

$

(3,485

)

$

(452

)

$

(3,864

)

$

-

$

33,866

Gross profit

184,687

3,485

452

3,864

-

192,488

Gross margin

82

%

85

%

Research and development

37,908

(5,456

)

(501

)

-

-

31,951

Sales and marketing

86,301

(9,612

)

(785

)

-

-

75,904

General and administrative

31,689

(7,022

)

(253

)

-

(1,249

)

23,165

Amortization of other intangibles

7,539

-

-

(7,539

)

-

-

Restructuring and other

(1

)

-

-

-

1

-

Operating income

$

21,251

$

25,575

$

1,991

$

11,403

$

1,248

$

61,468

Operating margin

9

%

27

%

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except percentages)

Three Months Ended September 30, 2021

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 $ 41,667 $ (3,485 ) $ (452 ) $ (3,864 ) $ - $ 33,866

Gross profit 184,687 3,485 452 3,864 - 192,488

Gross margin 82 % 85 %

Research and 37,908 (5,456 ) (501 ) - - 31,951 development

Sales and marketing 86,301 (9,612 ) (785 ) - - 75,904

General and 31,689 (7,022 ) (253 ) - (1,249 ) 23,165 administrative

Amortization of 7,539 - - (7,539 ) - - other intangibles

Restructuring and (1 ) - - - 1 - other

Operating income $ 21,251 $ 25,575 $ 1,991 $ 11,403 $ 1,248 $ 61,468

Operating margin 9 % 27 %

Three Months Ended September 30, 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

$

30,711

$

(1,866

)

$

(359

)

$

(3,830

)

$

-

$

24,656

Gross profit

137,875

1,866

359

3,830

-

143,930

Gross margin

82

%

85

%

Research and development

27,512

(2,989

)

(592

)

-

-

23,931

Sales and marketing

56,690

(6,122

)

(578

)

-

-

49,990

General and administrative

22,110

(3,854

)

(167

)

-

(1,339

)

16,750

Amortization of other intangibles

8,686

-

-

(8,686

)

-

-

Restructuring and other

46

-

-

-

(46

)

-

Operating income

$

22,831

$

14,831

$

1,696

$

12,516

$

1,385

$

53,259

Operating margin

14

%

32

%

Three Months Ended September 30, 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 $ 30,711 $ (1,866 ) $ (359 ) $ (3,830 ) $ - $ 24,656 revenue

Gross profit 137,875 1,866 359 3,830 - 143,930

Gross margin 82 % 85 %

Research and 27,512 (2,989 ) (592 ) - - 23,931 development

Sales and 56,690 (6,122 ) (578 ) - - 49,990 marketing

General and 22,110 (3,854 ) (167 ) - (1,339 ) 16,750 administrative

Amortizationof other 8,686 - - (8,686 ) - - intangibles

Restructuring 46 - - - (46 ) - and other

Operating $ 22,831 $ 14,831 $ 1,696 $ 12,516 $ 1,385 $ 53,259 income

Operating 14 % 32 %margin

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share data)

Three Months Ended September 30,

2021

2020

Non-GAAP net income:

Net income

$

23,641

$

17,479

Income tax (benefit) expense

(6,340

)

1,949

Non-GAAP effective cash tax

(7,113

)

(3,786

)

Interest expense, net

2,651

3,602

Cash paid for interest

(2,190

)

(3,160

)

Share-based compensation

25,575

14,831

Employer payroll taxes on employee stock transactions

1,991

1,696

Amortization of other intangibles

7,539

8,686

Amortization of acquired technology

3,864

3,830

Transaction, restructuring, and other

1,248

1,385

Loss (gain) on currency translation

1,299

(199

)

Non-GAAP net income

$

52,165

$

46,313

Share count:

Weighted-average shares outstanding - basic

283,923

280,077

Weighted-average shares outstanding - diluted

291,177

286,252

Shares used in non-GAAP per share calculations:

Weighted-average shares outstanding - basic

283,923

280,077

Weighted-average shares outstanding - diluted

291,177

286,252

Net income per share:

Net income per share - basic

$

0.08

$

0.06

Net income per share - diluted

$

0.08

$

0.06

Non-GAAP net income per share - basic

$

0.18

$

0.17

Non-GAAP net income per share - diluted

$

0.18

$

0.16

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share data)

Three Months Ended September 30,

2021 2020

Non-GAAP net income:

Net income $ 23,641 $ 17,479

Income tax (benefit) expense (6,340 ) 1,949

Non-GAAP effective cash tax (7,113 ) (3,786 )

Interest expense, net 2,651 3,602

Cash paid for interest (2,190 ) (3,160 )

Share-based compensation 25,575 14,831

Employer payroll taxes on employee stock 1,991 1,696 transactions

Amortization of other intangibles 7,539 8,686

Amortization of acquired technology 3,864 3,830

Transaction, restructuring, and other 1,248 1,385

Loss (gain) on currency translation 1,299 (199 )

Non-GAAP net income $ 52,165 $ 46,313



Share count:

Weighted-average shares outstanding - basic 283,923 280,077

Weighted-average shares outstanding - diluted 291,177 286,252



Shares used in non-GAAP per share calculations:

Weighted-average shares outstanding - basic 283,923 280,077

Weighted-average shares outstanding - diluted 291,177 286,252



Net income per share:

Net income per share - basic $ 0.08 $ 0.06

Net income per share - diluted $ 0.08 $ 0.06

Non-GAAP net income per share - basic $ 0.18 $ 0.17

Non-GAAP net income per share - diluted $ 0.18 $ 0.16

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands)

Three Months Ended September 30,

2021

2020 (1)

Unlevered Free Cash Flow ("uFCF"):

Net cash provided by operating activities

$

18,296

$

23,841

Cash paid for interest expense

2,190

3,160

Restructuring and other

(1

)

46

Purchase of property, plant, and equipment

(4,658

)

(1,982

)

Transaction and sponsor related costs

249

1,339

Discrete tax items

(3,846

)

7,390

Total uFCF

12,230

33,794

Interest tax adjustment

(548

)

(790

)

uFCF

$

11,682

$

33,004

(1) Previously reported Unlevered Free Cash Flow for the three months ended September 30, 2020 included $7,510 of cash tax payments made in the first quarter of fiscal 2021 that were related to the reorganization. Prior period results have been updated to exclude these cash tax payments made in the first quarter of fiscal 2021.

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands)

Three Months Ended September 30,

2021 2020 ^(1)

Unlevered Free Cash Flow ("uFCF"):

Net cash provided by operating activities $ 18,296 $ 23,841

Cash paid for interest expense 2,190 3,160

Restructuring and other (1 ) 46

Purchase of property, plant, and equipment (4,658 ) (1,982 )

Transaction and sponsor related costs 249 1,339

Discrete tax items (3,846 ) 7,390

Total uFCF 12,230 33,794

Interest tax adjustment (548 ) (790 )

uFCF $ 11,682 $ 33,004

(1) Previously reported Unlevered Free Cash Flow for the three months ended September 30, 2020 included $7,510 of cash tax payments made in the first quarter of fiscal 2021 that were related to the reorganization. Prior period results have been updated to exclude these cash tax payments made in the first quarter of fiscal 2021.

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except percentages)

Six Months Ended September 30, 2021

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 $ 80,500 $ (6,137 ) $ (767 ) $ (7,694 ) $ - $ 65,902 revenue

Gross profit 355,594 6,137 767 7,694 - 370,192

Gross margin 82 % 85 %

Research and 72,633 (9,423 ) (1,127 ) - - 62,083 development

Sales and 166,783 (17,220 ) (1,370 ) - - 148,193 marketing

General and 58,611 (12,047 ) (454 ) - (1,202 ) 44,908 administrative

Amortizationof other 15,079 - - (15,079 ) - - intangibles

Restructuring 25 - - - (25 ) - and other

Operating $ 42,463 $ 44,827 $ 3,718 $ 22,773 $ 1,227 $ 115,008 income

Operating 10 % 26 %margin

Six Months Ended September 30, 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

$

59,253

$

(3,364

)

$

(412

)

$

(7,656

)

$

-

$

47,821

Gross profit

264,841

3,364

412

7,656

-

276,273

Gross margin

82

%

85

%

Research and development

51,017

(5,407

)

(690

)

-

-

44,920

Sales and marketing

105,853

(11,527

)

(705

)

-

-

93,621

General and administrative

43,637

(7,205

)

(174

)

-

(2,898

)

33,360

Amortization of other intangibles

17,372

-

-

(17,372

)

-

-

Restructuring and other

25

-

-

-

(25

)

-

Operating (loss) income

$

46,937

$

27,503

$

1,981

$

25,028

$

2,923

$

104,372

Operating margin

14

%

32

%

Six Months Ended September 30, 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 $ 59,253 $ (3,364 ) $ (412 ) $ (7,656 ) $ - $ 47,821 revenue

Gross profit 264,841 3,364 412 7,656 - 276,273

Gross margin 82 % 85 %

Research and 51,017 (5,407 ) (690 ) - - 44,920 development

Sales and 105,853 (11,527 ) (705 ) - - 93,621 marketing

General and 43,637 (7,205 ) (174 ) - (2,898 ) 33,360 administrative

Amortizationof other 17,372 - - (17,372 ) - - intangibles

Restructuring 25 - - - (25 ) - and other

Operating $ 46,937 $ 27,503 $ 1,981 $ 25,028 $ 2,923 $ 104,372 (loss) income

Operating 14 % 32 %margin

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share data)

Six Months Ended September 30,

2021

2020

Non-GAAP net income:

Net income

$

36,935

$

30,344

Income tax expense

32

9,096

Non-GAAP effective cash tax

(13,254

)

(7,365

)

Interest expense, net

5,508

7,715

Cash paid for interest

(4,560

)

(6,923

)

Share-based compensation

44,827

27,503

Employer payroll taxes on employee stock transactions

3,718

1,981

Amortization of other intangibles

15,079

17,372

Amortization of acquired technology

7,694

7,656

Transaction, restructuring, and other

1,227

2,923

Gain on currency translation

(12

)

(218

)

Non-GAAP net income

$

97,194

$

90,084

Share count:

Weighted-average shares outstanding - basic

283,295

279,577

Weighted-average shares outstanding - diluted

290,254

285,423

Shares used in non-GAAP per share calculations:

Weighted-average shares outstanding - basic

283,295

279,577

Weighted-average shares outstanding - diluted

290,254

285,423

Net income (loss) per share:

Net income (loss) per share - basic

$

0.13

$

0.11

Net income (loss) per share - diluted

$

0.13

$

0.11

Non-GAAP net income per share - basic

$

0.34

$

0.32

Non-GAAP net income per share - diluted

$

0.33

$

0.32

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share data)

Six Months Ended September 30,

2021 2020

Non-GAAP net income:

Net income $ 36,935 $ 30,344

Income tax expense 32 9,096

Non-GAAP effective cash tax (13,254 ) (7,365 )

Interest expense, net 5,508 7,715

Cash paid for interest (4,560 ) (6,923 )

Share-based compensation 44,827 27,503

Employer payroll taxes on employee stock 3,718 1,981 transactions

Amortization of other intangibles 15,079 17,372

Amortization of acquired technology 7,694 7,656

Transaction, restructuring, and other 1,227 2,923

Gain on currency translation (12 ) (218 )

Non-GAAP net income $ 97,194 $ 90,084



Share count:

Weighted-average shares outstanding - basic 283,295 279,577

Weighted-average shares outstanding - diluted 290,254 285,423



Shares used in non-GAAP per share calculations:

Weighted-average shares outstanding - basic 283,295 279,577

Weighted-average shares outstanding - diluted 290,254 285,423



Net income (loss) per share:

Net income (loss) per share - basic $ 0.13 $ 0.11

Net income (loss) per share - diluted $ 0.13 $ 0.11

Non-GAAP net income per share - basic $ 0.34 $ 0.32

Non-GAAP net income per share - diluted $ 0.33 $ 0.32

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands)

Six Months Ended September 30,

2021

2020

Unlevered Free Cash Flow ("uFCF"):

Net cash provided by operating activities

$

101,768

$

60,849

Cash paid for interest expense

4,560

6,923

Restructuring and other

25

25

Purchase of property, plant, and equipment

(7,612

)

(6,400

)

Transaction and sponsor related costs

202

2,898

Discrete tax items

(5,029

)

14,900

Total uFCF

93,914

79,195

Interest tax adjustment

(1,141

)

(1,731

)

uFCF

$

92,773

$

77,464

View source version on businesswire.com: https://www.businesswire.com/news/home/20211027005135/en/

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

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