Business Wire | Oct 28, 2020 06:30AM EDT

Dynatrace Reports Second Quarter of Fiscal Year 2021 Financial Results

Oct. 28, 2020

WALTHAM, Mass.--(BUSINESS WIRE)--Oct. 28, 2020--Software intelligence company Dynatrace (NYSE: DT), today released financial results for the second quarter of its fiscal 2021 ended September 30, 2020.

"Dynatrace delivered strong second quarter results, exceeding our guidance on all key metrics," said John Van Siclen, Chief Executive Officer. "As digital transformation continues to accelerate, so does the scale and complexity of the dynamic multiclouds supporting these initiatives. Our lead in unified platform, automation and intelligence sets us apart in observability at scale as we enable digital teams to transform the way they work, shifting them from manual and reactive intervention to proactive optimization and accelerated innovation."

Second Quarter Fiscal 2021 and Other Recent Business Highlights

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

Financial Highlights

* Total Revenue of $168.6 million, an increase of 30% as reported and on a constant currency basis * Total ARR of $638.1 million, an increase of 35% as reported, and 33% on a constant currency basis * Subscription revenue of $157.7 million, an increase of 36% as reported, and 35% on a constant currency basis, and representing 94% of total revenue * GAAP Operating Income of $22.8 million and Non-GAAP Operating Income of $53.3 million * GAAP EPS of $0.06 and non-GAAP EPS of $0.18

Business Highlights:

* Extended coverage of Infrastructure metrics to all AWS CloudWatch and Azure Monitor services and a rapidly expanding set of Google Cloud Platform Monitoring services. Now nearly 500 technologies and services supported automatically by the Dynatrace OneAgent, Smartscape and Davis AI. * Continued recognition by industry analysts for observability platform leadership adding the top spot in ISG's Cloud Native Observability Quadrant and named one of the winners in Gartner's Peer Insights Customers' Choice for Application Performance monitoring. * Increased customer value and reach through expanding partner ecosystem, including a deeper AIOps partnership with ServiceNow and the launch of a Cloud Partner Competency Program to help organizations find the best Dynatrace capable partners to accelerate digital transformation.

Second Quarter 2021 Financial Highlights

(Unaudited - in thousands, except per share amounts)

Three Months Ended September 30,

2020 2019

Annualized recurring revenue $ 638,063 $ 470,906

Year-over-Year Increase 35 %



Annualized recurring revenue - constant currency $ 628,644 $ 470,906 (*)

Year-over-Year Increase 33 %



Revenues:

Total revenue $ 168,586 $ 129,378

Year-over-Year Increase 30 %



Total revenue - constant currency (*) $ 167,741 $ 129,378

Year-over-Year Increase 30 %



Subscription revenue $ 157,673 $ 115,805

Year-over-Year Increase 36 %



Subscription revenue - constant currency (*) $ 156,906 115,805

Year-over-Year Increase 35 %



Non-GAAP operating income ^(*) $ 53,259 $ 29,787

Non-GAAP operating margin ^(*) 32 % 23 %



Non-GAAP net income ^(*) $ 52,581 $ 17,666



Non-GAAP net income per share - diluted $ 0.18 $ 0.07



Non-GAAP shares outstanding - diluted 286,252 269,985



Unlevered Free Cash Flow ^(*) $ 40,514 $ 27,159

* 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 28, 2020, Dynatrace is issuing guidance for the third quarter and raising full year fiscal 2021 as follows:

Third Quarter of Fiscal Year 2021

* Total revenue is expected to be in the range of $171.0 million to $173.0 million, 19% to 21% growth as reported, and 18% to 20% on a constant currency basis * Subscription revenue is expected to be in the range of $160.5 million to $162.0 million, 25% to 26% growth as reported, 24% to 25% 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 $36.0 million to $38.5 million * Non-GAAP net income per diluted share is expected to be in the range of $0.12 to $0.13, based on a range of 289 million to 290 million diluted weighted-average shares outstanding

Full Year Fiscal 2021

* Total revenue is expected to be in the range of $668.0 million to $675.0 million, 22% to 24% growth as reported and on a constant currency basis * Subscription revenue is expected to be in the range of $624.0 million to $630.0 million, 28% to 29% growth as reported and on a constant currency basis * Total ARR is expected to be in the range of $721.0 million to $727.0 million, 26% to 27% growth as reported, and 25% to 26% on a constant currency basis * Non-GAAP operating income is expected to be in the range of $186.0 million to $191.0 million * Non-GAAP net income is expected to be in the range of $158.0 million to $164.0 million * Non-GAAP net income per diluted share is expected to be in the range of $0.55 to $0.57, 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 $192.0 million to $200.0 million, 29% to 30% of revenue

Our guidance is based on foreign exchange rates as of September 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 third 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 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 today, October 28, 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 (or 833-714-0959 for international calls) and using passcode 3256426. A live webcast of the call may be accessed on the Company's website at https://ir.dynatrace.com.

An audio replay will be available for two weeks following the conference call and webcast, The hear the replay, interested parties may go to https://ir.dynatrace.com or dial 800-585-8367 (or 416-621-4642 for international calls) and using passcode: 3256426.

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 below has been updated 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 provides answers about the performance 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 unrivaled 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 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 Six Months Ended September 30, September 30,

2020 2019 2020 2019

Revenue:

Subscription $ 157,673 $ 115,805 $ 302,030 $ 223,933

License 442 2,745 1,080 6,529

Service 10,471 10,828 20,984 21,466

Total revenue 168,586 129,378 324,094 251,928

Cost of revenue:

Cost of subscription 18,327 23,456 35,033 39,633

Cost of service 8,554 11,847 16,564 20,656

Amortization of acquired 3,830 4,243 7,656 8,800 technology

Total cost of revenue 30,711 39,546 59,253 69,089

Gross profit 137,875 89,832 264,841 182,839



Operating expenses:

Research and development 27,512 46,596 51,017 72,255

Sales and marketing 56,690 99,966 105,853 158,181

General and administrative 22,110 86,953 43,637 118,835

Amortization of other 8,686 10,061 17,372 20,203 intangibles

Restructuring and other 46 779 25 894

Total operating expenses 115,044 244,355 217,904 370,368

Income (loss) from 22,831 (154,523 ) 46,937 (187,529 )operations

Interest expense, net (3,602 ) (14,534 ) (7,715 ) (33,720 )

Other income, net 199 146 218 240

Income (loss) before income 19,428 (168,911 ) 39,440 (221,009 )taxes

Income tax expense (1,949 ) (248,423 ) (9,096 ) (245,480 )

Net income (loss) $ 17,479 $ (417,334 ) $ 30,344 $ (466,489 )

Net income (loss) per share:

Basic $ 0.06 $ (1.58 ) $ 0.11 $ (1.86 )

Diluted $ 0.06 $ (1.58 ) $ 0.11 $ (1.86 )

Weighted average shares outstanding:

Basic 280,077 264,127 279,577 251,412

Diluted 286,252 264,127 285,423 251,412

UNAUDITED SHARE-BASED COMPENSATION

Three Months Ended September 30,

Six Months EndedSeptember 30,

2020

2019

2020

2019

Cost of revenue

$

1,866

$

12,720

$

3,364

$

16,029

Research and development

2,989

27,379

5,407

34,506

Sales and marketing

6,122

56,781

11,527

71,885

General and administrative

3,854

57,866

7,205

73,751

Total share-based compensation expense

$

14,831

$

154,746

$

27,503

$

196,171

UNAUDITED SHARE-BASED COMPENSATION

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

2020 2019 2020 2019

Cost of revenue $ 1,866 $ 12,720 $ 3,364 $ 16,029

Research and development 2,989 27,379 5,407 34,506

Sales and marketing 6,122 56,781 11,527 71,885

General and administrative 3,854 57,866 7,205 73,751

Total share-based compensation $ 14,831 $ 154,746 $ 27,503 $ 196,171expense

DYNATRACE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

September 30, 2020

March 31,2020

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

248,437

$

213,170

Accounts receivable, net

110,251

157,058

Deferred commissions, current

41,190

38,509

Prepaid expenses and other current assets

61,261

61,188

Total current assets

461,139

469,925

Property and equipment, net

33,920

31,508

Operating lease right-of-use asset, net

42,571

-

Goodwill

1,271,602

1,270,733

Other intangible assets, net

175,789

201,592

Deferred tax assets, net

24,449

20,460

Deferred commissions, non-current

38,074

39,736

Other assets

8,616

8,126

Total assets

$

2,056,160

$

2,042,080

Liabilities and shareholders' equity

Current liabilities:

Accounts payable

$

8,185

$

11,112

Accrued expenses, current

84,498

93,728

Deferred revenue, current

349,541

384,060

Operating lease liabilities, current

9,311

-

Total current liabilities

451,535

488,900

Deferred revenue, non-current

44,647

60,711

Accrued expenses, non-current

18,308

20,987

Operating lease liabilities, non-current

37,817

-

Long-term debt

480,941

509,985

Total liabilities

1,033,248

1,080,583

Commitments and contingencies

Shareholders' equity:

Common shares, $0.001 par value, 600,000,000 shares authorized, 282,023,558 and 280,853,040 shares issued and outstanding at September 30, 2020 and March 31, 2020, respectively

281

281

Additional paid-in capital

1,609,246

1,573,347

Accumulated deficit

(563,376

)

(594,026

)

Accumulated other comprehensive loss

(23,239

)

(18,105

)

Total shareholders' equity

1,022,912

961,497

Total liabilities and shareholders' equity

$

2,056,160

$

2,042,080

DYNATRACE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

September 30, March 31, 2020 2020

(unaudited)

Assets

Current assets:

Cash and cash equivalents $ 248,437 $ 213,170

Accounts receivable, net 110,251 157,058

Deferred commissions, current 41,190 38,509

Prepaid expenses and other current assets 61,261 61,188

Total current assets 461,139 469,925

Property and equipment, net 33,920 31,508

Operating lease right-of-use asset, net 42,571 -

Goodwill 1,271,602 1,270,733

Other intangible assets, net 175,789 201,592

Deferred tax assets, net 24,449 20,460

Deferred commissions, non-current 38,074 39,736

Other assets 8,616 8,126

Total assets $ 2,056,160 $ 2,042,080



Liabilities and shareholders' equity

Current liabilities:

Accounts payable $ 8,185 $ 11,112

Accrued expenses, current 84,498 93,728

Deferred revenue, current 349,541 384,060

Operating lease liabilities, current 9,311 -

Total current liabilities 451,535 488,900

Deferred revenue, non-current 44,647 60,711

Accrued expenses, non-current 18,308 20,987

Operating lease liabilities, non-current 37,817 -

Long-term debt 480,941 509,985

Total liabilities 1,033,248 1,080,583

Commitments and contingencies

Shareholders' equity:

Common shares, $0.001 par value, 600,000,000shares authorized, 282,023,558 and 280,853,040 281 281 shares issued and outstanding at September 30,2020 and March 31, 2020, respectively

Additional paid-in capital 1,609,246 1,573,347

Accumulated deficit (563,376 ) (594,026 )

Accumulated other comprehensive loss (23,239 ) (18,105 )

Total shareholders' equity 1,022,912 961,497

Total liabilities and shareholders' equity $ 2,056,160 $ 2,042,080

DYNATRACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - In thousands)

Six Months EndedSeptember 30,

2020

2019

Cash flows from operating activities:

Net income (loss)

$

30,344

$

(466,489

)

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

Depreciation

3,797

3,971

Amortization

26,032

29,810

Share-based compensation

27,503

196,171

Deferred income taxes

(3,160

)

(48,566

)

Other

802

3,450

Net change in operating assets and liabilities:

Accounts receivable

49,353

29,578

Deferred commissions

1,250

(2,196

)

Prepaid expenses and other assets

(4,944

)

(519

)

Accounts payable and accrued expenses

(7,862

)

27,101

Operating leases, net

523

-

Deferred revenue

(62,789

)

9,461

Net cash provided by (used in) operating activities

60,849

(218,228

)

Cash flows from investing activities:

Purchase of property and equipment

(6,400

)

(9,758

)

Capitalized software additions

(184

)

(564

)

Net cash used in investing activities

(6,584

)

(10,322

)

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

(30,000

)

(455,189

)

Contribution for tax associated with reorganization

-

265,000

Proceeds from employee stock purchase plan

3,592

-

Proceeds from exercise of stock options

4,829

-

Equity repurchases

(25

)

(145

)

Installments related to acquisition

-

(4,694

)

Net cash (used in) provided by financing activities

(21,604

)

390,269

Effect of exchange rates on cash and cash equivalents

2,606

(1,337

)

Net increase in cash and cash equivalents

35,267

160,382

Cash and cash equivalents, beginning of period

213,170

51,314

Cash and cash equivalents, end of period

$

248,437

$

211,696

DYNATRACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - In thousands)

Six Months Ended September 30,

2020 2019

Cash flows from operating activities:

Net income (loss) $ 30,344 $ (466,489 )

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

Depreciation 3,797 3,971

Amortization 26,032 29,810

Share-based compensation 27,503 196,171

Deferred income taxes (3,160 ) (48,566 )

Other 802 3,450

Net change in operating assets and liabilities:

Accounts receivable 49,353 29,578

Deferred commissions 1,250 (2,196 )

Prepaid expenses and other assets (4,944 ) (519 )

Accounts payable and accrued expenses (7,862 ) 27,101

Operating leases, net 523 -

Deferred revenue (62,789 ) 9,461

Net cash provided by (used in) operating activities 60,849 (218,228 )



Cash flows from investing activities:

Purchase of property and equipment (6,400 ) (9,758 )

Capitalized software additions (184 ) (564 )

Net cash used in investing activities (6,584 ) (10,322 )



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 (30,000 ) (455,189 )

Contribution for tax associated with reorganization - 265,000

Proceeds from employee stock purchase plan 3,592 -

Proceeds from exercise of stock options 4,829 -

Equity repurchases (25 ) (145 )

Installments related to acquisition - (4,694 )

Net cash (used in) provided by financing activities (21,604 ) 390,269



Effect of exchange rates on cash and cash 2,606 (1,337 )equivalents



Net increase in cash and cash equivalents 35,267 160,382



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

Cash and cash equivalents, end of period $ 248,437 $ 211,696

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except percentages)

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

%

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except percentages)

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-GAAPoperatingincome:

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

Three Months Ended September 30, 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

$

39,546

$

(12,720

)

$

(28

)

$

(4,243

)

$

-

$

22,555

Gross profit

89,832

12,720

28

4,243

-

106,823

Gross margin

69

%

83

%

Research and development

46,596

(27,379

)

(19

)

-

-

19,198

Sales and marketing

99,966

(56,781

)

(343

)

-

-

42,842

General and administrative

86,953

(57,866

)

(1

)

-

(14,090

)

14,996

Amortization of other intangibles

10,061

-

-

(10,061

)

-

-

Restructuring and other

779

-

-

-

(779

)

-

Operating (loss) income

$

(154,523

)

$

154,746

$

391

$

14,304

$

14,869

$

29,787

Operating margin

(119

%)

23

%

_________________

Three Months Ended September 30, 2019^(1)



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

Non-GAAPoperatingincome:

Cost of $ 39,546 $ (12,720 ) $ (28 ) $ (4,243 ) $ - $ 22,555 revenue

Gross profit 89,832 12,720 28 4,243 - 106,823

Gross margin 69 % 83 %

Research and 46,596 (27,379 ) (19 ) - - 19,198 development

Sales and 99,966 (56,781 ) (343 ) - - 42,842 marketing

General and 86,953 (57,866 ) (1 ) - (14,090 ) 14,996 administrative

Amortizationof other 10,061 - - (10,061 ) - - intangibles

Restructuring 779 - - - (779 ) - and other

Operating $ (154,523 ) $ 154,746 $ 391 $ 14,304 $ 14,869 $ 29,787 (loss) income

Operating (119 %) 23 %margin

_________________

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

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share amounts)

Three Months Ended September 30,

2020

2019

Non-GAAP net income:

Net income (loss)

$

17,479

$

(417,334

)

Income tax expense

1,949

248,423

Cash paid for tax

(12,418

)

(262,020

)

Tax associated with reorganization (1)

14,900

254,242

Related party tax

-

7,310

Interest expense, net

3,602

14,534

Cash paid for interest

(3,160

)

(11,653

)

Share-based compensation

14,831

154,746

Employer payroll taxes on employee stock transactions

1,696

391

Amortization of other intangibles

8,686

10,061

Amortization of acquired technology

3,830

4,243

Transaction and sponsor related costs

1,339

14,090

Restructuring and other

46

779

Gain on currency translation

(199

)

(146

)

Non-GAAP net income

$

52,581

$

17,666

Share count:

Weighted-average shares outstanding - basic

280,077

264,127

Weighted-average shares outstanding - diluted

286,252

264,127

Shares used in non-GAAP per share calculations:

Weighted-average shares outstanding - basic

280,077

264,127

Weighted-average shares outstanding - diluted

286,252

269,985

Net income (loss) per share:

Net income (loss) per share - basic

$

0.06

$

(1.58

)

Net income (loss) per share - diluted

$

0.06

$

(1.58

)

Non-GAAP net income per share - basic

$

0.19

$

0.07

Non-GAAP net income per share - diluted

$

0.18

$

0.07

_________________

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share amounts)

Three Months Ended September 30,

2020 2019

Non-GAAP net income:

Net income (loss) $ 17,479 $ (417,334 )

Income tax expense 1,949 248,423

Cash paid for tax (12,418 ) (262,020 )

Tax associated with reorganization ^(1) 14,900 254,242

Related party tax - 7,310

Interest expense, net 3,602 14,534

Cash paid for interest (3,160 ) (11,653 )

Share-based compensation 14,831 154,746

Employer payroll taxes on employee stock 1,696 391 transactions

Amortization of other intangibles 8,686 10,061

Amortization of acquired technology 3,830 4,243

Transaction and sponsor related costs 1,339 14,090

Restructuring and other 46 779

Gain on currency translation (199 ) (146 )

Non-GAAP net income $ 52,581 $ 17,666



Share count:

Weighted-average shares outstanding - basic 280,077 264,127

Weighted-average shares outstanding - diluted 286,252 264,127



Shares used in non-GAAP per share calculations:

Weighted-average shares outstanding - basic 280,077 264,127

Weighted-average shares outstanding - diluted 286,252 269,985



Net income (loss) per share:

Net income (loss) per share - basic $ 0.06 $ (1.58 )

Net income (loss) per share - diluted $ 0.06 $ (1.58 )

Non-GAAP net income per share - basic $ 0.19 $ 0.07

Non-GAAP net income per share - diluted $ 0.18 $ 0.07

_________________

Non-GAAP net income for the three months ended September 30, 2020 includes $7,510 of cash tax payments made in the first quarter of fiscal 2021 that^ were related to the reorganization. Reporting these tax payments in the(1) first quarter of fiscal 2021 as related to the reorganization would have resulted in Non-GAAP net income for the three months ended June 30, 2020 of $44,733 instead of $37,223. There is no impact on year-to-date fiscal 2021 Non-GAAP net income.

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands)

Three Months Ended September 30,

Trailing Twelve Months Ended September 30, 2020

2020

2019

Adjusted EBITDA:

Net income (loss)

$

17,479

$

(417,334

)

$

78,809

Income tax expense (benefit)

1,949

248,423

(36,893

)

Interest expense, net

3,602

14,534

19,392

Amortization

13,013

14,729

54,679

Depreciation

2,207

1,937

7,690

Restructuring and other

46

779

223

Transaction and sponsor related costs

1,339

14,090

6,563

(Gain) loss on currency translation

(199

)

(146

)

1,219

Share-based compensation

14,831

154,746

53,810

Employer payroll taxes on employee stock transactions

1,696

391

2,371

Adjusted EBITDA

$

55,963

$

32,149

$

187,863

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands)

Trailing Three Months Ended Twelve September 30, Months Ended September 30, 2020 2019 2020

Adjusted EBITDA:

Net income (loss) $ 17,479 $ (417,334 ) $ 78,809

Income tax expense (benefit) 1,949 248,423 (36,893 )

Interest expense, net 3,602 14,534 19,392

Amortization 13,013 14,729 54,679

Depreciation 2,207 1,937 7,690

Restructuring and other 46 779 223

Transaction and sponsor related costs 1,339 14,090 6,563

(Gain) loss on currency translation (199 ) (146 ) 1,219

Share-based compensation 14,831 154,746 53,810

Employer payroll taxes on employee 1,696 391 2,371 stock transactions

Adjusted EBITDA $ 55,963 $ 32,149 $ 187,863

Three Months Ended September 30,

2020

2019

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

Net cash provided by (used in) operating activities

$

23,841

$

(252,395

)

Cash paid for interest expense

3,160

11,653

Restructuring and other

46

779

Purchase of property, plant, and equipment

(1,982

)

(5,607

)

Transaction and sponsor related costs

1,339

14,090

Tax associated with reorganization (1)

14,900

254,242

Related party tax

-

7,310

Total uFCF

41,304

30,072

Interest tax adjustment

(790

)

(2,913

)

uFCF (After tax adjustment)

$

40,514

$

27,159

_________________

Three Months Ended September 30,

2020 2019

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

Net cash provided by (used in) operating $ 23,841 $ (252,395 )activities

Cash paid for interest expense 3,160 11,653

Restructuring and other 46 779

Purchase of property, plant, and equipment (1,982 ) (5,607 )

Transaction and sponsor related costs 1,339 14,090

Tax associated with reorganization^ (1) 14,900 254,242

Related party tax - 7,310

Total uFCF 41,304 30,072

Interest tax adjustment (790 ) (2,913 )

uFCF (After tax adjustment) $ 40,514 $ 27,159

_________________

Unlevered Free Cash Flow for the three months ended September 30, 2020 includes $7,510 of cash tax payments made in the first quarter of fiscal^ 2021 that were related to the reorganization. Reporting these tax payments(1) in the first quarter of fiscal 2021 as related to the reorganization would have resulted in Unlevered Free Cash Flow for the three months ended June 30, 2020 of $44,460 instead of $36,950. There is no impact on year-to-date fiscal 2021 Unlevered Free Cash Flow.

September 30, 2020

Adjusted EBITDA/Net Debt Leverage Ratio:

Long-term debt

$

480,941

Cash

248,437

Net debt

232,504

TTM Adjusted EBITDA

$

187,863

Leverage Ratio

1.2

x

September 30, 2020

Adjusted EBITDA/Net Debt Leverage Ratio:

Long-term debt $ 480,941

Cash 248,437

Net debt 232,504



TTM Adjusted EBITDA $ 187,863

Leverage Ratio 1.2 x

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except percentages)

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 income

$

46,937

$

27,503

$

1,981

$

25,028

$

2,923

$

104,372

Operating margin

14

%

32

%

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except percentages)

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 income

Operating 14 % 32 %margin

Six Months Ended September 30, 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

$

69,089

$

(16,029

)

$

(28

)

$

(8,800

)

$

-

$

44,232

Gross profit

182,839

16,029

28

8,800

-

207,696

Gross margin

73

%

82

%

Research and development

72,255

(34,506

)

(30

)

-

-

37,719

Sales and marketing

158,181

(71,885

)

(347

)

-

-

85,949

General and administrative

118,835

(73,751

)

(1

)

-

(17,954

)

27,129

Amortization of other intangibles

20,203

-

-

(20,203

)

-

-

Restructuring and other

894

-

-

-

(894

)

-

Operating (loss) income

$

(187,529

)

$

196,171

$

406

$

29,003

$

18,848

$

56,899

Operating margin

(74

%)

23

%

Six Months Ended September 30, 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 $ 69,089 $ (16,029 ) $ (28 ) $ (8,800 ) $ - $ 44,232 revenue

Gross profit 182,839 16,029 28 8,800 - 207,696

Gross margin 73 % 82 %

Research and 72,255 (34,506 ) (30 ) - - 37,719 development

Sales and 158,181 (71,885 ) (347 ) - - 85,949 marketing

General and 118,835 (73,751 ) (1 ) - (17,954 ) 27,129 administrative

Amortizationof other 20,203 - - (20,203 ) - - intangibles

Restructuring 894 - - - (894 ) - and other

Operating $ (187,529 ) $ 196,171 $ 406 $ 29,003 $ 18,848 $ 56,899 (loss) income

Operating (74 %) 23 %margin

(1)

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

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

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share amounts)

Six Months Ended September 30,

2020

2019

Non-GAAP net income:

Net income (loss)

$

30,344

$

(466,489

)

Income tax expense

9,096

245,480

Cash paid for tax

(22,545

)

(264,072

)

Tax associated with reorganization

14,900

254,242

Related party tax

-

7,310

Interest expense, net

7,715

33,720

Cash paid for interest

(6,923

)

(27,391

)

Share-based compensation

27,503

196,171

Employer payroll taxes on employee stock transactions

1,981

406

Amortization of other intangibles

17,372

20,203

Amortization of acquired technology

7,656

8,800

Transaction and sponsor related costs

2,898

17,954

Restructuring and other

25

894

Gain on currency translation

(218

)

(240

)

Non-GAAP net income

$

89,804

$

26,988

Share count:

Weighted-average shares outstanding - basic

279,577

251,412

Weighted-average shares outstanding - diluted

285,423

251,412

Shares used in non-GAAP per share calculations:

Weighted-average shares outstanding - basic

279,577

251,412

Weighted-average shares outstanding - diluted

285,423

258,043

Net income (loss) per share:

Net income (loss) per share - basic

$

0.11

$

(1.86

)

Net income (loss) per share - diluted

$

0.11

$

(1.86

)

Non-GAAP net income per share - basic

$

0.32

$

0.11

Non-GAAP net income per share - diluted

$

0.31

$

0.10

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share amounts)

Six Months Ended September 30,

2020 2019

Non-GAAP net income:

Net income (loss) $ 30,344 $ (466,489 )

Income tax expense 9,096 245,480

Cash paid for tax (22,545 ) (264,072 )

Tax associated with reorganization 14,900 254,242

Related party tax - 7,310

Interest expense, net 7,715 33,720

Cash paid for interest (6,923 ) (27,391 )

Share-based compensation 27,503 196,171

Employer payroll taxes on employee stock 1,981 406 transactions

Amortization of other intangibles 17,372 20,203

Amortization of acquired technology 7,656 8,800

Transaction and sponsor related costs 2,898 17,954

Restructuring and other 25 894

Gain on currency translation (218 ) (240 )

Non-GAAP net income $ 89,804 $ 26,988



Share count:

Weighted-average shares outstanding - basic 279,577 251,412

Weighted-average shares outstanding - diluted 285,423 251,412



Shares used in non-GAAP per share calculations:

Weighted-average shares outstanding - basic 279,577 251,412

Weighted-average shares outstanding - diluted 285,423 258,043



Net income (loss) per share:

Net income (loss) per share - basic $ 0.11 $ (1.86 )

Net income (loss) per share - diluted $ 0.11 $ (1.86 )

Non-GAAP net income per share - basic $ 0.32 $ 0.11

Non-GAAP net income per share - diluted $ 0.31 $ 0.10

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands)

Six Months Ended September 30,

2020

2019

Adjusted EBITDA:

Net income (loss)

$

30,344

$

(466,489)

Income tax expense

9,096

245,480

Interest expense, net

7,715

33,720

Amortization

26,032

29,810

Depreciation

3,797

3,971

Restructuring and other

25

894

Transaction and sponsor related costs

2,898

17,954

Gain on currency translation

(218)

(240)

Share-based compensation

27,503

196,171

Employer payroll taxes on employee stock transactions

1,981

406

Adjusted EBITDA

$

109,173

$

61,677

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands)

Six Months Ended September 30,

2020 2019

Adjusted EBITDA:

Net income (loss) $ 30,344 $ (466,489)

Income tax expense 9,096 245,480

Interest expense, net 7,715 33,720

Amortization 26,032 29,810

Depreciation 3,797 3,971

Restructuring and other 25 894

Transaction and sponsor related costs 2,898 17,954

Gain on currency translation (218) (240)

Share-based compensation 27,503 196,171

Employer payroll taxes on employee stock 1,981 406 transactions

Adjusted EBITDA $ 109,173 $ 61,677

Six Months Ended September 30,

2020

2019

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

Net cash provided by (used in) operating activities

$

60,849

$

(218,228

)

Cash paid for interest expense

6,923

27,391

Restructuring and other

25

894

Purchase of property, plant, and equipment

(6,400

)

(9,758

)

Transaction and sponsor related costs

2,898

17,954

Tax associated with reorganization

14,900

254,242

Related party tax

-

7,310

Total uFCF

79,195

79,805

Interest tax adjustment

(1,731

)

(6,848

)

uFCF (After tax adjustment)

$

77,464

$

72,957

View source version on businesswire.com: https://www.businesswire.com/news/home/20201028005313/en/

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

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