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Dynatrace Reports Fourth Quarter and Full Year Fiscal 2021 Financial Results

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·17-min read
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  • ARR of $774 million, up 35% year-over-year, 32% on a constant currency basis

  • Subscription revenue of $183 million, up 35% year-over-year, 32% on a constant currency basis

  • GAAP EPS of $0.09 and non-GAAP EPS of $0.15, on a dilutive basis

Software intelligence company Dynatrace (NYSE: DT) today released financial results for the fourth quarter of its fiscal 2021 ended March 31, 2021.

"Dynatrace’s strong fourth quarter performance capped off an excellent year exceeding guidance across all our key operating metrics led by ARR growth of 35% year-over-year" stated John Van Siclen, Chief Executive Officer. "As digital transformation and cloud-first initiatives continue to accelerate, our unique value proposition combining modern cloud observability with powerful AIOps capabilities continues to resonate with customers. Looking forward to fiscal 2022, we will continue to invest in growth to take advantage of the large and growing market opportunity we have in front of us."

Fourth Quarter Fiscal 2021 and Other Recent Business Highlights:

All growth rates are compared to the fourth quarter and full year of fiscal 2020 unless otherwise noted.

Fourth Quarter Fiscal 2021 Financial Highlights:

  • Total ARR of $774 million, an increase of 35%, and 32% on a constant currency basis

  • Total Revenue of $197 million, an increase of 31%, and 27% on a constant currency basis

  • Subscription Revenue of $183 million, an increase of 35%, and 32% on a constant currency basis, and representing 93% of total revenue

  • GAAP Operating Income of $21 million and Non-GAAP Operating Income of $49 million

  • GAAP EPS of $0.09 and non-GAAP EPS of $0.15, on a dilutive basis

Full Year Fiscal 2021 Financial Highlights:

  • Total Revenue of $704 million, an increase of 29%, and 28% on a constant currency basis

  • Subscription Revenue of $655 million, an increase of 34%, and 33% on a constant currency basis, and representing 93% of total revenue

  • GAAP Operating Income of $92 million and Non-GAAP Operating Income of $207 million

  • GAAP EPS of $0.26 and non-GAAP EPS of $0.63, on a dilutive basis

  • Unlevered Free Cash Flow of $237 million, or 34% of revenue

Business Highlights:

  • Released additional enhancements across multiple modules during our annual Perform User Conference including enhanced log analytics, session replay for mobile, enhanced AI support for Kubernetes, and node.js support for the recently introduced Cloud Application Security Module.

  • Released the 6th Module to our platform, the Cloud Automation Module, which provides DevOps teams automated AI-powered continuous delivery for consistent, high-quality, and highly efficient release cycles.

  • Announced that AWS awarded Dynatrace Machine Learning Competency status for experience and expertise in Applied AI for AWS offerings. This adds to our AWS competencies already awarded for DevOps, Containers, and Cloud Migration.

  • Recognized by Gartner as a leader in its recent 2021 Magic Quadrant for Application Performance Monitoring (APM) for the 11th consecutive time. In addition, Dynatrace was scored highest in 4 of 5 Use Cases in the accompanying 2021 Critical Capabilities for APM report.

Fourth Quarter 2021 Financial Highlights

(Unaudited – in thousands, except per share amounts)

Three Months Ended March 31,

2021

2020

Key Operating Metric:

Annualized recurring revenue

$

774,090

$

572,759

Year-over-Year Increase

35

%

Annualized recurring revenue - constant currency (*)

$

755,065

$

572,759

Year-over-Year Increase

32

%

Revenue:

Total revenue

$

196,504

$

150,577

Year-over-Year Increase

31

%

Total revenue - constant currency (*)

$

191,818

$

150,577

Year-over-Year Increase

27

%

Subscription revenue

$

182,842

$

135,366

Year-over-Year Increase

35

%

Subscription revenue - constant currency (*)

$

178,561

$

135,366

Year-over-Year Increase

32

%

Non-GAAP Financial Measures:

Non-GAAP operating income (*)

$

49,478

$

36,156

Non-GAAP operating margin (*)

25

%

24

%

Non-GAAP net income (*)

$

43,371

$

28,117

Non-GAAP net income per share - diluted

$

0.15

$

0.10

Non-GAAP shares outstanding - diluted

288,067

283,302

Unlevered Free Cash Flow (*)

$

85,602

$

63,302

Full Year 2021 Financial Highlights

(Unaudited – in thousands, except per share amounts)

Year Ended March 31,

2021

2020

Revenue:

Total revenue

$

703,509

$

545,803

Year-over-Year Increase

29

%

Total revenue - constant currency (*)

$

698,006

$

545,803

Year-over-Year Increase

28

%

Subscription revenue

$

655,180

$

487,817

Year-over-Year Increase

34

%

Subscription revenue - constant currency (*)

$

650,219

$

487,817

Year-over-Year Increase

33

%

Non-GAAP Financial Measures:

Non-GAAP operating income (*)

$

207,251

$

130,775

Non-GAAP operating margin (*)

29

%

24

%

Non-GAAP net income (*)

$

180,056

$

83,835

Non-GAAP net income per share - diluted

$

0.63

$

0.31

Non-GAAP shares outstanding - diluted

286,509

269,271

Unlevered Free Cash Flow (*)

$

237,055

$

149,547

* 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 May 12, 2021, Dynatrace is issuing guidance for the first quarter fiscal 2022 and full year fiscal 2022 as follows:

All growth rates are compared to the first quarter and full year of fiscal 2021 unless otherwise noted.

First Quarter of Fiscal Year 2022:

  • Total revenue is expected to be in the range of $202 to $204 million, 30% to 31% growth as reported, and 25% to 26% on a constant currency basis

  • Subscription revenue is expected to be in the range of $190.5 to $192 million, 32% to 33% growth as reported, 27% to 28% on a constant currency basis

  • Non-GAAP operating income is expected to be in the range of $49 to $51 million

  • Non-GAAP net income is expected to be in the range of $41 to $43 million

  • Non-GAAP net income per diluted share is expected to be in the range of $0.14 to $0.15, based on a range of 291 to 292 million diluted weighted-average shares outstanding

Full Year Fiscal 2022:

  • Total ARR is expected to be in the range of $975 to $990 million, 26% to 28% growth as reported, and 25% to 27% on a constant currency basis

  • Total revenue is expected to be in the range of $885 to $900 million, 26% to 28% growth as reported, and 24% to 26% on a constant currency basis

  • Subscription revenue is expected to be in the range of $834 to $848 million, 27% to 29% growth as reported, and 25% to 27% on a constant currency basis

  • Non-GAAP operating income is expected to be in the range of $203 to $216 million

  • Non-GAAP net income is expected to be in the range of $171 to $183 million

  • Non-GAAP net income per diluted share is expected to be in the range of $0.59 to $0.62, 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 $256 to $268 million, 29% to 30% of revenue

Our guidance is based on foreign exchange rates as of April 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 at 8:00 a.m. Eastern Time today, May 12, 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 # 13718082. The call will also be available live via webcast on the company’s website, ir.dynatrace.com.

An audio replay of the call will also be available until 11:59 p.m. Eastern Time on May 26, 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 # 13718082. 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® ARR at the end of a reporting period for the cohort of Dynatrace® accounts as of one year prior to the date of calculation, divided by the Dynatrace® ARR one year prior to the date of calculation for that same cohort. This calculation excludes the benefit of Dynatrace® ARR resulting from the conversion of Classic products to the Dynatrace® platform.

Dynatrace customers are defined as accounts, as identified by a unique account identifier, that generate at least $10,000 of Dynatrace® ARR as of the reporting date. In infrequent cases, a single large organization may comprise multiple customer accounts when there are distinct divisions, departments or subsidiaries that operate and make purchasing decisions independently from the parent organization. In cases where multiple customer accounts exist under a single organization, each customer account is counted separately based on a mutually exclusive accounting of ARR.

Adjusted EBITDA/Net Debt Leverage Ratio is defined as our Net Debt divided by our trailing twelve month Adjusted EBITDA. Net Debt is defined as total principal less cash and cash equivalents.

Unlevered Free Cash Flow is defined as net cash provided by (used in) operating activities and adjusted to exclude cash paid for interest (net of tax), non-recurring restructuring and acquisition related costs, along with costs associated with one-time offerings and filings, less cash used in investing activities for acquisition of property and equipment. However, given our debt obligations, unlevered free cash flow does not represent residual cash flow available for discretionary expenses.

About Dynatrace

Dynatrace provides software intelligence to simplify cloud complexity and accelerate digital transformation. With 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® 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 first quarter and full year of fiscal 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 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 February 3, 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.

Gartner Disclaimer

Gartner, Magic Quadrant for Application Performance Monitoring, Federico De Silva, Padraig Byrne, and John Chessman, 9 April 2021. Before 2015, Dynatrace was listed as Compuware. Dynatrace was spun off from Compuware following the privatization of Compuware in December 2014. Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

DYNATRACE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Three Months Ended
March 31,

Twelve Months Ended
March 31,

2021

2020

2021

2020

(unaudited)

Revenue:

Subscription

$

182,842

$

135,366

$

655,180

$

487,817

License

109

2,262

1,446

12,686

Service

13,553

12,949

46,883

45,300

Total revenue

196,504

150,577

703,509

545,803

Cost of revenue:

Cost of subscription

22,073

17,263

77,488

73,193

Cost of service

9,432

10,049

34,903

39,289

Amortization of acquired technology

3,830

3,825

15,317

16,449

Total cost of revenue

35,335

31,137

127,708

128,931

Gross profit

161,169

119,440

575,801

416,872

Operating expenses:

Research and development

31,668

24,509

111,415

119,281

Sales and marketing

74,805

55,594

245,487

266,175

General and administrative

25,140

21,265

92,219

161,983

Amortization of other intangibles

8,687

10,038

34,744

40,280

Restructuring and other

17

(1

)

40

1,092

Total operating expenses

140,317

111,405

483,905

588,811

Income (loss) from operations

20,852

8,035

91,896

(171,939

)

Interest expense, net

(3,035

)

(5,682

)

(14,205

)

(45,397

)

Other (expense) income, net

(2,582

)

(1,504

)

162

(1,197

)

Income (loss) before income taxes

15,235

849

77,853

(218,533

)

Income tax benefit (expense)

11,719

50,060

(2,139

)

(195,284

)

Net income (loss)

$

26,954

$

50,909

$

75,714

$

(413,817

)

Net income (loss) per share:

Basic

$

0.10

$

0.18

$

0.27

$

(1.56

)

Diluted

$

0.09

$

0.18

$

0.26

$

(1.56

)

Weighted average shares outstanding:

Basic

281,726

278,665

280,469

264,933

Diluted

288,067

283,302

286,509

264,933

SHARE-BASED COMPENSATION

Three Months Ended
March 31,

Twelve Months Ended
March 31,

2021

2020

2021

2020

(unaudited)

Cost of revenues

$

1,877

$

1,339

$

7,307

$

18,685

Research and development

3,018

1,991

11,684

38,670

Sales and marketing

6,146

6,106

24,153

84,698

General and administrative

3,652

3,358

14,640

80,425

Total share-based compensation expense

$

14,693

$

12,794

$

57,784

$

222,478

DYNATRACE, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

March 31,

2021

2020

Assets

Current assets:

Cash and cash equivalents

$

324,962

$

213,170

Accounts receivable, net

242,079

157,058

Deferred commissions, current

48,986

38,509

Prepaid expenses and other current assets

64,255

79,040

Total current assets

680,282

487,777

Property and equipment, net

36,916

31,508

Operating lease right-of-use asset, net

42,959

Goodwill

1,271,195

1,270,733

Other intangible assets, net

149,484

201,592

Deferred tax assets, net

16,811

Deferred commissions, non-current

48,638

39,736

Other assets

9,933

8,126

Total assets

$

2,256,218

$

2,046,877

Liabilities and shareholders' equity

Current liabilities:

Accounts payable

$

9,621

$

11,112

Accrued expenses, current

119,527

95,011

Deferred revenue, current

509,272

384,060

Operating lease liabilities, current

9,491

Total current liabilities

647,911

490,183

Deferred revenue, non-current

47,504

60,711

Accrued expenses, non-current

16,072

20,294

Operating lease liabilities, non-current

38,203

Deferred tax liabilities

1,014

Long-term debt

391,913

509,985

Total liabilities

1,142,617

1,081,173

Commitments and contingencies

Shareholders' equity:

Common shares, $0.001 par value, 600,000,000 shares authorized, 283,130,238 and 280,853,040 shares issued and outstanding at March 31, 2021 and March 31, 2020, respectively

283

281

Additional paid-in capital

1,653,328

1,573,347

Accumulated deficit

(513,799

)

(589,819

)

Accumulated other comprehensive loss

(26,211

)

(18,105

)

Total shareholders' equity

1,113,601

965,704

Total liabilities and shareholders' equity

$

2,256,218

$

2,046,877

DYNATRACE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended March 31,

2021

2020

Cash flows from operating activities:

Net income (loss)

$

75,714

$

(413,817

)

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

Depreciation

9,022

7,864

Amortization

51,942

58,457

Share-based compensation

57,784

222,478

Deferred income taxes

(7,036

)

(46,221

)

Other

1,845

6,129

Net change in operating assets and liabilities:

Accounts receivable

(81,992

)

(44,021

)

Deferred commissions

(16,323

)

(20,107

)

Prepaid expenses and other assets

5,669

(57,588

)

Accounts payable and accrued expenses

26,592

53,004

Operating leases, net

731

Deferred revenue

96,488

91,367

Net cash provided by (used in) operating activities

220,436

(142,455

)

Cash flows from investing activities:

Purchase of property and equipment

(14,076

)

(19,721

)

Capitalized software costs

197

(892

)

Net cash used in investing activities

(13,879

)

(20,613

)

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

)

Debt issuance costs

(866

)

Repayment of term loans

(120,000

)

(515,189

)

Contribution for tax associated with reorganization

265,000

Proceeds from employee stock purchase plan

9,195

Proceeds from exercise of stock options

13,052

Equity repurchases

(49

)

(156

)

Installments related to acquisitions

(4,694

)

Net cash (used in) provided by financing activities

(97,802

)

329,392

Effect of exchange rates on cash and cash equivalents

3,037

(4,468

)

Net increase in cash and cash equivalents

111,792

161,856

Cash and cash equivalents, beginning of year

213,170

51,314

Cash and cash equivalents, end of year

$

324,962

$

213,170

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands)

Three Months Ended March 31, 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

$

35,335

$

(1,877)

$

(224)

$

(3,830)

$

$

29,404

Gross profit

161,169

1,877

224

3,830

167,100

Gross margin

82

%

85

%

Research and development

31,668

(3,018)

(378)

28,272

Sales and marketing

74,805

(6,146)

(637)

68,022

General and administrative

25,140

(3,652)

(202)

42

21,328

Amortization of other intangibles

8,687

(8,687)

Restructuring and other

17

(17)

Operating income (loss)

$

20,852

$

14,693

$

1,441

$

12,517

$

(25)

$

49,478

Operating margin

11

%

25

%

Three Months Ended March 31, 2020 (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

$

31,137

$

(1,339

)

$

(39

)

$

(3,825

)

$

$

25,934

Gross profit

119,440

1,339

39

3,825

124,643

Gross margin

79

%

83

%

Research and development

24,509

(1,991

)

(89

)

22,429

Sales and marketing

55,594

(6,106

)

(54

)

49,434

General and administrative

21,265

(3,358

)

(2

)

(1,281

)

16,624

Amortization of other intangibles

10,038

(10,038

)

Restructuring and other

(1

)

1

Operating income

$

8,035

$

12,794

$

184

$

13,863

$

1,280

$

36,156

Operating margin

5

%

24

%

(1)

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

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share data)

Three Months Ended March 31,

2021

2020

Non-GAAP net income:

Net income

$

26,954

$

50,909

Income tax benefit

(11,719

)

(50,060

)

Non-GAAP effective cash tax

(3,546

)

(2,472

)

Interest expense, net

3,035

5,682

Cash paid for interest

(2,561

)

(5,567

)

Share-based compensation

14,693

12,794

Employer payroll taxes on employee stock transactions

1,441

184

Amortization of other intangibles

8,687

10,038

Amortization of acquired technology

3,830

3,825

Transaction and sponsor related costs

(42

)

1,281

Restructuring and other

17

(1

)

Loss on currency translation

2,582

1,504

Non-GAAP net income

$

43,371

$

28,117

Share count:

Weighted-average shares outstanding - basic

281,726

278,665

Weighted-average shares outstanding - diluted

288,067

283,302

Shares used in non-GAAP per share calculations:

Weighted-average shares outstanding - basic

281,726

278,665

Weighted-average shares outstanding - diluted

288,067

283,302

Net income per share:

Net income per share - basic

$

0.10

$

0.18

Net income per share - diluted

$

0.09

$

0.18

Non-GAAP net income per share - basic

$

0.15

$

0.10

Non-GAAP net income per share - diluted

$

0.15

$

0.10

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands)

Three Months Ended March 31,

2021

2020

Adjusted EBITDA:

Net income

$

26,954

$

50,909

Income tax benefit

(11,719

)

(50,060

)

Interest expense, net

3,035

5,682

Amortization

12,896

14,359

Depreciation

2,433

1,887

Restructuring and other

17

(1

)

Transaction and sponsor related costs

(42

)

1,281

Loss on currency translation

2,582

1,504

Share-based compensation

14,693

12,794

Employer payroll taxes on employee stock transactions

1,441

184

Adjusted EBITDA

$

52,290

$

38,539

Three Months Ended March 31,

2021

2020

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

Net cash provided by operating activities

$

85,871

$

64,641

Cash paid for interest expense

2,561

5,567

Restructuring and other

17

(1

)

Purchase of property, plant, and equipment

(5,208

)

(4,578

)

Transaction and sponsor related costs

(42

)

1,281

Discrete tax items

3,043

(2,216

)

Total uFCF

86,242

64,694

Interest tax adjustment

(640

)

(1,392

)

uFCF (After tax adjustment)

$

85,602

$

63,302

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands)

Year Ended March 31, 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

$

127,708

$

(7,307

)

$

(718

)

$

(15,317

)

$

$

104,366

Gross profit

575,801

7,307

718

15,317

599,143

Gross margin

82

%

85

%

Research and development

111,415

(11,684

)

(1,356

)

98,375

Sales and marketing

245,487

(24,153

)

(1,630

)

219,704

General and administrative

92,219

(14,640

)

(410

)

(3,356

)

73,813

Amortization of other intangibles

34,744

(34,744

)

Restructuring and other

40

(40

)

Operating income

$

91,896

$

57,784

$

4,114

$

50,061

$

3,396

$

207,251

Operating margin

13

%

29

%

Year Ended March 31, 2020 (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

$

128,931

$

(18,685

)

$

(104

)

$

(16,449

)

$

$

93,693

Gross profit

416,872

18,685

104

16,449

452,110

Gross margin

76

%

83

%

Research and development

119,281

(38,670

)

(234

)

80,377

Sales and marketing

266,175

(84,698

)

(452

)

181,025

General and administrative

161,983

(80,425

)

(6

)

(21,619

)

59,933

Amortization of other intangibles

40,280

(40,280

)

Restructuring and other

1,092

(1,092

)

Operating (loss) income

$

(171,939

)

$

222,478

$

796

$

56,729

$

22,711

$

130,775

Operating margin

(32

%)

24

%

(1)

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

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share data)

Year Ended March 31,

2021

2020

Non-GAAP net income:

Net income (loss)

$

75,714

$

(413,817

)

Income tax (benefit) expense

2,139

195,284

Non-GAAP effective cash tax

(14,720

)

(7,372

)

Interest expense, net

14,205

45,397

Cash paid for interest

(12,475

)

(39,568

)

Share-based compensation

57,784

222,478

Employer payroll taxes on employee stock transactions

4,114

796

Amortization of other intangibles

34,744

40,280

Amortization of acquired technology

15,317

16,449

Transaction and sponsor related costs

3,356

21,619

Restructuring and other

40

1,092

(Gain) loss on currency translation

(162

)

1,197

Non-GAAP net income

$

180,056

$

83,835

Share count:

Weighted-average shares outstanding - basic

280,469

264,933

Weighted-average shares outstanding - diluted

286,509

264,933

Shares used in non-GAAP per share calculations:

Weighted-average shares outstanding - basic

280,469

264,933

Weighted-average shares outstanding - diluted

286,509

269,271

Net income (loss) per share:

Net income (loss) per share - basic

$

0.27

$

(1.56

)

Net income (loss) per share - diluted

$

0.26

$

(1.56

)

Non-GAAP net income per share - basic

$

0.64

$

0.32

Non-GAAP net income per share - diluted

$

0.63

$

0.31

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands)

Year Ended March 31,

2021

2020

Adjusted EBITDA:

Net income (loss)

$

75,714

$

(413,817

)

Income tax (benefit) expense

2,139

195,284

Interest expense, net

14,205

45,397

Amortization

51,942

58,457

Depreciation

9,022

7,864

Restructuring and other

40

1,092

Transaction and sponsor related costs

3,356

21,619

(Gain) loss on currency translation

(162

)

1,197

Share-based compensation

57,784

222,478

Employer payroll taxes on employee stock transactions

4,114

796

Adjusted EBITDA

$

218,154

$

140,367

Year Ended March 31,

2021

2020

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

Net cash provided by (used in) operating activities

$

220,436

$

(142,455

)

Cash paid for interest expense

12,475

39,568

Restructuring and other

40

1,092

Purchase of property, plant, and equipment

(14,076

)

(19,721

)

Transaction and sponsor related costs

3,356

21,619

Discrete tax items

17,943

259,336

Total uFCF

240,174

159,439

Interest tax adjustment

(3,119

)

(9,892

)

uFCF (After tax adjustment)

$

237,055

$

149,547

March 31, 2021

Adjusted EBITDA/Net Debt Leverage Ratio:

Long-term debt

$

391,913

Cash

324,962

Net debt

66,951

TTM Adjusted EBITDA

$

218,154

Leverage Ratio

0.3

x

DYNATRACE, INC.
GAAP to Non-GAAP Reconciliations
(Unaudited - In thousands, except per share data)

Updated Non-GAAP Net Income Calculation

For each of the quarters ended June 30, 2019 through December 31, 2020, we have elected to update our non-GAAP net income calculations and non-GAAP net income per share to include a non-GAAP effective cash tax and the updated information is provided below. Aside from updates made in the calculation of non-GAAP net income to include the employer payroll taxes on employee stock transactions, which have been previously reported, no other updates have been made to any other adjustments in the calculation of non-GAAP net income or non-GAAP net income per share for such periods, and our consolidated financial results calculated under GAAP have not been affected.

Three months ended

6/30/19

9/30/19

12/31/19

3/31/20

6/30/20

9/30/20

12/31/20

Non-GAAP net income:

Net (loss) income

$

(49,155

)

$

(417,334

)

$

1,763

$

50,909

$

12,865

$

17,479

$

18,416

Income tax (benefit) expense

(2,943

)

248,423

(136

)

(50,060

)

7,147

1,949

4,762

Non-GAAP effective cash tax

(919

)

(1,466

)

(2,515

)

(2,472

)

(3,578

)

(3,786

)

(3,810

)

Interest expense, net

19,186

14,534

5,995

5,682

4,113

3,602

3,455

Cash paid for interest

(15,738

)

(11,653

)

(6,610

)

(5,567

)

(3,763

)

(3,160

)

(2,991

)

Share-based compensation

41,425

154,746

13,513

12,794

12,672

14,831

15,588

Employer payroll taxes on employee stock transactions

15

391

206

184

285

1,696

692

Amortization of other intangibles

10,142

10,061

10,039

10,038

8,686

8,686

8,685

Amortization of acquired technology

4,557

4,243

3,824

3,825

3,826

3,830

3,831

Transaction and sponsor related costs

3,864

14,090

2,384

1,281

1,559

1,339

500

Restructuring and other

115

779

199

(1

)

(21

)

46

(2

)

(Gain) loss on currency translation

(94

)

(146

)

(67

)

1,504

(19

)

(199

)

(2,526

)

Non-GAAP net income(1)

$

10,455

$

16,668

$

28,595

$

28,117

$

43,772

$

46,313

$

46,600

Shares used in non-GAAP per share calculations:

Weighted-average shares outstanding - basic

237,693

264,127

277,926

278,665

279,069

280,077

281,010

Weighted-average shares outstanding - diluted

238,619

269,985

280,156

283,302

284,309

286,252

286,427

Net income per share:

Non-GAAP net income per share - basic(1)

$

0.04

$

0.06

$

0.10

$

0.10

$

0.16

$

0.17

$

0.17

Non-GAAP net income per share - diluted(1)

$

0.04

$

0.06

$

0.10

$

0.10

$

0.15

$

0.16

$

0.16

(1)

We previously reported non-GAAP net income and non-GAAP net income per share of the following amounts:

Three months ended

6/30/19

9/30/19

12/31/19

3/31/20

6/30/20

9/30/20

12/31/20

Non-GAAP net income

$

9,322

$

17,666

$

26,901

$

29,946

$

37,223

$

52,581

$

47,645

Net income per share:

Non-GAAP net income per share - basic

$

0.04

$

0.07

$

0.10

$

0.11

$

0.13

$

0.19

$

0.17

Non-GAAP net income per share - diluted

$

0.04

$

0.07

$

0.10

$

0.11

$

0.13

$

0.18

$

0.17

View source version on businesswire.com: https://www.businesswire.com/news/home/20210512005232/en/

Contacts

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

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