8-K
Dynatrace, Inc. (DT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): January 29, 2020
DYNATRACE, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-39010 | 47-2386428 |
|---|---|---|
| (State or other jurisdiction of<br><br>incorporation) | (Commission<br><br>File Number) | (I.R.S. Employer<br><br>Identification No.) |
| 1601 Trapelo Road, Suite 116 | 02451 | |
| --- | --- | |
| Waltham MA | ||
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (617) 530-1000
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.001 per share | DT | New York Stock Exchange |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||
|---|---|---|---|
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).<br><br><br><br>Emerging growth company ý<br><br><br><br>If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ | |
| --- |
Item 2.02. Results of Operations and Financial Conditions.
On January 29, 2020, Dynatrace, Inc. (the "Company") issued a press release announcing, and will hold a conference call to discuss, the Company's financial results and other information for the quarter ended December 31, 2019. The full text of the press release is furnished as Exhibit 99.1 to this report and incorporated into this Item 2.02 by reference.
The information in this Item 2.02 of this Report on Form 8-K and Exhibit 99.1 attached hereto is intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit<br><br>No. | Description |
|---|---|
| 99.1 | Press release issued by Dynatrace, Inc. dated January 29, 2020 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: January 29, 2020 | Dynatrace, Inc. | |
|---|---|---|
| By: | /s/ Kevin C. Burns | |
| Kevin C. Burns | ||
| Chief Financial Officer & Treasurer | ||
| (Principal Financial Officer) |
Exhibit
Exhibit 99.1
Dynatrace Reports Third Quarter of Fiscal Year 2020 Financial Results
| • | Subscription and Services revenue of $139.4 million, a year-over-year increase of 36% |
|---|---|
| • | Annualized recurring revenue "ARR" of $534.5 million, a year-over-year increase of 44% |
| --- | --- |
| • | GAAP EPS of $0.01 and non-GAAP EPS of $0.10 |
| --- | --- |
WALTHAM, Mass, Jan 29, 2020 (Business Wire) - Dynatrace (NYSE: DT), the market-leading software intelligence provider, purpose-built for the enterprise cloud, today released financial results for the third quarter of its fiscal 2020 ended December 31, 2019.
“The third quarter marked another strong performance for Dynatrace, highlighted by record subscription and services revenue, ongoing robust demand for our all-in-one software intelligence platform, and continued strong momentum. We are pleased with our performance across our key operating metrics, which was driven by the combination of new logos and expansion with existing customers,” stated John Van Siclen, Chief Executive Officer. “As companies continue to digitally transform and move to enterprise clouds, Dynatrace remains well positioned to grow market share globally. Consequently, while we continue to execute efficiently and focus on profitability, we remain committed to maintaining our leadership position through ongoing innovation and further expansion of sales and marketing.”
Third Quarter Fiscal 2020 and Other Recent Business Highlights:
Financial Highlights:
| • | Total Revenue of $143.3 million, an increase of 25% compared to $114.7 million in Q3 2019 |
|---|---|
| • | Total ARR of $534.5 million, an increase of 44% compared to $372.3 million at the end of Q3 2019 |
| --- | --- |
| • | Subscription and Services revenue of $139.4 million, an increase of 36% compared to $102.6 million in Q3 2019, and representing 97% of total revenue |
| --- | --- |
| • | GAAP Operating Income of $7.6 million and Non-GAAP Operating Income of $37.5 million |
| --- | --- |
| • | GAAP EPS of $0.01 and non-GAAP EPS of $0.10 |
| --- | --- |
Dynatrace^®^Platform Highlights:
| • | Ended the quarter with 2,208 Dynatrace customers, a sequential increase of 380 from the end of Q2 2020 |
|---|---|
| • | Dynatrace Net Expansion rate at or above 120% for the 7th consecutive quarter |
| --- | --- |
| • | Dynatrace ARR represents 87% of total ARR, increasing from 80% of total ARR at the end of Q2 2020 |
| --- | --- |
Business Highlights:
| • | Extended AI-powered software intelligence to AWS hybrid clouds through our unique SaaS architecture allowing Dynatrace to support AWS hybrid clouds with greater ease and data security than alternative approaches. |
|---|---|
| • | Paved the way to the autonomous cloud by releasing Keptn, an open source control plane to simplify IT’s journey to NoOps for cloud native environments. |
| --- | --- |
| • | Announced the contributions of transaction tracing knowhow and manpower to the OpenTelemetry project to shape the future of open standards-based observability and extend the reach of the Dynatrace Software Intelligence Platform. |
| --- | --- |
Third Quarter 2020 Financial Highlights
(Unaudited – in thousands, except per share amounts)
| Three Months Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||
| Annualized recurring revenue | $ | 534,490 | $ | 372,317 | ||
| Year-over-Year Increase | 44 | % | ||||
| Revenues: | ||||||
| Total revenue | $ | 143,298 | $ | 114,690 | ||
| Year-over-Year Increase | 25 | % | ||||
| Subscription and services revenue | $ | 139,403 | $ | 102,626 | ||
| Year-over-Year Increase | 36 | % | ||||
| Non-GAAP operating income ^(*)^ | $ | 37,514 | $ | 23,713 | ||
| Non-GAAP operating margin ^(*)^ | 26 | % | 21 | % | ||
| Non-GAAP net income ^(*)^ | $ | 26,695 | $ | 3,582 | ||
| Non-GAAP net income per share | $ | 0.10 | $ | 0.02 | ||
| Non-GAAP shares outstanding - diluted | 280,156 | 237,468 | ||||
| Unlevered Free Cash Flow ^(*)^ | $ | 13,287 | $ | 26,033 |
* 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.
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Financial Outlook
Based on information available, as of January 29, 2020, Dynatrace is issuing guidance for the fourth quarter and full year fiscal 2020 as follows:
Fourth Quarter of Fiscal Year 2020:
| • | Total revenue is expected to be in the range of $147.0 million to $148.0 million |
|---|---|
| • | Non-GAAP operating income is expected to be in the range of $33.5 million to $34.5 million |
| --- | --- |
| • | Non-GAAP net income is expected to be in the range of $21.5 million to $22.5 million |
| --- | --- |
| • | Non-GAAP net income per diluted share is expected to be $0.08, based on approximately 284 million diluted weighted-average shares |
| --- | --- |
Full Year Fiscal 2020:
| • | Total revenue is expected to be in the range of $542.2 million to $543.2 million |
|---|---|
| • | Total ARR is expected to be in the range of $563 million to $566 million |
| --- | --- |
| • | Non-GAAP operating income is expected to be in the range of $127.5 million to $128.5 million |
| --- | --- |
| • | Non-GAAP net income is expected to be in the range of $74.8 million to $75.8 million |
| --- | --- |
| • | Non-GAAP net income per diluted share is expected to be $0.28, based on approximately 272 million diluted weighted-average shares |
| --- | --- |
Reconciliation of non-GAAP operating income, non-GAAP net income and non-GAAP net income per share guidance to the most directly comparable GAAP measures is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from these non-GAAP measures; in particular, the measures and effects of stock-based compensation expense specific to equity compensation awards that are directly impacted by future hiring, turnover and retention needs, as well as unpredictable fluctuations in our stock price. We expect the variability of the above charges to have a significant, and potentially unpredictable, impact on our future GAAP financial results.
These statements are forward-looking and actual results may differ materially. Refer to the section under the heading Forward-Looking Statements below for information on the factors that could cause our actual results to differ materially.
Conference Call and Webcast Information
Dynatrace will host a conference call today, January 29, 2020, to discuss its results and business outlook at 8:00 a.m. Eastern Time. The call will be accessible by telephone at 866-211-4694 (domestic) or 647-689-6731 (international). The call will also be available live via webcast on the Company’s website at https://ir.dynatrace.com. A telephone replay of the conference call will be available at 800-585-8367 or 416-621-4642 (access code 6059566) until February 12, 2020. A webcast replay will be available at https://ir.dynatrace.com.
The company has used, and intends to continue to use, the investor relations portion of its website as a means of disclosing material non-public information and for complying with disclosure obligations under Regulation FD.
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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.
Adjusted EBITDA is defined as Net Income (loss) adjusted by removing the impact of our capital structure (net interest income or expense from our outstanding debt), asset base (depreciation and amortization), tax consequences, restructuring and other gains and losses, transaction and sponsor related costs, gains and losses on foreign currency and stock-based compensation.
Annual Recurring Revenue “ARR” is defined as the daily revenue of all subscription agreements that are actively generating revenue as of the last day of the reporting period multiplied by 365. We exclude from our calculation of Total ARR any revenues derived from month-to-month agreements and/or product usage overage billings.
Dynatrace Net Expansion Rate is defined as the Dynatrace® ARR at the end of a reporting period for the cohort of Dynatrace® accounts as of one year prior to the date of calculation, divided by the Dynatrace® ARR one year prior to the date of calculation for that same cohort. This calculation excludes the benefit of Dynatrace® ARR resulting from the conversion of Classic products to the Dynatrace® platform, as well as any upsell generated at the time of conversion.
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 enterprise cloud complexity and accelerate digital transformation. With AI and complete automation, our all-in-one platform provides answers, not just data, about the performance of applications, the underlying infrastructure and the experience of all users. That’s why many of the world’s largest enterprises trust Dynatrace to modernize and automate enterprise cloud operations, release better software faster, and deliver unrivaled digital experiences. Curious to see how you can simplify your enterprise cloud? Let us show you. Visit our trial page for a free 15-day Dynatrace trial. To learn more about how Dynatrace can help your business, visit https://www.dynatrace.com, visit our blog and follow us on Twitter @dynatrace.
Cautionary Language Concerning Forward-Looking Statements
This press release includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding management’s expectations of future financial and operational performance and operational expenditures, expected growth, and business outlook, including our financial guidance for the fourth fiscal quarter and full year 2020, and statements regarding the size of our market and our positioning for
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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, 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 successfully convert and upsell our customers as they convert from our Classic products to the Dynatrace^®^ platform, 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 November 4, 2019 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.
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DYNATRACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited – In thousands, except per share amounts)
| Three Months Ended<br>December 31, | Nine Months Ended<br>December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |||||||||
| Revenue: | ||||||||||||
| Subscription | $ | 128,518 | $ | 91,661 | $ | 352,451 | $ | 251,974 | ||||
| License | 3,895 | 12,064 | 10,424 | 32,805 | ||||||||
| Service | 10,885 | 10,965 | 32,351 | 30,019 | ||||||||
| Total revenue | 143,298 | 114,690 | 395,226 | 314,798 | ||||||||
| Cost of revenue: | ||||||||||||
| Cost of subscription | 16,297 | 13,534 | 55,930 | 40,922 | ||||||||
| Cost of service | 8,584 | 7,731 | 29,240 | 22,148 | ||||||||
| Amortization of acquired technology | 3,824 | 4,558 | 12,624 | 13,780 | ||||||||
| Total cost of revenue | 28,705 | 25,823 | 97,794 | 76,850 | ||||||||
| Gross profit | 114,593 | 88,867 | 297,432 | 237,948 | ||||||||
| Operating expenses: | ||||||||||||
| Research and development | 22,517 | 17,643 | 94,772 | 55,229 | ||||||||
| Sales and marketing | 52,400 | 43,275 | 210,581 | 130,667 | ||||||||
| General and administrative | 21,883 | 19,672 | 140,718 | 64,764 | ||||||||
| Amortization of other intangibles | 10,039 | 11,879 | 30,242 | 35,892 | ||||||||
| Restructuring and other | 199 | (24 | ) | 1,093 | 459 | |||||||
| Total operating expenses | 107,038 | 92,445 | 477,406 | 287,011 | ||||||||
| Income (loss) from operations | 7,555 | (3,578 | ) | (179,974 | ) | (49,063 | ) | |||||
| Interest expense, net | (5,995 | ) | (21,060 | ) | (39,715 | ) | (49,242 | ) | ||||
| Other income (expense), net | 67 | (146 | ) | 307 | 2,278 | |||||||
| Income (loss) before income taxes | 1,627 | (24,784 | ) | (219,382 | ) | (96,027 | ) | |||||
| Income tax benefit (expense) | 136 | 2,682 | (245,344 | ) | 10,431 | |||||||
| Net income (loss) | $ | 1,763 | $ | (22,102 | ) | $ | (464,726 | ) | $ | (85,596 | ) | |
| Net income (loss) per share: | ||||||||||||
| Basic | $ | 0.01 | $ | (0.09 | ) | $ | (1.78 | ) | $ | (0.36 | ) | |
| Diluted | $ | 0.01 | $ | (0.09 | ) | $ | (1.78 | ) | $ | (0.36 | ) | |
| Weighted average shares outstanding: | ||||||||||||
| Basic | 277,926 | 236,024 | 260,383 | 235,648 | ||||||||
| Diluted | 280,156 | 236,024 | 260,383 | 235,648 |
UNAUDITED SHARE-BASED COMPENSATION
| Three Months Ended December 31, | Nine Months Ended<br>December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |||||
| Cost of revenues | $ | 1,317 | $ | 476 | $ | 17,346 | $ | 3,466 |
| Research and development | 2,173 | 1,009 | 36,679 | 7,590 | ||||
| Sales and marketing | 6,707 | 2,179 | 78,592 | 14,640 | ||||
| General and administrative | 3,316 | 2,393 | 77,067 | 16,589 | ||||
| Total share-based compensation expense | $ | 13,513 | $ | 6,057 | $ | 209,684 | $ | 42,285 |
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DYNATRACE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| (In thousands) | December 31, 2019 | March 31, 2019 | |||||
|---|---|---|---|---|---|---|---|
| (unaudited) | |||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 188,555 | $ | 51,314 | |||
| Accounts receivable, net of allowance for doubtful accounts | 166,481 | 115,431 | |||||
| Deferred commissions, current | 36,343 | 27,705 | |||||
| Prepaid expenses and other current assets | 20,065 | 18,768 | |||||
| Total current assets | 411,444 | 213,218 | |||||
| Property and equipment, net | 28,030 | 17,925 | |||||
| Goodwill | 1,270,650 | 1,270,120 | |||||
| Other intangible assets, net | 215,784 | 259,123 | |||||
| Deferred tax assets, net | 10,714 | 10,678 | |||||
| Deferred commissions, non-current | 36,727 | 31,545 | |||||
| Other assets | 8,981 | 7,649 | |||||
| Receivable from related party | 5,977 | 1,108 | |||||
| Total assets | $ | 1,988,307 | $ | 1,811,366 | |||
| Liabilities and shareholders' equity / member's deficit | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 10,832 | $ | 6,559 | |||
| Accrued expenses, current | 86,194 | 64,920 | |||||
| Current portion of long-term debt | — | 9,500 | |||||
| Deferred revenue, current | 352,207 | 272,772 | |||||
| Payable to related party | — | 597,150 | |||||
| Total current liabilities | 449,233 | 950,901 | |||||
| Deferred revenue, non-current | 79,111 | 92,973 | |||||
| Accrued expenses, non-current | 18,048 | 98,359 | |||||
| Deferred tax liabilities | 2,489 | 47,598 | |||||
| Long-term debt, net of current portion | 540,236 | 1,011,793 | |||||
| Total liabilities | 1,089,117 | 2,201,624 | |||||
| Commitments and contingencies | |||||||
| Shareholders' equity / member's deficit: | |||||||
| Common shares, $0.001 par value, 600,000,000 shares authorized, 280,784,786 shares issued and outstanding at December 31, 2019 | 281 | — | |||||
| Common units, no par value, 100 units authorized, issued and outstanding at March 31, 2019 | — | — | |||||
| Additional paid-in capital | 1,560,559 | (184,546 | ) | ||||
| Accumulated deficit | (640,728 | ) | (176,002 | ) | |||
| Accumulated other comprehensive loss | (20,922 | ) | (29,710 | ) | |||
| Total shareholders' equity / member's deficit | 899,190 | (390,258 | ) | ||||
| Total liabilities and shareholders' equity / member's deficit | $ | 1,988,307 | $ | 1,811,366 |
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DYNATRACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited – In thousands)
| Nine Months Ended<br>December 31, | ||||||
|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||
| Cash flows from operating activities: | ||||||
| Net loss | $ | (464,726 | ) | $ | (85,596 | ) |
| Adjustments to reconcile net loss to cash (used in) provided by operations: | ||||||
| Depreciation | 5,977 | 5,425 | ||||
| Amortization | 44,098 | 54,852 | ||||
| Share-based compensation | 209,684 | 42,285 | ||||
| Deferred income taxes | (45,686 | ) | (15,979 | ) | ||
| Other | 4,313 | 661 | ||||
| Net change in operating assets and liabilities: | ||||||
| Accounts receivable | (49,022 | ) | (19,290 | ) | ||
| Deferred commissions | (13,484 | ) | (7,445 | ) | ||
| Prepaid expenses and other assets | (692 | ) | (814 | ) | ||
| Accounts payable and accrued expenses | 37,537 | 21,222 | ||||
| Deferred revenue | 64,905 | 89,612 | ||||
| Net cash (used in) provided by operating activities | (207,096 | ) | 84,933 | |||
| Cash flows from investing activities: | ||||||
| Purchase of property and equipment | (15,143 | ) | (4,866 | ) | ||
| Capitalized software additions | (729 | ) | (790 | ) | ||
| Net cash used in investing activities | (15,872 | ) | (5,656 | ) | ||
| 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 | ) | — | |||
| Proceeds from term loans | — | 1,120,000 | ||||
| Debt issuance costs | — | (16,288 | ) | |||
| Repayment of term loans | (485,189 | ) | (25,856 | ) | ||
| Payments to related parties | — | (1,177,021 | ) | |||
| Contribution for tax associated with reorganization | 265,000 | — | ||||
| Equity repurchases | (150 | ) | (649 | ) | ||
| Installments related to acquisition | (4,694 | ) | (3,653 | ) | ||
| Net cash provided by (used in) financing activities | 360,264 | (103,467 | ) | |||
| Effect of exchange rates on cash and cash equivalents | (55 | ) | (2,535 | ) | ||
| Net increase (decrease) in cash and cash equivalents | 137,241 | (26,725 | ) | |||
| Cash and cash equivalents, beginning of period | 51,314 | 77,581 | ||||
| Cash and cash equivalents, end of period | $ | 188,555 | $ | 50,856 |
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DYNATRACE, INC.
GAAP to Non-GAAP Reconciliations
(Unaudited - In thousands)
| Three Months Ended December 31, 2019 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| GAAP | Share-based compensation | Amortization of other intangibles | Restructuring & other | Non-GAAP | |||||||||||
| Non-GAAP operating income: | |||||||||||||||
| Cost of revenues | $ | 28,705 | $ | (1,317 | ) | $ | (3,824 | ) | $ | — | $ | 23,564 | |||
| Gross profit | 114,593 | 1,317 | 3,824 | — | 119,734 | ||||||||||
| Gross margin | 80 | % | 84 | % | |||||||||||
| Research and development | 22,517 | (2,173 | ) | — | — | 20,344 | |||||||||
| Sales and marketing | 52,400 | (6,707 | ) | — | — | 45,693 | |||||||||
| General and administrative | 21,883 | (3,316 | ) | — | (2,384 | ) | 16,183 | ||||||||
| Amortization of other intangibles | 10,039 | — | (10,039 | ) | — | — | |||||||||
| Restructuring and other | 199 | — | — | (199 | ) | — | |||||||||
| Operating income | 7,555 | 13,513 | 13,863 | 2,583 | 37,514 | ||||||||||
| Operating margin | 5 | % | 26 | % | |||||||||||
| Three Months Ended December 31, 2018 | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| GAAP | Share-based compensation | Amortization of other intangibles | Restructuring & other | Non-GAAP | |||||||||||
| Non-GAAP operating income: | |||||||||||||||
| Cost of revenues | $ | 25,823 | $ | (476 | ) | $ | (4,558 | ) | $ | — | $ | 20,789 | |||
| Gross profit | 88,867 | 476 | 4,558 | — | 93,901 | ||||||||||
| Gross margin | 77 | % | 82 | % | |||||||||||
| Research and development | 17,643 | (1,009 | ) | — | — | 16,634 | |||||||||
| Sales and marketing | 43,275 | (2,179 | ) | — | — | 41,096 | |||||||||
| General and administrative | 19,672 | (2,393 | ) | — | (4,821 | ) | 12,458 | ||||||||
| Amortization of other intangibles | 11,879 | — | (11,879 | ) | — | — | |||||||||
| Restructuring and other | (24 | ) | — | — | 24 | — | |||||||||
| Operating (loss) income | (3,578 | ) | 6,057 | 16,437 | 4,797 | 23,713 | |||||||||
| Operating margin | (3 | )% | 21 | % |
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DYNATRACE, INC.
GAAP to Non-GAAP Reconciliations
(Unaudited - In thousands, except per share amounts)
| Three Months Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||
| Non-GAAP net income: | ||||||
| Net income (loss) | $ | 1,763 | $ | (22,102 | ) | |
| Income tax benefit | (136 | ) | (2,682 | ) | ||
| Cash paid for tax | (4,209 | ) | (1,374 | ) | ||
| Tax associated with reorganization | 1,558 | — | ||||
| Related party tax | (1,558 | ) | — | |||
| Interest expense, net | 5,995 | 21,060 | ||||
| Cash paid for interest | (6,610 | ) | (18,757 | ) | ||
| Share-based compensation | 13,513 | 6,057 | ||||
| Amortization of other intangibles | 10,039 | 11,879 | ||||
| Amortization of acquired technology | 3,824 | 4,558 | ||||
| Transaction and sponsor related costs | 2,384 | 4,821 | ||||
| Restructuring and other | 199 | (24 | ) | |||
| (Gain) loss on currency translation | (67 | ) | 146 | |||
| Non-GAAP net income | $ | 26,695 | $ | 3,582 | ||
| Share count: | ||||||
| Weighted-average shares outstanding - basic | 277,926 | 236,024 | ||||
| Weighted-average shares outstanding - diluted | 280,156 | 236,024 | ||||
| Shares used in non-GAAP per share calculations: | ||||||
| Weighted-average shares outstanding - basic | 277,926 | 236,024 | ||||
| Weighted-average shares outstanding - diluted | 280,156 | 237,468 | ||||
| Net income (loss) per share: | ||||||
| Net income (loss) per share - basic | $ | 0.01 | $ | (0.09 | ) | |
| Net income (loss) per share - diluted | $ | 0.01 | $ | (0.09 | ) | |
| Non-GAAP net income per share - basic | $ | 0.10 | $ | 0.02 | ||
| Non-GAAP net income per share - diluted | $ | 0.10 | $ | 0.02 |
10
DYNATRACE, INC.
GAAP to Non-GAAP Reconciliations
(Unaudited - In thousands)
| Three Months Ended December 31, | Trailing Twelve Months Ended December 31, 2019 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | ||||||||||
| Adjusted EBITDA: | |||||||||||
| Net income (loss) | $ | 1,763 | $ | (22,102 | ) | $ | (495,324 | ) | |||
| Income tax (benefit) expense | (136 | ) | (2,682 | ) | 232,058 | ||||||
| Interest expense, net | 5,995 | 21,060 | 60,318 | ||||||||
| Amortization | 14,288 | 18,155 | 62,038 | ||||||||
| Depreciation | 2,006 | 1,840 | 7,871 | ||||||||
| Restructuring and other | 199 | (24 | ) | 2,397 | |||||||
| Transaction and sponsor related costs | 2,384 | 4,821 | 22,788 | ||||||||
| (Gain) loss on currency translation | (67 | ) | 146 | (670 | ) | ||||||
| Share-based compensation | 13,513 | 6,057 | 238,550 | ||||||||
| Adjusted EBITDA | $ | 39,945 | $ | 27,271 | $ | 130,026 | |||||
| Three Months Ended December 31, | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | |||||
| 2019 | 2018 | ||||||||||
| Unlevered Free Cash Flow ("uFCF") (After tax adjustment): | |||||||||||
| Net cash provided by operating activities | $ | 11,132 | $ | 8,773 | |||||||
| Cash paid for interest expense | 6,610 | 18,757 | |||||||||
| Restructuring and other | 199 | (24 | ) | ||||||||
| Purchase of property, plant, and equipment | (5,385 | ) | (1,605 | ) | |||||||
| Transaction and sponsor related costs | 2,384 | 4,821 | |||||||||
| Tax associated with reorganization | 1,558 | — | |||||||||
| Related party tax | (1,558 | ) | — | ||||||||
| Total uFCF | 14,940 | 30,722 | |||||||||
| Interest tax adjustment | (1,653 | ) | (4,689 | ) | |||||||
| uFCF (After tax adjustment) | $ | 13,287 | $ | 26,033 | December 31, 2019 | ||||||
| --- | --- | --- | --- | ||||||||
| Adjusted EBITDA/Net Debt Leverage Ratio: | |||||||||||
| Long-term debt | $ | 540,236 | |||||||||
| Cash | 188,555 | ||||||||||
| Net debt | 351,681 | ||||||||||
| TTM Adjusted EBITDA | $ | 130,026 | |||||||||
| Leverage Ratio | 2.7 | x |
11
DYNATRACE, INC.
GAAP to Non-GAAP Reconciliations
(Unaudited - In thousands)
| Nine Months Ended December 31, 2019 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| GAAP | Share-based compensation | Amortization of other intangibles | Restructuring & other | Non-GAAP | |||||||||||
| Non-GAAP operating income: | |||||||||||||||
| Cost of revenues | $ | 97,794 | $ | (17,346 | ) | $ | (12,624 | ) | $ | — | $ | 67,824 | |||
| Gross profit | 297,432 | 17,346 | 12,624 | — | 327,402 | ||||||||||
| Gross margin | 75 | % | 83 | % | |||||||||||
| Research and development | 94,772 | (36,679 | ) | — | — | 58,093 | |||||||||
| Sales and marketing | 210,581 | (78,592 | ) | — | — | 131,989 | |||||||||
| General and administrative | 140,718 | (77,067 | ) | — | (20,338 | ) | 43,313 | ||||||||
| Amortization of other intangibles | 30,242 | — | (30,242 | ) | — | — | |||||||||
| Restructuring and other | 1,093 | — | — | (1,093 | ) | — | |||||||||
| Operating (loss) income | (179,974 | ) | 209,684 | 42,866 | 21,431 | 94,007 | |||||||||
| Operating margin | (46 | )% | 24 | % | |||||||||||
| Nine Months Ended December 31, 2018 | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| GAAP | Share-based compensation | Amortization of other intangibles | Restructuring & other | Non-GAAP | |||||||||||
| Non-GAAP operating income: | |||||||||||||||
| Cost of revenues | $ | 76,850 | $ | (3,466 | ) | $ | (13,780 | ) | $ | — | $ | 59,604 | |||
| Gross profit | 237,948 | 3,466 | 13,780 | — | 255,194 | ||||||||||
| Gross margin | 76 | % | 81 | % | |||||||||||
| Research and development | 55,229 | (7,590 | ) | — | — | 47,639 | |||||||||
| Sales and marketing | 130,667 | (14,640 | ) | — | — | 116,027 | |||||||||
| General and administrative | 64,764 | (16,589 | ) | — | (10,093 | ) | 38,082 | ||||||||
| Amortization of other intangibles | 35,892 | — | (35,892 | ) | — | — | |||||||||
| Restructuring and other | 459 | — | — | (459 | ) | — | |||||||||
| Operating (loss) income | (49,063 | ) | 42,285 | 49,672 | 10,552 | 53,446 | |||||||||
| Operating margin | (16 | )% | 17 | % |
12
DYNATRACE, INC.
GAAP to Non-GAAP Reconciliations
(Unaudited - In thousands, except per share amounts)
| Nine Months Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||
| Non-GAAP net income: | ||||||
| Net loss | $ | (464,726 | ) | $ | (85,596 | ) |
| Income tax expense (benefit) | 245,344 | (10,431 | ) | |||
| Cash paid for tax | (268,281 | ) | (3,451 | ) | ||
| Tax associated with reorganization | 255,800 | — | ||||
| Related party tax | 5,752 | — | ||||
| Interest expense, net | 39,715 | 49,242 | ||||
| Cash paid for interest | (34,001 | ) | (24,647 | ) | ||
| Share-based compensation | 209,684 | 42,285 | ||||
| Amortization of other intangibles | 30,242 | 35,892 | ||||
| Amortization of acquired technology | 12,624 | 13,780 | ||||
| Transaction and sponsor related costs | 20,338 | 10,093 | ||||
| Restructuring and other | 1,093 | 459 | ||||
| Gain on currency translation | (307 | ) | (2,278 | ) | ||
| Non-GAAP net income | $ | 53,277 | $ | 25,348 | ||
| Share count: | ||||||
| Weighted-average shares outstanding - basic | 260,383 | 235,648 | ||||
| Weighted-average shares outstanding - diluted | 260,383 | 235,648 | ||||
| Shares used in non-GAAP per share calculations: | ||||||
| Weighted-average shares outstanding - basic | 260,383 | 235,648 | ||||
| Weighted-average shares outstanding - diluted | 265,112 | 236,374 | ||||
| Net (loss) income per share: | ||||||
| Net loss per share - basic | $ | (1.78 | ) | $ | (0.36 | ) |
| Net loss per share - diluted | $ | (1.78 | ) | $ | (0.36 | ) |
| Non-GAAP net income per share - basic | $ | 0.20 | $ | 0.11 | ||
| Non-GAAP net income per share - diluted | $ | 0.20 | $ | 0.11 |
13
DYNATRACE, INC.
GAAP to Non-GAAP Reconciliations
(Unaudited - In thousands)
| Nine Months Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||
| Adjusted EBITDA: | ||||||
| Net loss | $ | (464,726 | ) | $ | (85,596 | ) |
| Income tax expense (benefit) | 245,344 | (10,431 | ) | |||
| Interest expense, net | 39,715 | 49,242 | ||||
| Amortization | 44,098 | 54,852 | ||||
| Depreciation | 5,977 | 5,425 | ||||
| Restructuring and other | 1,093 | 459 | ||||
| Transaction and sponsor related costs | 20,338 | 10,093 | ||||
| Gain on currency translation | (307 | ) | (2,278 | ) | ||
| Share-based compensation | 209,684 | 42,285 | ||||
| Adjusted EBITDA | $ | 101,216 | $ | 64,051 | ||
| Nine Months Ended December 31, | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| 2019 | 2018 | |||||
| Unlevered Free Cash Flow ("uFCF") (After tax adjustment): | ||||||
| Net cash (used in) provided by operating activities | $ | (207,096 | ) | $ | 84,933 | |
| Cash paid for interest expense | 34,001 | 24,647 | ||||
| Restructuring and other | 1,093 | 459 | ||||
| Purchase of property, plant, and equipment | (15,143 | ) | (4,866 | ) | ||
| Transaction and sponsor related costs | 20,338 | 10,093 | ||||
| Tax associated with reorganization | 255,800 | — | ||||
| Related party tax | 5,752 | — | ||||
| Total uFCF | 94,745 | 115,266 | ||||
| Interest tax adjustment | (8,500 | ) | (6,162 | ) | ||
| uFCF (After tax adjustment) | $ | 86,245 | $ | 109,104 |
14
Contacts
Marc P. Griffin
646-277-1290
Marc.Griffin@ICRinc.com
Michael Bowen
203-682-8299
Michael.Bowen@ICRinc.com
Media Relations
Jack Murphy
646-677-1834
Jack.Murphy@ICRinc.com
Mike Maciag
Dynatrace
Mike.Maciag@dynatrace.com
650-279-3655
15