WALTHAM, Mass.--(BUSINESS WIRE)--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.

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.

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 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® to modernize and automate cloud operations, release better software faster, and deliver unrivaled digital experiences.