dt-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 001-39010

Dynatrace, Inc.

(Exact name of Registrant as specified in its charter)


Delaware		47-2386428
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1601 Trapelo Road, Suite 116		02451
Waltham	MA
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (781) 530-1000

N/A

(Former name, former address and former fiscal year, 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

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had 287,339,714 shares of common stock outstanding as of August 1, 2022.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. All statements of historical fact included in this Quarterly Report regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading “Risk Factors” included elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the year ended March 31, 2022 (“Annual Report”). These forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:

•our future financial performance, including our expectations regarding our revenue, annual recurring revenue, gross profit or gross margin, operating expenses, ability to generate cash flow, revenue mix and ability to maintain future profitability;

•our expectations regarding the potential impact of the novel coronavirus (“COVID-19”) pandemic on our business, operations, and the markets in which we and our partners and customers operate;

•anticipated trends and growth rates in our business and in the markets in which we operate;

•our ability to maintain and expand our customer base and our partner network;

•our ability to sell our applications and expand internationally;

•our ability to anticipate market needs and successfully develop new and enhanced solutions to meet those needs;

•our ability to hire and retain necessary qualified employees to grow our business and expand our operations;

•the evolution of technology affecting our applications, platform and markets;

•our ability to adequately protect our intellectual property;

•our ability to service our debt obligations; and

•certain macroeconomic factors facing the global economies, including rising inflation and changing interest rates.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” in the Annual Report and as filed with the SEC and “Risk Factors” in Part II, Item 1A in this Quarterly Report and elsewhere in this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.


PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of June 30, 2022 and March 31, 20 2 2	2
	Condensed Consolidated Statements of Operations for the Three Months Ended June 30, 2022 and 2021	3
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended June 30, 2022 and 2021	4
	Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended June 30, 2022 and 2021	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2022 and 2021	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	24
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3.	Default Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	53
Item 6.	Exhibits	54
Signatures		55

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

DYNATRACE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


	June 30, 2022		March 31, 2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	571,345	$	462,967
Accounts receivable, net	191,836		350,666
Deferred commissions, current	61,182		62,601
Prepaid expenses and other current assets	35,439		72,188
Total current assets	859,802		948,422
Property and equipment, net	45,782		45,271
Operating lease right-of-use assets, net	53,369		58,849
Goodwill	1,280,511		1,281,876
Other intangible assets, net	95,008		105,736
Deferred tax assets, net	26,368		28,106
Deferred commissions, non-current	59,245		63,435
Other assets	10,564		9,615
Total assets	$	2,430,649	$	2,541,310

Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	4,795	$	22,715
Accrued expenses, current	114,214		141,556

Deferred revenue, current	617,969		688,554
Operating lease liabilities, current	12,402		12,774
Total current liabilities	749,380		865,599
Deferred revenue, non-current	16,352		25,783
Accrued expenses, non-current	28,182		19,409
Operating lease liabilities, non-current	46,682		52,070
Deferred tax liabilities	—		85
Long-term debt, net	244,427		273,918
Total liabilities	1,085,023		1,236,864
Commitments and contingencies (Note 8)
Shareholders' equity:
Common shares, $0.001 par value, 600,000,000 shares authorized, 287,259,306 and 286,053,276 shares issued and outstanding at June 30, 2022 and March 31, 2022, respectively	287		286
Additional paid-in capital	1,830,782		1,792,197
Accumulated deficit	(459,234)		(461,348)
Accumulated other comprehensive loss	(26,209)		(26,689)
Total shareholders' equity	1,345,626		1,304,446
Total liabilities and shareholders' equity	$	2,430,649	$	2,541,310

The accompanying notes are an integral part of these condensed consolidated financial statements.

DYNATRACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited – In thousands, except per share data)


	Three Months Ended June 30,
	2022		2021
Revenue:
Subscription	$	249,558	$	196,520
License	—		50
Service	17,715		13,170
Total revenue	267,273		209,740
Cost of revenue:
Cost of subscription	32,738		24,982
Cost of service	15,168		10,021
Amortization of acquired technology	3,892		3,830
Total cost of revenue	51,798		38,833
Gross profit	215,475		170,907

Operating expenses:
Research and development	48,482		34,725
Sales and marketing	105,015		80,482
General and administrative	36,321		26,922
Amortization of other intangibles	6,573		7,540
Restructuring and other	(10)		26
Total operating expenses	196,381		149,695
Income from operations	19,094		21,212
Interest expense, net	(2,175)		(2,857)
Other (expense) income, net	(2,250)		1,311
Income before income taxes	14,669		19,666
Income tax expense	(12,555)		(6,372)
Net income	$	2,114	$	13,294
Net income per share:
Basic	$	0.01	$	0.05
Diluted	$	0.01	$	0.05
Weighted average shares outstanding:
Basic	286,203		282,661
Diluted	290,024		288,988

The accompanying notes are an integral part of these condensed consolidated financial statements.

DYNATRACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited - In thousands)


	Three Months Ended June 30,
	2022		2021
Net income	$	2,114	$	13,294
Other comprehensive income (loss)
Foreign currency translation adjustment	480		(1,658)
Total other comprehensive income (loss)	480		(1,658)
Comprehensive income	$	2,594	$	11,636

The accompanying notes are an integral part of these condensed consolidated financial statements.

DYNATRACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited - In thousands)


	Three Months Ended June 30, 2022
	Common Shares			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Shareholders' Equity
	Shares	Amount
Balance, March 31, 2022	286,053	$	286	$	1,792,197	$	(461,348)	$	(26,689)	$	1,304,446
Foreign currency translation								480		480
Restricted stock units vested	886	1		(1)						—
Restricted stock awards forfeited	(14)	—								—
Issuance of common stock related to employee stock purchase plan	266	—		8,627						8,627
Exercise of stock options	68	—		1,275						1,275
Share-based compensation				28,695						28,695
Equity repurchases				(11)						(11)
Net income						2,114				2,114
Balance, June 30, 2022	287,259	$	287	$	1,830,782	$	(459,234)	$	(26,209)	$	1,345,626



	Three Months Ended June 30, 2021
	Common Shares			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss	Shareholders’ Equity
	Shares	Amount
Balance, March 31, 2021	283,130	$	283	$	1,653,328	$	(513,799)	$

SEC Form 10-Q filed by Dynatrace Inc.