Dynatrace (NYSE: DT), the leader in unified observability and security, today announced financial results for the third quarter of fiscal 2024 ended December 31, 2023. "Our Q3 results of balanced grow...
Autore: Business Wire
Exceeds high end of guidance across all Q3 metrics
Delivers ARR growth of 21% year-over-year on a constant currency basis
Achieves GAAP Operating Margin of 10% and Non-GAAP Operating Margin of 29%
WALTHAM, Mass.: Dynatrace (NYSE: DT), the leader in unified observability and security, today announced financial results for the third quarter of fiscal 2024 ended December 31, 2023.
"Our Q3 results of balanced growth, profitability, and free cash flow reflect our continued ability to execute successfully in a dynamic market,” said Rick McConnell, Chief Executive Officer. “As customers look to address the business challenges of modern cloud environments, they are coming to Dynatrace for a more comprehensive observability architecture that enables them to drive innovation, optimize costs, and mitigate risk. Our contextual analytics, hypermodal AI, and automation differentiate the Dynatrace platform in the market and provide us with a powerful advantage to capture the opportunity ahead of us.”
Third Quarter Fiscal 2024 and Other Recent Business Highlights:
All growth rates are compared to the third quarter of fiscal 2023, unless otherwise noted.
Financial Highlights:
Business Highlights:
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1 Gartner, Voice of the Customer for Application Performance Monitoring and Observability, 29 December 2023.
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Third Quarter 2024 Financial Highlights (Unaudited – In thousands, except per share data) | ||||||||
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| Three Months Ended December 31, | ||||||
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| 2023 |
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| 2022 |
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Key Operating Metric: |
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Annual recurring revenue | $ | 1,425,284 |
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| $ | 1,162,591 |
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Year-over-Year Increase |
| 23 | % |
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Year-over-Year Increase - constant currency (*) |
| 21 | % |
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Revenue: |
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Total revenue | $ | 365,096 |
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| $ | 297,456 |
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Year-over-Year Increase |
| 23 | % |
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Year-over-Year Increase - constant currency (*) |
| 21 | % |
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Subscription revenue | $ | 348,294 |
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| $ | 279,152 |
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Year-over-Year Increase |
| 25 | % |
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Year-over-Year Increase - constant currency (*) |
| 23 | % |
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GAAP Financial Measures: |
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GAAP income from operations | $ | 35,720 |
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| $ | 33,887 |
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GAAP operating margin |
| 10 | % |
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| 11 | % | |
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GAAP net income | $ | 42,691 |
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| $ | 15,026 |
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GAAP net income per share - diluted | $ | 0.14 |
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| $ | 0.05 |
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GAAP shares outstanding - diluted |
| 299,246 |
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| 291,228 |
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Net cash provided by operating activities | $ | 75,657 |
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| $ | 61,962 |
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Non-GAAP Financial Measures: |
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Non-GAAP income from operations (*) | $ | 104,636 |
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| $ | 80,653 |
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Non-GAAP operating margin (*) |
| 29 | % |
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| 27 | % | |
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Non-GAAP net income (*) | $ | 96,184 |
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| $ | 73,469 |
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Non-GAAP net income per share - diluted (*) | $ | 0.32 |
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| $ | 0.25 |
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Non-GAAP shares outstanding - diluted (*) |
| 299,246 |
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| 291,228 |
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Free Cash Flow (*) | $ | 67,357 |
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| $ | 57,574 |
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* 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 Investor Relations section of our website at ir.dynatrace.com.
Financial Outlook
Based on information available as of February 8, 2024, Dynatrace is issuing guidance for the fourth quarter and updating guidance for full year fiscal 2024 in the table below.
This guidance reflects foreign exchange rates as of January 31, 2024. We now expect foreign exchange to be a tailwind of approximately $10 million on ARR and approximately $13 million on revenue for fiscal 2024. Given recent weakening in the U.S. dollar, this represents an incremental tailwind of approximately $15 million to ARR and $6 million to revenue for the full year when compared to our prior guidance.
Growth rates for ARR, Total revenue, and Subscription revenue are presented in constant currency to provide better visibility into the underlying growth of the business.
All growth rates below are compared to the fourth quarter and full year of fiscal 2023.
(In millions, except per share data) | Q4 Fiscal 2024 Guidance | |||||
Total revenue | $372 - $377 |
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As reported | 18% - 20% |
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Constant currency | 18% - 19% |
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Subscription revenue | $353 - $358 |
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As reported | 20% - 22% |
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Constant currency | 20% - 21% |
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Non-GAAP income from operations | $85 - $90 |
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Non-GAAP operating margin | 23% - 24% |
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Non-GAAP net income | $79 - $84 |
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Non-GAAP net income per diluted share | $0.26 - $0.28 |
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Diluted weighted average shares outstanding | 300 - 301 |
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(In millions, except per share data) | Current Guidance Fiscal 2024 |
| Prior Guidance Fiscal 2024* |
| Guidance Change at Midpoint** | |
Total ARR | $1,485 - $1,495 |
| $1,480 - $1,490 |
| $5 | |
As reported | 19% - 20% |
| 19% - 20% |
| — bps | |
Constant currency | 18% - 19% |
| 19% - 20% |
| (100) bps | |
Total revenue | $1,422 - $1,427 |
| $1,409 - $1,419 |
| $11 | |
As reported | 23% |
| 22% |
| 100 bps | |
Constant currency | 22% |
| 21% - 22% |
| 50 bps | |
Subscription revenue | $1,352 - $1,357 |
| $1,334 - $1,344 |
| $16 | |
As reported | 25% |
| 23% - 24% |
| 150 bps | |
Constant currency | 24% |
| 22% - 23% |
| 150 bps | |
Non-GAAP income from operations | $388 - $393 |
| $377 - $386 |
| $9 | |
Non-GAAP operating margin | 27.25% - 27.5% |
| 27% |
| 50 bps | |
Non-GAAP net income | $348 - $353 |
| $328 - $337 |
| $18 | |
Non-GAAP net income per diluted share | $1.16 - $1.18 |
| $1.09 - $1.12 |
| $0.06 | |
Diluted weighted average shares outstanding | 299 - 300 |
| 300 - 301 |
| (1) | |
Free cash flow | $330 - $335 |
| $313 - $320 |
| $16 | |
Free cash flow margin | 23% |
| 22% - 23% |
| 50 bps | |
*Prior guidance was issued on November 2, 2023. **Changes in our guidance metrics are rounded to the nearest 50 bps. | ||||||
Reconciliations of non-GAAP income from operations, non-GAAP net income, non-GAAP net income per diluted share and free cash flow guidance to the most directly comparable GAAP measures are 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 for investors and analysts at 8:00 a.m. Eastern Time today, February 8, 2024. To access the conference call from the U.S. and Canada, dial (866) 405-1247, or internationally, dial (201) 689-8045 with conference ID# 13743643. 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 February 22, 2024, by dialing (877) 660-6853 from the U.S. or Canada, or for international callers by dialing (201) 612-7415 and entering conference ID# 13743643. In addition, an archived webcast will be available at ir.dynatrace.com.
We announce material financial information to our investors using our Investor Relations website, press releases, SEC filings and public conference calls and webcasts. We also use these channels to disclose information about the comp