Summary
Dynatrace reported fiscal 2021 second quarter revenue of $168.6 million, up 30.3% year over year. Gross profit increased 53.5% to $137.9 million, and gross margin reached 81.8%, up 12.3 percentage points. Operating income was $22.8 million, a swing to a profit from an operating loss in the prior-year quarter. Net income was $17.5 million, and diluted EPS was $0.06. The quarter also showed an operating margin of 13.5%, up 133.0 percentage points. On a non-GAAP basis, operating income was $53.3 million, net income was $52.6 million, and diluted EPS was $0.18.
Cash generation improved sharply. Operating cash flow was $23.8 million for the quarter and $60.8 million for the six months. Capital expenditures were $2.0 million in the quarter, down 64.7%, and $6.4 million year to date, down 34.4%. Unlevered free cash flow was $40.5 million for the quarter. Deferred revenue, current, was $349.5 million, up 19.8% year over year. Remaining performance obligations were $880.0 million, up 34.7%. Those metrics suggest a business with a growing subscription backlog.
Operationally, Dynatrace ended the quarter with 2,594 Dynatrace customers, up from 1,828 a year earlier. Dynatrace ARR was $607.6 million, and total ARR was $638.1 million, up 35% as reported and 33% on a constant currency basis. The company reported a Dynatrace net expansion rate of 120%+. It extended coverage of Infrastructure metrics to all AWS CloudWatch and Azure Monitor services and a rapidly expanding set of Google Cloud Platform Monitoring services. It now supports nearly 500 technologies and services automatically through Dynatrace OneAgent, Smartscape, and Davis AI. Management also highlighted a deeper AIOps partnership with ServiceNow and a new Cloud Partner Competency Program.
Guidance points to continued growth. For the third quarter of fiscal 2021, total revenue is expected to be $171.0 million to $173.0 million, 19% to 21% growth as reported. Non-GAAP operating income is expected to be $43.0 million to $45.0 million, and non-GAAP EPS is expected to be $0.12 to $0.13. For full fiscal 2021, total revenue is expected to be $668.0 million to $675.0 million, 22% to 24% growth as reported. Total ARR is expected to be $721.0 million to $727.0 million, 26% to 27% growth as reported. Non-GAAP operating income is expected to be $186.0 million to $191.0 million, and non-GAAP EPS is expected to be $0.55 to $0.57. Unlevered free cash flow is expected to be $192.0 million to $200.0 million, 29% to 30% of revenue.
Risks remain. The COVID-19 pandemic continues to create uncertainty, and management said customers and prospects may reduce or re-evaluate spending, ask for pricing discounts or extended payment terms, shorten subscription contracts, or increase attrition. The outlook assumes a continued challenging economic environment and incorporates a wider range of outcomes. Dynatrace also carries substantial debt and must service its credit facilities, which adds financial risk. The company says it plans to keep investing in sales and marketing and research and development to support growth. Execution on platform adoption and retention will determine whether the strong second quarter momentum carries into the back half of fiscal 2021.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $168.6M | $155.5M | +8.4% | $129.4M | +30.3% |
| Gross profit | $137.9M | $127.0M | +8.6% | $89.8M | +53.5% |
| Gross margin | 81.8% | 81.7% | +0.1 pp | 69.4% | +12.3 pp |
| Research & development | $27.5M | $23.5M | +17.0% | $46.6M | -41.0% |
| Sales & marketing | $56.7M | $49.2M | +15.3% | $100.0M | -43.3% |
| General & administrative | $22.1M | $21.5M | +2.7% | $87.0M | -74.6% |
| Total operating expenses | $115.0M | $102.9M | +11.8% | $244.4M | -52.9% |
| Operating income (loss) | $22.8M | $24.1M | -5.3% | -$154.5M | +114.8% |
| Operating margin | 13.5% | 15.5% | -2.0 pp | -119.4% | +133.0 pp |
| Net income (loss) | $17.5M | $12.9M | +35.9% | -$417.3M | +104.2% |
| Net margin | 10.4% | 8.3% | +2.1 pp | -322.6% | +332.9 pp |
| Diluted EPS | $0.06 | $0.05 | +$0.01 | — | — |
Risks
COVID-19 has caused temporary office closures, suspended company travel, and virtual-only events, and Dynatrace warns the pandemic may reduce customers' willingness to purchase, alter purchasing timing, lead to pricing discounts or extended payment terms, reduce subscription contract duration, or increase customer attrition. MD&A states the extent of impact remains uncertain and may not be fully reflected in results until future periods.
Dynatrace identified a material weakness in internal control over financial reporting for the fiscal year ended March 31, 2020, related to accounting for income taxes and realizability of tax attributes. It hired an International Tax Manager in April 2020 and a Vice President of Tax in June 2020, but cannot predict whether remediation will succeed, creating restatement and reporting risk.
The Compuware and SIGOS spin-offs were taxable transactions. Dynatrace paid an estimated Compuware Spin Tax Liability of $251.8 million, remains responsible for any excess taxes, and the $265.0 million distribution from Compuware could be challenged as a fraudulent transfer, potentially affecting financial condition.
At September 30, 2020, Dynatrace had approximately $550.0 million of aggregate indebtedness, including $491.1 million under its first lien term loan facility and $15.6 million of letters of credit. The Credit Agreement limits dividends, investments, capital expenditures, acquisitions, and other actions, and a default could accelerate debt or permit lenders to exercise remedies against substantially all assets.
Dynatrace hosts its Dynatrace solutions primarily using AWS, with additional providers such as Microsoft Azure, Interoute, and Alibaba. AWS can terminate its agreement upon material uncured breach on 30 days' prior written notice, and a prolonged AWS disruption would interrupt platform access and require significant delays and expense to re-architect on another cloud.
Dynatrace says sales cycles can range from several months to over a year, large purchases are unpredictable, and a significant portion of transactions occur in the last two weeks of each quarter. MD&A also notes that seasonality in the sales cycle is concentrated in the third and fourth quarters of the fiscal year.
Dynatrace faces competition from Cisco AppDynamics, Broadcom, New Relic, Datadog, Nagios, Akamai, Catchpoint, and cloud providers including AWS, Azure and Google Cloud Platform. Competitors may bundle offerings, have larger sales resources, or offer in-house or open-source alternatives, which could pressure pricing and market share.
Dynatrace disclosed that it has experienced a small number of email phishing attacks that compromised a limited number of email accounts. Because the platform is multi-tenant, a security breach could affect a significant number of customers and lead to remediation costs, regulatory fines, lost customers, and reputational harm.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Total ARR
Unlevered Free Cash Flow
Non-GAAP Operating Income
Summary, forecast, risks and KPIs are extracted from Dynatrace, Inc.'s SEC filings for Q2 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.