Summary
Dynatrace finished fiscal 2021 with a fourth quarter that kept the top line compounding at a fast clip. Total revenue rose 30.5% to $196.5 million from $150.6 million in the prior-year quarter. Total annual recurring revenue reached $774 million, up 35%, or 32% on a constant currency basis. Subscription revenue accounted for 93% of total revenue in the quarter and for the full year. Gross profit climbed 34.9% to $161.2 million and gross margin rose to 82.0% from 79.3%. The customer base grew at the same time. Dynatrace ended the year with 2,936 customers, up from 2,373 a year earlier, and added 584 new customers during fiscal 2021.
Operating profit grew faster than revenue. Fourth-quarter GAAP operating income was $20.9 million, up 159.5%, and operating margin rose to 10.6% from 5.3%. Net income moved the other way, falling 47.1% to $26.95 million from $50.9 million, because the prior-year quarter carried a far larger income tax benefit. On a non-GAAP basis, operating income was $49 million and net income was $43.4 million. Operating cash flow for the quarter was $85.9 million, up 32.8%.
The full year shows how much ground the business covered in twelve months. Revenue was $703.5 million, up 28.9%, and gross profit was $575.8 million, up 38.1%. Operating income turned positive at $91.9 million after a loss of $171.9 million a year earlier, and net income was $75.7 million against a loss of $413.8 million. Diluted earnings per share were $0.26 versus a loss of $1.56. Unlevered free cash flow reached $237 million, or 34% of revenue, while operating cash flow was $220.4 million, up 254.7%. Capital expenditures were $14.1 million for the year, down 28.6%, with $5.2 million spent in the fourth quarter, up 13.8%. Deferred revenue, current, was $509.3 million, up 32.6%, and remaining performance obligations were $1.19 billion, up 38.4%.
Guidance for fiscal 2022 comes in two pieces, a first-quarter view and a full-year view, with profitability stated on a non-GAAP basis. For the first quarter, subscription revenue is expected to be in the range of $190.5 million to $192 million, growth of 32% to 33% as reported, with non-GAAP operating income of $49 million to $51 million, and non-GAAP net income of $41 million to $43 million, or $0.14 to $0.15 per diluted share. For the full fiscal year 2022, ARR is guided to $975 million to $990 million, growth of 26% to 28%. Non-GAAP operating income is guided to $203 million to $216 million, and unlevered free cash flow to $256 million to $268 million, or 29% to 30% of revenue.
Demand and currency sit at the center of the risk picture. Dynatrace warns that the COVID-19 pandemic could cut customer demand, delay purchasing decisions, push it toward pricing discounts or extended payment terms, shrink subscription contracts, and lift attrition, and management says it will keep investing in sales, marketing and research and development regardless. Reported growth ran ahead of constant currency growth in the quarter, which means foreign exchange is flattering the headline numbers, and the fiscal 2022 plan rests on rates as of April 30, 2021. Net expansion has held above 120% for twelve consecutive quarters, and the $201 million increase in ARR split into $62 million from new customers, $128 million from existing customer expansion, and $11 million from Classic conversions net of churn. The company also revised prior-year income tax amounts for an immaterial error.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2021 | Q3 FY2021 | QoQ | Q4 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $196.5M | $182.9M | +7.4% | $150.6M | +30.5% |
| Gross profit | $161.2M | $149.8M | +7.6% | $119.4M | +34.9% |
| Gross margin | 82.0% | 81.9% | +0.1 pp | 79.3% | +2.7 pp |
| Research & development | $31.7M | $28.7M | +10.2% | $24.5M | +29.2% |
| Sales & marketing | $74.8M | $64.8M | +15.4% | $55.6M | +34.6% |
| General & administrative | $25.1M | $23.4M | +7.2% | $21.3M | +18.2% |
| Total operating expenses | $140.3M | $125.7M | +11.6% | $111.4M | +26.0% |
| Operating income (loss) | $20.9M | $24.1M | -13.5% | $8.0M | +159.5% |
| Operating margin | 10.6% | 13.2% | -2.6 pp | 5.3% | +5.3 pp |
| Net income (loss) | $27.0M | $18.4M | +46.4% | $46.7M | -42.3% |
| Net margin | 13.7% | 10.1% | +3.7 pp | 31.0% | -17.3 pp |
Risks
Subscription revenue increased 34% to $655.2 million in fiscal 2021 from $487.8 million in fiscal 2020, slower than the 39% growth in the prior year, and the filing warns recent growth rates may not be indicative of future growth. Continued growth depends on new customer additions, expansion within existing customers, and market adoption of the Dynatrace platform.
Sales cycles range from several months to over a year and large enterprise purchasing decisions are unpredictable; within each quarter a significant portion of transactions occur in the last two weeks, and the third fiscal quarter is typically the largest. This creates quarterly variability and makes it difficult to adjust cost structure on a timely basis.
The company used SolarWinds Orion software and took recommended actions after the SUNBURST malicious code incident; the full extent and consequences may not be fully understood, and future compromise of its systems or data could occur. It also disclosed a small number of email phishing attacks that compromised a limited number of email accounts.
The markets are highly competitive and the company faces direct or indirect competition from Cisco, Broadcom, New Relic, Datadog, Nagios, Akamai, Catchpoint, and cloud providers such as AWS, Microsoft Azure, and Google Cloud Platform. Some competitors have greater resources and may bundle offerings, and customers may build in-house solutions using open source software.
The COVID-19 pandemic has led to temporary office closures or limited occupancy, suspended company travel, and virtual-only events, while customers' ability or willingness to purchase, timing of purchasing decisions, and attrition rates remain uncertain. The duration and extent of the impact on future results cannot be accurately predicted.
The company is transitioning to combined multi-year contracts with a single anniversary date, which may cause variability in the timing and amounts of billings and impact deferred revenue and remaining performance obligations. The transition away from perpetual licenses continues to reduce the deferred revenue balance.
At March 31, 2021, the company had approximately $425.0 million of aggregate indebtedness, including $401.1 million under its first lien term loan, and the Credit Agreement contains covenants limiting dividends, acquisitions, capital expenditures, and other actions. A default could accelerate indebtedness and permit lenders to exercise remedies against substantially all assets.
A material weakness related to accounting for income taxes was remediated as of March 31, 2021, but the company is no longer an emerging growth company and is now required to comply with Section 404 of the Sarbanes-Oxley Act. Failure to maintain effective internal control over financial reporting could result in material misstatements or missed reporting obligations.
The company relies on non-exclusive partners, including AWS, Google Cloud Platform, Microsoft Azure, IBM Red Hat, and others, and some partners also compete with Dynatrace. If partners do not effectively market and sell its offerings or choose to favor their own or competitors' products, its ability to grow could be harmed.
The Thoma Bravo Funds beneficially owned 29.8% of common stock as of March 31, 2021 and can exert significant influence over board composition, mergers, capital raising, and charter amendments. Thoma Bravo may also pursue corporate opportunities independent of Dynatrace that conflict with its interests.
Success depends on senior management and highly skilled technical, sales, and marketing employees, and competition for employees is particularly intense in Europe where research and development operations are concentrated. Compensation and personnel costs may increase as a result.
SaaS KPIs
All quarters →Dynatrace Net Expansion Rate
Dynatrace Customers
Summary, forecast, risks and KPIs are extracted from Dynatrace, Inc.'s SEC filings for Q4 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.