Dynatrace’s DT first-quarter fiscal 2021 adjusted earnings of 13 cents per share beat the Zacks Consensus Estimate by 30% and also bettered 4 cents reported in the year-ago quarter.
Further, revenues of $155.5 million trumped the consensus mark by 4.2%. The top line improved 26.9% year over year as well. At constant currency (cc), revenues increased 30% year over year to $159.1 million.
Subscription revenues surged 33.5% year over year to $144.4 million. At cc, subscription revenues surged 37% year over year to $147.7 million.
Service revenues decreased 1.2% from the year-ago quarter to $10.5 million.
Dynatrace, Inc. Price, Consensus and EPS Surprise
Dynatrace, Inc. price-consensus-eps-surprise-chart | Dynatrace, Inc. Quote
Overall, subscription and services revenues jumped 30.4% year over year to $154.9 million, accounting for more than 99% of total revenues
However, license revenues plummeted 83.1% from the year-ago quarter to $0.6 million.
Dynatrace added 85 net new customers ending first quarter with 2,458 customers. Moreover, net expansion rate was more than 120% for the 9th consecutive quarter.
Total annual recurring revenues (ARR) at the end of the fiscal first quarter soared 37.4% year over year to $601.4 million. At cc, ARR jumped 39% to $609 million.
ARR per Dynatrace customer also increased to $229K, up more than 10% year over year.
During the reported quarter, Dynatrace enhanced support for Kubernetes. The company also achieved FedRAMP authorization at Moderate Impact Level, which opens up wider access to the U.S. government’s digital transformation projects. The company cited IDC data, per which, the U.S. government is expected to spend $94 billion on digital transformation by 2023.
Gross margin expanded 280 basis points (bps) year over year to 85.1% in the reported quarter, driven by higher subscription gross margin.
Research & development (R&D) expenses increased 13.8% year over year to $21.1 million However, as a percentage of revenues, R&D expenses declined 160 bps to 13.6%.
Sales & marketing (S&M) expenses were $43.8 million, up 1.5% year over year. However, as percentage of revenues, S&M expenses decreased 700 bps to 28.1%.
General & administrative (G&A) expenses jumped 37% year over year to $16.6 million. As a percentage of revenues, G&A increased 80 bps to 10.7%.
Non-GAAP operating margin improved 32.7% compared with 22.1% in the year-ago quarter.
Balance Sheet & Other Details
As of Jun 30, 2020, Dynatrace had cash and cash equivalents worth $250.4 million compared with $213.2 million as of Mar 31.
Long-term debt as of Jun 30, 2020 was $510.5 million compared with $510 million as of Mar 31.
Dynatrace made a principal repayment of $30 million in early July, reducing its debt to $480 million.
The company’s quarterly unlevered free cash flow came in at $37 million compared with free cash flow of $45.8 million in the year-ago quarter.
Moreover, remaining performance obligation (RPO) at the end of the quarter was approximately $857 million, up 40% year over year. Dynatrace expects to realize $503 million of RPO over the next 12 months.
For second-quarter fiscal 2021, revenues are expected between $159 million and $161 million, implying a 25-26% increase year over year, at cc.
The Zacks Consensus Estimate for the ongoing quarter’s revenues is currently pegged at $152.9 million, indicating 18.1% growth from the figure reported in the year-ago quarter.
Subscription revenues are expected between $149 million and $150.5 million, implying a 30-32% increase year over year, at cc.
Non-GAAP operating income is expected between $43 million and $45 million.
Non-GAAP earnings are expected between 9 cents and 10 cents per share. The consensus mark for current-quarter earnings is pegged at 10 cents per share, suggesting a 66.7% surge from the figure reported in the year-ago quarter.
For fiscal 2021, revenues are expected between $646 million and $656 million (up from previous guidance range of $630-$643 million), implying a 20-22% (up from 17-20%) year-over-year increase, at cc.
The Zacks Consensus Estimate for the current fiscal year’s revenues is pegged at $638 million, indicating a rise of 16.9% from the year-earlier reported number.
Subscription revenues are expected in the range of $603-$612 million (up from previous guidance range of $591- $601 million), indicating growth of 26-27% (up from 23-25%), at cc.
Total ARR is projected between $698 million and $708 million (up from $680 - $692 million)
Non-GAAP operating income is envisioned between $166 million and $175 million (up from previous guidance range of $146-$156 million).
Moreover, non-GAAP earnings are anticipated between 46 cents and 49 cents per share (up from previous guidance range of 39-42 cents per share). The consensus mark for current-year earnings stands at 40 cents per share, suggesting a 29% improvement from the figure reported in the year-ago period.
Further, unlevered free cash flow is predicted in the band of $187-$195 million (up from $180-$190 million).
Zacks Rank & Stocks to Consider
Dynatrace currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector are Dropbox DBX, Everbridge EVBG and Asure Software ASUR. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Both Dropbox and Everbridge are scheduled to report earnings on Aug 6. Asure Software is set to release quarterly results on Aug 10.
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