Dynatrace’s DT fourth-quarter fiscal 2020 adjusted earnings of 11 cents per share beat the Zacks Consensus Estimate by 37.5% and also bettered 3 cents reported in the year-ago quarter.
Further, revenues of $150.6 million trumped the consensus mark by 3%. The top line improved 29.6% year over year as well.
Subscription revenues surged 38.3% year over year to $135.4 million. Service revenues increased 20.3% from the year-ago quarter to $12.9 million.
Overall, subscription and services revenues jumped 37% year over year to $148.3 million, accounting for more than 98% of total revenues
However, license revenues plummeted 70% from the year-ago quarter to $2.3 million.
Dynatrace Inc Price, Consensus and EPS Surprise
Dynatrace Inc price-consensus-eps-surprise-chart | Dynatrace Inc Quote
Dynatrace ended fiscal 2020 with 2,373 customers, up 74% year over year. Moreover, net expansion rate was 123%. This was the 8th consecutive quarter when net expansion rate was at or above 120%.
Total annual recurring revenues (ARR) at the end of the fiscal fourth quarter soared 42% year over year to $572.8 billion. Approximately, 80-85% of ARR is from enterprise customers belonging to industries that showed resilience despite the coronavirus crisis.
Dynatrace platform accounted for 92% of total ARR in the quarter under review.
Moreover, remaining performance obligation (RPO) at the end of the quarter was approximately $860 million, up 56% year over year. Dynatrace expects to realize $495 million of RPO over the next 12 months.
Gross margin expanded 510 basis points (bps) year over year to 79.3% in the reported quarter, driven by higher subscription gross margin.
Research & development (R&D) expenses increased 13.8% year over year to $24.5 million However, as a percentage of revenues, R&D expenses declined 230 bps to 16.3%.
Sales & marketing (S&M) expenses were $55.6 million, up 15.3% year over year. However, as percentage of revenues, S&M expenses decreased 460 bps to 36.9%.
General & administrative (G&A) expenses fell 21.3% year over year to $21.3 million. As a percentage of revenues, G&A dropped to 14.1% from 23.3% reported in the year-ago quarter.
Non-GAAP operating margin expanded 210 bps on a year-over-year basis to 23.9%.
Balance Sheet & Other Details
As of Mar 31, 2020, Dynatrace had cash and cash equivalents worth $213.2 million compared with $51.3 million as of Dec 31, 2019.
Long-term debt as of Mar 31, 2020 was $510 million compared with $1.01 billion as of Dec 31, 2019.
The company’s quarterly unlevered free cash flow came in at $63.30 million compared with free cash flow of $75.7 million in the year-ago quarter.
For first-quarter fiscal 2021, revenues are expected between $148 million and $150 million, implying a 24-25% increase year over year, adjusted for forex. The company expects the negative impact of coronavirus to be maximum on first-quarter revenues.
The Zacks Consensus Estimate for the ongoing quarter’s revenues is currently pegged at $150.5 million, indicating 22.8% growth from the figure reported in the year-ago quarter.
Non-GAAP operating income is expected between $38 million and $40 million.
Non-GAAP earnings are expected between 9 cents and 10 cents per share. The consensus mark for current-quarter earnings is pegged at 7 cents per share, suggesting a 75% surge from the figure reported in the year-ago quarter.
For fiscal 2021, revenues are expected between $630 million and $643 million, implying a 17-20% year-over-year increase, adjusted for forex.
The Zacks Consensus Estimate for the current fiscal year’s revenues is pegged at $655 million, indicating a rise of 21% from the year-earlier quarter’s reported number.
Subscription revenues are expected in the range of $591- $601 million, up 23-25%, adjusted for forex.
Total ARR is projected between $680 million and $692 million.
Non-GAAP operating income is envisioned between $146 million and $156 million.
Moreover, non-GAAP earnings are anticipated between 39 cents and 42 cents per share. The consensus mark for current-year earnings stands at 34 cents per share, suggesting a 22.6% improvement from the figure reported in the year-ago quarter.
Further, unlevered free cash flow is predicted in the band of $180-$190 million.
Zacks Rank & Stocks to Consider
Dynatrace currently carries a Zacks Rank #3 (Hold). AudioEye AEYE, NVIDIA NVDA and Nutanix NTNX are some better-ranked stocks in the broader computer and technology sector. While AudioEye and Nutanix (NTNX) sport a Zacks Rank #1 (Strong Buy), NVIDIA carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AudioEye, NVIDIA and Nutanix are set to report quarterly results on May 14, 21 and 27, respectively.
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