Dynatrace, Inc. (DT) Q2 2023 Earnings Call Transcript

For the period ending Septembr 30, 2022

November 2, 2022 8:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to Dynatrace Fiscal Second Quarter 2023 Earnings Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]

Please note, this conference is being recorded. At this time, I will now turn the conference over to Noelle Faris, Vice President of Investor Relations. Ms. Faris, you may now begin.

Noelle Faris

Thanks, Operator. Good morning, everyone. And thank you for joining Dynatrace’s second quarter fiscal 2023 earnings conference call. Joining me on today’s call are Rick McConnell, Chief Executive Officer; and Kevin Burns, Chief Financial Officer.

Before we get started, please note that today’s comments include forward-looking statements, such as statements regarding revenue and earnings guidance. These forward-looking statements are subject to risks and uncertainties depending on a number of factors that could cause actual results to differ materially from those expressed or implied by such statements.

Additional information concerning these uncertainties and risk factors is contained in Dynatrace’s filing with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q.

The forward-looking statements included in this call represent the company’s view on November 2, 2022. Dynatrace disclaims any obligation to update these statements to reflect future events or circumstances.

As a reminder, we will be referring to some non-GAAP financial measures during today’s call. A detailed reconciliation of GAAP and non-GAAP measures can be found on the Investor Relations section of our website.

Unless otherwise noted, the growth rate we discuss today are non-GAAP, reflecting constant currency growth. To see the reconciliation between these non-GAAP and GAAP measures, please refer to today’s earnings press release and financial presentation under the Events section of our website.

And with that, let me turn the call over to our Chief Executive Officer, Rick McConnell. Rick?

Rick McConnell

Thanks, Noelle, and good morning, everyone. Thank you for joining us on today’s call. Dynatrace’s Q2 results solidly beat expectations on the top and bottomline. In particular, adjusted ARR in the second quarter was 33% year-over-year. Subscription revenue came in at $261 million, an increase of 29% year-over-year in constant currency. Non-GAAP operating income was $73 million or 26% of revenue. And on a trailing 12-month basis, free cash flow margin was 29%.

These results once again highlight our ability to run a balanced business that delivers compelling topline growth coupled with strong bottomline performance, and they are a testament to the strength of our market, the significant value of our platform and the ongoing durability of our business model.