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美国
证券交易委员会
华盛顿特区 20549
表格 10-Q  
(标记一)
☒根据1934年证券交易所法案第13或15(d)节的季度报告
截至季度结束日期的财务报告2024年9月30日
或
☐根据《1934年证券交易法》第13或15(d)条规定的过渡报告
转型期从 至

委员会备案号码：001-39010 
dynatrace公司。
（注册人按照其章程指定的准确名称） 
特拉华州47-2386428
（国家或其他管辖区的
公司成立或组织）		（联邦税号
唯一识别号码）
1601 Trapelo Road, Suite 116
Waltham,马萨诸塞州02451
，（主要行政办公地址）(邮政编码)
注册人的电话号码，包括区号： (781) 530-1000

不适用
（前名称、地址及财政年度，如果自上次报告以来有更改）
根据证券法案第12(b)条款登记的证券:
每一类的名称交易
符号:		在其上注册的交易所的名称
普通股，每股面值为0.001美元。DT请使用moomoo账号登录查看New York Stock Exchange

请在本公司于1934年证券交易法规定的12个月内（或本公司被要求提交此类报告的较短期间内）提交的所有根据1934年证券交易法第13节或15(d)节要求提交的报告中进行勾选，并且自起再过去的90天内一直受到此类提交要求的影响。 Yes  ☒否☐

请用复选标记表示，登记者是否在过去12个月内（或登记者必须提交此类文件的较短期限内）根据《S-t条例》第405条规定提交了规定要提交的每个交互式数据文件。Yes  ☒无☐

​
大型加速报告人☒加速文件申报人☐
非加速文件提交人☐更小的报告公司☐
新兴成长公司☐

如果是新兴成长型公司，请在方框内打勾，以表示注册申请人已选择不使用根据《证券交易法》第13(a)条规定提供的任何新的或修订后的财务会计准则的延期过渡期。☐

请打勾以指示注册人是否是外壳公司（如交易所法规定12b-2中所定义）。 是☐没有☒

该注册人有 298,484,021 截至2024年11月5日，普通股份股数为


有关前瞻性声明之特别说明

本季度10-Q表格中包含根据1995年《私人证券诉讼改革法案》的某些"前瞻性声明"，包括以下声明：
•我们未来的财务表现，包括我们对推动未来表现的关键因素的预期，我们的营业收入，年度重复收入，毛利润或毛利率，营业费用，现金流生成能力，以及帐单/收入组成。;
•我们在当前宏观经济环境中的导航能力；
•预期我们业务和所在市场的趋势;
•我们有能力预测市场需求，并成功开发新的和改进的解决方案来满足这些需求；
•科技的发展影响着我们的产品、平台和市场，包括我们继续发展技术能力的计划;
•我们计划继续投资研发，推动创新，以满足客户的需求，并扩大我们的客户群。
•我们能够维持和扩大我们的客户群和合作伙伴生态系统；
•我们对不断演变的竞争环境的期望；
•我们计划投资于未来的增长机会，我们期望这将推动长期价值；
•我们能够卖出我们的产品并进行国际扩张;
•我们招聘和留住必要的合格员工来发展业务和扩大业务的能力; 和
•我们有能力充分保护我们的知识产权。
这些前瞻性声明包括但不限于计划、目标、期望和意图以及本季度报告中包含的其他非历史事实的声明，并且被词语"将会"、"期望"、"预计"、"意图"、"计划"、"相信"、"寻求"、"估计"或类似含义的词语所识别。这些前瞻性声明反映了我们对计划、意图、期望、战略和前景的当前看法，这些看法基于我们目前掌握的信息和做出的假设。尽管我们认为，我们在前述前瞻性声明中反映或暗示的计划、意图、期望、战略和前景是合理的，但我们无法保证这些计划、意图、期望或战略将会实现或达成。此外，实际结果可能会与前瞻性声明中描述的结果有实质性差异，并受到一系列风险和超出我们控制范围的因素的影响，包括但不限于本报告摘要中列出的风险、本季度报告第II部分第1A项《风险因素》中说明的风险，以及我们的其他美国证券交易委员会文件中的风险。我们不承担因新信息、未来事件或其他原因导致本季度报告中的任何前瞻性声明得以更新的义务。



我们业务相关的重要风险摘要

我们的业务受到许多风险和不确定性的影响，您在评估我们的业务时应该注意。请参阅本季度报告中的第II部分第1A项，标题为“风险因素”，以了解我们认为重要的风险讨论。这些风险和不确定性包括但不限于以下内容：
•我们最近一段时间经历了快速的营业收入增长，这可能并不代表我们未来的增长。
•我们季度和年度营运业绩可能会受多种因素影响，这可能会使我们未来的业绩难以预测。
•我们提供的解决方案在市场上的采纳相对较新，可能不会像我们预期的那样增长，这可能会损害我们的业务和前景。
•我们的业务依赖于对可观测性和安防-半导体解决方案的整体需求，因此对这些解决方案的支出减少或整体不利的经济状况可能会对我们的业务、运营结果和财务状况产生负面影响。
•如果我们不能创新，不继续开发并有效营销可以预测并满足客户需求的解决方案，我们的业务、运营结果和财务状况可能会受到影响。
•如果我们的平台和解决方案无法有效地与客户现有或未来的IT基础设施互操作，那么我们的解决方案的安装可能会延迟或取消，这将损害我们的业务。
•如果我们无法获得新客户，或无法保留并扩大现有客户关系，我们的未来收入和营运业绩将受到损害。
•如果未能有效扩展我们的销售和营销能力，可能会损害我们执行业务计划、扩大客户基础，以及实现更广泛市场对我们应用的接受。
•我们面临著极大竞争，可能会不利于我们吸引新客户、留住现有客户并扩展业务。
•如果我们无法与合作伙伴保持成功的关系，或者如果我们的合作伙伴未能履行其职责，我们将受到行销、卖出和分销应用程式和服务的能力受限，我们的业务、营运结果和财务状况可能受到损害。
•安防违规、计算机恶意软件、计算机骇客攻击及其他安防事件或妥协可能损害我们的业务、声誉、品牌和营运结果。
•我们解决方案中真实或被认为存在的错误、失败、缺陷或漏洞可能会对我们的财务业绩和增长前景产生不利影响。
•未能保护和执行我们专有的科技和知识产权可能会严重损害我们的业务、营运结果和财务状况。







1

第一部分. 财务资讯
项目 1。 简明综合财务报表（未经审核）

dynatrace, 公司。
缩表合并资产负债表
（以千为单位，除股份及每股数据外）
2024年9月30日2024年3月31日
（未经审计）
资产
流动资产:
现金及现金等价物$907,177 $778,983 
短期投资97,834 57,891 
应收帐款净额303,341 602,739 
待续佣金，当期106,554 98,935 
预付费用及其他流动资产68,672 66,749 
全部流动资产1,483,578 1,605,297 
长期投资48,312 46,350 
物业及设备，扣除折旧后净值52,649 53,325 
营运租赁权利资产，净额70,957 61,390 
商誉1,337,205 1,335,494 
无形资产，扣除累计摊销31,701 50,995 
递延税款资产，净额177,714 138,836 
逾期佣金，非流动95,187 93,310 
其他资产32,350 24,782 
资产总额$3,329,653 $3,409,779 
负债及股东权益
流动负债：
应付账款$17,298 $21,410 
应计费用，流动208,825 233,675 
营业收入待确认收入，当期806,171 987,953 
营运租赁负债，流动15,606 15,513 
流动负债合计1,047,900 1,258,551 
逾期收入，非流动资产54,878 62,308 
应计费用，非流动16,926 18,404 
营运租赁负债，非流动64,997 54,013 
递延所得税负债996 1,013 
总负债1,185,697 1,394,289 
合同和应付之可能负债（注10）
股东权益:
普通股，$0.001 每股面额为 600,000,000 股份已授权 298,519,163 和 296,962,547 2024年9月30日和2024年3月31日分别发行并流通中的股份数。
299 297 
资本公积额额外增资2,295,796 2,249,349 
累积亏损(116,129)(198,757)
累积其他全面损失(36,010)(35,399)
股东权益总额2,143,956 2,015,490 
总负债及股东权益$3,329,653 $3,409,779 
相关附注是这些基本报表的一个不可或缺的部分。


2

dynatrace, 公司。
综合营业损益汇缩陈述
(未经审核 - 以千为单位，除每股数据外)
截至9月30日的三个月截至9月30日止六个月,
2024202320242023
营业收入:
订阅$399,810 $334,497 $781,386 $650,951 
服务18,319 17,203 35,963 33,635 
营业总收入418,129 351,700 817,349 684,586 
营业成本:
订阅费用55,796 44,792 109,368 87,696 
服务成本17,595 15,675 34,397 31,217 
Goodwill impairment4,393 3,900 8,772 7,798 
总营业成本77,784 64,367 152,537 126,711 
毛利润340,345 287,333 664,812 557,875 
营业费用：
研发费用95,366 74,084 182,944 140,366 
销售和市场推广费用144,224 127,605 289,330 252,722 
总务与行政48,953 44,748 93,931 83,843 
其他无形资产摊销4,776 5,627 9,552 11,387 
营业费用总计293,319 252,064 575,757 488,318 
营业收入47,026 35,269 89,055 69,557 
利息收益，净额12,850 8,509 25,625 15,655 
其他费用，净额(2,038)(3,075)(4,073)(2,823)
税前收入57,838 40,703 110,607 82,389 
所得税支出(13,830)(4,894)(27,979)(8,392)
净利润$44,008 $35,809 $82,628 $73,997 
每股净利润：
基础
$0.15 $0.12 $0.28 $0.25 
稀释
$0.15 $0.12 $0.27 $0.25 
加权平均股本数:
基础
298,089 293,654 297,736 292,504 
稀释
301,373 297,794 301,714 297,492 
随附说明是这些简明合并财务报表的一部分。


3

/s/ Nicole Fitzpatrick
综合收益简明合并报表
(未经审计 - 千元)
截至9月30日的三个月截至9月30日的六个月
2024202320242023
净利润$44,008 $35,809 $82,628 $73,997 
其他综合损失
外币翻译调整(1,055)(474)(1,277)(1,891)
未实现的可供出售投资增值，扣除税款后766 — 666 — 
其他全面损失总额(289)(474)(611)(1,891)
综合收益$43,719 $35,335 $82,017 $72,106 
随附说明是这些简明合并财务报表的一部分。




4

DYNATRACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited - In thousands)
Three Months Ended September 30, 2024
Common SharesAdditional 
Paid-In Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive
Loss		Shareholders' Equity
SharesAmount
Balance, June 30, 2024298,181 $298 $2,263,195 $(160,137)$(35,721)$2,067,635 
Other comprehensive loss— — — — (289)(289)
Restricted stock units vested1,049 1 (1)— — — 
Exercise of stock options198 1 4,557 — — 4,558 
Share-based compensation— — 71,703 — — 71,703 
Shares withheld for employee taxes(74)— (3,660)— — (3,660)
Repurchases of common stock(835)(1)(39,998)— — (39,999)
Net income— — — 44,008 — 44,008 
Balance, September 30, 2024298,519 $299 $2,295,796 $(116,129)$(36,010)$2,143,956 
Three Months Ended September 30, 2023
Common SharesAdditional 
Paid-In Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive
Loss
Shareholders’ Equity
SharesAmount
Balance, June 30, 2023293,160 $293 $2,053,086 $(315,201)$(33,246)$1,704,932 
Other comprehensive loss— — — — (474)(474)
Restricted stock units vested959 1 (1)— — — 
Exercise of stock options175 — 3,429 — — 3,429 
Share-based compensation— — 57,958 — — 57,958 
Net income— — — 35,809 — 35,809 
Balance, September 30, 2023294,294 $294 $2,114,472 $(279,392)$(33,720)$1,801,654 
The accompanying notes are an integral part of these condensed consolidated financial statements.




5

DYNATRACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited - In thousands)
Six Months Ended September 30, 2024
Common SharesAdditional 
Paid-In Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive
Loss		Shareholders' Equity
SharesAmount
Balance, March 31, 2024296,963 $297 $2,249,349 $(198,757)$(35,399)$2,015,490 
Other comprehensive loss— — — — (611)(611)
Restricted stock units vested3,075 3 (3)— — — 
Issuance of common stock related to employee stock purchase plan262— 10,389 — — 10,389 
Exercise of stock options399 1 8,772 — — 8,773 
Share-based compensation— — 129,360 — — 129,360 
Shares withheld for employee taxes(252)— (11,966)— — (11,966)
Repurchases of common stock(1,928)(2)(90,105)— — (90,107)
Net income— — — 82,628 — 82,628 
Balance, September 30, 2024298,519 $299 $2,295,796 $(116,129)$(36,010)$2,143,956 
Six Months Ended September 30, 2023
Common SharesAdditional 
Paid-In Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive
Loss
Shareholders’ Equity
SharesAmount
Balance, March 31, 2023290,411 $290 $1,989,797 $(353,389)$(31,829)$1,604,869 
Other comprehensive loss— — — — (1,891)(1,891)
Restricted stock units vested2,780 3 (3)— — — 
Issuance of common stock related to employee stock purchase plan313 — 9,584 — — 9,584 
Exercise of stock options790 1 16,618 — — 16,619 
Share-based compensation— — 98,476 — — 98,476 
Net income— — — 73,997 — 73,997 
Balance, September 30, 2023294,294 $294 $2,114,472 $(279,392)$(33,720)$1,801,654 
The accompanying notes are an integral part of these condensed consolidated financial statements.


6

DYNATRACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited – In thousands)
Six Months Ended September 30,
20242023
Cash flows from operating activities:
Net income$82,628 $73,997 
Adjustments to reconcile net income to cash provided by operations:
Depreciation
8,635 7,890 
Amortization
19,356 19,207 
Share-based compensation
129,360 98,476 
Deferred income taxes
(39,059)(35,166)
Other
3,133 3,019 
Net change in operating assets and liabilities:
Accounts receivable
300,077 177,689 
Deferred commissions
(7,166)8,978 
Prepaid expenses and other assets
(14,073)(22,909)
Accounts payable and accrued expenses
(30,479)(33,246)
Operating leases, net
1,465 1,333 
Deferred revenue
(199,486)(128,488)
Net cash provided by operating activities
254,391 170,780 
Cash flows from investing activities:
Purchase of property and equipment
(6,871)(13,017)
Acquisition of a business, net of cash acquired(100)(32,391)
Purchases of investments(80,024)— 
Proceeds from sales and maturities of investments40,375 — 
Net cash used in investing activities
(46,620)(45,408)
Cash flows from financing activities:
Payments of deferred consideration related to capitalized software additions(1,656)— 
Proceeds from employee stock purchase plan
10,389 9,584 
Proceeds from exercise of stock options8,773 16,619 
Repurchases of common stock
(90,107)— 
Taxes paid related to net share settlement of equity awards(11,966)— 
Net cash (used in) provided by financing activities
(84,567)26,203 
Effect of exchange rates on cash and cash equivalents4,990 (5,399)
Net increase in cash and cash equivalents128,194 146,176 
Cash and cash equivalents, beginning of period778,983 555,348 
Cash and cash equivalents, end of period$907,177 $701,524 
Supplemental cash flow data:
Cash paid for interest$365 $420 
Cash paid for tax, net$55,452 $41,804 
The accompanying notes are an integral part of these condensed consolidated financial statements.


7

DYNATRACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.    Description of the Business
Business
Dynatrace, Inc. (“Dynatrace”, or the “Company”) offers the only end-to-end platform that combines broad and deep observability and continuous runtime application security with Davis® hypermodal artificial intelligence (“AI”) to provide answers and intelligent automation from data at an enormous scale. The Company’s comprehensive solutions help IT, development, security, and business operations teams at global organizations modernize and automate cloud operations, deliver software faster and more securely, and provide significantly improved digital experiences.
Fiscal year
The Company’s fiscal year ends on March 31. References to fiscal 2025, for example, refer to the fiscal year ending March 31, 2025.
2.    Significant Accounting Policies
Basis of presentation and consolidation
The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. All intercompany balances and transactions have been eliminated in the accompanying condensed consolidated financial statements.
Unaudited interim consolidated financial information
The accompanying interim condensed consolidated balance sheet as of September 30, 2024 and the interim condensed consolidated statements of operations, statements of comprehensive income, and statements of shareholders’ equity for the three and six months ended September 30, 2024 and 2023, statements of cash flows for the six months ended September 30, 2024 and 2023, and the related disclosures are unaudited. In management’s opinion, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all normal and recurring adjustments necessary for the fair presentation of the Company’s financial position as of September 30, 2024, its results of operations for the three and six months ended September 30, 2024 and 2023, and its cash flows for the six months ended September 30, 2024 and 2023 are in accordance with U.S. GAAP. The results for the three and six months ended September 30, 2024 are not necessarily indicative of the results to be expected for the full fiscal year or any other interim period.
These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2024 (the “Annual Report”).
Use of estimates
The preparation of unaudited condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the condensed consolidated financial statements and accompanying notes. Management evaluates such estimates and assumptions for continued reasonableness. In particular, the Company makes estimates with respect to the stand-alone selling price for each distinct performance obligation in customer contracts with multiple performance obligations, the allowance for credit losses, the fair value of assets acquired and liabilities assumed in business combinations, the valuation of long-lived assets, the period of benefit for deferred commissions and material rights, income taxes, equity-based compensation expense, and the determination of the incremental borrowing rate used for operating lease liabilities, among other things. Management bases these estimates on historical experiences and on various other assumptions that the Company believes are reasonable. Actual results could differ from those estimates.
Significant accounting policies
The Company’s significant accounting policies are discussed in Note 2, Significant Accounting Policies, to the audited consolidated financial statements in the Company’s Annual Report. There have been no changes to the Company’s significant accounting policies described in the Company’s Annual Report that have had a material impact on its condensed consolidated financial statements and related notes.


8

Recently issued accounting pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and application of all segment disclosure requirement to entities with a single reportable segment. ASU 2023-07 is effective for the Company’s annual periods beginning fiscal 2025 and interim periods beginning in the first quarter of fiscal 2026. The Company is currently evaluating the impact ASU 2023-07 will have on its financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in the income tax rate reconciliation table and disaggregates the income taxes paid by jurisdiction. ASU 2023-09 will be effective for annual periods beginning after December 15, 2024, which will be the Company’s fiscal 2026. The Company is currently evaluating the impact of ASU 2023-09 on its financial statement disclosures.
3.    Revenue Recognition
Disaggregation of revenue
The following table is a summary of the Company’s total revenue by geographic region (in thousands, except percentages):
Three Months Ended September 30,Six Months Ended September 30,
2024202320242023
Amount%Amount%Amount%Amount%
North America$253,259 61 %$208,968 59 %$493,695 60 %$407,505 59 %
Europe, Middle East and Africa102,135 24 %87,764 25 %200,126 25 %170,913 25 %
Asia Pacific37,654 9 %31,189 9 %73,927 9 %60,997 9 %
Latin America25,081 6 %23,779 7 %49,601 6 %45,171 7 %
Total revenue$418,129 $351,700 $817,349 $684,586 
For the three and six months ended September 30, 2024 and 2023, the United States was the only country that represented more than 10% of the Company’s revenue, constituting $240.2 million and 57% and $197.8 million and 56% of total revenue during the three months ended September 30, 2024 and 2023, respectively, and $468.1 million and 57% and $385.8 million and 56% of total revenue during the six months ended September 30, 2024 and 2023, respectively.
Revenue recognized during the three months ended September 30, 2024 and 2023, which was included in the deferred revenue balance at the beginning of each respective period, was $369.1 million and $305.4 million, respectively. Revenue recognized during the six months ended September 30, 2024 and 2023, which was included in the deferred revenue balance at the beginning of each respective period, was $659.0 million and $532.9 million, respectively.
Remaining performance obligations
As of September 30, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $2,398.8 million, which consists of both billed consideration in the amount of $861.0 million and unbilled consideration in the amount of $1,537.7 million that the Company expects to recognize as subscription and service revenue. The Company expects to recognize 55% of the total remaining performance obligations as revenue over the next 12 months and the remainder thereafter.
Contract assets
As of September 30, 2024 and March 31, 2024, contract assets of $4.1 million and $5.2 million, respectively, were included in accounts receivable, net, on the Company’s condensed consolidated balance sheets.
4.     Business Combinations
Rookout, Ltd.
On August 31, 2023, the Company acquired 100% of the outstanding equity of Rookout, Ltd. (“Rookout”). Rookout is a provider of enterprise-ready and privacy-aware solutions that enable developers to troubleshoot and debug actively running code in Kubernetes-hosted cloud-native applications. This acquisition expanded the Company’s unified observability and security platform from the addition of Rookout’s technology and experienced team. The purchase consideration of Rookout was $33.4 million, after considering certain adjustments, and was paid from cash on hand.


9

The fair value of the purchase price was allocated to the identifiable assets acquired and liabilities assumed as of the acquisition date, with the excess recorded to goodwill. The Company acquired $6.0 million of net assets, including $7.8 million of intangible assets, resulting in goodwill of $27.4 million. The fair value of certain acquired assets and assumed liabilities was finalized during the three months ended September 30, 2024.
Goodwill is primarily attributable to expected synergies and acquired skilled workforce. The goodwill was allocated to the Company’s one reporting unit. The Company identified developed technology as the sole acquired intangible asset. The estimated fair value of the developed technology was $7.8 million, which was based on a valuation using the income approach. The estimated useful life of the developed technology is seven years. The acquired goodwill and intangible asset were not deductible for tax purposes.
Runecast Solutions Limited
On March 1, 2024, the Company acquired a 100% equity interest in Runecast Solutions Limited (“Runecast”). Runecast is a provider of software solutions that provide insights for security compliance, vulnerability assessment, and configuration management for complex, on-premises, hybrid and multi-cloud IT environments. This acquisition expanded the Company’s unified observability and security platform from the addition of Runecast’s technology and experienced team.
The preliminary purchase consideration consisted of $26.1 million cash paid at closing and $2.3 million in deferred cash payments. The deferred cash payments are being held by the Company to satisfy indemnification obligations and post-closing purchase price adjustments payable within 15 months after the acquisition date. During the six months ended September 30, 2024 the Company paid $0.1 million for a post-closing purchase price adjustment.
In connection with the acquisition of Runecast, $9.0 million of restricted stock awards (“RSAs”) will be issued to the previous owners subject to continuing employment and certain indemnification clauses. For the three and six months ended September 30, 2024, the Company recognized $0.9 million and $1.8 million of share-based compensation expense for the RSAs, respectively.
The fair value of the purchase price was allocated to the identifiable assets acquired and assumed acquired as of the acquisition date, with the excess recorded to goodwill. The Company acquired $3.2 million of net assets, including $7.5 million of intangible assets, resulting in goodwill of $25.2 million. The preliminary fair value of assets acquired and liabilities assumed may change as additional information is received during the measurement period.
Goodwill is primarily attributable to expected synergies and acquired skilled workforce. The goodwill was allocated to the Company’s one reporting unit. The Company identified developed technology and customer relationships as the acquired intangible assets. The estimated fair value of the developed technology and customer relationships was $7.3 million and $0.2 million, respectively, which was based on a valuation using the income approach. The estimated useful lives of the developed technology and customer relationships is seven years and four years, respectively. The acquired goodwill and intangible assets were not deductible for tax purposes.
5.     Investments and Fair Value Measurements
The following table summarizes the amortized cost, unrealized gains and losses, and fair value of the Company’s available-for-sale investments, including those securities classified within “Cash and cash equivalents” in the condensed consolidated balance sheets (in thousands):
September 30, 2024
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
U.S. treasury securities$120,413 $527 $(19)$120,921 
Corporate debt securities14,404 130 (1)$14,533 
Commercial paper5,892 11 — 5,903 
U.S. government agency securities5,862 3 (2)5,863 
Total$146,571 $671 $(22)$147,220 
March 31, 2024
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
U.S. treasury securities$149,978 $— $(229)$149,749 



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The Company regularly reviews the securities in an unrealized loss position and evaluates the current expected credit loss by considering factors such as credit ratings, issuer-specific factors, current economic conditions, and reasonable and supportable forecasts. The Company does not intend to sell these investments nor is it more likely than not that the Company would be required to sell the security before its anticipated maturity. Based on the evaluation of available evidence, the Company does not believe any unrealized losses on its investments represent credit losses as of September 30, 2024 and March 31, 2024.
The fair values of available-for-sale investments, excluding those securities classified within “Cash and cash equivalents” in the condensed consolidated balance sheets, by remaining contractual maturity are as follows (in thousands):
September 30, 2024March 31, 2024
Due within one year$97,834 $57,891 
Due in one year through five years47,938 46,248 
   Total$145,772 $104,139 
Effective January 1, 2024, the Company offers a non-qualified deferred compensation plan to eligible U.S. employees. The Company held $0.4 million and $0.1 million of mutual funds that are associated with this plan and were classified as restricted trading securities as of September 30, 2024 and March 31, 2024, respectively. These securities are not included in the tables above but are included as investments in the condensed consolidated balance sheets.
The following tables present the Company’s financial assets that have been measured at fair value on a recurring basis as of September 30, 2024 and March 31, 2024, and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands):
September 30, 2024
Level 1Level 2Level 3Total
Cash equivalents:
Money market funds$625,010 $— $— $625,010 
U.S. treasury securities— 1,448 — 1,448 
Investments:
Mutual funds374 — — 374 
U.S. treasury securities— 119,473 — 119,473 
Corporate debt securities— 14,533 — 14,533 
Commercial paper— 5,903 — 5,903 
U.S. agency securities— 5,863 — 5,863 
Total financial assets$625,384 $147,220 $— $772,604 
March 31, 2024
Level 1Level 2Level 3Total
Cash equivalents:
Money market funds$477,102 $— $— $477,102 
U.S. treasury securities— 45,610 — 45,610 
Investments:
Mutual funds102 — — 102 
U.S. treasury securities— 104,139 — 104,139 
Total financial assets$477,204 $149,749 $— $626,953 
The Company recorded interest income from its cash, cash equivalents, and investments of $13.2 million and $9.0 million for the three months ended September 30, 2024 and 2023, respectively, and $26.2 million and $16.5 million for the six months ended September 30, 2024 and 2023, respectively.


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6.    Goodwill and Other Intangible Assets, Net
Changes in the carrying amount of goodwill for the six months ended September 30, 2024 consists of the following (in thousands):
September 30, 2024
Balance, beginning of period$1,335,494 
Foreign currency impact1,711 
Balance, end of period$1,337,205 
Intangible assets, net, excluding goodwill, consists of the following (in thousands):
Weighted
Average 
Useful Life
(in months)
September 30, 2024March 31, 2024
Capitalized software103$218,754 $218,529 
Customer relationships120351,756 351,756 
Trademarks and tradenames12055,003 55,003 
Total intangible assets625,513 625,288 
Less: accumulated amortization(593,812)(574,293)
Total other intangible assets, net$31,701 $50,995 
Amortization of intangible assets totaled $9.7 million and $9.5 million for the three months ended September 30, 2024 and 2023, respectively, and $19.4 million and $19.2 million for the six months ended September 30, 2024 and 2023, respectively.
7.    Income Taxes
The Company computes its interim provision for income taxes by applying the estimated annual effective tax rate to income from operations and adjusts the provision for discrete tax items occurring in the period. The Company’s effective tax rate for the three months ended September 30, 2024 was 23.9% compared to 12.0% for the three months ended September 30, 2023. The Company’s effective tax rate for the six months ended September 30, 2024 was 25.3% compared to 10.2% for the six months ended September 30, 2023. The increase in the effective tax rate for both the three months ended September 30, 2024 and the six months ended September 30, 2024 was primarily due to a decrease in share-based compensation tax benefits.
8.    Long-term Debt
On December 2, 2022, the Company entered into a Credit Agreement for a senior secured revolving credit facility (as amended to date, the “Credit Facility”) in an aggregate amount of $400.0 million. The Credit Facility has sublimits for swing line loans up to $30.0 million and for the issuance of standby letters of credit in a face amount up to $45.0 million. The Credit Facility will mature on December 2, 2027. As of September 30, 2024 and March 31, 2024, there were no amounts outstanding under the Credit Facility. There were $0.8 million of letters of credit issued as of September 30, 2024 and March 31, 2024. The Company had $399.2 million of availability under the Credit Facility as of September 30, 2024 and March 31, 2024.
Borrowings under the Credit Facility are available in U.S. dollars, Euros, Pounds Sterling and Canadian Dollars, with a sublimit of $100.0 million for non-U.S. dollar-denominated borrowings. Borrowings under the Credit Facility currently bear interest at (i) the Term Secured Overnight Financing Rate plus 0.10%, (ii) the Adjusted Euro Interbank Offer Rate, (iii) the Canadian Overnight Repo Rate Average, (iv) the Base Rate, as defined per the Credit Facility, or (v) the Sterling Overnight Index Average, in each case plus an applicable margin as defined per the Credit Agreement. Interest payments are due quarterly, or more frequently, based on the terms of the Credit Facility.
The Company incurs fees with respect to the Credit Facility, including (i) a commitment fee ranging from 0.175% to 0.35% per annum, dependent on the Company’s leverage ratio, as defined per the Credit Facility, of the unused commitment under the Credit Facility, (ii) a fronting fee of 0.125% per annum of the face amount of each letter of credit, (iii) a participation fee equal to the applicable margin, as defined per the Credit Facility, applied to the daily average face amount of letters of credit, and (iv) customary administrative fees.
Debt issuance costs of $1.9 million were incurred in connection with the Credit Facility. The debt issuance costs are included within “Other assets” in the condensed consolidated balance sheets and are being amortized into interest expense over the contractual term of the Credit Facility. There were $1.2 million and $1.4 million of unamortized debt issuance costs as of September 30, 2024 and March 31, 2024, respectively.


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Pursuant to the Credit Facility, obligations owed under the Credit Facility are secured by a first priority security interest on substantially all assets of Dynatrace LLC and other wholly owned subsidiaries of the Company, including a pledge of the capital stock and other equity interests of certain subsidiaries. Under certain circumstances, the guarantees may be released without action by, or consent of, the administrative agent of the Credit Facility. The Credit Facility contains customary affirmative and negative covenants, including financial covenants that require the Company to maintain specified financial ratios. At September 30, 2024, the Company was in compliance with all applicable covenants.
Interest expense
Interest expense, including amortization of debt issuance costs and original issuance discount, was $0.4 million for the three months ended September 30, 2024 and 2023, and $0.5 million and $0.8 million for the six months ended September 30, 2024 and 2023, respectively.
9.    Leases
The Company leases office space under non-cancelable operating leases which expire at various dates from fiscal 2025 to 2035. As of September 30, 2024, the weighted average remaining lease term was 6.2 years and the weighted average discount rate was 4.5%. The Company did not have any finance leases as of September 30, 2024.
The following table presents information about leases on the condensed consolidated statements of operations (in thousands):
Three Months Ended September 30,Six Months Ended September 30,

2024202320242023
Operating lease expense$4,000 $3,831 $8,132 $7,600 
Short-term lease expense$726 $507 $1,327 $1,006 
Variable lease expense $324 $344 $811 $732 
The following table presents supplemental cash flow information about the Company’s leases (in thousands):
Six Months Ended September 30,
20242023
Cash paid for amounts included in the measurement of lease liabilities$10,376 $9,090 
Operating lease assets obtained in exchange for new operating lease liabilities (1)
$17,903 $9,387 
_________________
(1) Includes the impact of new leases as well as remeasurements and modifications of existing leases.
As of September 30, 2024, remaining maturities of lease liabilities were as follows (in thousands):
Fiscal Years Ending March 31,Amount
2025$9,527 
202617,585 
202716,164 
202811,461 
20299,311 
Thereafter27,579 
Total operating lease payments 91,627 
Less: imputed interest(11,024)
Total operating lease liabilities$80,603 

As of September 30, 2024, the Company had commitments of $86.1 million for an operating lease that has not yet commenced, and therefore is not included in the right-of-use assets or operating lease liabilities. This operating lease is expected to commence during fiscal 2026 with a lease term of 10 years.


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10.    Commitments and Contingencies
Legal matters
The Company is, from time to time, party to legal proceedings and subject to claims in the ordinary course of business. Although the outcome of legal proceedings and claims cannot be predicted with certainty, the Company currently believes that the resolution of any such matters will not have a material adverse effect on its business, operating results, financial condition, or cash flows.
11.    Shareholders’ Equity
Share Repurchase Program
In May 2024, the Company announced a share repurchase program for up to $500 million of common stock. The share repurchase program does not have a time limit, does not obligate the Company to acquire a specific number of shares, and may be suspended, modified, or terminated at any time, without prior notice. Repurchases may be made from time to time on the open market, pursuant to 10b5-1 trading plans, or by other legally permissible means.
For the three and six months ended September 30, 2024, the Company repurchased and retired 0.8 million and 1.9 million shares of its common stock for a total of $40.0 million and $90.1 million, respectively. As of September 30, 2024, $409.9 million remained available for future repurchases.
12.    Share-based Compensation
The following table summarizes the components of total share-based compensation expense included in the condensed consolidated financial statements for each period presented (in thousands):
Three Months Ended September 30,Six Months Ended September 30,
2024202320242023
Cost of revenue$9,714 $7,197 $17,444 $12,685 
Research and development26,607 18,177 48,187 31,441 
Sales and marketing20,750 18,877 36,772 32,876 
General and administrative14,632 13,707 26,957 21,474 
Total share-based compensation$71,703 $57,958 $129,360 $98,476 
Amended and Restated 2019 Equity Incentive Plan
In July 2019, the Company’s board of directors (the “Board”), upon the recommendation of the compensation committee of the Board, adopted the 2019 Equity Incentive Plan (the “2019 Plan”), which was subsequently approved by the Company’s stockholders and was later amended and restated by the Board in January 2021.
The Company initially reserved 52,000,000 shares of common stock for the issuance of awards under the 2019 Plan. The 2019 Plan provides that the number of shares reserved and available for issuance under the plan automatically increases each April 1 by 4% of the outstanding number of shares of the Company’s common stock on the immediately preceding March 31 or such lesser number determined by the compensation committee. This number is subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization. As of September 30, 2024, 56,826,675 shares of common stock were available for future issuance under the 2019 Plan.


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Stock options
The following table summarizes activity for stock options during the six months ended September 30, 2024:
Number of Options
Weighted Average
Exercise Price
Weighted Average Remaining Contractual Term Aggregate Intrinsic Value
(in thousands)(per share)(years)(in thousands)
Balance, March 31, 20243,063 $22.56 5.6$73,903 
Exercised(399)21.97 
Forfeited or expired(49)41.99 
Balance, September 30, 20242,615 $22.28 5.1$81,608 
Options vested and expected to vest at September 30, 20242,615 $22.28 5.1$81,608 
Options vested and exercisable at September 30, 20242,597 $22.10 5.1$81,525 
As of September 30, 2024, the total unrecognized compensation expense related to non-vested stock options was $0.3 million and is expected to be recognized over a weighted average period of 0.5 years.
Restricted shares and units
The following table provides a summary of the changes in the number of RSAs and restricted stock units (“RSUs”) for the six months ended September 30, 2024:
Number of
 RSAs
Weighted Average
Grant Date Fair Value
Number of RSUs
Weighted Average
Grant Date Fair Value
(in thousands)(per share)(in thousands)(per share)
Balance, March 31, 2024142 $49.05 9,852 $48.17 
Granted— — 5,872 47.75 
Vested— — (3,075)48.34 
Forfeited— — (727)48.30 
Balance, September 30, 2024142 $49.05 11,922 $47.92 
RSUs outstanding as of September 30, 2024 were comprised of 10.7 million RSUs with only service conditions and 1.2 million RSUs with both service and performance or market-based conditions (“PSUs”).
During the six months ended September 30, 2024, the Company granted PSUs that contain financial performance conditions (the “Financial PSUs”) and PSUs based on relative total stockholder return performance (the “rTSR PSUs”). Both the Financial PSUs and rTSR PSUs are not earned if the applicable threshold percentage of the specific metric is not achieved. The maximum number of shares that may be earned is 200% of the target award. The PSUs are also subject to time-based vesting and are contingent upon the employee remaining employed by the Company or one of its subsidiaries through the applicable vesting date.
The Financial PSUs generally vest 33% one year after the grant date and the remaining 67% vest ratably on a quarterly basis over the following two years. The number of shares that may be earned pursuant to the Financial PSUs is based on specific Company metrics related to the Company’s fiscal year ending March 31, 2025.
The rTSR PSUs generally vest 33% annually after the grant date. The number of shares that may be earned pursuant to the rTSR PSUs is based on the Company’s stock price performance relative to companies that are the constituents of the Russell 3000 index over performance periods of one, two, and three fiscal years that began on April 1, 2024.
As of September 30, 2024, the total unrecognized compensation expense related to unvested RSAs was $6.8 million and is to be recognized over a weighted average period of 2.4 years. As of September 30, 2024, the total unrecognized compensation expense related to unvested RSUs was $493.6 million and is expected to be recognized over a weighted average period of 2.2 years.


15

Employee Stock Purchase Plan
In July 2019, the Board adopted, and the Company’s stockholders approved, the 2019 Employee Stock Purchase Plan (“ESPP”). The Company offers, sells and issues shares of common stock under this ESPP from time to time based on various factors and conditions, although the Company is under no obligation to sell any shares under this ESPP. The ESPP provides for six-month offering periods and each offering period consists of six-month purchase periods. On each purchase date, eligible employees purchase shares of the Company’s common stock at a price per share equal to 85% of the lesser of (1) the fair market value of the Company’s common stock on the offering date or (2) the fair market value of the Company’s common stock on the purchase date. For the six months ended September 30, 2024, 261,829 shares of common stock were purchased under the ESPP. As of September 30, 2024, 18,572,583 shares of common stock were available for future issuance under the ESPP.
As of September 30, 2024, there was approximately $1.1 million of unrecognized share-based compensation related to the ESPP that is expected to be recognized over the remaining term of the current offering period.
13.    Net Income Per Share
The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share data):
Three Months Ended September 30,Six Months Ended September 30,
2024202320242023
Numerator:
Net income$44,008 $35,809 $82,628 $73,997 
Denominator:
Weighted average shares outstanding, basic298,089 293,654 297,736 292,504 
Dilutive effect of share-based awards3,284 4,140 3,978 4,988 
Weighted average shares outstanding, diluted301,373 297,794 301,714 297,492 
Net income per share, basic$0.15 $0.12 $0.28 $0.25 
Net income per share, diluted$0.15 $0.12 $0.27 $0.25 
The effect of certain common share equivalents were excluded from the computation of weighted-average diluted shares outstanding for the three and six months ended September 30, 2024 and 2023 as inclusion would have resulted in anti-dilution. A summary of these weighted-average anti-dilutive common share equivalents is provided in the table below (in thousands):
Three Months Ended September 30,Six Months Ended September 30,
2024202320242023
Stock options 101 144 108 152 
Unvested RSAs and RSUs2,897 4,304 644 2,926 
Shares committed under ESPP— — 1 — 
14.    Geographic Information
Revenue
Revenues by geography are based on legal jurisdiction. See Note 3, Revenue Recognition, for a disaggregation of revenue by geographic region.


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Long-lived assets, net
The following table presents the Company’s net long-lived assets, which consists of property and equipment, net, and operating lease right-of-use asset, net, by geographic region for the periods presented (in thousands):
September 30, 2024March 31, 2024
North America$37,134 $35,339 
Europe, Middle East and Africa81,540 73,892 
Asia Pacific4,561 5,041 
Latin America371 443 
Total long-lived assets, net$123,606 $114,715 


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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. We prepare our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United State of America (“U.S. GAAP”) and applicable rules and regulation of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business. In particular, we encourage you to review the risks and uncertainties described in the section titled “Risk Factors” included elsewhere in this Form 10-Q and in our Form 10-K for the fiscal year ended March 31, 2024 (the “Annual Report”). These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this report or implied by past results and trends. Our fiscal year ends on March 31. Our historical results are not necessarily indicative of the results that may be expected for any period in the future, and our interim results are not necessarily indicative of the results we expect for the full fiscal year or any other period.
Overview
Dynatrace offers the only end-to-end unified platform that combines broad and deep observability and continuous runtime application security with advanced Davis® hypermodal AI to provide answers and intelligent automation from data at an enormous scale. Our comprehensive solutions help IT, development, security, and business operations teams at global organizations modernize and automate cloud operations, deliver software faster and more securely, and provide significantly improved digital experiences.
Many of the world’s largest organizations trust the Dynatrace platform to accelerate digital transformation. We have been seeing increased demand for large, strategic deals in which customers’ business criteria drive broader technology architecture decisions. At the same time, workloads continue migrating to the cloud as customers seek the agility, flexibility, and rapid technology advancements that can prove elusive in on-premises data center environments. AI has been sweeping across industries and exploding in relevancy and criticality as organizations desire significant advancements in innovation, productivity, and performance. The escalating cybersecurity threat landscape is also increasing the need for more sophisticated protection. The confluence of these megatrends in dynamic hybrid, multicloud environments brings a scale and frequency of change that is exponentially greater than that of just a few years ago. As enterprises and public sector institutions embrace modern cloud environments as the underlying foundation of their business and digital transformations, we believe that the scale, growing complexity, and dynamic nature of these environments are rapidly making solutions such as the Dynatrace platform mandatory instead of optional for many organizations.
We take Dynatrace to market through a combination of our global direct sales team and a network of partners, including global system integrators (“GSIs”), cloud providers, resellers and technology alliance partners. We target the largest 15,000 global enterprise accounts, which generally have annual revenues in excess of $1 billion, which we believe see more value from our integrated full-stack platform.
We generate revenue primarily by selling subscriptions, which we define as Software-as-a-Service (“SaaS”) agreements, term-based licenses, perpetual licenses, and maintenance and support agreements. The majority of our customers deploy Dynatrace as a SaaS solution to get the latest Dynatrace features and updates with greatly reduced administrative effort. We also provide options to deploy our platform in customer-provisioned infrastructure.
Under our Dynatrace Platform Subscription ("DPS”) model, which provides customers with more modern pricing with flexibility and transparency, a customer makes a minimum annual spend commitment at the platform level and then consumes that commitment based on actual usage and a straightforward rate card. Any platform capability can be used in any quantity at any time based on the customer’s evolving needs.
The Dynatrace platform has been commercially available since 2016 and is the primary offering we sell.
Second-Quarter 2025 Financial Highlights
Our financial highlights for the three months ended September 30, 2024 were:
•Our annual recurring revenue (“ARR”) was $1,617 million as of September 30, 2024, which reflected 20% growth year-over-year;
•Total revenue and subscription revenue was $418 million and $400 million, respectively;
•We delivered GAAP income from operations of $47 million and non-GAAP income from operations(1) of $131 million; and
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•Our net cash provided by operating activities and free cash flow(1) was $24 million and $20 million, respectively.
(1) Non-GAAP financial measure. For additional information, please see the “Key Metrics” section below for applicable definitions and the “Non-GAAP Financial Results” section below for a reconciliation to the most directly comparable GAAP financial measure.
We believe in a disciplined and balanced approach to operating our business. We plan to continue driving innovation to meet customers’ needs and grow our customer base. We also plan to invest in future growth opportunities that we expect will drive long-term value, while leveraging our global partner ecosystem, optimizing costs, and improving efficiency and profitability.
We believe this approach is even more important at this time as we navigate the current macroeconomic environment, which can include geopolitical considerations, fluctuations in credit, equity, and foreign currency markets, changes in inflation, interest rates, consumer confidence and spending, and other factors that may affect the buying patterns of our customers and prospective customers, including the size of transactions and length of sales cycles. In the ongoing dynamic macroeconomic landscape, we have seen resiliency in our industry and we remain confident in our ability to execute in this environment. Please see the section titled “Risk Factors” included under Part II, Item 1A of this Quarterly Report for further discussion of the possible impact of macroeconomic conditions on our business and regarding fluctuations in our annual and quarterly operating results.
Key Factors Affecting Our Performance
Our historical financial performance has been, and we expect our financial performance in the future to be, driven by our ability to:
•Extend our technology and market leadership position. We intend to maintain our position as the market-leading unified observability and security platform through increased investment in research and development, and innovation. We plan to expand the functionality of our end-to-end Dynatrace platform and invest in capabilities that address new market opportunities. We also plan to evolve our AI capabilities to drive differentiation. We believe this strategy will enable new growth opportunities and allow us to deliver differentiated high-value outcomes to our customers.
•Expand and strengthen our relationships with existing customers. We plan to establish new and deeper relationships within our existing customers’ organizations (notably, development teams) and expand the breadth of our platform capabilities to provide for expansion opportunities. In addition, we believe the ease of implementation of Dynatrace provides us with the opportunity to expand adoption within our existing enterprise customers, across new customer applications, and into additional business units or divisions. While still in its early stages, we also believe that our DPS licensing model will drive further expansion opportunities for customers that prefer the flexibility and predictability of pricing under that model.
•Grow our customer base. We intend to drive new customer growth through a focus on the largest 15,000 global enterprise accounts, which generally have annual revenues in excess of $1 billion and more complex IT ecosystems and cloud environments. In particular, we are increasing the focus of our sales force on the largest 500 global companies and strategic enterprise accounts. In addition, we plan to expand our reach internationally to what we believe are large, mostly untapped markets for our company, while leveraging our sector specialization globally.
•Leverage our strategic partner ecosystem. We intend to invest in our strategic partner ecosystem, with a particular emphasis on building cloud-focused, loyal and comprehensive partnerships with GSIs and hyperscaler cloud providers. These strategic partners continually work with their customers to help them digitally transform their businesses and reduce cloud complexity. By working more closely with strategic partners, our objective is to participate in digital transformation projects earlier in the purchasing cycle and enable customers to establish more resilient cloud deployments from the start.
Key Metrics
We monitor the following key metrics to help us measure and evaluate the effectiveness of our operations:
As of September 30,
20242023
(in thousands, except percentages)
Total ARR1,616,531 $1,343,530 
Year-over-year increase20 %26 %
Dollar-based net retention rate112 %114 %
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Three Months Ended September 30,Six Months Ended September 30,
2024202320242023
(in thousands)(in thousands)
Non-GAAP income from operations(1)
$130,669 $106,435 $244,919 $198,510 
Free cash flow(1)
20,138 34,127 247,520 157,763 
(1) Non-GAAP financial measure. For additional information, please see the applicable definitions below and the “Non-GAAP Financial Results” section below for a reconciliation to the most directly comparable GAAP financial measure.
ARR: We define ARR as the daily revenue of all subscription agreements that are actively generating revenue as of the last day of the reporting period multiplied by 365. We exclude from our calculation of ARR any revenues derived from month-to-month agreements and/or product usage overage billings.
Dollar-based net retention rate: We define the dollar-based net retention rate as the Dynatrace ARR at the end of a reporting period for the cohort of Dynatrace accounts as of one year prior to the date of calculation, divided by the Dynatrace ARR one year prior to the date of calculation for that same cohort. Our dollar-based net retention rate reflects customer renewals, expansion, contraction and churn, and excludes the benefit of Dynatrace ARR resulting from the conversion of Classic products to the Dynatrace platform. Beginning in fiscal 2023, we began to exclude the headwind associated with the Dynatrace perpetual license ARR given the diminishing impact of perpetual license ARR. We believe that eliminating the perpetual license headwind results in a dollar-based net retention rate metric that better reflects Dynatrace’s ability to expand existing customer relationships. Dollar-based net retention rate is presented on a constant currency basis.
Non-GAAP income from operations: We define non-GAAP income from operations as GAAP income from operations adjusted for the following items: share-based compensation; employer payroll taxes on employee stock transactions; amortization of intangibles; transaction, restructuring and other non-recurring or unusual items that may arise from time to time.
Free cash flow: We define free cash flow as the net cash provided by or used in operating activities less capital expenditures, reflected as purchase of property and equipment and capitalized software additions in our financial statements.
Non-GAAP Financial Results
To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide investors with certain non-GAAP financial measures, including non-GAAP income from operations and free cash flow. We use these non-GAAP financial measures for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons and liquidity. We believe that these non-GAAP financial measures provide useful information about our operating results, enhance the overall understanding of past financial performance, and allow for greater transparency with respect to metrics used by our management in its financial and operational decision-making.
The presentation of the non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Our non-GAAP financial measures may not provide information that is directly comparable to similarly titled metrics provided by other companies.
The tables below provide a reconciliation of our non-GAAP income from operations and free cash flow to their most directly comparable GAAP measure.
Three Months Ended September 30,Six Months Ended September 30,
2024202320242023
(in thousands)(in thousands)
GAAP income from operations$47,026 $35,269 $89,055 $69,557 
Share-based compensation71,703 57,958 129,360 98,476 
Employer payroll taxes on employee stock transactions2,771 2,301 8,180 7,504 
Amortization of intangibles9,169 9,527 18,324 19,185 
Transaction, restructuring, and other— 1,380 — 3,788 
Non-GAAP income from operations$130,669 $106,435 $244,919 $198,510 
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Three Months Ended September 30,Six Months Ended September 30,
2024202320242023
(in thousands)(in thousands)
Net cash provided by operating activities$23,650 $36,877 $254,391 $170,780 
Purchase of property and equipment(3,512)(2,750)(6,871)(13,017)
Capitalized software additions— — — — 
Free cash flow$20,138 $34,127 247,520 157,763 
Key Components of Results of Operations
Revenue
Revenue includes subscriptions and services.
Subscription. Our subscription revenue consists of (i) SaaS agreements, (ii) Dynatrace term-based licenses which are recognized ratably over the contract term, (iii) Dynatrace perpetual licenses that are recognized ratably over the term of the expected optional maintenance renewals, which is generally three years, and (iv) maintenance and support agreements. We typically invoice SaaS subscription fees and term licenses annually in advance and recognize subscription revenue ratably over the term of the applicable agreement, provided that all other revenue recognition criteria have been satisfied. Fees for our Dynatrace perpetual licenses are generally billed up front. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates-Revenue Recognition” included in Part II, Item 7 of our Annual Report for more information.
Service. Service revenue consists of revenue from helping our customers deploy our software in highly complex operational environments and training their personnel. We recognize the revenues associated with these professional services on a time and materials basis as we deliver the services or provide the training. We generally recognize the revenues associated with our services in the period the services are performed, provided that collection of the related receivable is reasonably assured.
Cost of Revenue
Cost of subscription. Cost of subscription revenue includes all direct costs to deliver and support our subscription products, including salaries, benefits, bonuses, share-based compensation and related expenses such as employer taxes, third-party hosting fees related to our cloud services, allocated overhead for depreciation, facilities, and IT, and amortization of internally developed capitalized software technology. We recognize these expenses as they are incurred.
Cost of service. Cost of service revenue includes salaries, benefits, bonuses, share-based compensation and related expenses such as employer taxes, and allocated overhead for depreciation, facilities, and IT. We recognize these expenses as they are incurred.
Amortization of acquired technology. Amortization of acquired technology includes amortization expense for technology acquired in the Thoma Bravo Funds’ acquisition of our company in 2014, business combinations and asset acquisitions. To the extent significant future acquisitions are consummated, we expect that our amortization of acquired technologies may increase due to additional non-cash charges associated with the amortization of intangible assets acquired.
Gross Profit and Gross Margin
Gross profit is revenue less cost of revenue, and gross margin is gross profit as a percentage of revenue. Gross profit has been and will continue to be affected by various factors, including the mix of our subscription and service revenue, the costs associated with third-party cloud-based hosting services for our cloud-based subscriptions, and the extent to which we expand our customer support and services organizations. We expect that our gross margin will fluctuate from period to period depending on the interplay of these various factors.
Operating Expenses
Personnel costs, which consist of salaries, benefits, bonuses, share-based compensation and, with regard to sales and marketing expenses, sales commissions, are the most significant component of our operating expenses. We also incur other non-personnel costs, such as an allocation of our general overhead expenses, including depreciation, facilities, IT, and other costs.
Research and development. Research and development expenses primarily consist of the cost of programming personnel. We focus our research and development efforts on developing new solutions, core technologies, and to further enhance the functionality,
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reliability, performance and flexibility of existing solutions. We believe that our software development teams and our core technologies represent a significant competitive advantage for us and we expect that our research and development expenses will continue to increase in absolute dollars as we invest in research and development headcount to further strengthen and enhance our solutions.
Sales and marketing. Sales and marketing expenses primarily consist of personnel and facility-related costs for our sales, marketing, and business development personnel, commissions earned by our sales personnel, and the cost of marketing and business development programs. We expect that sales and marketing expenses will continue to increase in absolute dollars as we continue to hire additional sales and marketing personnel and invest in marketing programs.
General and administrative. General and administrative expenses primarily consist of the personnel and facility-related costs for our executive, finance, legal, human resources and administrative personnel, and other corporate expenses, including those associated with our ongoing public reporting obligations. We anticipate continuing to incur additional expenses as we continue to invest in the growth of our operations.
Amortization of other intangibles. Amortization of other intangibles primarily consists of amortization of customer relationships and tradenames.
Interest Income, Net
Interest income, net, consists primarily of interest income, primarily from money market funds, bank deposits, debt securities held as investments and certificates of deposits, fees on our Credit Facility (as defined later in this section), and amortization of debt issuance costs.
Other Expense, Net
Other expense, net, consists primarily of foreign currency realized and unrealized gains and losses related to the impact of transactions denominated in a foreign currency, including balances between subsidiaries.
Income Tax Expense
Our income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. We are subject to income taxes in both the United States and numerous foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax expense.
Our income tax rate varies from the U.S. federal statutory rate mainly due to (1) the foreign derived intangibles deduction and, (2) the generation of U.S. foreign tax credits, partially offset by (3) foreign withholding taxes, (4) nondeductible executive compensation, and (5) foreign earnings taxed at rates higher than the U.S. statutory tax rate. We expect this fluctuation in income tax rates, as well as its potential impact on our results of operations, to continue.
Internal Revenue Code (“IRC”) Section 174
For tax years beginning on or after January 1, 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to currently deduct research and development expenses and requires taxpayers to capitalize and amortize them over five years for research activities performed in the United States and 15 years for research activities performed outside the United States pursuant to IRC Section 174. This law change has increased our U.S. federal and state cash taxes and reduced cash flows since fiscal year 2024.
Share-based compensation
The tax effects of the accounting for share-based compensation may significantly impact our effective tax rate from period to period. In periods in which our share price differs from the grant price of the share-based awards vesting or exercised in that period, we will recognize excess tax benefits or deficiencies that will impact our effective tax rate. The amount and value of share-based compensation issued relative to our earnings in a particular period will also affect the magnitude of the impact of share-based compensation on our effective tax rate. These tax effects are dependent on our share price, which we do not control, and a decline in our share price could significantly increase our effective tax rate and adversely affect our financial results.
Pillar Two proposal
Many countries have enacted or are in the process of enacting laws based on the Pillar Two proposal relating to a 15% global minimum tax issued by the Organization for Economic Cooperation and Development (“OECD”). For fiscal year 2025, we expect to meet the Transitional Country-by-Country (CbCR) Safe Harbor rules for most, if not all, the jurisdictions that have adopted the rules.
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Based on the guidance available thus far, we do not expect these provisions to have a material impact on our consolidated financial statements. We will continue to monitor ongoing developments and evaluate any potential impact on future periods.
Results of Operations
The following tables set forth our results of operations for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods.
Comparison of the Three Months Ended September 30, 2024 and 2023
Three Months Ended September 30,
20242023
AmountPercentAmountPercent
(in thousands, except percentages)
Revenue:
Subscription$399,810 96 %$334,497 95 %
Service18,319 4 %17,203 5 %
Total revenue418,129 100 %351,700 100 %
Cost of revenue:
Cost of subscription55,796 14 %44,792 13 %
Cost of service17,595 4 %15,675 4 %
Amortization of acquired technology4,393 1 %3,900 1 %
Total cost of revenue (1)
77,784 19 %64,367 18 %
Gross profit340,345 81 %287,333 82 %
Operating expenses:
Research and development (1)
95,366 23 %74,084 21 %
Sales and marketing (1)
144,224 34 %127,605 36 %
General and administrative (1)
48,953 12 %44,748 13 %
Amortization of other intangibles4,776 1 %5,627 2 %
Total operating expenses293,319 252,064 
Income from operations47,026 11 %35,269 10 %
Interest income, net12,850 8,509 
Other expense, net(2,038)(3,075)
Income before income taxes57,838 40,703 
Income tax expense(13,830)(4,894)
Net income$44,008 $35,809 
(1)  Includes share-based compensation expense as follows:
Three Months Ended September 30,
20242023
(in thousands)
Cost of revenue$9,714 $7,197 
Research and development26,607 18,177 
Sales and marketing20,750 18,877 
General and administrative14,632 13,707 
Total share-based compensation$71,703 $57,958 
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Revenue
Three Months Ended September 30,Change
20242023AmountPercent
(in thousands, except percentages)
Subscription$399,810 $334,497 $65,313 20 %
Service18,319 17,203 1,116 6 %
Total revenue$418,129 $351,700 $66,429 19 %
Subscription
Subscription revenue increased by $65.3 million, or 20%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, primarily due to the growth of the Dynatrace platform by adding new customers combined with existing customers expanding their use of our solutions.
Service
Service revenue increased by $1.1 million, or 6%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The increase was primarily due to timing of delivery of services.
Cost of Revenue
Three Months Ended September 30,Change
20242023AmountPercent
(in thousands, except percentages)
Cost of subscription$55,796 $44,792 $11,004 25 %
Cost of service17,595 15,675 1,920 12 %
Amortization of acquired technology4,393 3,900 493 13 %
Total cost of revenue$77,784 $64,367 $13,417 21 %
Cost of subscription
Cost of subscription increased by $11.0 million, or 25%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was primarily due to increased cloud-based hosting costs of $4.2 million related to our growing cloud-based subscription revenue and increased personnel costs of $5.0 million, inclusive of a $1.8 million increase in share-based compensation, largely due to headcount growth to support our growing customer base.
Cost of service
Cost of service increased by $1.9 million, or 12%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The increase was primarily the result of increased personnel costs of $1.0 million, inclusive of a $0.7 million increase in share-based compensation.
Amortization of acquired technology
Amortization of acquired technology increased by $0.5 million, or 13%, and includes amortization expense for technology acquired in the Thoma Bravo Funds’ acquisition of our company in 2014, business combinations, and asset acquisitions. The increase was driven by the amortization of acquired technology associated with our acquisitions of Rookout, Ltd. in August 2023 and Runecast Solutions Limited in March 2024.
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Gross Profit and Gross Margin
Three Months Ended September 30,Change
20242023AmountPercent
(in thousands, except percentages)
Gross profit:  
Subscription$344,014$289,705$54,309 19 %
Service7241,528(804)(53 %)
Amortization of acquired technology(4,393)(3,900)(493)13 %
Total gross profit$340,345$287,333$53,012 18 %
Gross margin:
Subscription86 %87 %
Service4 %9 %
Amortization of acquired technology(100 %)(100 %)
Total gross margin81 %82 %
Subscription
Subscription gross profit increased by $54.3 million, or 19%, during the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Subscription gross margin decreased from 87% to 86% for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease in gross margin was primarily due to increased cloud-based hosting costs to support the growth of our subscription cloud-based offerings.
Services
Service gross profit decreased by $0.8 million, or 53%, during the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Service gross margin decreased from 9% to 4% for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease in gross profit and gross margin was primarily due to increased personnel costs and share-based compensation expense.
Operating Expenses
Three Months Ended September 30,Change
20242023AmountPercent
(in thousands, except percentages)
Operating expenses:
Research and development$95,366 $74,084 $21,282 29 %
Sales and marketing144,224 127,605 16,619 13 %
General and administrative48,953 44,748 4,205 9 %
Amortization of other intangibles4,776 5,627 (851)(15 %)
Total operating expenses$293,319 $252,064 $41,255 16 %
Research and development
Research and development expenses increased by $21.3 million, or 29%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The increase was primarily the result of increased personnel costs of $18.8 million, inclusive of a $8.4 million increase in share-based compensation, largely due to headcount growth to support the continued expansion of functionality and capabilities of the Dynatrace platform.
Sales and marketing
Sales and marketing expenses increased by $16.6 million, or 13%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The increase was primarily due to increased personnel costs of $10.9 million, inclusive of a $1.9 million increase in share-based compensation. Further contributing to the increase was increased marketing program costs and partner cost of $2.0 million.
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General and administrative
General and administrative expenses increased $4.2 million, or 9%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The increase was primarily the result of increased personnel costs of $4.2 million, inclusive of a $0.9 million increase in share-based compensation.
Amortization of other intangibles
Amortization of other intangibles decreased by $0.9 million, or 15%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The decrease was primarily the result of lower amortization for certain intangible assets that are amortized on a systematic basis that reflects the pattern in which the economic benefits of the intangible assets are estimated to be realized and the completion of amortization on certain intangibles.
Interest Income, Net
Interest income, net, was $12.9 million for the three months ended September 30, 2024 compared to $8.5 million for the three months ended September 30, 2023. The increase in interest income was primarily the result of higher interest rates on our cash, cash equivalents, and investments.
Other Expense, Net
Other expense, net, was $2.0 million for the three months ended September 30, 2024 compared to $3.1 million for the three months ended September 30, 2023. The change was primarily the result of foreign currency realized and unrealized gains and losses related to the impact of transactions denominated in a foreign currency, including balances between subsidiaries.
Income Tax Expense
Income tax expense increased by $8.9 million resulting in an expense of $13.8 million for the three months ended September 30, 2024 as compared to an expense of $4.9 million for the three months ended September 30, 2023. This increase was primarily due to an increase in pre-tax income, a non-recurring discrete benefit recognized in the prior year related to a tax law change, and a decrease in share-based compensation tax benefits.
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Comparison of the Six Months Ended September 30, 2024 and 2023
Six Months Ended September 30,
20242023
AmountPercentAmountPercent
(in thousands, except percentages)
Revenue:
Subscription$781,386 96 %$650,951 95 %
Service35,963 4 %33,635 5 %
Total revenue817,349 100 %684,586 100 %
Cost of revenue:
Cost of subscription109,368 14 %87,696 13 %
Cost of service34,397 4 %31,217 5 %
Amortization of acquired technology8,772 1 %7,798 1 %
Total cost of revenue (1)
152,537 19 %126,711 19 %
Gross profit664,812 81 %557,875 81 %
Operating expenses:
Research and development (1)
182,944 22 %140,366 21 %
Sales and marketing (1)
289,330 35 %252,722 37 %
General and administrative (1)
93,931 11 %83,843 12 %
Amortization of other intangibles9,552 1 %11,387 2 %
Total operating expenses575,757 488,318 
Income from operations89,055 11 %69,557 10 %
Interest income, net25,625 15,655 
Other expense, net(4,073)(2,823)
Income before income taxes110,607 82,389 
Income tax expense(27,979)(8,392)
Net income$82,628 $73,997 
(1)  Includes share-based compensation expense as follows:
Six Months Ended September 30,
20242023
(in thousands)
Cost of revenue$17,444 $12,685 
Research and development48,187 31,441 
Sales and marketing36,772 32,876 
General and administrative26,957 21,474 
Total share-based compensation$129,360 $98,476 
Revenue
Six Months Ended September 30,Change
20242023AmountPercent
(in thousands, except percentages)
Subscriptions$781,386 $650,951 $130,435 20 %
Services35,963 33,635 2,328 7 %
Total revenue$817,349 $684,586 $132,763 19 %
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Subscription
Subscription revenue increased by $130.4 million, or 20%, for the six months ended September 30, 2024, as compared to the six months ended September 30, 2023, primarily due to the growth of the Dynatrace platform by adding new customers combined with existing customers expanding their use of our solutions.
Service
Service revenue increased by $2.3 million, or 7%, for the six months ended September 30, 2024 as compared to the six months ended September 30, 2023. The increase was primarily due to timing of delivery of services.
Cost of Revenue
Six Months Ended September 30,Change
20242023AmountPercent
(in thousands, except percentages)
Cost of subscription$109,368 $87,696 $21,672 25 %
Cost of service34,397 31,217 3,180 10 %
Amortization of acquired technology8,772 7,798 974 12 %
Total cost of revenue$152,537 $126,711 $25,826 20 %
Cost of subscription
Cost of subscription increased $21.7 million, or 25%, for the six months ended September 30, 2024 as compared to the six months ended September 30, 2023. The increase was primarily due to increased cloud-based hosting costs of $7.4 million related to our growing cloud based subscription revenue and increased personnel costs of $10.2 million, inclusive of a $3.6 million increase in share-based compensation largely due to headcount growth to support our growing customer base.
Cost of service
Cost of service increased $3.2 million, or 10%, for the six months ended September 30, 2024 as compared to the six months ended September 30, 2023. The increase was primarily the result of increased personnel cost of $1.7 million, inclusive of a $1.2 million increase in share-based compensation.
Amortization of acquired technologies
Amortization of acquired technology increased by $1.0 million, or 12%, and includes amortization expense for technology acquired in the Thoma Bravo Funds’ acquisition of our company in 2014, business combinations, and asset acquisitions. The increase was driven by the amortization of acquired technology associated with our acquisitions of Rookout, Ltd. in August 2023 and Runecast Solutions Limited in March 2024.











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Gross Profit and Gross Margin
Six Months Ended September 30,Change
20242023AmountPercent
(in thousands, except percentages)
Gross profit:  
Subscription$672,018$563,255$108,763 19 %
Services1,5662,418(852)(35 %)
Amortization of acquired technology(8,772)(7,798)(974)12 %
Total gross profit$664,812$557,875$106,937 19 %
Gross margin:
Subscription86 %87 %
Services4 %7 %
Amortization of acquired technology(100 %)(100 %)
Total gross margin81 %81 %
Subscription
Subscription gross profit increased by $108.8 million, or 19%, during the six months ended September 30, 2024 compared to the six months ended September 30, 2023. Subscription gross margin decreased from 87% to 86% for the six months ended September 30, 2024 compared to the six months ended September 30, 2023. The decrease in gross margin was primarily due to increased cloud-based hosting costs to support the growth of our subscription cloud-based offerings.
Services
Services gross profit decreased by $0.9 million, or 35%, during the six months ended September 30, 2024 compared to the six months ended September 30, 2023. Services gross margin decreased from 7% to 4% for the six months ended September 30, 2024 compared to the six months ended September 30, 2023. The decreases in gross profit and gross margin was primarily due to increased personnel costs and share-based compensation expense.
Operating Expenses
Six Months Ended September 30,Change
20242023AmountPercent
(in thousands, except percentages)
Operating expenses:
Research and development$182,944 $140,366 $42,578 30 %
Sales and marketing289,330 252,722 36,608 14 %
General and administrative93,931 83,843 10,088 12 %
Amortization of other intangibles9,552 11,387 (1,835)(16 %)
Total operating expenses$575,757 $488,318 $87,439 18 %
Research and development
Research and development expenses increased by $42.6 million, or 30%, for the six months ended September 30, 2024 as compared to the six months ended September 30, 2023. The increase was primarily the result of increased personnel costs of $38.2 million, inclusive of a $16.7 million increase in share-based compensation largely due to headcount growth to support the continued expansion of functionality and capabilities of the Dynatrace platform.
Sales and marketing
Sales and marketing expenses increased by $36.6 million, or 14%, for the six months ended September 30, 2024, as compared to the six months ended September 30, 2023. The increase was primarily the result of increased personnel costs of $23.4 million, inclusive of a $3.9 million increase in share-based compensation. Further contributing to the increase was increased partner costs and professional fees of $5.9 million.
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General and administrative
General and administrative expenses increased $10.1 million, or 12%, for the six months ended September 30, 2024, as compared to the six months ended September 30, 2023. The increase was primarily the result of increased personnel costs of $12.4 million, inclusive of a $5.5 million increase in share-based compensation.
Amortization of other intangibles
Amortization of other intangibles decreased by $1.8 million, or 16%, for the six months ended September 30, 2024 as compared to the six months ended September 30, 2023. The decline was primarily the result of lower amortization for certain intangible assets that are amortized on a systematic basis that reflects the pattern in which the economic benefits of the intangible assets are estimated to be realized and the completion of amortization on certain intangibles.
Interest Income, Net
Interest income, net, was $25.6 million for the six months ended September 30, 2024 as compared to $15.7 million for the six months ended September 30, 2023. The increase in interest income was primarily the result of higher interest rates on cash, cash equivalents, and investments.
Other Expense, Net
Other expense, net, was $4.1 million for the six months ended September 30, 2024 as compared to $2.8 million for the six months ended September 30, 2023. The change was primarily the result of foreign currency realized and unrealized gains and losses related to the impact of transactions denominated in a foreign currency, including balances between subsidiaries.
Income Tax Expense
Income tax expense of $28.0 million for the six months ended September 30, 2024 represented a $19.6 million increase as compared to an expense of $8.4 million for the six months ended September 30, 2023. This increase was primarily due to an increase in pre-tax income, a non-recurring discrete benefit recognized in the prior year related to a tax law change, and a decrease in share-based compensation tax benefits.
Liquidity and Capital Resources
We have historically maintained a disciplined and balanced approach to optimizing costs and improving the efficiency and profitability of our business, while continuing to invest in future growth opportunities that we expect will drive long-term value. Our principal sources of liquidity are cash and cash equivalents, marketable securities (investments) and cash provided by operating activities. From time to time, we may borrow under our Credit Facility. As of September 30, 2024, we had $907.2 million of cash and cash equivalents, $146.1 million of investments, consisting of U.S. Treasury securities, corporate debt securities, commercial paper, and U.S. agency securities, that have maturities between one and 27 months, and $399.2 million available under our Credit Facility.
We have historically financed our operations primarily through payments by our customers for use of our product offerings and related services and, to a lesser extent, the net proceeds we have received from sales of equity securities.
Over the past three years, cash flows from customer collections have increased. However, operating expenses have also increased as we have invested in growing our business. Our operating cash requirements may increase in the future as we continue to invest in the strategic growth of our company.
Our billings and revenue mix may vary over time due to a number of factors, including the mix of subscriptions and services and the contract length of our customer agreements. Such variability in the timing and amounts of our billings could impact the timing of our cash collections from period to period.
Our material cash requirements from known contractual and other obligations consist of our rent payments required under operating lease agreements and non-cancelable purchase obligations for cloud hosting support. As of September 30, 2024, total contractual commitments were $363.5 million, with $91.9 million committed within the next 12 months.
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Cash from operations could be affected by various risks and uncertainties, including, but not limited to, the risks detailed in the section titled “Risk Factors” included under Part I, Item 1A of this Quarterly Report. However, we believe that our existing cash, cash equivalents, investments, funds available under our revolving credit facility, and cash generated from operations, will be sufficient to meet our cash requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts, the continued expansion of sales and marketing activities, the introduction of new and enhanced products, seasonality of our billing activities, timing and extent of spending to support our growth strategy, and the continued market acceptance of our products. In the event that additional financing is required from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results, and financial condition would be adversely affected.
Share Repurchase Program
We announced a share repurchase program for up to $500.0 million of common stock on May 15, 2024. For the three and six months ended September 30, 2024, we repurchased and retired 0.8 million and 1.9 million shares of our common stock for a total of $40.0 million and $90.1 million, respectively. As of September 30, 2024, $409.9 million remained available for future repurchases. For additional information, please see Part II, Item 2 of this Quarterly Report.
Our Credit Facilities
In December 2022, we entered into a senior secured revolving credit facility in an aggregate amount of $400.0 million (as amended to date, the “Credit Facility”). As of September 30, 2024, we had $399.2 million available under the Credit Facility with $0.8 million of letters of credit outstanding. As of September 30, 2024, we were in compliance with all applicable covenants pertaining to the Credit Facility. The Credit Facility is discussed further in Note 8, Long-term Debt, of the condensed consolidated financial statements in this Quarterly Report.
Summary of Cash Flows
Six Months Ended September 30,
20242023
(in thousands)
Cash provided by operating activities (1)
$254,391 $170,780 
Cash used in investing activities(46,620)(45,408)
Cash (used in) provided by financing activities(84,567)26,203 
Effect of exchange rate changes on cash and cash equivalents4,990 (5,399)
Net increase in cash and cash equivalents$128,194 $146,176 
(1) Net cash provided by operating activities includes cash payments for interest and tax as follows:
Six Months Ended September 30,
20242023
(in thousands)
Cash paid for interest$365 $420 
Cash paid for tax, net$55,452 $41,804 
Operating Activities
For the six months ended September 30, 2024, cash provided by operating activities was $254.4 million as a result of net income of $82.6 million, and adjusted by non-cash charges of $121.4 million and a change of $50.3 million in our operating assets and liabilities. The non-cash charges were primarily comprised of share-based compensation of $129.4 million and depreciation and amortization of $28.0 million, partially offset by deferred income taxes of $39.1 million. The change in our net operating assets and liabilities was primarily the result of a decrease in accounts receivable of $300.1 million due to the timing of receipts of payments from customers, partially offset by a decrease in deferred revenue of $199.5 million due to seasonality in our sales cycle, which is higher in the third and fourth quarters of our fiscal year, a decrease in accounts payable and accrued expenses of $30.5 million driven by timing of payments, including the payments of our annual bonus plans and year-end commissions, and an increase in prepaid expenses and other assets of $14.1 million driven by the timing of payments in advance of future services.
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For the six months ended September 30, 2023, cash provided by operating activities was $170.8 million as a result of net income of $74.0 million, and adjusted by non-cash charges of $93.4 million and a change of $3.4 million in our operating assets and liabilities. The non-cash charges were primarily comprised of share-based compensation of $98.5 million, depreciation and amortization of $27.1 million, partially offset by deferred income taxes of $35.2 million. The change in our net operating assets and liabilities was primarily the result of a decrease in accounts receivable of $177.7 million due to the timing of receipts of payments from customers and a decrease in deferred commissions of $9.0 million due to commissions paid on new bookings. Partially offsetting this was a decrease in deferred revenue of $128.5 million due to seasonality in our sales cycle, which is higher in the third and fourth quarters of our fiscal year, a decrease in accounts payable and accrued expenses of $33.2 million driven by timing of payments, and an increase in prepaid expenses and other assets of $22.9 million driven by the timing of payments in advance of future services.
Investing Activities
Cash used in investing activities during the six months ended September 30, 2024 was $46.6 million, primarily as a result of purchases of investments, net of sales and maturities, of $39.6 million and purchases of property and equipment of $6.9 million.
Cash used in investing activities during the six months ended September 30, 2023 was $45.4 million as a result of the Rookout acquisition of $32.4 million and purchases of property and equipment of $13.0 million. For additional information about the Rookout acquisition, please see Note 4, Business Combinations of the condensed consolidated financial statements in this Quarterly Report.
Financing Activities
Cash used in financing activities during the six months ended September 30, 2024 was $84.6 million, primarily as a result of repurchases of common stock of $90.1 million and taxes paid related to net share settlement of equity awards of $12.0 million, partially offset from proceeds from our employee stock purchase plan (“ESPP”) of $10.4 million and proceeds from the exercise of our stock options of $8.8 million.
Cash provided by financing activities during the six months ended September 30, 2023 was $26.2 million, as a result of proceeds from the exercise of our stock options of $16.6 million and proceeds from our ESPP of $9.6 million.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in accordance with GAAP. The preparation of condensed consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
There have been no significant changes in our critical accounting policies and estimates during the six months ended September 30, 2024 as compared to the critical accounting policies and estimates disclosed in our Annual Report. For a full discussion of these estimates and policies, see “Critical Accounting Policies and Estimates” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, if any, and the impact of these pronouncements on our consolidated financial statements, if any, see Note 2, Significant Accounting Policies, of our condensed consolidated financial statements included elsewhere in this Quarterly Report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates and interest rates. We do not hold or issue financial instruments for trading purposes.
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Foreign Currency Exchange Risk
Our international operations have provided and are expected to continue to provide a significant portion of our consolidated revenues and expenses that we report in U.S. dollars. We do not believe that an immediate 10% increase or decrease in the relative value of the U.S. dollar to other currencies would have a material effect on our results of operations or cash flows, and to date, we have not engaged in any hedging strategies with respect to foreign currency transactions. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates, and we may choose to engage in the hedging of foreign currency transactions in the future.
Translation exposure
Our reporting currency is the U.S. dollar, and the functional currency of each of our subsidiaries is either its local currency or the U.S. dollar, depending on the circumstances. As a result, our consolidated revenues and expenses are affected and will continue to be affected by changes in the U.S. dollar against major foreign currencies, particularly the Euro. Fluctuations in foreign currencies impact the amount of total assets, liabilities, earnings and cash flows that we report for our foreign subsidiaries upon the translation of these amounts into U.S. dollars. In particular, the strengthening of the U.S. dollar generally will reduce the reported amount of our foreign-denominated cash and cash equivalents, total revenues and total expenses that we translate into U.S. dollars and report in our condensed consolidated financial statements. These gains or losses are recorded as a component of accumulated other comprehensive loss within shareholders’ equity.
Transaction exposure
We transact business in multiple currencies. As a result, our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates on transactions denominated in currencies other than the functional currencies of our subsidiaries. These gains or losses are recorded within “Other expense, net” in our condensed consolidated statements of operations.
Interest Rate Risk
As of September 30, 2024, we had cash and cash equivalents of $907.2 million, consisting primarily of money market funds, bank deposits, and highly liquid investments with an original maturity of three months of less, and investments of $146.1 million, consisting of U.S. Treasury securities, corporate debt securities, commercial paper and U.S. agency securities. These interest-earning instruments carry a degree of interest rate risk. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our condensed consolidated financial statements.
As of September 30, 2024, we also had the Credit Facility in place, with availability of $399.2 million. The Credit Facility bears interest based on (i) the Term Secured Overnight Financing Rate plus 0.10%, (ii) the Adjusted Euro Interbank Offer Rate, (iii) the Canadian Overnight Repo Rate Average, (iv) the Base Rate, as defined per the Credit Facility, or (v) the Sterling Overnight Index Average, in each case plus an applicable margin, as defined in the Credit Agreement. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our condensed consolidated financial statements.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Quarterly Report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures, as of September 30, 2024, were effective and provided reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act) during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitation in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are, from time to time, party to legal proceedings and subject to claims in the ordinary course of business. Although the outcome of legal proceedings and claims cannot be predicted with certainty, we currently believe that the resolution of any such matters will not have a material adverse effect on our business, operating results, financial condition, or cash flows. Regardless of the outcome, legal proceedings and claims can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
ITEM 1A. RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our condensed consolidated financial statements and related notes, before making a decision to invest in our common stock. The risks and uncertainties described below may not be the only ones we face. If any of the risks actually occur, our business, operating results, financial condition and prospects could be materially and adversely affected. In that event, the market price of our common stock could decline, and you could lose all or part of your investment.
Risks Related to Our Business and Industry
We have experienced rapid revenue growth in recent periods, which may not be indicative of our future growth.
We have experienced rapid revenue growth in recent periods. Our annual revenue grew 23% in the year ended March 31, 2024 compared to the prior year. Our revenue for the six months ended September 30, 2024 grew 19% compared to the prior-year period. This revenue growth may not be indicative of our future revenue growth, and we may not be able to sustain revenue growth consistent with recent history, or at all. We believe our ability to continue to increase our revenue depends on several factors, including, but not limited to:
•our ability to attract new customers and retain and increase sales to existing customers;
•our ability to continue to expand customer adoption and usage of our Dynatrace platform;
•our ability to develop our existing platform, introduce new solutions, and enhance and improve existing solutions on our platform;
•continued growth of cloud-based services and solutions;
•our ability to continue to develop offerings and solutions that our customers prefer over those of our competitors;
•our ability to hire and retain sufficient numbers of sales and marketing, research and development, and general and administrative personnel; and
•our ability to expand into new geographies and markets, including the business intelligence, data analytics, and application security markets, and expand our global operations.
If we are unable to achieve any of these, our revenue growth could be adversely affected.
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Our quarterly and annual operating results may be adversely affected due to a variety of factors, which could make our future results difficult to predict.
Our annual and quarterly revenue and operating results have fluctuated significantly in the past and may vary significantly in the future due to a variety of factors, many of which are outside of our control. Our financial results in any one quarter may not be meaningful and should not be relied upon as indicative of future performance. If our revenues, earnings, or operating results fall below the expectations of investors or securities analysts in a particular quarter, or below any guidance that we may provide, the price of our common stock could decline. We may not be able to accurately predict our future billings, revenues, earnings, or operating results. Some of the important factors that may cause our operating results to fluctuate from quarter to quarter or year to year include:
•fluctuations in the demand for our solutions, the timing of purchases by our customers, and the length of the sales cycles, particularly for larger purchases;
•fluctuations in the rate of utilization by customers of the cloud to manage their business needs, or a slowdown in the migration of enterprise systems to the cloud;
•the impact of recessionary pressures or uncertainties in the global economy, or in the economies of the countries in which we operate, on our customers’ purchasing decisions and the length of our sales cycles;
•our ability to attract new customers and retain existing customers;
•our ability to expand into new geographies and markets, including the business intelligence, data analytics, and application security markets;
•the budgeting cycles and internal purchasing priorities of our customers;
•changes in go-to-market strategy, customer renewal rates, churn, and our ability to cross-sell additional solutions to our existing customers and our ability to up-sell additional quantities of previously purchased offerings to existing customers;
•the seasonal buying patterns of our customers;
•the payment terms and contract term length associated with our product sales and their effect on our billings and free cash flow;
•changes in customer requirements or market needs;
•the emergence of significant privacy, data protection, systems and application security or other threats, regulations, or requirements applicable to the use of enterprise systems or cloud-based systems that we are not prepared to meet or that require additional investment by us;
•changes in the demand and growth rate of the markets for observability, application security, analytics, and AI-enabled solutions;
•our ability to anticipate or respond to changes in the competitive landscape, or improvements in the functionality of competing solutions that reduce or eliminate one or more of our competitive advantages;
•our ability to timely develop, introduce, and gain market acceptance for new solutions and product enhancements;
•our ability to adapt and update our offerings and solutions on an ongoing and timely basis in order to maintain compatibility and efficacy with the frequently changing and expanding variety of software and systems that our offerings are designed to monitor;
•our ability to maintain and expand our relationships with strategic technology partners that own, operate, and offer the major platforms on which applications operate, with which we must interoperate and remain compatible, and from which we must obtain certifications and endorsements in order to maintain credibility and momentum in the market;
•our ability to control costs, including our operating expenses;
•our ability to efficiently complete and integrate any acquisitions or business combinations that we may undertake in the future;
•general economic, industry, and market conditions, both domestically and in our foreign markets, including regional or geopolitical conflicts or other disruptions to commerce;
•the emergence of new technologies or trends in the marketplace, or a change in the trends that are important to our strategy and the value of our platform in the marketplace;
•foreign currency exchange rate fluctuations;
•the timing of revenue recognition for our customer transactions, and the effect of the mix of subscriptions and services on the timing of revenue recognition;
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•extraordinary expenses, such as litigation or other dispute-related settlement payments; and
•future accounting pronouncements or changes in our accounting policies.
Any one of the factors referred to above or the cumulative effect of some of the factors referred to above may result in our operating results being below our expectations and the expectations of securities analysts and investors and any guidance that we may provide, or may result in significant fluctuations in our quarterly and annual operating results, including fluctuations in our key performance indicators. This variability and unpredictability could result in our failure to meet our business plan or the expectations of securities analysts or investors for any period. In addition, a significant percentage of our operating expenses are fixed in nature in the short term and based on forecasted revenue trends. Accordingly, in the event of revenue shortfalls, we are generally unable to mitigate the negative impact on margins in the short term.
Market adoption of the solutions that we offer is relatively new and may not grow as we expect, which may harm our business and prospects.

The utilization of solutions that we offer on the Dynatrace platform is relatively new. We believe our future success will depend in large part on the growth, if any, in the demand for observability and security solutions that utilize analytics and automation at their core, particularly the demand for enterprise-wide solutions and our ability to provide solutions that meet such ever-evolving needs. We currently target the markets for infrastructure observability, application observability, security protection, security analytics, digital experience, business analytics, and automation. It is difficult to predict customer demand, adoption, churn, and renewal rates for our new and existing solutions, the rate at which existing customers expand their usage of our solutions, and the size and growth rate of the market for our solutions. Expansion in our addressable market depends on a number of factors, including the continued and growing reliance of enterprises on software applications to manage and drive critical business functions and customer interactions, increased use of microservices and containers, as well as the continued proliferation of mobile applications, large data sets, cloud computing, and the Internet of Things. If our solutions do not achieve widespread adoption, we are not able to develop new solutions that meet customer needs, or there is a reduction in demand for observability and security solutions generally, it could result in reduced customer purchases, reduced renewal rates, and decreased revenue, any of which will adversely affect our business, operating results, and financial condition.
Our business is dependent on overall demand for observability and security solutions and therefore reduced spending on those solutions or overall adverse economic conditions may negatively affect our business, operating results, and financial condition.
Our business depends on the overall demand for observability and security solutions, particularly demand from mid- to large-sized accounts worldwide, and the purchase of our solutions by such organizations is often discretionary. Over the last year, we have observed global economic uncertainty at times as well as lengthening sales cycles. In an economic downturn or during periods of economic or political instability, we believe that our customers or prospects may reduce their operating or IT budgets, which could cause them to defer or forego purchases of observability and security solutions, including ours. Customers may delay or cancel IT projects or seek to lower their costs by renegotiating vendor contracts or renewals. To the extent purchases of observability and security solutions are perceived by existing customers and potential customers to be discretionary, our revenue may be disproportionately affected by delays or reductions in general IT spending. Weak or turbulent global economic conditions or a reduction in observability and security spending, even if general economic conditions remain unaffected, could adversely impact our business, operating results and financial condition in a number of ways, including longer sales cycles, lower prices for our solutions, reduced subscription renewals, and lower revenue. Moreover, any potential U.S. federal government shutdown resulting from budgetary decisions, a prolonged continuing resolution, breach of the federal debt ceiling, a potential U.S. sovereign default, and changes in laws, regulations, or policies following the 2024 U.S. Presidential election may increase uncertainty and volatility in the global economy and financial markets. In addition, any negative economic effects or instability resulting from changes in the political environment and international relations in the United States or other key markets as well as resulting regulatory or tax policy changes may adversely affect our business and financial results.

As the market for observability and security solutions is relatively new and continues to develop, trends in spending remain unpredictable and subject to reductions due to the changing technology environment and customer needs as well as uncertainties about the future.
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If we fail to innovate and do not continue to develop and effectively market solutions that anticipate and respond to the needs of our customers, our business, operating results, and financial condition may suffer.

The markets for observability and security solutions are characterized by constant change and innovation, and we expect them to continue to rapidly evolve. Moreover, many of our customers operate in industries characterized by changing technologies and business models, which require them to develop and manage increasingly complex software application and IT infrastructure environments. Our future success, if any, will be based on our ability to consistently provide our customers with an end-to-end, near real-time view into the performance of their software applications and IT infrastructure, provide notification and prioritization of degradations and failures, perform root cause analysis of performance issues, and analyze the quality of their end users’ experiences and the resulting impact on their businesses and brands. If we do not respond to the rapidly changing needs of our customers by developing and making available new solutions and solution enhancements that can address evolving customer needs on a timely basis, our competitive position and business prospects will be harmed, and our revenue growth and margins could decline.

In addition, the process of developing new technology is complex and uncertain, and if we fail to accurately predict customers’ changing needs and emerging technological trends, our business could be harmed. We believe that we must continue to dedicate significant resources to our research and development efforts, including significant resources to developing new solutions and solution enhancements before knowing whether the market will accept them. For example, we have made significant investments in our new application security offering and in developing our GrailTM core technology, AutomationEngine, and AppEngine. We have also expanded our Davis® AI engine to create the observability and security industry’s first hypermodal AI, converging fact-based, predictive, and causal AI insights with new generative AI capabilities. Our new solutions and solution enhancements could fail to attain sufficient market acceptance for many reasons, including:
•delays in developing and releasing new solutions or enhancements to the market;
•failures to accurately predict market or customer demands, priorities, and practices, including other technologies utilized by customers in their environments and competitors and partners that they prefer to work with;
•the introduction or anticipated introduction of competing products by existing and emerging competitors;
•the inability to execute our go-to-market strategy effectively, which depends on our sales and marketing teams and our partners to sell solutions for new markets and product categories;
•delays or failures to provide updates to customers to maintain compatibility between Dynatrace and the various applications and platforms being used in the customers’ applications and multicloud environments;
•defects, errors, or failures in the design or performance of our new solutions or solution enhancements;
•the perceived value of our solutions or enhancements relative to their cost; and
•negative publicity about the performance or effectiveness of our solutions.
In addition to developing new solutions or enhancements using internal resources, we may acquire technologies from a third party, or acquire another company. Any acquisition of this type could be unsuccessful for a variety of reasons, require significant management attention, disrupt our business, dilute stockholder value, and adversely affect our results of operations. For a description of some of the risks related to potential acquisitions, please see the risk below entitled “We may acquire other businesses, products, or technologies in the future which could require significant management attention, disrupt our business or result in operating difficulties, dilute stockholder value, and adversely affect our results of operations.”
To the extent that we are not able to continue to execute on our business model to timely and effectively develop or acquire and market applications to address these challenges and attain market acceptance, our business, operating results, and financial condition will be adversely affected.
Further, we may make changes to our solutions that our customers do not value or find useful. We may also discontinue certain features, begin to charge for certain features that are currently free, or increase fees for any of our features or usage of our solutions. If our new solutions, enhancements, or pricing strategies do not achieve adequate acceptance in the market, our competitive position will be impaired, our revenue may decline or grow more slowly than expected and the negative impact on our operating results may be particularly acute, and we may not receive a return on our investment in the upfront research and development, sales and marketing, and other expenses that we incur in connection with new solutions or solution enhancements.
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If our platform and solutions do not effectively interoperate with our customers’ existing or future IT infrastructures, installations of our solutions could be delayed or canceled, which would harm our business.
Our success depends on the interoperability of our platform and solutions with third-party operating systems, applications, cloud platforms, data, and devices that we have not developed and do not control. Any third-party changes that degrade the functionality of our platform or solutions or give preferential treatment to competitive software could adversely affect the adoption and usage of our platform. We may not be successful in adapting our platform or solutions to operate effectively with these systems, applications, cloud platforms, data, or devices. If it is difficult for our customers to access and use our platform or solutions, or if our platform or solutions cannot connect a broadening range of systems, applications, cloud platforms, data, and devices, then our customer growth and retention may be harmed, and our business and operating results could be adversely affected.

Multicloud deployments utilize multiple third-party platforms and technologies, and these technologies are updated to new versions at a rapid pace. As a result, we deliver frequent updates to our solutions designed to maintain compatibility and support for our customers’ changing technology environments and ensure our solutions’ ability to continue to monitor customers’ applications. If our solutions fail to work with any one or more of these technologies or applications, or if our customers fail to install the most recent updates and versions of our solutions that we offer, our solutions will be unable to continuously monitor our customers’ critical business applications.

Ensuring that our solutions are up-to-date and compatible with the technology and multicloud platforms utilized by our customers is critical to our success. We have formed alliances with many technology and cloud platform providers to provide updates to our solutions to maintain compatibility. We work with technology and cloud platform providers to understand and align updates to their product roadmaps and engage in early access and other programs to ensure compatibility of our solutions with the technology vendor’s generally available release. If our relations with our technology partners degrades or ceases, we may be unable to deliver these updates, or if our customers fail to install the most recent updates and versions of our solutions that we offer, then our customers’ ability to benefit from our solution may decrease significantly and, in some instances, may require the customer to de-install our solution due to the incompatibility of our solution with the customer’s applications.

If we are unable to acquire new customers or retain and expand our relationships with existing customers, our future revenues and operating results will be harmed.
To continue to grow our business, we need to attract new customers and increase deployment, usage, and consumption of our solutions by existing customers. Our success in attracting new customers and expanding our relationships with existing customers depends on numerous factors, including our ability to:
•offer a compelling, end-to-end observability and security platform, together with advanced AI for IT operations that provides answers and intelligent automation from data at an enormous scale;
•design and execute our sales and marketing strategy;
•effectively identify, attract, onboard, train, develop, motivate, and retain new sales, marketing, professional services, and support personnel in the markets we pursue;
•develop or expand relationships with technology partners, systems integrators, resellers, online marketplaces, and other partners, including strategic alliances and cloud-focused partnerships with GSIs, including Accenture, Deloitte, DXC, and Kyndryl, and hyperscalers such as AWS, GCP, Azure, and others, some of which may also compete with us;
•expand into new geographies and markets, including the business intelligence and data analytics market;
•deploy our platform and solutions for new customers; and
•provide quality customer support and professional services.
Our customers have no obligation to renew their agreements, and our customers may decide not to renew these agreements with a similar contract period, at the same prices and terms or with the same or a greater number of licenses. Although our customer retention rate has historically been strong, some of our customers have elected not to renew their agreements with us, and it is difficult to accurately predict long-term customer retention, churn and expansion rates. Our customer retention and expansion rates may decline or fluctuate as a result of a number of factors, including our customers’ satisfaction with our solutions platform, our customer support and professional services, changes to our go-to-market strategy, our prices and pricing plans, the competitiveness of other software products and services, reductions in our customers’ spending levels, customer concerns about macroeconomic trends, user adoption of our solutions, deployment success, utilization rates by our customers, new product releases and changes to our product offerings. For example, when we updated our go-to-market strategy earlier this year, more than 30% of our customer accounts transitioned to new sales representatives. It is difficult to predict whether these changes will achieve their desired effects and a negative impact on retention and other results is possible. If our customers do not renew their agreements, or renew on less favorable terms, our business, financial condition, and operating results may be adversely affected.

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Our ability to increase sales to existing customers depends on several factors, including their experience with implementing and using our platform and the existing solutions they have implemented, their ability to integrate our solutions with existing technologies, and our pricing models, including our DPS licensing model. A failure to increase sales to existing customers could adversely affect our business, operating results, and financial condition.

Failure to effectively expand our sales and marketing capabilities could harm our ability to execute on our business plan, increase our customer base, and achieve broader market acceptance of our applications.

Our ability to increase our customer base and achieve broader market acceptance of our solutions will depend to a significant extent on the ability of our sales and marketing organizations to work together to drive our sales pipeline and cultivate customer and partner relationships to drive revenue growth. We have invested in and plan to continue expanding our sales and marketing organizations, both in the United States and internationally. We also plan to dedicate significant resources to sales and marketing programs, including lead generation activities and brand awareness campaigns, such as our industry events, webinars, and user events with an increased investment in digital or online activities. If we are unable to effectively identify, hire, onboard, train, develop, motivate, and retain talented sales personnel or marketing personnel or if our new sales personnel or marketing personnel, online investments are unable to achieve desired productivity levels in a reasonable period of time, or if we do not create an effective strategy for our personnel to execute, our ability to increase our customer base and achieve broader market acceptance of our offerings could be harmed.

We face significant competition, which may adversely affect our ability to add new customers, retain existing customers, and grow our business.
The markets in which we compete are highly competitive, fragmented, evolving, complex, and defined by rapidly changing technology (including, without limitation, new and evolving uses of AI) and customer needs, and we expect competition to continue to increase in the future. A number of companies, some of which are larger and have more resources than we do, have developed or are developing products and services that currently, or in the future may, compete with some or all of our solutions. We have also been expanding the scope of our solutions to include new offerings and we increasingly compete with other companies in new and adjacent markets. Competition could result in increased pricing pressure, reduced profit margins, increased sales and marketing expenses and our failure to increase, or loss of, market share, any of which could adversely affect our business, operating results, and financial condition.

We compete either directly or indirectly with infrastructure monitoring vendors, APM vendors, log management vendors, DEM vendors, security vendors, open source and commercial open source vendors, point solutions from public cloud providers, and IT operations management and business intelligence providers with offerings that cover some portion of the capabilities that we provide. Further, to the extent that one of our competitors establishes or strengthens a cooperative relationship with, or acquires one or more software APM, data analytics, compliance, or network visibility vendors, it could adversely affect our ability to compete. We may also face competition from companies entering our market, which has a relatively low barrier to entry in some segments, including large technology companies that could expand their platforms or acquire one of our competitors. For example, Cisco acquired Splunk earlier this year.

Many existing and potential competitors enjoy substantial competitive advantages, such as:
•greater brand recognition and longer operating histories;
•longer-term and more extensive relationships with existing and potential customers, and access to larger customer bases, which often provide incumbency advantages;
•broader global distribution and presence;
•larger sales and marketing budgets and resources;
•the ability to integrate or bundle competitive offerings with other products, offerings and services;
•lower labor and development costs;
•greater resources to make acquisitions;
•larger and more mature intellectual property portfolios; and
•substantially greater financial, technical, management and other resources.
Additionally, in certain circumstances, and particularly among large technology companies that have complex and large software application and IT infrastructure environments, customers may elect to build in-house solutions to address their observability and security needs. Any such in-house solutions could leverage open source software, and therefore be made generally available at little or no cost.

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These competitive pressures in our markets or our failure to compete effectively may result in fewer customers, price reductions, fewer orders, reduced revenue and gross profit, and loss of market share. Any failure to meet and address these factors could materially and adversely affect our business, operating results, and financial condition.

If the prices we charge for our solutions and services are unacceptable to our customers, our operating results will be harmed.
As the market for our solutions matures, or as new or existing competitors introduce new products, offerings, or services that compete with ours, we may experience pricing pressure and be unable to renew our agreements with existing customers or attract new customers at prices that are consistent with our current pricing model and operating budget. If this were to occur, it is possible that we would have to change our pricing model or reduce our prices, which could harm our revenue, gross margin, and operating results. Pricing decisions may also impact the mix of adoption among our licensing and subscription models, and negatively impact our overall revenue. Moreover, large global accounts, which we expect will account for a large portion of our business in the future, may demand substantial price concessions. If we are, for any reason, required to reduce our prices, our revenue, gross margin, profitability, financial position, and cash flow may be adversely affected.
We expect our billings and revenue mix to vary over time, which could harm our gross margin, cash flows, and operating results.
Our billings and revenue mix may vary over time due to a number of factors, including the mix of subscriptions and services and the contract length of our customer agreements. Our gross margins, cash flows, and operating results could also be harmed by further changes in billings and revenue mix and costs, together with numerous other factors, including entry into new lower margin markets or growth in lower margin markets, entry into markets with different pricing and cost structures, pricing discounts, increased price competition, and in response to macroeconomic conditions. Any one of these factors or the cumulative effects of certain of these factors may result in significant fluctuations in our revenues, billings, gross margin, and operating results. This variability and unpredictability could result in our failure to meet internal expectations or those of securities analysts or investors for a particular period. If we fail to meet or exceed such expectations for these or any other reasons, the market price of our common stock could decline.
If we are unable to maintain successful relationships with our partners, or if our partners fail to perform, our ability to market, sell, and distribute our applications and services will be limited, and our business, operating results, and financial condition could be harmed.
In addition to our sales force, we rely on partners, including our strategic partners, to increase our sales and distribution of our software and services. We also have independent software vendor partners whose integrations may increase the breadth of the ecosystem in which our solutions can operate, and the size of the market that our solutions can address. We also have partnerships with GSIs, including Accenture, Deloitte, DXC, and Kyndryl, and hyperscalers such as AWS, GCP, and Azure, on which many of our customers depend, and through which our customers may be able to procure and deploy our solutions. We are dependent on these partner relationships to contribute to enabling our sales growth. We expect that our future growth will be increasingly dependent on the success of our partners and our partner relationships, and if those partnerships do not provide such benefits, our ability to grow our business will be harmed. If we are unable to scale our partner relationships effectively, or if our partners are unable to serve our customers effectively, we may need to expand our services organization, which could adversely affect our results of operations.

Our agreements with our partners are generally non-exclusive, meaning our partners may offer products from several different companies to their customers or have their products or technologies also interoperate with products and technologies of other companies, including products that compete with our offerings. Moreover, some of our partners also compete with us, and if our partners do not effectively market and sell our offerings, choose to use greater efforts to market and sell their own products or those of our competitors or fail to meet the needs of our customers, our ability to grow our business and sell our offerings will be harmed. Many of our customers are also customers of hyperscalers such as AWS, GCP, and Azure. If our solutions fail to interoperate effectively with the hyperscalers’ products, or if our partnerships with one or more of these hyperscalers are not successful or are terminated, our ability to sell additional products or offerings to these customers and our ability to grow our business will be harmed. Furthermore, our partners may cease marketing our offerings with limited or no notice and with little or no penalty, and new partners could require extensive training and may take several months or more to achieve productivity. The loss of a substantial number of our partners, our possible inability to replace them or our failure to recruit additional partners could harm our results of operations. Our partner structure could also subject us to lawsuits or reputational harm if, for example, a partner misrepresents the functionality of our offerings to customers or violates applicable laws or our corporate policies.

We believe the Dynatrace brand is integral to our future success and if we fail to cost-effectively maintain and enhance awareness of our company, our business and competitive position may be harmed.
We believe that maintaining and enhancing the Dynatrace brand and increasing market awareness of our company and our solutions are critical to achieving broad market knowledge of our existing and future solutions. Increasing awareness is important to attract and retain customers, partners, and employees, particularly as we continue to introduce new capabilities and enhancements and expand internationally. In addition, independent industry analysts, such as Gartner and Forrester, often provide reviews of our solutions, as
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well as those of our competitors, and perception of our solutions in the marketplace may be significantly influenced by these reviews. We have no control over what these or other industry analysts report, and because industry analysts may influence current and potential customers, our brand could be harmed if they do not provide a positive review of our solutions or view us as a market leader.

The successful promotion of the Dynatrace brand and the market’s awareness of our solutions and platform will depend largely upon our ability to continue to offer and market enterprise-grade observability and security solutions, share our thought leadership, and continue to differentiate our solutions successfully from those of our competitors. We have invested, and expect to continue to invest, substantial resources to promote and maintain our brand and generate sales leads, both in the United States and internationally, but there is no guarantee that our awareness strategies will enhance the recognition of our brand or lead to increased sales. If our efforts to promote and maintain our brand are not cost effective or successful, our operating results and our ability to attract and retain customers, partners and employees may be adversely affected. In addition, even if our brand recognition and customer loyalty increase, this may not result in increased sales of our solutions or higher revenue.

Our sales cycles can be long, unpredictable and vary seasonally, which can cause significant variation in the number and size of transactions that close in a particular quarter.
Many of our customers are large enterprises, whose purchasing decisions, budget cycles and constraints, and evaluation processes are unpredictable and out of our control. During recessionary times, or when there is volatility or uncertainty in the global economy or in the economies of the countries in which we operate, our sales cycles may be elongated and our customers’ purchasing decisions may be delayed or cancelled. In addition, we are experiencing, and we may continue to experience, an increase in the number of large, strategic deals where customers are looking to make broader observability architecture decisions. These deals come with a higher degree of variability, longer sales cycles, greater uncertainty of completing the sale, and specially negotiated terms. The length of our sales cycle, from initial evaluation to payment for our subscriptions, can range from several months to over a year and can vary substantially from customer to customer. Our sales efforts involve significant investment of resources in field sales, partner development, marketing, and educating our customers about the use, technical capabilities, and benefits of our platform and services. Customers often undertake a prolonged evaluation process, which frequently involves not only our platform, but also those of other companies or the consideration of internally developed alternatives, including those using open source software. Some of our customers initially deploy our platform on a limited basis, with no guarantee that they will deploy our platform widely enough across their organization to justify our substantial pre-sales investment. As a result, it is difficult to predict exactly when, or even if, we will make a sale to a potential customer or if we can increase sales to our existing customers.

We have experienced seasonal and end-of-quarter concentration of our transactions and variations in the number and size of transactions that close in a particular quarter, which impacts our ability to grow revenue over the long term and plan and manage cash flows and other aspects of our business and cost structure. Our transactions vary by quarter, with the third and fourth fiscal quarters typically being our largest. In addition, within each quarter, a significant portion of our transactions occur in the last two weeks of that quarter. Large individual sales may also occur in quarters subsequent to those we anticipate, which may make it difficult to forecast our expected sales cycle. If expectations for our business turn out to be inaccurate, our revenue growth may be adversely affected over time and we may not be able to adjust our cost structure on a timely basis and our cash flows and results of operations may suffer.
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Our ability to succeed depends on the experience and expertise of our senior management team. If we are unable to attract, retain, and motivate our leadership team, our business, operating results, and prospects may be harmed.
Our ability to succeed depends in significant part on the experience and expertise of our senior management team. From time to time, there may be changes in our senior management team resulting from the hiring or departure of executives. In the last two years, we hired a new Chief Revenue Officer, Chief Marketing Officer, and various new sales and marketing leaders in their organizations, among other leadership changes.

All members of our senior management team are employed on an at-will basis, which means that they are not contractually obligated to remain employed with us and could terminate their employment with us at any time (subject to any applicable notice periods). Accordingly, and despite our efforts to retain our senior management team, they could terminate their employment with us at any time, which could disrupt our operations and negatively impact employee morale and our culture. After their termination, such person could go to work for one of our competitors after the expiration of any applicable non-compete period, and the restrictions on non-competition may in any case be difficult to enforce depending on the circumstances. The loss of members of our senior management team, particularly if closely grouped, could disrupt our operations, negatively impact employee morale and our culture, and adversely affect our ability to formulate and execute our business plan and thus, our business, operating results, and prospects could be adversely affected. If we fail to develop effective succession plans for our senior management team, and to identify, recruit, onboard, train and integrate strategic hires, our business, operating results, and financial condition could be adversely affected.
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We rely on highly skilled personnel and if we are unable to attract, retain, or motivate substantial numbers of qualified personnel or expand and train our personnel, we may not be able to grow effectively.
Our success largely depends on the talents and efforts of key technical, sales, and marketing employees and our future success depends on our continuing ability to efficiently and effectively identify, hire, onboard, train, develop, motivate, and retain highly skilled personnel for all areas of our organization. Competition in our industry is intense, and often leads to increased compensation and other personnel costs. In addition, competition for employees with experience in our industry can be intense, particularly in Europe, where our research and development operations are concentrated and where other technology companies compete for management and engineering talent. Our continued ability to compete and grow effectively depends on our ability to attract substantial numbers of qualified new employees and to retain and motivate our existing employees.
Any failure to offer high-quality customer support and professional services may adversely affect our relationships with our customers and our financial results.

We typically bundle customer support with arrangements for our solutions and offer professional services for implementation and training. In deploying and using our platform and solutions, our customers may require the assistance of our services teams to resolve complex technical and operational issues. Increased customer demand for support, without corresponding revenue, could increase costs and adversely affect our operating results. We may also be unable to respond quickly enough to accommodate short-term increases in customer demand for support. If we fail to meet our service level commitments, which relate to uptime or response times, or if we suffer extended periods of unavailability for our solutions, we may be contractually obligated to provide these customers with service credits or we could face contract terminations and be required to provide refunds of prepaid unused fees. Our sales are highly dependent on our reputation and on positive recommendations from our existing customers. Any failure to maintain high-quality customer support and professional services, or a market perception that we do not maintain high-quality product support or services, could adversely affect our reputation, and our ability to sell our solutions to existing and new customers.

We believe that our corporate culture has contributed to our success, and if we cannot successfully maintain our culture as we grow, we could lose the innovation, creativity, and teamwork fostered by our culture.

We believe that a critical component to our success has been a focus on maintaining an entrepreneurial and innovative corporate culture. We believe our culture has contributed significantly to our abilities to innovate and develop new technologies and attract and retain employees. We have spent substantial time and resources in building our team while maintaining this corporate culture. Over our last two fiscal years, our total employee headcount as of March 31, 2024 increased 32% compared to our total headcount as of March 31, 2022 and we also expanded our international employee presence. The addition of new employees from different business backgrounds in different geographic locations, and the significant number of employees who work either on a hybrid or remote basis may make it difficult for us to maintain our corporate culture. If our culture is negatively affected, our ability to support our growth and innovation may diminish.
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Our Credit Facility contains restrictions that impact our business and expose us to risks that could adversely affect our liquidity and financial condition.
In 2022, we entered into the Credit Facility in the aggregate amount of $400.0 million. As of September 30, 2024, we had $399.2 million available under the Credit Facility with $0.8 million of letters of credit outstanding. The actual amounts of our debt servicing payments vary based on the amounts of indebtedness outstanding, the applicable interest accrual periods and the applicable interest rates and fee margins, which vary based on prescribed formulas. The Credit Facility contains various customary covenants (including a financial covenant requiring compliance with a maximum leverage ratio) that are operative so long as our Credit Facility remains outstanding.

If we are unable to generate sufficient cash flow or otherwise to obtain the funds necessary to make required payments under our Credit Facility, or if we fail to comply with the various covenants and other requirements of our set forth in the Credit Facility, we could default under our Credit Facility. Our Credit Facility also contains provisions that trigger repayment obligations or an event of default upon a change of control, as well as various representations and warranties which, if breached, could lead to an event of default. Any such default that is not cured or waived could result in an acceleration of indebtedness then outstanding under our Credit Facility, an increase in the applicable interest rates under our Credit Facility, and a requirement that our subsidiaries that have guaranteed our Credit Facility pay the obligations in full, and would permit the lenders to exercise remedies with respect to all of the collateral that is securing our Credit Facility, including substantially all of our and the subsidiary guarantors’ assets. We cannot be certain that our future operating results will be sufficient to ensure compliance with the covenants in our Credit Facility or to remedy any defaults under our Credit Facility. In the event of any default and related acceleration, we may not have or be able to obtain sufficient funds to make any accelerated payments. Any such default could have a material adverse effect on our liquidity, financial condition, and results of operations.
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Risks Related to Information Technology, Intellectual Property, and Data Security and Privacy
Security breaches, computer malware, computer hacking attacks, and other security incidents or compromises could harm our business, reputation, brand, and operating results.
We have in the past been, and may in the future be, the target and victim of cybersecurity attacks, including email phishing and other types of attacks. In general, security incidents, breaches, and compromises have increased in sophistication and have become more prevalent across industries and may occur on our systems; on the systems of third parties that we use to host our solutions or SaaS solutions that we use in the operation of our business; on the systems or libraries of third parties that we use to develop our products; or on third party hosting platforms on which our customers’ host their systems. These security incidents or compromises may be caused by, or result in, but are not limited to, security breaches, computer malware or malicious software, ransomware, phishing attacks, computer hacking, denial of service attacks, security system control failures in our own systems or from vendors that we or our customers use, software vulnerabilities, social engineering, sabotage, malicious downloads, and the errors or malfeasance of our own or our customers’ or vendors’ employees. Although we have taken significant measures to detect, effectively remediate, and prevent future phishing and other attacks and security threats, we cannot be certain that our efforts will be effective to prevent and remediate all attacks and security threats. As a result, unauthorized access to, security breaches, incidents, or compromises of, or denial-of-service attacks against our platform could result in the unauthorized access to, or use of, and/or loss of, such data, as well as loss of intellectual property, customer data, employee data, trade secrets, or other confidential or proprietary information. In particular, because we utilize a multi-tenant platform, any security breach, incident, or compromise could potentially affect a significant amount of our customers.

The consequences of a security breach, incident, or compromise may be more severe if customers have chosen to configure our platform to collect and store confidential, personal, sensitive, or proprietary information. Our customers determine, through their configuration, the nature of the customer data processed by Dynatrace, and accordingly the content of the notices that they provide to data subjects as well as the consents that they obtain, if they do in fact, obtain consent. As such, our risks are also affected by how our customers obtain consent or provide transparency to the individuals whose data is provided by the customer to Dynatrace. If our customers fail to comply with applicable law or fail to provide adequate notice or to obtain consent, we could be exposed to a risk of loss, litigation, or regulatory action, and possible liability, some or all of which may not be covered by insurance, and our ability to operate our business may be impaired.

We and certain of our service providers have experienced and may in the future experience disruptions, outages, and other performance problems on our internal systems due to service attacks, unauthorized access, or other security related incidents or compromises affecting personal information. Any security breach, incident, or compromise or loss of system control caused by hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss, modification, or corruption of data, software, hardware or other computer equipment and the inadvertent transmission of computer malware could harm our business, operating results, and financial condition, and expose us to claims arising from loss or unauthorized disclosure of confidential or personal information or data and the related breach of our contracts with customers or others, or of privacy or data security laws. If an actual or perceived security incident, breach, or compromise occurs, the market perception of the effectiveness of our security controls could be harmed, our brand and reputation could be damaged, we could lose customers, and we could suffer financial exposure due to such events or in connection with remediation efforts, investigation costs, regulatory fines, including fines assessed under the European General Data Protection Regulation (“GDPR”) or other privacy laws, private lawsuits, and changed security control, system architecture, and system protection measures.

We have administrative, technical, and physical security measures in place, as well as policies and procedures in place to contractually require third parties to whom we transfer data to implement and maintain appropriate security measures. We also proactively employ multiple methods at different layers of our systems to defend against intrusion and attack and to protect our data. However, because the techniques used to obtain unauthorized access or to compromise or sabotage systems change frequently and generally are not identified until they are launched against or even penetrate a target, we may be unable to anticipate these techniques or to implement adequate preventative measures that will be sufficient to counter all current and emerging technology threats. We may therefore experience security breaches, incidents, or compromises that may remain undetected for extended periods of time. Vendors’ or suppliers’ software or systems may be susceptible or vulnerable to breaches and attacks, which could compromise our systems. A vendor or other supply chain-related breach or compromise could spread to our own systems or affect our operations or financial systems in material ways that we cannot yet anticipate.

A majority of our employees have the ability to work either partially or fully remote. Certain security systems in homes or other remote workplaces may be less secure than those used in our offices, which may subject us to increased security risks, including cybersecurity-related events, and expose us to risks of data or financial loss and associated disruptions to our business operations. We may also be exposed to risks associated with the locations of remote workers, including exposure to compromised Internet infrastructure. If we are unable to effectively manage the cybersecurity and other risks of remote work, our business could be harmed or otherwise negatively impacted.
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Because data security is a critical competitive factor in our industry, we make statements in our privacy policies, our online product documentation and in our marketing materials describing the security of our platform, including descriptions of certain security measures we employ or security features embedded within our offerings. In addition, our customer contracts include commitments related to security measures and data protection. Should any of these statements be untrue, become untrue, or be perceived to be untrue, even if through circumstances beyond our reasonable control, or if any of these security measures or features prove to be ineffective or are perceived to be ineffective, we may face claims, including claims of unfair or deceptive trade practices or breach of regulations including GDPR, brought by the U.S. Federal Trade Commission, state, local, or foreign regulators (e.g., a European Union-based data protection authority) or private litigants, and breach of contract.

While we believe that we maintain a sufficient amount of insurance to cover certain data security-related risks and incidents, our insurance coverage may not always cover all costs or losses. In addition, we cannot be certain that sufficient insurance will continue to be available to us on commercially acceptable terms in the future. Any large, successful claim that exceeds our insurance coverage or any changes in insurance availability and requirements could have a material adverse impact on our financial condition and reputation.

Interruptions or disruptions with the delivery of our SaaS solutions, or third-party cloud-based systems that we depend on in our operations, may adversely affect our business, operating results, and financial condition.
Our business and continued growth depends on the ability of our customers to access our platform and solutions, particularly our cloud-based solutions, at any time and within an acceptable amount of time. In addition, our ability to access certain third-party SaaS solutions is important to our operations and the delivery of our customer support and professional services, as well as our sales operations.

We have experienced, and may in the future experience, service disruptions, outages, and other performance problems both in the delivery of our SaaS solutions, and in third-party SaaS solutions we use due to a variety of factors, including infrastructure changes, malicious actors including disgruntled employees, human or software errors, or capacity constraints. We have experienced disruptions, outages, or performance problems in the past causing some of our services to be unavailable for a limited period of time. While none of these occurrences have been material to our business, future events could be more impactful. We utilize a multi-tenant structure, meaning that generally, our customers are hosted on a shared platform. As such, any interruption in service could affect a significant number of our customers. In some instances, we or our third-party service providers may not be able to identify the cause or causes of these performance problems within an acceptable period of time. It may become increasingly difficult to maintain and improve the performance of our SaaS solutions as they become more complex. If our SaaS solutions are unavailable or degraded or if our customers are unable to access features of our SaaS solutions within a reasonable amount of time or at all, our business would be adversely affected. In addition, if any of the third-party SaaS solutions that we use were to experience a significant or prolonged outage or security breach, our business could be adversely affected.

We currently host our Dynatrace solutions on cloud infrastructure hyperscaler providers, such as AWS, Azure and GCP. Our Dynatrace solutions reside on hardware operated by these providers. Our operations depend on protecting the virtual cloud infrastructure hosted by a hyperscaler by maintaining its configuration, architecture, features, and interconnection specifications, as well as the information stored in these virtual data centers and which third-party Internet service providers transmit. Although we have disaster recovery plans, including the use of multiple hyperscaler locations, any incident affecting a hyperscaler’s infrastructure that may be caused by fire, flood, severe storm, earthquake, or other natural disasters, actual or threatened public health emergencies, cyber-attacks, terrorist or other attacks, and other similar events beyond our control could negatively affect our platform and our ability to deliver our solutions to our customers. A prolonged hyperscaler service disruption affecting our SaaS platform for any of the foregoing reasons would negatively impact our ability to serve our customers and could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers, or otherwise harm our business. We may also incur significant costs for using alternative equipment or taking other actions in preparation for, or in reaction to, events that damage the hyperscaler services we use.

Hyperscalers have the right to terminate our agreements with them upon material uncured breach following prior written notice. If any of our hyperscaler service agreements are terminated, or there is a lapse of service, we would experience interruptions in access to our platform as well as significant delays and additional expense in arranging new facilities and services and/or re-architecting our solutions for deployment on a different cloud infrastructure, which would adversely affect our business, operating results, and financial condition.
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Real or perceived errors, failures, defects, or vulnerabilities in our solutions could adversely affect our financial results and growth prospects.
Our solutions and underlying platform are complex, and in the past, we or our customers have discovered software errors, failures, defects, and vulnerabilities in our solutions after they have been released, including after new versions or updates are released. Our solutions and our platform are frequently deployed and used in large-scale computing environments with different operating systems, system management software and equipment and networking configurations, which have in the past, and may in the future, cause errors in, or failures of, our solutions or other aspects of the computing environment into which they are deployed. In addition, deployment of our solutions into complicated, large-scale computing environments have in the past exposed, and may, in the future, expose undetected errors, failures, defects, or vulnerabilities in our solutions. AI may not work as we had anticipated or it may produce unexpected results or outcomes. Despite testing by us, errors, failures, defects, or vulnerabilities may not be found in our solutions until they are released to our customers or thereafter. Real or perceived errors, failures, defects, or vulnerabilities in our solutions (in particular, any failure of our application security offering to perform as warranted) could result in, among other things, negative publicity and damage to our reputation, lower renewal rates, loss of or delay in market acceptance of our solutions, loss of competitive position, or claims by customers for losses sustained by them or expose us to breach of contract claims, regulatory fines, and related liabilities. If vulnerabilities in our solutions are exploited by adversaries, our customers could experience damages or losses for which our customers seek to hold us accountable. In the case of real or perceived errors, failures, defects, or vulnerabilities in our solutions giving rise to claims by customers, we may be required, or may choose, for regulatory, contractual, customer relations, or other reasons, to expend additional resources in order to help correct the problem.

Assertions by third parties of infringement or other violations by us of their intellectual property rights, or other lawsuits brought against us, could result in significant costs and substantially harm our business, operating results, and financial condition.
Patent and other intellectual property disputes are common in the markets in which we compete. Some companies in the markets in which we compete, including some of our competitors, own large numbers of patents, copyrights, trademarks, and trade secrets, which they may use to assert claims of infringement, misappropriation, or other violations of intellectual property rights against us, our partners, our technology partners, or our customers. As the number of patents and competitors in our market increase, allegations of infringement, misappropriation, and other violations of intellectual property rights may also increase. Our broad solution portfolio and the competition in our markets further exacerbate the risk of additional third-party intellectual property claims against us in the future. Any allegation of infringement, misappropriation, or other violation of intellectual property rights by a third party, even those without merit, could cause us to incur substantial costs and resources defending against the claim, could distract our management from our business, and could cause uncertainty among our customers or prospective customers, all of which could have an adverse effect on our business, operating results, and financial condition. We cannot assure you that we are not infringing or otherwise violating any third-party intellectual property rights.

Furthermore, companies that bring allegations against us may have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend against similar allegations that may be brought against them than we do. We have received, and may in the future receive, notices alleging that we have misappropriated, misused, or infringed other parties’ intellectual property rights, including allegations made by our competitors, and, to the extent we gain greater market visibility, we face a higher risk of being the subject of intellectual property infringement assertions. There also is a market for acquiring third-party intellectual property rights and a competitor, or other entity, could acquire third-party intellectual property rights and pursue similar assertions based on the acquired intellectual property. They may also make such assertions against our customers or partners.

An adverse outcome of a dispute may require us to take several adverse steps, such as pay substantial damages, including potentially treble damages, if we are found to have willfully infringed a third party’s patents or copyrights; cease making, using, selling, licensing, importing, or otherwise commercializing solutions that are alleged to infringe or misappropriate the intellectual property of others; expend additional development resources to attempt to redesign our solutions or otherwise to develop non-infringing technology, which may not be successful; enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies or intellectual property rights or have royalty obligations imposed by a court; or indemnify our customers, partners, and other third parties. Any damages or royalty obligations we may become subject to, or any prohibition against our commercializing our solutions as a result of an adverse outcome, could harm our business and operating results.

Additionally, our agreements with customers and partners include indemnification provisions, under which we agree to indemnify them for losses suffered or incurred as a result of allegations of intellectual property infringement and, in some cases, for damages caused by us to property or persons or other third-party allegations. Furthermore, we have agreed in certain instances to defend our partners against third-party claims asserting infringement of certain intellectual property rights, which may include patents, copyrights, trademarks, or trade secrets, and to pay judgments entered on such assertions. Large indemnity payments could harm our business, operating results, and financial condition.
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Failure to protect and enforce our proprietary technology and intellectual property rights could substantially harm our business, operating results, and financial condition.
The success of our business depends on our ability to protect and enforce our proprietary rights, including our patents, trademarks, copyrights, trade secrets, and other intellectual property rights, throughout the world. We attempt to protect our intellectual property under patent, trademark, copyright, and trade secret laws, and through a combination of confidentiality procedures, contractual provisions, internal policies and other methods, all of which offer only limited protection. However, the steps we take to protect our intellectual property may be inadequate. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Despite our precautions, it may be possible for unauthorized third parties to copy our technology and use information that we regard as proprietary to create products, offerings, and services that compete with ours. In the past, we have been made aware of public postings of portions of our source code. It is possible that released source code could reveal some of our trade secrets and impact our competitive advantage. Some license provisions protecting against unauthorized use, copying, transfer, reverse engineering, and disclosure of our technology may be unenforceable under the laws of certain jurisdictions and foreign countries. Further, the laws of some countries do not protect proprietary rights to the same extent as the laws of the United States, and in some countries, there may not be sufficient legal processes available to us, in a timely fashion or at all, to enable us to effectively protect our intellectual property. In expanding our international activities, our exposure to unauthorized copying and use of our technology and proprietary information may increase. In addition, the use of other companies’ generative AI tools by our employees or contractors in a manner that violates our internal policies may compromise some of our proprietary or intellectual property rights.

The process of obtaining patent protection is expensive and time consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. We may choose not to seek patent protection for certain innovations and may choose not to pursue patent protection in certain jurisdictions. Furthermore, it is possible that our patent applications may not result in issued patents, that the scope of the claims in our issued patents will be insufficient or not have the coverage originally sought, that our issued patents will not provide us with any competitive advantages, and that our issued patents and other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. In addition, issuance of a patent does not guarantee that we have an absolute right to practice our patented technology, or that we have the right to exclude others from practicing our patented technology. As a result, we may not be able to obtain adequate patent protection or to enforce our issued patents effectively.

In addition to patented technology, we rely on our unpatented proprietary technology and trade secrets. Despite our efforts to protect our proprietary technology and trade secrets, unauthorized parties may attempt to misappropriate, reverse engineer, or otherwise obtain and use them. The contractual provisions that we enter into with employees, consultants, partners, vendors, and customers may not prevent unauthorized use or disclosure of our proprietary technology or trade secrets and may not provide an adequate remedy in the event of unauthorized use or disclosure of our proprietary technology or trade secrets.

Moreover, policing unauthorized use of our technologies, solutions and intellectual property is difficult, expensive, and time consuming, particularly in foreign countries where the laws may not be as protective of intellectual property rights as those in the United States and where mechanisms for enforcement of intellectual property rights may be weak. We may be unable to determine the extent of any unauthorized use or infringement of our solutions, technologies, or intellectual property rights.

From time to time, legal action by us may be necessary to enforce our patents and other intellectual property rights, to protect our trade secrets, to determine the validity and scope of the intellectual property rights of others, or to defend against allegations of infringement or invalidity. Such litigation could result in substantial costs and diversion of resources and could negatively affect our business, operating results, financial condition, and cash flows. If we are unable to protect our intellectual property rights, our business, operating results and financial condition will be harmed.

Our use of open source technology could impose limitations on our ability to commercialize our solutions and platform.
We use open source software in our solutions and platform and expect to continue to use open source software in the future. Although we monitor our use of open source software to avoid subjecting our solutions and platform to conditions we do not intend, we may face allegations from others alleging ownership of, or seeking to enforce the terms of, an open source license, including by demanding release of the open source software, derivative works, or our proprietary source code that was developed using such software. These allegations could also result in litigation. The terms of many open source licenses have not been interpreted by U.S. courts. As a result, there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our solutions. In such an event, we could be required to seek licenses from third parties to continue offering our solutions, to make our proprietary code generally available in source code form, to re-engineer our solutions, or to discontinue the sale of our solutions if re-engineering could not be accomplished on a timely basis, any of which could adversely affect our business, operating results, and financial condition.
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Our participation in open source initiatives may limit our ability to enforce our intellectual property rights in certain circumstances.
As part of our strategy to broaden our target markets and accelerate adoption of our offerings, we contribute software program code to certain open source projects managed by organizations such as Microsoft, Google, and Cloud Native Computing Foundation. We also undertake our own open source initiatives to promote “open innovation” and “enterprise openness,” meaning that we make technologies available under open source licenses with the goal of exchanging insights and experience with other experts in the community, broadening the adoption of our platform by our customers, and providing our partners with the ability to leverage their own technologies through the Dynatrace platform. In some cases, we accept contributions of code from the community, our customers, and partners.

When we contribute to a third-party managed open source project, the copyrights, patent rights, and other proprietary rights in and to the technologies, including software program code owned by us that we contribute to these projects, are often licensed to the project managers and to all other contributing parties without material restriction on further use or distribution. If and to the extent that any of the technologies that we contribute, either alone or in combination with the technologies that may be contributed by others, practice any inventions that are claimed under our patents or patent applications, then we may be unable to enforce those claims or prevent others from practicing those inventions, regardless of whether such other persons also contributed to the open source project (even if we were to conclude that their use infringes our patents with competing offerings), unless any such third party asserts its patent rights against us. This limitation on our ability to assert our patent rights against others could harm our business and ability to compete. In addition, if we were to attempt to enforce our patent rights, we could suffer reputational injury among our customers and the open source community.

Any actual or perceived failure by us to comply with stringent and evolving privacy laws or regulatory requirements in one or multiple jurisdictions, privacy, and information security policies and/or contractual obligations could result in proceedings, actions, or penalties against us.
We are subject to U.S. federal, state, and international laws, regulations, and standards relating to the collection, use, disclosure, retention, security, transfer, and other processing of personal data. The legal and regulatory frameworks for privacy, data protection, and security issues worldwide are rapidly evolving and as a result, implementation standards, potential fines, enforcement practices, and litigation risks are likely to remain uncertain for the foreseeable future.

•In the United States, state legislatures continue to propose and pass comprehensive privacy legislation, including data breach notification laws, personal data privacy laws, and consumer protection laws. For example, the California Consumer Privacy Act (“CCPA”), as amended by the California Privacy Rights Act, gives California residents rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. It is not yet fully clear how the CCPA will be interpreted. The effects of the CCPA are potentially significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses to comply and increase our potential exposure to regulatory enforcement and/or litigation. Certain other state laws impose similar privacy obligations and we also anticipate that more states will increasingly enact legislation similar to the CCPA. The CCPA has prompted a number of proposals for new federal and state-level privacy legislation, and in some states, efforts to pass comprehensive privacy laws have been successful. The existence of comprehensive privacy laws in different states in the country, if enacted, will add additional complexity, variation in requirements, restrictions, and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data, and has resulted in and will result in increased compliance costs and/or changes in business practices and policies.
•Outside of the United States, virtually every jurisdiction in which we operate has established its own privacy, data protection and/or data security legal framework with which we or our customers must comply, including, but not limited to, the European Union (“EU”).
◦In the EU, data protection laws are stringent and continue to evolve, resulting in possible significant operational costs for internal compliance and risk to our business. The EU has adopted the GDPR, which imposes robust obligations upon covered companies, including heightened notice and consent requirements, greater rights of data subjects (e.g., the “right to be forgotten”), increased data portability for EU consumers, additional data breach notification and data security requirements, requirements for engaging third-party processors, and increased fines for non-compliance. Serious breaches of the GDPR (and similar data protection regulations in the United Kingdom) may result in monetary penalties of up to 4% of worldwide annual revenue and fines up to 2% of annual worldwide revenue can be imposed for other violations. In addition to the GDPR, other European legislative proposals and current laws and regulations apply to cookies and similar tracking technologies, electronic communications, and marketing, with an increased focus on online behavioral advertising. The EU also is considering the Regulation on
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Privacy and Electronic Communications (“ePrivacy Regulation”) which would replace an existing ePrivacy Directive. The ePrivacy Regulation is focused on privacy regarding electronic communications services and data processed by electronic communications services. The ePrivacy Regulation may require us to further modify some of our data practices and compliance could result in additional costs for our company. In addition, the EU Digital Services Act (“DSA”) and Digital Markets Act (“DMA”) add further complexity and increased consumer protection and technology regulation.
◦Many jurisdictions outside of Europe where we do business directly or through resellers today and may seek to expand our business in the future, are also considering and/or have enacted comprehensive data protection and/or cybersecurity legislation. These include Australia, Brazil, China, Japan, Mexico, and Singapore.
•We are subject to various data transfer rules related to our ability to transfer data from one country to another. This may limit our ability to transfer certain data or require us to guarantee a certain level of protection when transferring data from one country to another.
•We are also subject to data localization laws in certain countries that may, for example, require personal information of citizens to be collected, stored, and modified only within that country. These and similar regulations may interfere with our intended business activities, inhibit our ability to expand into those markets, require modifications to our offerings or services, or prohibit us from continuing to offer services in those markets without significant additional costs.
•Current or future laws, regulations, and ethical considerations related to the use of AI technology may impact our ability to provide insights from data and use certain data to develop our offerings. Our company has significant experience with AI and we have incorporated it within our offerings for several years. While we focus on using AI in a responsible, ethical, and legal manner, our use of AI and the impact of laws, regulations, and ethical considerations for AI generally, and as they apply to our customers, may also require us to develop new or different systems and processes to test for accuracy, bias, and other variables and could increase our burden and cost of research and development in this area. These factors may also impose burdensome and costly requirements on our ability and our customers’ ability to utilize data in innovative ways. For example, the EU has adopted the AI Act and in the United States, new AI-related laws and rulemakings are underway or being proposed at the federal, state, and local levels. AI is evolving rapidly and if our use of AI and data were to draw controversy, it could harm our reputation and give rise to legal or regulatory action.

The regulatory framework both in the United States and internationally governing the collection, processing, storage, use and sharing of certain information, particularly financial and other personal information, is rapidly evolving and is likely to continue to be subject to uncertainty and varying interpretations. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with laws in other jurisdictions or which our existing data management practices or the features of our services and platform capabilities. We therefore cannot yet fully determine the impact these or future laws, rules, regulations, and industry standards may have on our business or operations.

In addition to the laws and regulations to which we are subject regarding the collection, processing, storage, use, and sharing of certain information, our contracts with customers include specific obligations regarding the protection of confidentiality and the permitted uses of personally identifiable and other proprietary information. We also publicly post documentation regarding our practices concerning the collection, processing, use, and disclosure of data. Although we endeavor to comply with our published policies and documentation and the various laws and regulations that we are subject to, we may at times fail to do so or be alleged to have failed to do so. Any failure or perceived failure by us, or any third parties with which we do business, to comply with our posted privacy policies and product documentation or privacy laws or regulations, changing consumer expectations, evolving laws, rules, and regulations, industry standards, or contractual obligations to which we or such third parties are or may become subject, may result in actions or other claims against us by governmental entities or private actors, the expenditure of substantial costs, time and other resources or the imposition of significant fines, penalties or other liabilities, which could, individually or in the aggregate, materially and adversely affect our business, financial condition, and results of operations. In addition, any such action, particularly to the extent we were found to be guilty of violations or otherwise liable for damages, would damage our reputation and adversely affect our business, financial condition, and results of operations.

Additionally, our customers may be subject to differing privacy laws, rules, and legislation, which may mean that they require us to be bound by varying contractual requirements applicable to certain other jurisdictions. Adherence to such contractual requirements may impact our collection, use, processing, storage, sharing, and disclosure of various types of information, including financial information and other personal information, and may mean we become bound by, or voluntarily comply with, self-regulatory or other industry standards relating to these matters that may further change as laws, rules, and regulations evolve. Complying with these requirements and changing our policies and practices may be onerous and costly, and we may not be able to respond quickly or effectively to regulatory, legislative, and other developments. These changes may in turn impair our ability to offer our existing or planned features, products, and services and/or increase our cost of doing business. As we expand our customer base, these requirements may vary from customer to customer, further increasing the cost of compliance and doing business.
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Risks Related to Legal, Regulatory, Accounting, and Tax Matters
Tax matters, including changes in tax laws, rules, regulations, and treaties, could impact our effective tax rate and our results of operations.
We operate in over 30 countries around the world and, as a multinational corporation, we are subject to income and non-income taxes, including payroll, sales, use, value-added, net worth, property, and goods and services taxes, in both the United States and various non-U.S. jurisdictions.

Our effective tax rate has fluctuated in the past and is likely to fluctuate in the future. Our effective tax rate is affected by the allocation of revenues and expenses to different jurisdictions and the timing of recognizing revenues and expenses. In addition, in the ordinary course of our global business, there are many intercompany transactions and calculations where the ultimate tax determination is uncertain.

The amount of taxes that we pay is subject to our interpretation of applicable tax laws in the jurisdictions in which we file and changes to tax laws. Significant judgment is required in determining our worldwide provision for income taxes and other tax liabilities, and in determining the realizability of tax attributes such as foreign tax credits and domestic deferred tax assets. From time to time, we are subject to regular tax audits, examinations, and reviews in the ordinary course of business. While we believe that our tax estimates are reasonable and we have complied with all applicable income tax laws, there can be no assurance that a governing tax authority will not have a different interpretation and require us to pay additional taxes. If any amounts that we ultimately pay to a tax authority differ materially from amounts that we previously recorded, it could negatively affect our financial results and operations for the period at issue and on an ongoing basis.

We do not collect sales and use, value added, and similar taxes in all jurisdictions in which we have sales, based on our belief that such taxes are not applicable in certain of those jurisdictions. Sales and use, value added, and similar tax laws and rates vary greatly by jurisdiction. Certain jurisdictions in which we do not collect such taxes may assert that such taxes are applicable, which could result in tax assessments, penalties, and interest, and we may be required to collect such taxes in the future. Such tax assessments, penalties, and interest or future requirements may adversely affect our results of operations.

Tax laws, rules, and regulations are constantly under review by persons involved in the legislative process and by tax authorities. Changes to tax laws (which may have retroactive application) could adversely affect us or holders of our common stock. For example, changes in tax laws, rules, regulations, treaties, rates, changing interpretation of existing laws or regulations, the impact of accounting for share-based compensation, the impact of accounting for business combinations, changes in our international organization, and changes in overall levels of income before tax, can increase our or our stockholders’ tax liability. In recent years, many changes have been made to applicable tax laws and changes are likely to continue to occur in the future.

The Organization for Economic Cooperation and Development reached agreement among various countries to implement a minimum 15% tax rate on certain multinational enterprises, commonly referred to as Pillar Two. Many countries continue to announce changes in their tax laws and regulations based on the Pillar Two proposals. For fiscal year 2025, we expect to meet the Transitional Country-by-Country (CbCR) Safe Harbor rules for most, if not all, the jurisdictions that have adopted the rules. Based on the guidance available thus far, we do not expect this legislation to have a material impact on our consolidated financial statements, but we will continue to evaluate it as additional guidance and clarification becomes available.
We are subject to a number of risks associated with global sales and operations.

Revenue from customers located outside of the United States represented 43% of our total revenue for the six months ended September 30, 2024. As of September 30, 2024, approximately 68% of our employees were located outside of the United States. As a result, our global sales and operations are subject to a number of risks and additional costs, including the following:
•increased expenses associated with international sales and operations, including establishing and maintaining office space and equipment for our international operations;
•fluctuations in exchange rates between the U.S. dollar and other currencies in the markets where we do business, and other controls, regulations, and orders that might restrict our ability to repatriate cash;
•volatility, uncertainties, and recessionary pressures in the global economy or in the economies of the countries in which we operate;
•difficulties in penetrating new markets due to existing competition or local lack of recognition of the Dynatrace brand;
•risks associated with trade restrictions and additional legal requirements, including the exportation of our technology or source code that is required in many of the countries in which we operate;
•greater risk of unexpected changes in regulatory rules, regulations and practices, tariffs and tax laws and treaties;
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•compliance with U.S. and foreign import and export control and economic sanctions laws and regulations, including the Export Administration Regulations administered by the U.S. Department of Commerce’s Bureau of Industry and Security and the executive orders and laws implemented by the U.S. Department of the Treasury’s Office of Foreign Asset Controls;
•compliance with anti-bribery laws, including the U.S. Foreign Corrupt Practices Act (“FCPA”) and the U.K. Anti-Bribery Act, and a heightened risk of unfair or corrupt business practices in certain geographies, and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements;
•compliance with privacy, data protection, and data security laws of many countries and jurisdictions, including the EU’s GDPR and the CCPA;
•limited or uncertain protection of intellectual property rights in some countries and the risks and costs associated with monitoring and enforcing intellectual property rights abroad;
•greater difficulty in enforcing contracts and managing collections in certain jurisdictions, as well as longer collection periods;
•management communication and integration problems resulting from cultural and geographic dispersion;
•difficulties hiring local staff, differing employer/employee relationships, and the potential need for country-specific benefits, programs, and systems;
•social, economic, and political instability, epidemics and pandemics, terrorist attacks, wars, geopolitical conflicts, disputes, and security concerns in general; and
•potentially adverse tax consequences.
These and other factors could harm our ability to generate future global revenue and, consequently, materially impact our business, results of operations, and financial condition.
Continued uncertainty in the U.S. and global economies, particularly Europe, along with uncertain geopolitical conditions, could negatively affect sales of our offerings and services and could harm our operating results.
As our business has grown, we have become increasingly subject to the risks arising from adverse changes in the domestic and global economies. Uncertainty in the macroeconomic environment and associated global economic conditions, as well as geopolitical disruption, may result in extreme volatility in credit, equity, and foreign currency markets. These conditions, including changes in inflationary pressures, rising interest rates, lower consumer confidence or uneven or lower spending, volatile capital markets, financial and credit market fluctuations, political turmoil, natural catastrophes, epidemics, warfare (including the ongoing conflicts in Ukraine, and in Israel and surrounding areas), and terrorist attacks on the United States or elsewhere, may also adversely affect the buying patterns of our customers and prospective customers, including the size of transactions and length of sales cycles, which would adversely affect our overall pipeline as well as our revenue growth expectations. For example, we have seen lengthening sales cycles, which may affect our future revenues and results of operations. In addition, increased economic uncertainty in the United States and abroad could lead to periods of economic slowdown or recession, continued inflation and higher interest rates, and the occurrence of such events, or public perception that any of these events may occur, could result in a general decrease in spending on technology or other business interruptions. We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or within the technology industry. If macroeconomic or geopolitical conditions deteriorate or if the pace of recovery slows or is uneven, our overall results of operations could be adversely affected.

We continue to invest in our international operations. There are significant risks with overseas investments, and our growth prospects in these regions are uncertain. Increased volatility, further declines in the European credit, equity, and foreign currency markets or geopolitical disruptions (including ongoing conflicts in Ukraine, and in Israel and surrounding areas) could cause delays in or cancellations of orders or have other negative impacts on our business operations in Europe (where a significant amount of our research and development operations are concentrated) and other regions throughout the world. If tensions between the United States, members of NATO and other countries continue to escalate and create global security concerns, it may result in an increased adverse impact on regional and global economies and increase the likelihood of cyber-attacks. Deterioration of economic or geopolitical conditions in the countries in which we do business could also cause slower or impaired collections on accounts receivable. In addition, we could experience delays in the payment obligations of our worldwide reseller customers if they experience weakness in the end-user market, which would increase our credit risk exposure and harm our financial condition.

In 2022, we suspended all business in Russia and Belarus. Although we do not have material operations in Ukraine, Russia, or Belarus, geopolitical instability in the region, new sanctions, and enhanced export controls has and may continue to impact our ability to sell or export our platform in Ukraine, Russia, Belarus and surrounding countries. Similarly, our operations in Israel and the surrounding areas are not material to our business results, though geopolitical instability in the region may impact our ability to sell or export our platform there. While we do not believe the overall impact to be material to our business results, if these conflicts and the scope of sanctions expand further or persist for an extended period of time, our business could be harmed.
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Because we recognize revenue from our SaaS subscriptions and term licenses over the subscription or license term, downturns or upturns in new sales and renewals may not be immediately reflected in our operating results and may be difficult to discern.
For customers who purchase a subscription to our Dynatrace platform, whether they purchase a SaaS subscription, or a term license, we generally recognize revenue ratably over the term of their subscription. For customers who purchase a perpetual license, we generally recognize the license revenue ratably over three years. Thus, substantially all of the revenue that we report in each quarter from the Dynatrace platform is derived from the recognition of revenue relating to contracts entered into during previous quarters. For the three months ended September 30, 2024, revenue recognized from deferred revenue at the beginning of the period was $369.1 million. Consequently, a decline in new or renewed customer contracts in any single quarter may have a small impact on our revenue for that quarter. However, such a decline will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our solutions, and potential changes in our rate of renewals, may not be fully reflected in our results of operations until future periods. In addition, a significant majority of our costs are expensed as incurred, while revenue is recognized over the life of the agreement with our customer. As a result, increased growth in the number of our customers could continue to result in our recognition of more costs than revenue in the earlier periods of the terms of our agreements.
Our revenue recognition policy and other factors may distort our financial results in any given period and make them difficult to predict.
Under accounting standards update No. 2014-09 (Topic 606), Revenue from Contracts with Customers (“ASC 606”), we recognize revenue when our customer obtains control of goods or services in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. Our subscription revenue consists of (i) SaaS agreements, (ii) term-based licenses for the Dynatrace platform which are recognized ratably over the contract term, (iii) Dynatrace perpetual license revenue that is recognized ratably or over the term of the expected optional maintenance renewals, which is generally three years, and (iv) maintenance and support agreements. A significant increase or decline in our subscription contracts in any one quarter may not be fully reflected in the results for that quarter, but will affect our revenue in future quarters.

Furthermore, the presentation of our financial results requires us to make estimates and assumptions that may affect revenue recognition. In some instances, we could reasonably use different estimates and assumptions, and changes in estimates are likely to occur from period to period. For a full discussion of these estimates and policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” included in Part II, Item 7 of our Annual Report.

Given the foregoing factors, our actual results could differ significantly from our estimates, comparing our revenue and operating results on a period-to-period basis may not be meaningful, and our past results may not be indicative of our future performance.
Changes in existing financial accounting standards or practices may harm our operating results.
Changes in existing accounting rules or practices, new accounting pronouncements, or varying interpretations of current accounting pronouncements or practice could harm our operating results or result in changes to the manner in which we conduct our business. Further, such changes could potentially affect our reporting of transactions completed and reported before such changes are effective.
U.S. Generally Accepted Accounting Principles (“GAAP”) are subject to interpretation by the Financial Accounting Standards Board (“FASB”), the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or a change in these interpretations could have a significant effect on our reported financial results and could affect the reporting of transactions completed before the announcement of a change.
We may face exposure to foreign currency exchange rate fluctuations.
We have transacted in foreign currencies and expect to transact in foreign currencies in the future. In addition, we maintain assets and liabilities that are denominated in currencies other than the functional operating currencies of our global entities. Accordingly, changes in the value of foreign currencies relative to the U.S. dollar will affect our revenue and operating results due to transactional and translational remeasurement that is reflected in our earnings. As a result of such foreign currency exchange rate fluctuations, which have been prevalent over recent periods, it could be more difficult to detect underlying trends in our business and results of operations.

In addition, to the extent that fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the expectations of our investors, the trading price of our common stock could be adversely affected. We do not currently maintain a program to hedge transactional exposures in foreign currencies. However, in the future, we may use derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates. The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place. Moreover, the use of hedging instruments may introduce additional risks if we are unable to structure effective hedges with such instruments.
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Our sales to government entities are subject to a number of challenges and risks.
We sell our solutions to U.S. federal and state and foreign governmental agency customers, often through our resellers, and we may increase sales to government entities in the future. Sales to government entities are subject to a number of challenges and risks, including constraints on the budgetary process, including changes in the policies and priorities of the particular government, continuing resolutions, adherence to government audit and certification requirements, debt ceiling disruptions, deficit-reduction legislation, and any shutdown or default of the particular government. Selling to government entities can be highly competitive, expensive and time consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate a sale. Contracts and subcontracts with government agency customers are subject to procurement laws and regulations relating to the award, administration, and performance of those contracts. Government demand and payment for our solutions are affected by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our solutions. We may be subject to audit or investigations relating to our sales to government entities, and any violations could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, refunds of fees received, forfeiture of profits, suspension of payments, fines, and suspension or debarment from future government business including business with governmental agencies across the country involved. Government entities may have statutory, contractual, or other legal rights to terminate contracts with our distributors and resellers for convenience, non-appropriation, or due to a default. Any of these risks relating to our sales to governmental entities could adversely impact our future sales and operating results.
We may acquire other businesses, products, or technologies in the future which could require significant management attention, disrupt our business or result in operating difficulties, dilute stockholder value, and adversely affect our results of operations.
Our growth depends upon our ability to enhance our existing offerings and our ability to introduce new offerings on a timely basis. We intend to continue to address the need to develop new offerings and enhance existing offerings both through internal research and development, and also through the acquisition of other companies, product lines, technologies, and personnel. For example, in August 2023, we acquired Rookout, a provider of enterprise-ready and privacy-aware solutions that enable developers to quickly troubleshoot and debug actively running code in Kubernetes-hosted cloud-native applications. In March 2024, we acquired Runecast, a provider of software solutions that provide insights for security compliance, vulnerability assessment, and configuration management for complex, on-premises, hybrid and multi-cloud IT environment. We expect to continue to consider and evaluate a wide array of potential acquisitions as part of our overall business strategy, including, but not limited to, acquisitions of certain businesses, technologies, services, products, and other assets and revenue streams. At any given time, we may be engaged in discussions or negotiations with respect to one or more acquisitions, any of which could, individually or in the aggregate, be material to our financial condition and results of operations. There can be no assurance that we will be successful in identifying, negotiating, and consummating favorable acquisition opportunities, and we may not be able to complete such acquisitions on favorable terms. If we do complete acquisitions, we may not ultimately strengthen our competitive position or achieve our goals, and any acquisitions we complete could be viewed negatively by our customers, securities analysts, and investors, and could be disruptive to our operations.
Acquisitions may involve additional significant challenges, uncertainties, and risks, including, but not limited to:
•challenges, difficulties, or increased costs associated with integrating new employees, systems, technologies, and business cultures;
•failure of the acquisition to advance our business strategy and failure to achieve the acquisition’s anticipated benefits or synergies;
•disruption of our ongoing operations, diversion of our management’s attention, and increased costs and expenses associated with pursuing acquisition opportunities;
•inadequate data security, cybersecurity, and operational and information technology compliance and resilience;
•failure to identify, or our underestimation of, commitments, liabilities, deficiencies, and other risks associated with acquired businesses or assets;
•inconsistency between the business models of our company and the acquired company, and potential exposure to new or increased regulatory oversight and uncertain or evolving legal, regulatory, and compliance requirements;
•the potential loss of key management, other employees, or customers of the acquired business;
•potential reputational risks that could arise from transactions with, or investments in, companies involved in new or developing businesses or markets, which may be subject to uncertain or evolving legal, regulatory, and compliance requirements;
•potential impairment of goodwill or other acquisition-related intangible assets; and
•the potential for acquisitions to result in dilutive issuances of our equity securities or significant additional debt.
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The integration process for an acquired business may require significant time and resources, and we may not be able to manage the process successfully. We may not successfully evaluate or utilize the acquired technology or personnel, or accurately forecast the financial impact of an acquired business, including accounting charges. We may have to pay cash, incur debt, or issue equity securities to pay for any such acquisitions, each of which could adversely affect our financial condition or the value of our common stock. The sale of equity or issuance of debt to finance any such acquisitions could result in dilution to our stockholders. The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations.
Acquisitions may also heighten many of the risks described in this “Risk Factors” section. Acquisitions are inherently risky, may not be successful, and may harm our business, results of operations, and financial condition.
Our business is subject to a wide range of laws and regulations and our failure to comply with those laws and regulations could harm our business, operating results, and financial condition.
Our business is subject to regulation by various U.S. federal, state, local, and foreign governmental agencies, including agencies responsible for monitoring and enforcing employment and labor laws, workplace safety, product safety, environmental laws, consumer protection laws, privacy, cybersecurity and data protection laws, anti-bribery laws, trade controls, federal acquisition regulations and guidelines, federal securities laws, and tax laws and regulations. In certain foreign jurisdictions, these regulatory requirements may be more stringent than those in the United States. These laws and regulations are subject to change over time and we must continue to monitor and dedicate resources to ensure continued compliance. We also anticipate continued changes in the laws and regulations governing cybersecurity controls and processes, data governance, trade controls, and the use of AI. Non-compliance with applicable regulations or requirements could subject us to litigation, investigations, sanctions, mandatory product recalls, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties, or injunctions. If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, operating results, and financial condition could be materially adversely affected. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could harm our business, operating results, and financial condition. Changes in cybersecurity, data governance, trade, and AI regulation, as well as geopolitical tensions, could increase our cost of doing business, for example, by requiring breach notifications or increased restrictions on trade, or requiring that data be retained, accessed, and viewed only within specific jurisdictional locations.
We are subject to governmental export, import, and sanctions controls that could impair our ability to compete in international markets and subject us to liability if we are not in compliance with applicable laws.
Our solutions are subject to export control and economic sanctions laws and regulations, including the U.S. Export Administration Regulations administered by the U.S. Commerce Department’s Bureau of Industry and Security and the economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control. Exports, re-exports, and transfers of our software and services must be made in compliance with these laws and regulations. Obtaining the necessary authorizations, including any required license for a particular sale, may be time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities.

Various countries regulate the import of encryption technology. Changes in the encryption or other technology incorporated into our solutions or in applicable export or import laws and regulations may delay the introduction and sale of our solutions in international markets, prevent customers from deploying our solutions or, in some cases, prevent the export or import of our solutions to certain countries, regions, governments, or persons altogether.

Changes in sanctions, export, or import laws and regulations, in the enforcement or scope of existing laws and regulations, or in the countries, regions, governments, persons, or technologies targeted by such laws and regulations, could also result in decreased use of our solutions or in our ability to sell our solutions in certain countries.

Even though we take precautions to prevent our solutions from being provided to restricted countries or persons, our solutions could be provided to those targets by our resellers or customers despite such precautions, and our customers may choose to host their systems including the Dynatrace platform using a hosting vendor that is a restricted person. The decreased use of our solutions or limitation on our ability to export or sell our solutions could adversely affect our business, while violations of these export and import control and economic sanctions laws and regulations could have negative consequences for us and our personnel, including government investigations, administrative fines, civil and criminal penalties, denial of export privileges, incarceration, and reputational harm.

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Due to the global nature of our business, we could be adversely affected by violations of anti-bribery, anti-money laundering and similar laws in other jurisdictions in which we operate.
We are subject to the FCPA, the U.K. Bribery Act and other anti-corruption and anti-money laundering laws in other jurisdictions. These laws generally prohibit companies, their employees, and their intermediaries from making or offering improper payments or other benefits to government officials and others in the private sector.

As we increase our sales and operations outside of the United States and increase our use of third parties, such as partners, resellers, agents and other intermediaries, our risks under these laws increases. Although we take steps to ensure compliance by adopting policies and conducting training, we cannot guarantee that our employees, partners, resellers, agents, or other intermediaries will not engage in prohibited conduct that could render us responsible under these laws. Non-compliance with these laws could subject us to investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with specified persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences. Any investigations, actions and/or sanctions could have a material negative impact on our business, financial condition, and results of operations.
Risks Related to Our Common Stock
The trading price of our common stock has been, and may continue to be, volatile and you could lose all or part of your investment.
Technology stocks have historically experienced high levels of volatility. The trading price of our common stock has fluctuated substantially and will likely continue to be volatile, ranging from an intraday low of $17.05 to an intraday high of $80.13 between our initial public offering in 2019 through November 5, 2024. Factors that could cause fluctuations in the trading price of our common stock include the following:
•announcements of new products, offerings or technologies, commercial relationships, acquisitions, or other events by us or our competitors;
•changes in how customers perceive the benefits of our platform;
•shifts in the mix of billings and revenue attributable to SaaS subscriptions, licenses and services from quarter to quarter;
•departures of our Chief Executive Officer, Chief Financial Officer, other executive officers, senior management or other key personnel;
•price and volume fluctuations in the overall stock market from time to time;
•fluctuations in the trading volume of our shares or the size of our public float;
•sales of large blocks of our common stock;
•actual or anticipated changes or fluctuations in our operating results;
•whether our operating results meet the expectations of securities analysts or investors;
•changes in actual or future expectations of investors or securities analysts;
•litigation, data breaches, or security incidents involving us, our industry or both;
•regulatory developments in the United States, foreign countries or both;
•general economic conditions and trends; and
•major catastrophic events in our domestic and foreign markets.
In addition, if the market for technology stocks or the stock market in general experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, operating results, or financial condition. The trading price of our common stock might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us. In the past, following periods of volatility in the trading price of a company’s securities, securities class action litigation has often been brought against that company.
If our internal controls over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results, prevent fraud or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.
As a public company, we are required to maintain internal control over financial reporting and disclosure controls and procedures. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on our internal control over financial reporting. Our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we or our accounting firm identify deficiencies in our internal control over financial reporting that are deemed to
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be material weaknesses, the market price of our stock would likely decline and we could be subject to lawsuits, sanctions, or investigations by regulatory authorities, including SEC enforcement actions, and we could be required to restate our financial results, any of which would require additional financial and management resources.

If material weaknesses in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results, which could materially and adversely affect our business, results of operations, and financial condition, restrict our ability to access the capital markets, require us to expend significant resources to correct the material weakness, subject us to fines, penalties or judgments, harm our reputation, or otherwise cause a decline in investor confidence.

Sales of substantial amounts of our common stock in the public markets, or the perception that such sales could occur, could reduce the market price of our common stock.
Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales could occur, could adversely affect the market price of our common stock and may make it more difficult for you to sell your common stock at a time and price that you deem appropriate. One of our historically largest shareholders, the Thoma Bravo Funds, sold approximately 53.4 million shares of our common stock during our fiscal 2024, and an additional approximately 6.5 million shares in the first quarter of our fiscal 2025, bringing their beneficial ownership below 5% of our common stock. In addition, any such sales, or the possibility that these sales may occur, could make it more difficult for us to sell shares of our common stock in the public market in the future.

Our issuance of additional capital stock in connection with financings, acquisitions, investments, our stock incentive plans, or otherwise will dilute all other stockholders.
We may issue additional capital stock in the future that will result in dilution to all other stockholders. We may also raise capital through equity financings in the future. As part of our business strategy, we may acquire or make investments in complementary companies, products, offerings or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock may cause stockholders to experience significant dilution of their ownership interests and the per share value of our common stock to decline.

We cannot guarantee that our share repurchase program will be fully consummated or will enhance long-term stockholder value, and share repurchases could increase the volatility of the trading price of our common stock and diminish our cash reserves.

In May 2024, we announced a share repurchase program under which we are authorized to purchase up to $500.0 million of our common stock from time to time. As of September 30, 2024, a total of $409.9 million remained available for repurchase under the share repurchase program. Our share repurchase program does not have an expiration date and does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares on any particular timetable or at all. There can be no assurance that we will repurchase shares at favorable prices. Further, our share repurchases could affect the trading price of our common stock, increase its volatility, reduce our cash reserves, and may be suspended or terminated at any time, which may result in a lower market valuation of our common stock.

We do not intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
We have never declared or paid any dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future. As a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
Our charter and bylaws contain anti-takeover provisions that could delay or discourage takeover attempts that stockholders may consider favorable.
Our charter and bylaws contain provisions that could delay or prevent a change in control of our company. These provisions could also make it difficult for stockholders to elect directors who are not nominated by the current members of our board of directors or take other corporate actions, including effecting changes in our management. These provisions include:
•a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors;
•directors may only be removed for cause, and subject to the affirmative vote of the holders of 66 2/3% or more of our outstanding shares of capital stock then entitled to vote at a meeting of our stockholders called for that purpose;
•the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those
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shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
•allowing only our board of directors to fill vacancies on our board of directors, which prevents stockholders from being able to fill vacancies on our board of directors;
•a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
•the requirement that a special meeting of stockholders may be called only by our board of directors, the chair of our board of directors, our Chief Executive Officer or our president (in the absence of a Chief Executive Officer), which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;
•the requirement for the affirmative vote of holders of at least 66 2/3% of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend the provisions of our charter relating to the management of our business (including our classified board structure) or certain provisions of our bylaws, which may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt;
•the ability of our board of directors to amend the bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt;
•advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us; and
•a prohibition of cumulative voting in the election of our board of directors, which would otherwise allow less than a majority of stockholders to elect director candidates.
Our charter also contains a provision that provides us with protections similar to Section 203 of the Delaware General Corporation Law, and prevents us from engaging in a business combination, such as a merger, with an interested stockholder (i.e., a person or group who acquires at least 15% of our voting stock) for a period of three years from the date such person became an interested stockholder, unless (with certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner.

We may issue preferred stock, the terms of which could adversely affect the voting power or value of our common stock.
Our charter authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, preferences, limitations, and relative rights, including preferences over our common stock respecting dividends and distributions, as our board of directors may determine. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our common stock. For example, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of our common stock.
Our bylaws designate certain specified courts as the sole and exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Pursuant to our bylaws, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for state law claims for (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a claim of, or a claim based on, a breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders; (3) any action asserting a claim pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our bylaws; (4) any action to interpret, apply, enforce, or determine the validity of our certificate of incorporation or bylaws; or (5) any action asserting a claim governed by the internal affairs doctrine (collectively, the “Delaware Forum Provision”). The Delaware Forum Provision does not apply to any causes of action arising under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act. Our bylaws further provide that, unless we consent in writing to the selection of an alternative forum, the U.S. federal district courts will be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum Provision”). In addition, our bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have notice of and consented to the foregoing provisions; provided, however, that stockholders cannot and will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
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The Delaware Forum Provision and the Federal Forum Provision may impose additional litigation costs on stockholders in pursuing the claims identified above. Additionally, the Delaware Forum Provision and the Federal Forum Provision in our bylaws may limit our stockholders’ ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage the filing of lawsuits against us and our directors, officers, and employees, even though an action, if successful, might benefit our stockholders. In addition, while the Delaware Supreme Court and other state courts have upheld the validity of federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court, there is uncertainty as to whether courts in other states will enforce our Federal Forum Provision. If the Federal Forum Provision is found to be unenforceable in an action, we may incur additional costs associated with resolving such an action. The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable or invalid. The Court of Chancery of the State of Delaware or the U.S. federal district courts may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.

General Risk Factors

Catastrophic events could materially interrupt or disrupt our business and others with which we conduct business.

Catastrophic events, such as natural disasters (e.g., fire, flood, severe storm, earthquake and other weather events), pandemics (such as COVID-19), epidemics, or outbreaks of an infectious disease, could interrupt or disrupt our business and our customers, partners, and suppliers, including hyperscaler providers which host Dynatrace solutions on their cloud infrastructure. For a description of some of the risks related to interruption or disruption of our services, please see the risk above entitled, “Interruptions or disruptions with the delivery of our SaaS solutions, or third party cloud-based systems that we depend on in our operations, may adversely affect our business, operating results, and financial condition.”

The COVID-19 pandemic, and policies and regulations implemented by governments in response to it, had a significant impact, both directly and indirectly, on global businesses and commerce and indirect effects, such as worker shortages and supply chain constraints. Future global health concerns could also result in social, economic, and labor instability in the countries in which we or the third parties with whom we engage operate.

The impact to our business from any catastrophic event depends on many different factors that cannot be accurately predicted, such as its duration and scope and the interruption, disruption, or instability caused by the event. Future catastrophic events could have severe impacts on our business and our customers’ and prospective customers’ businesses, for example, by adversely impacting their timing, ability, or willingness to spend on software platforms or purchase our offerings. Negative effects of catastrophic events on our customers or prospective customers could lead to pricing discounts or extended payment terms, reductions in the amount or duration of customers’ subscription contracts or term licenses, or increase customer attrition rates. Any of the foregoing, especially for a prolonged period, could adversely affect our productivity, employee morale, future sales, operating results, and overall financial performance. Catastrophic events may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

Climate change may have a long-term negative impact on our business.
The long-term effects of climate change on the global economy and the technology industry in particular are unclear. However, there are inherent climate-related risks such as natural disasters, infrastructure disruptions, and geopolitical instability that have the potential to disrupt and impact our business and the third parties with which we conduct business.

In addition, changes in U.S. federal and state legislation and regulation and the laws, rules, and regulations of other countries where we have operations related to climate change could result in increased capital expenditures to comply with these new requirements. Numerous treaties, laws, and regulations have been enacted or proposed in an effort to regulate climate change, including regulations aimed at limiting greenhouse gas emissions and the implementation of “green” building codes. These laws and regulations may result in increased operating costs across various levels of our supply chain, which could cause us to increase costs to satisfy service obligations to our customers. We may also incur costs associated with increased regulations or investor requirements for increased sustainability disclosures and reporting, including reporting requirements and standards or expectations regarding the environmental impacts of our business. The cost of compliance with, or failure to comply with, such laws, rules, and regulations could result in increased compliance costs, and any untimely or inaccurate disclosure could adversely affect our reputation, business, or financial performance.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(c) Issuer Purchases of Equity Securities
Share repurchase activity during the three months ended September 30, 2024 was as follows (in thousands, except shares and per share data):
Period (1)
(a) Total Number of Shares Purchased
(b) Average Price Paid per Share(2)
(c ) Total Number of Shares Purchased as Part of Publicly Announced Plan or Programs
(d) Approximate Dollar Value of Shares that may Yet be Purchased Under Plans or Programs(3)
July 1, 2024 - July 31, 2024291,230 $43.97 291,230 $437,082 
August 1, 2024 - August 31, 2024205,400 47.98 205,400 427,224 
September 1, 2024 - September 30, 2024338,133 51.23338,133 409,893 
Total834,763 $47.90 834,763 
(1) Information is based on trade dates of share repurchase transactions.
(2) Excludes commissions paid and any estimated excise taxes payable on share repurchases.
(3) On May 15, 2024, we announced a share repurchase program for up to $500 million of shares of our common stock.Our share repurchase program does not have a time limit.
For additional information, please see Note 11, Shareholders’ Equity, of the condensed consolidated financial statements in this Quarterly Report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During the three months ended September 30, 2024, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act).


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ITEM 6. EXHIBITS

The exhibits listed below are filed or incorporated by reference into this Report.
Exhibit
Number 
Exhibit Title
3.1
3.2
3.3
4.1
10.1*
31.1*
31.2*
32.1**
101.INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
_________________
* Filed herewith.
** The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.
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SIGNATURES
    Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DYNATRACE, INC.
Date:November 7, 2024By:/s/ Rick McConnell
Rick McConnell
Chief Executive Officer
(Principal Executive Officer)
Date:November 7, 2024By:/s/ James Benson
James Benson
Executive Vice President, Chief Financial Officer & Treasurer
(Principal Financial Officer)

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