Executive Summary
Dynatrace Inc reported robust financial results for the first quarter of fiscal year 2025, achieving a revenue of $399 million, up 21% year-over-year in constant currency. The Annual Recurring Revenue (ARR) reached $1.54 billion, reflecting a 20% increase and underscoring the company's strong market momentum driven by higher customer demand for their observability platform. Notably, net income was $38.62 million, or $0.13 per diluted share, exceeding expectations guidance, signaling resilience in a competitive landscape. Management expressed optimism about the growing adoption of observability solutions, propelled by AI and cloud migration trends, while maintaining a prudent stance on guidance amid market fluctuations. Overall, the fiscal outlook remains positive, bolstered by continued investments in product innovation and customer success initiatives.
Key Performance Indicators
Key Insights
### Financial Performance Metrics
1. **Revenue**: $399 million, up from $330 million YoY (21% increase)
2. **ARR**: $1.54 billion, reflecting a 20% increase YoY.
3. **Net Income**: $38.62 million, compared to $38.28 million YoY (1.13% increase).
4. **Earnings per Share**: $0.13, consistent with Q1 2024.
5. **Gross Margin**: 81.28%, a slight improvement compared to previous quarters.
6. **Operating Income**: $42.03 million, 10.53% of revenue.
7. **Free Cash Flow**: $227 million, highlighting stro...
Financial Highlights
### Financial Performance Metrics
1. Revenue: $399 million, up from $330 million YoY (21% increase)
2. ARR: $1.54 billion, reflecting a 20% increase YoY.
3. Net Income: $38.62 million, compared to $38.28 million YoY (1.13% increase).
4. Earnings per Share: $0.13, consistent with Q1 2024.
5. Gross Margin: 81.28%, a slight improvement compared to previous quarters.
6. Operating Income: $42.03 million, 10.53% of revenue.
7. Free Cash Flow: $227 million, highlighting strong cash generation with approximately 30% margin on revenue.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
399.22M |
19.93% |
4.82% |
| Gross Profit |
324.47M |
19.93% |
5.01% |
| Operating Income |
42.03M |
22.58% |
81.76% |
| Net Income |
38.62M |
1.13% |
1.78% |
| EPS |
0.13 |
0.00% |
0.00% |
Key Financial Ratios
operatingProfitMargin
10.5%
operatingCashFlowPerShare
$0.78
freeCashFlowPerShare
$0.77
Management Commentary
### Key Management Insights
- Rick McConnell, CEO: "Our first quarter results are a compelling example of our team’s disciplined execution...Observation software has become mandatory in helping organizations minimize impact."
- Jim Benson, CFO: "We surpassed the high end of our top-line growth...Net new ARR was up 23% year-over-year...We expect significant opportunities given the robust health of our demand environment."
"Given recent industry-wide outages that have impacted billions of end users globally, observability software has become mandatory." - Rick McConnell
— Rick McConnell
"Net new ARR on a constant currency basis was $46 million, up 23% year-over-year." - Jim Benson
— Jim Benson
Forward Guidance
Dynatrace maintains a conservative outlook for the remainder of the fiscal year, emphasizing a disciplined approach in assessing the market's ongoing fluctuations. Although ARR growth is expected to stabilize, management anticipates that both top-line and profitability will build momentum through continued investments in AI-driven observability solutions. The second quarter revenue guidance is set between $404 million and $407 million, and management reiterates their commitment to maintaining full-year guidance despite macroeconomic uncertainties.