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What changed in Dynatrace, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Dynatrace, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+491 added−565 removedSource: 10-K (2023-05-25) vs 10-K (2022-05-26)

Top changes in Dynatrace, Inc.'s 2023 10-K

491 paragraphs added · 565 removed · 358 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

61 edited+45 added−23 removed10 unchanged
Biggest changeWe believe this strategy will enable new growth opportunities and allow us to continue to deliver differentiated high-value outcomes to our customers. • Grow our customer base. We intend to drive new customer growth by expanding our direct sales force focused on the largest 15,000 global enterprise accounts, which generally have annual revenues in excess of $1 billion.
Biggest changeWe intend to drive new customer growth by expanding our direct sales force focused on the largest 15,000 global enterprise accounts, which generally have annual revenues in excess of $1 billion. In addition, we plan to leverage our global partner ecosystem to add new customers in geographies where we have direct coverage and work jointly with our partners.
We provide employees with industry-competitive compensation and benefits, including retirement savings programs, the opportunity to invest in Dynatrace at a discount through our 2019 Employee Stock Purchase Plan (“ESPP”), and medical, dental, vision, and life and disability plans. Our benefits vary around the world due to local country regulations and cultural preferences.
We provide employees with industry-competitive compensation and benefits, including retirement savings programs, the opportunity to invest in Dynatrace at a discount through our Employee Stock Purchase Plan (“ESPP”), and medical, dental, vision, and life and disability plans. Our benefits vary around the world due to local country regulations and cultural preferences.
Digital Experience Management Dynatrace ® Digital Experience Management integrates three user experience capabilities into one solution—Real User Monitoring (“RUM”), Synthetic Monitoring, and Session Replay. Dynatrace ® RUM automatically captures every user click, tap, and swipe from any device across targeted applications and automatically connects these to back-end services for a complete picture of the user journey.
Digital Experience Monitoring Dynatrace ® Digital Experience Monitoring integrates three user experience capabilities into one solution - Real User Monitoring (“RUM”), Synthetic Monitoring, and Session Replay. Dynatrace ® RUM automatically captures every user click, tap, and swipe from any device across targeted applications and automatically connects these to back-end services for a complete picture of the user journey.
Application Security Optimized for cloud-native applications, containers, and Kubernetes, Dynatrace ® Application Security automatically and continuously detects vulnerabilities in applications, libraries, and code at runtime. It also provides real-time detection and blocking to protect against injection attacks that exploit critical vulnerabilities, such as Log4Shell.
Application Security Optimized for cloud-native applications, containers, and Kubernetes, Dynatrace ® Application Security automatically and continuously detects vulnerabilities in applications, libraries, and code at runtime. It also provides real-time detection and blocking to help protect against injection attacks that exploit critical vulnerabilities, such as Log4Shell.
Dynatrace ® Synthetic Monitoring simulates user experience across production and development environments in internally built and third-party applications, such as Salesforce, Zoom, NetSuite, and ServiceNow, to provide a proactive view into applications’ and API performance and availability without the need for live users.
Dynatrace ® Synthetic Monitoring simulates user experience across production and development environments in internally built and third-party applications, such as Salesforce, Zoom, NetSuite, and ServiceNow, to provide a proactive view into applications and API performance and availability without the need for live users.
Dynatrace ONE is provided to all Dynatrace customers and includes automatic product updates and upgrades, online access to documentation, knowledge base, and discussion forums as well as access to Dynatrace University.
Dynatrace ONE is provided to all Dynatrace customers and includes automatic product updates and upgrades, online access to documentation, a knowledge base, and discussion forums as well as access to Dynatrace University.
Dynatrace ® Session Replay delivers a movie-like review of a real user’s experience with an application, including what they saw and clicked on, how they converted, or where they abandoned the application. These insights enable digital teams to create more perfect user experiences.
Dynatrace ® Session Replay delivers a movie-like review of a real user’s experience with an application, including what they saw and clicked on, how they converted, or where they abandoned the application. We believe these insights enable digital teams to create more perfect user experiences.
Our customers are also able to procure our software through leading marketplaces such as AWS, Azure, SAP, Google and IBM. • Resellers.
Our customers are also able to procure our software through leading marketplaces, such as AWS, Azure, SAP, and Google. • Resellers.
These insights enable teams to continuously improve user experience and accelerate the delivery of digital innovation.
These insights enable teams to continuously improve their user experience and accelerate the delivery of digital innovation.
Research and Development We have a strong organic research and development (“R&D”) organization that is responsible for designing, developing, testing, and operating all aspects of our software intelligence offerings, including addressing new use cases, adding new innovative capabilities, extending the scale and scope of our technology, and embracing modern cloud and AI technologies while maintaining high quality.
Research and Development We have a strong research and development (“R&D”) organization that is responsible for designing, developing, testing, and operating all aspects of our offerings, including addressing new use cases, adding new innovative capabilities, extending the scale and scope of our technology, and embracing modern cloud and AI technologies while maintaining high quality.
Compensation and Benefits Our compensation program is designed to attract, reward and retain talented individuals who possess the skills necessary to support our business, contribute to our strategic goals and create long-term value for our stockholders.
Saving for the future: compensation and benefits - Our compensation program is designed to attract, reward, and retain talented individuals who possess the skills necessary to support our business, contribute to our strategic goals, and create long-term value for our stockholders.
Davis ® , our proprietary AI engine, dynamically baselines the performance of all components in the full stack, continually learning normal performance thresholds to provide precise answers when performance deviates from expected or desired conditions.
Davis ® , our proprietary AI engine, dynamically baselines the performance of all components in the full stack, continually learning to provide precise answers when performance deviates from expected or desired conditions.
We partner with leading innovative technology organizations such as Atlassian, Red Hat, ServiceNow, and VMWare to develop integrations, best practices, and extended capabilities that help our customers and solution partners achieve faster time to market and enhanced value in dynamic multicloud environments. • System integrators.
We partner with leading innovative technology organizations such as Atlassian, Red Hat, ServiceNow, Snyk, and VMware to develop integrations, best practices, and extended capabilities that help our customers and solution partners achieve faster time to market and enhanced value in dynamic multicloud environments.
Our resellers market and sell our products throughout the world and provide a go-to-market channel in regions where we do not have a direct presence, such as Africa, Japan, the Middle East, and South Korea. • Technology alliance partners.
Our resellers market and sell our offerings throughout the world and provide a go-to-market channel in countries and regions where we do not have a direct presence, such as in Africa, Japan, the Middle East, and South Korea. • Technology alliance partners.
Dynatrace University is our global on-line, self-service education program that provides several learning options for customers and partners to develop their skills around monitoring, managing, integrating, and analyzing multicloud environments and application workloads with Dynatrace.
Dynatrace University is our global online, self-service education program that provides several learning options for customers and partners to develop their skills around monitoring, managing, integrating, and analyzing multicloud environments and application workloads with Dynatrace.
Information contained on, or that can be accessed through, our website are not incorporated by reference into this Annual Report and should not be considered to be part of this Annual Report, and inclusions of our website address in this Annual Report are inactive textual references only.
Information contained on, or that can be accessed through, our websites are not incorporated by reference into this Annual Report and should not be considered to be part of this Annual Report, and inclusions of our website addresses in this Annual Report are inactive textual references only.
Support and SaaS Operations Dynatrace ONE is our innovative onboarding and support service that is focused on simplifying and streamlining the experience our customers have with the company and our products. Dynatrace ONE uses in-product chat as the primary vehicle for customer interaction to drive adoption and growth, as well as to handle issues and user questions.
Customer Support Dynatrace ONE is our innovative onboarding and support service that is focused on simplifying and streamlining the experience that our customers have with the company and our offerings. Dynatrace ONE uses in-product chat as the primary vehicle for customer interaction to drive adoption and growth, as well as to handle issues and user questions.
The principal competitive factors in our markets are: • artificial intelligence capabilities; • automation; • product features, functionality, and reliability; • ease and cost of deployment, use and maintenance; • deployment options and flexibility; • customer, technology, and platform support; • ability to easily integrate with customers software application and IT infrastructure environments; • the quality of data collection and correlation; • interoperability and ease of integration; and • brand recognition.
The principal competitive factors in our markets are: • AI capabilities; • automation; • product features, functionality, and reliability; • ease and cost of deployment, use and maintenance; • deployment options and flexibility; • customer, technology, and platform support; • ability to easily integrate with customers’ software application and IT infrastructure environments; • the quality of data collection and correlation; • interoperability and ease of integration; and • brand recognition.
Digital Business Analytics Dynatrace ® Digital Business Analytics leverages the data already flowing through the Dynatrace platform’s APM and DEM Modules and Davis ® , the AI engine, to provide precise, real-time answers that enable teams to understand how the performance of their digital services affects critical KPIs, such as feature adoption, conversion, orders, release validation, customer segmentation, and app store ratings.
Digital Business Analytics Dynatrace ® Digital Business Analytics leverages the data already flowing through the Dynatrace platform’s APM, Infrastructure Monitoring, and DEM modules and leverages Davis ® , the AI engine, to provide precise, real-time answers that enable teams to understand how the performance of their digital services affects critical key performance indicators (“KPIs”), such as feature adoption, conversion, orders, release validation, customer segmentation, and app store ratings.
Applications and Microservices Monitoring Our approach to APM changes how our customers monitor applications and manage transactions across highly complex hybrid, multicloud environments. Because modern clouds are dynamic, Dynatrace instrumentation is automatic.
Applications and Microservices Monitoring Our approach to application performance monitoring (“APM”) changes how our customers monitor applications and manage transactions across highly complex, hybrid, multicloud environments. Because modern clouds are dynamic, Dynatrace instrumentation is automatic.
We intend to maintain our position as the market-leading software intelligence platform through increased investment in research and development and continued innovation. We expect to focus on expanding the functionality of Dynatrace ® and investing in capabilities that address new market opportunities.
We intend to maintain our position as the market-leading unified observability and security platform through increased investment in research and development, and continued innovation. We expect to focus on expanding the functionality of our unified Dynatrace® platform and investing in capabilities that address new market opportunities.
Our mission is to bring together industry experts and hands-on practitioners to create a world-class partner network. In addition, our partner network extends the sales reach of the Dynatrace ® platform providing new sales opportunities, renewals of existing subscriptions, as well as upsell and cross-sell opportunities. Our partner network includes: • Cloud providers.
Our goal is to bring together industry experts and hands-on practitioners to create a world-class partner network. In addition, our partner network extends the sales reach of the Dynatrace ® platform providing new sales opportunities, renewals of existing subscriptions, as well as upsell and cross-sell opportunities. Our partner network includes: • Global system integrators.
We work with many of the major cloud providers to increase awareness of our products and make it easy for customers to access our software. Our software is developed to run in and integrate with leading cloud providers, such as, AWS, Azure, and Google Cloud Platform.
We work with the major cloud providers to increase awareness of our offerings and make it easy for customers to access our software. Our software is developed to run in and integrate with leading cloud providers, such as AWS, Azure, and GCP.
We have registered numerous Internet domain names related to our business. We also license software from third parties for integration into our applications and utilize open-source software. We enter into agreements with our employees, contractors, customers, partners, and other parties with which we do business to limit access to and disclosure of our proprietary information.
We also license software from third parties for integration into our applications and utilize open-source software. We enter into agreements with our employees, contractors, customers, partners, and other parties with which we do business to limit access to and disclosure of our confidential and proprietary information.
Dynatrace ® provides out-of-the-box configuration for the leading cloud platforms, such as AWS, Azure, Google Cloud Platform, Red Hat OpenShift, VMware Tanzu, and SAP, as well as coverage for traditional on-premises systems, including mainframe and monolithic applications in a single, easy-to-use, intelligent platform. • AI-powered, answer-centric insights.
Dynatrace ® provides out-of-the-box configuration for the leading cloud platforms, such as AWS, Azure, GCP, Red Hat OpenShift, and SAP, as well as coverage for traditional on-premises systems, including mainframe and monolithic applications in a single, easy-to-use, intelligent platform.
We do this primarily through our digital online 7 Table of Contents channels, such as the Dynatrace News blog, Dynatrace Community, and Dynatrace University, as well as our customer event series ‘Perform and DynatraceGo!’ Partners We develop and maintain partnerships that help us market and deliver our products to our customers around the world.
We do this primarily through our digital online channels, such as the Dynatrace News blog, Dynatrace Community, and Dynatrace University, as well as our customer event series ‘Perform’ and ‘Innovate’. 9 Table of Contents Partners We develop and maintain partnerships that help us market and deliver our offerings to our customers around the world.
Unlike ML-based correlation engines that rely on historical data for learning behavior and overwhelm IT professionals with hundreds of alerts, Dynatrace ® provides a single problem resolution and precise root-cause determination.
Unlike machine learning (“ML”)-based correlation engines that rely on historical data for learning behavior and which can overwhelm IT professionals with alerts, Dynatrace ® provides a single problem resolution and precise root-cause determination.
We have a network of systems integrators, both global and regional, that help joint customers integrate our products into their multicloud ecosystems. These partners extend our scale and reach and collaborate with our direct sales teams, bringing domain expertise in technologies and industries along with additional offerings powered by Dynatrace ® .
In addition, we continue to foster relationships with a network of regional systems integrators that help joint customers integrate our offerings into their multicloud ecosystems. These partners extend our scale and reach and collaborate with our direct sales teams, bringing domain expertise in technologies and industries along with additional offerings powered by Dynatrace ® . • Cloud providers.
Other trademarks and trade names referred to in this Annual Report are the property of their respective owners. 10 Table of Contents Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, including amendments and exhibits to these reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are available free of charge on the Investor Relations section of our website at www.dynatrace.com as soon as reasonably practicable after we file or furnish such material with the Securities and Exchange Commission (“SEC”).
Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, including amendments and exhibits to these reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge on the Investor Relations section of our website at https://ir.dynatrace.com as soon as reasonably practicable after we file or furnish such material with the Securities and Exchange Commission (“SEC”).
Cloud Automation Dynatrace ® Cloud Automation leverages the observability and intelligence at the core of the Dynatrace platform and includes an embedded control plane to enable development, DevOps, and SRE teams to automate CI/CD, deployment, and release processes to accelerate release cycles, drive production reliability and meet business imperatives.
Cloud Automation Dynatrace ® Cloud Automation leverages the observability and intelligence at the core of the Dynatrace platform and includes an embedded control plane to enable development, DevOps, and site reliability engineering (“SRE”) teams to automate continuous integration and continuous delivery (“CI/CD”), deployment, and release processes to accelerate release cycles, drive production reliability, and meet business imperatives.
We compete either directly or indirectly with: • APM vendors, such as Cisco and New Relic; • Infrastructure monitoring vendors, such as BMC and Datadog; • DEM vendors, such as Akamai and Catchpoint; • Security vendors such as Palo Alto Networks and Splunk; • Open source and commercial open source vendors such as Elastic and Grafana; • Point solutions from public cloud providers; and • IT operations management, AIOps, and business intelligence providers with offerings that cover some portion of the capabilities we provide. 9 Table of Contents In addition to the above companies, we also face potential competition from vendors in adjacent markets that may offer capabilities that overlap with ours.
We compete either directly or indirectly with: • APM vendors, such as Cisco and New Relic; • infrastructure monitoring vendors, such as BMC and Datadog; • log management vendors, such as Splunk and Datadog; • DEM vendors, such as Akamai and Catchpoint; • security vendors, such as Palo Alto Networks and Splunk; • open source and commercial open source vendors, such as Elastic and Grafana; • point solutions from public cloud providers; and • IT operations management, AIOps, and business intelligence providers with offerings that cover some portion of the capabilities that we provide.
Dynatrace ® is installed as a single agent, OneAgent ® , which automatically configures itself, and continuously discovers all components of the full stack to enable high fidelity data capture at enormous scale.
The Dynatrace platform provides the following key benefits: • Single agent, fully automated configuration. Dynatrace ® is installed as a single agent, OneAgent ® , which automatically configures itself, and continuously discovers all components of the customer’s full stack to enable high fidelity data capture at great scale.
We expect competition to continually evolve as enterprises shift to dynamic multicloud environments and as more mature vendors look to provide a holistic approach to monitoring.
We expect competition to continually evolve as enterprises shift to dynamic multicloud environments and as more mature vendors look to provide a holistic approach in areas of the market that we serve.
In addition, we believe the ease of implementation for Dynatrace ® provides us the opportunity to expand adoption within our existing enterprise customers, across new customer applications, and into additional business units or divisions.
In addition, we believe the ease of implementation for Dynatrace® provides us the opportunity to expand adoption within our existing enterprise customers, across new customer applications, and into additional business units or divisions. Once customers are on the Dynatrace® platform, we have seen significant dollar-based net expansion due to the ease of use and power of our platform.
This Annual Report includes our trademarks and trade names, including, without limitation, Dynatrace ® , OneAgent ® , SmartScape ® , PurePath ® and Davis ® , which are our property and are protected under applicable intellectual property laws.
This Annual Report includes our trademarks and trade names, including, without limitation, Dynatrace ® , OneAgent ® , SmartScape ® , PurePath ®, Davis ® and Grail TM which are our property and are protected under applicable intellectual property laws. Other trademarks and trade names referred to in this Annual Report are the property of their respective owners.
The Dynatrace Software Intelligence Platform The Dynatrace ® Software Intelligence Platform provides application and microservices monitoring (“APM”), runtime application security, infrastructure monitoring, digital experience monitoring (“DEM”), business analytics, and cloud automation in an easy-to-use, highly automated, all-in-one solution.
Our Product Offerings All of our offerings leverage the Dynatrace ® observability and security platform to provide application and microservices monitoring, runtime application security, infrastructure monitoring, log management and analytics, digital experience monitoring (“DEM”), digital business analytics, and cloud automation in an easy-to-use, highly automated, all-in-one solution.
This coverage extends to the leading cloud platforms, including AWS, Microsoft Azure, Google Cloud Platform, VMWare Tanzu, Red Hat OpenShift, and Kubernetes, utilizing our OneAgent ® instrumentation and powerful API ingestion capabilities to provide a single source of analysis across environments.
Infrastructure Monitoring Dynatrace® Infrastructure Monitoring provides complete visibility into a customer’s infrastructure layer across public and private clouds and hybrid, multicloud environments. This coverage extends to the leading cloud platforms, including AWS, Azure, GCP, VMWare Tanzu, Red Hat OpenShift, and Kubernetes, utilizing our OneAgent ® instrumentation and powerful API ingestion capabilities to provide a single source of analysis across environments.
We believe this all-in-one approach reduces the need for a variety of disparate tools and enables our customers to improve productivity and decision making while reducing operating costs.
In addition, the Dynatrace® platform provides extensive automation, including continuous discovery, proactive anomaly detection, and optimization across the software lifecycle. We believe this all-in-one approach reduces the need for a variety of disparate tools and enables our customers to improve productivity and decision making while reducing operating costs.
As of March 31, 2022, we had 98 issued patents, 75 of which are in the United States, and 35 pending applications, of which 22 are in the United States. Our issued patents expire at various dates through September 2040.
As of March 31, 2023, we had 115 issued patents, 80 of which are in the United States, and 42 pending applications, of which 25 are in the United States. Our issued patents expire at various dates through July 2041.
We believe the accuracy and precision of the answers delivered by Davis ® enable our customers to shift from reactive to proactive remediation, providing a substantial advantage in time savings, resource efficiency, customer satisfaction, and business outcomes. • Enterprise scale. Dynatrace ® utilizes big data architecture and enterprise-proven cloud technologies that are engineered for large, complex hybrid, multicloud environments.
We believe the accuracy and precision of the answers delivered by Davis ® enable our customers to shift from reactive to proactive remediation, providing a substantial advantage in time savings, resource efficiency, customer satisfaction, and business outcomes. • Unified observability, security and business data at any scale .
Our expertise and cloud modernization practices cover cloud ecosystem integration, automated incident management and problem resolution, DevOps CI/CD integration, user experience, business intelligence insights, digital business analytics, and more.
Professional Services Our Dynatrace Services Organization empowers our customers to innovate, automate, and transform the way they work with the Dynatrace ® platform. Our expertise and cloud modernization practices cover cloud ecosystem integration, automated incident management and problem resolution, DevOps CI/CD integration, user experience, business intelligence insights, digital business analytics, and more.
Our Mission Control center automatically upgrades all Dynatrace ® instances and offers on-premises cluster customers auto-deployment options that suit their specific enterprise management processes. 5 Table of Contents Our Growth Strategy • Extend our technology and market leadership position.
Our Mission Control center automatically upgrades all Dynatrace ® instances and offers on-premises cluster customers auto-deployment options that suit their specific enterprise management processes. 8 Table of Contents Customers As of March 31, 2023, we had more than 3,600 customers in over 90 countries.
Through shorter feedback loops between Dev and Ops teams and continuous release validation, DevOps and SRE teams can focus on delivering innovation faster and with less risk.
Through shorter feedback loops between Dev and Ops teams and continuous release validation, DevOps and SRE teams can focus on delivering innovation faster and with less risk. Dynatrace Deployment and Operations The Dynatrace ® platform utilizes big data architecture and enterprise-proven cloud technologies that are engineered for large, complex hybrid, multicloud environments.
We engineered the Dynatrace platform to automatically capture a wide variety of high-fidelity application, infrastructure, user experience, and open-source telemetry data at scale. With this broad set of observability data, the Dynatrace platform dynamically maps all components and their dependencies in a full-stack hybrid, multicloud environment for real-time, continuous context.
With this broad set of observability data, the Dynatrace® platform dynamically maps all components and their dependencies in a full-stack hybrid, multicloud environment for real-time, continuous context. Our proprietary AI engine, Davis®, processes this observability data in real time to deliver answers to issues, bottlenecks, degradations, and more.
Dynatrace ONE Premium offers dedicated expertise for customers with designated Product Specialists and Customer Success Managers familiar with the customer’s environment, goals, and challenges to provide a customized success plan.
Dynatrace ONE Premium offers dedicated expertise for customers with designated Product Specialists and Customer Success Managers familiar with the customer’s environment, goals, and challenges to provide a customized plan. 10 Table of Contents Intellectual Property Dynatrace relies on a combination of patent, copyright, trademark, trade dress, and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our proprietary rights.
Any patents that may issue in the future with respect to pending or future patent applications may not provide sufficiently broad protection or may not prove to be enforceable in actions against alleged infringers. 8 Table of Contents We have registered “Dynatrace” and the “Dynatrace” logo as trademarks in the United States and other jurisdictions for our name and our product as well as certain other words and phrases that we use in our business, including “One Agent”, “PurePath”, “SmartScape” and “Davis”.
We have registered “Dynatrace” and the “Dynatrace” logo as trademarks in the United States and other jurisdictions for our name and our product as well as certain other words and phrases that we use in our business, including “One Agent”, “PurePath”, “SmartScape”, and “Davis”. We have registered numerous Internet domain names related to our business.
We may also face competition from companies entering our market, including large technology companies which that could expand their platforms or acquire one of our competitors. Human Capital Management Human Capital We believe that our success is in large part due to the drive, creativity and the overall strength of our workforce.
In addition to the above companies, we also face potential competition from vendors in adjacent markets that may offer capabilities that overlap with ours. We may also face competition from companies entering our market, including large technology companies that could expand their platforms or acquire one of our competitors.
No organization or customer accounted for more than 10% of our revenue for the years ended March 31, 2022, 2021, and 2020. Sales and Marketing We take Dynatrace ® to market through a combination of our global direct sales team and a network of partners, including resellers, system integrators and managed service providers.
Sales and Marketing 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.
Traditional approaches for developing, operating, monitoring, and securing software were not designed to keep pace with these modern cloud environments. What was once a well understood layering of applications running on operating systems on physical servers connected to physical networks has rapidly become virtualized into software at all levels.
What was once a well understood layering of applications running on operating systems on physical servers connected to physical networks has rapidly become virtualized into software at all levels. Applications are no longer monolithic and have become fragmented into thousands, potentially millions, of microservices, written in multiple software languages.
With role-based access and advanced security functionality, we built the Dynatrace platform for enterprise-wide adoption by the largest organizations in the world. • Flexible deployment options. We deploy our platform as a SaaS solution, with the option of retaining the data in the cloud, or at the edge in customer-provisioned infrastructure, which we refer to as Dynatrace ® Managed.
With role-based access and advanced security functionality, we built the Dynatrace ® platform for enterprise-wide adoption by the largest organizations in the world.
In other geographies, we utilize a multi-tier “master reseller” model, such as in Africa, Japan, the Middle East, and South Korea. • Increase penetration within existing customers. We plan to continue to increase the penetration within our existing customers by expanding the breadth of our platform capabilities to provide for continued cross-selling opportunities.
Increase penetration within existing customers. We plan to continue to increase the penetration within our existing customers by establishing new and deeper relationships within our customers’ organizations (notably, development teams) and expanding the breadth of our platform capabilities to provide for continued cross-selling opportunities.
As enterprises and public sector institutions embrace the cloud to effect their digital transformation, we designed our unified platform to address the growing complexity faced by IT, development, security, and business operations teams. The Dynatrace ® platform combines comprehensive observability and continuous runtime application security with advanced AIOps to provide answers and intelligent automation from data, at enormous scale.
Our Dynatrace ® platform combines the only fully unified end-to-end solution for comprehensive observability and continuous runtime application security together with advanced artificial intelligence (“AI”) for IT operations (“AIOps”) to provide answers and intelligent automation from data at enormous scale.
As of March 31, 2022, we had approximately 3,600 employees operating within over 30 countries, with 65% outside of the United States. In countries in which we operate we are subject to local labor law requirements. None of our employees are represented by a labor union and we have not experienced any work stoppages.
None of our employees are represented by a labor union and some of our employees outside of the United States are represented by a works council. We have not experienced any work stoppages due to labor disputes. We believe that our relations with our employees and works councils are strong.
The SEC maintains an Internet website at http://www.sec.gov that contains reports, and other information regarding us and other companies that file materials with the SEC electronically.
The SEC maintains a website at www.sec.gov that contains our SEC filings and other information regarding us and other companies that file materials with the SEC electronically. Investors and others should note that we announce material financial information to our investors using our Investor Relations website, press releases, SEC filings and public conference calls and webcasts.
ITEM 1. BUSINESS Overview Digital transformation is ubiquitous, with software defining how we bank, manufacturer, deliver healthcare, receive government services, and communicate with our colleagues, friends, and families. This transformation is happening in dynamic hybrid, multicloud environments, which bring a scale and frequency of change that is exponentially greater than that of the old data-center world.
This transformation is happening in particular in dynamic hybrid, multicloud environments, which bring a scale and frequency of change that is exponentially greater than that of the old data center world. Traditional approaches for developing, operating, monitoring, and securing software were not designed to keep pace with these modern cloud environments.
We believe that our employees should have a strong work/life balance, develop and grow personally and professionally, and be able to save for their future.
We also believe that our employees should have a strong work/life balance, be able to save for their future, and give back to the communities in which we work and live. Strengthening our approach to DEIB - People, culture, and community initiatives focused on improving our DEIB efforts help us build a more inclusive and supportive culture.
OneAgent ® dynamically profiles the performance of all components of the full stack with code-level precision, even as applications and environments update and change. • Full-stack, all-in-one approach with deep cloud integrations. Dynatrace ® combines Application and Microservices Monitoring, with Application Security, Infrastructure Monitoring, Digital Experience Management, Business Analytics, and Cloud Automation and in a single platform.
OneAgent ® dynamically profiles the performance of all components of the full stack with code-level precision, even as applications and environments update and change. In addition, Dynatrace ® incorporates and enriches data from open source approaches such as OpenTelemetry. • Distributed tracing and code-level analysis technology.
Dynatrace was also honorably mentioned in a number of categories by Comparably’s workplace awards including Best Company Outlook, Best Global Culture and Best Places to Work in Boston. Corporate Information Our principal executive offices are located at 1601 Trapelo Road, Suite 116, Waltham, MA 02451 and our telephone number is (781) 530-1000. Our website address is www.dynatrace.com.
Through our volunteer program, Dynatracers can engage in paid time off to volunteer with charitable organizations that they are passionate about. Corporate Information Our principal executive offices are located at 1601 Trapelo Road, Suite 116, Waltham, Massachusetts 02451 and our telephone number is (781) 530-1000. Our website is www.dynatrace.com and our Investor Relations website is https://ir.dynatrace.com.
We also provide resources and training to employees to ensure that as we continue to grow, we are hiring people of all types. Additionally, Dynatrace continues to be recognized as an employer of choice earning awards around the globe in 2021 and 2022.
Dynatrace continues to be recognized as an employer of choice, earning awards around the globe in the last two years. In 2022 and 2023, Dynatrace won two of Comparably’s workplace awards - Best Company Outlook and Best Global Culture .
Our strategic partners include industry-leading global system integrators, software vendors, and cloud and technology providers. We intend to continue to invest in our partner ecosystem, with a particular emphasis on expanding our strategic alliances and cloud-focused partnerships with global system integrators, including Deloitte and DXC, and hyperscale cloud providers, including AWS, Microsoft Azure, Google Cloud Platform, and Red Hat.
Enhance our strategic partner ecosystem. We intend to continue to invest in our strategic partner ecosystem, with a particular emphasis on cloud-focused 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.
It removes blind spots and helps ensure development teams aren’t wasting time chasing false positives, and it provides the organizations with confidence in the security of their applications. 6 Table of Contents Infrastructure Monitoring Dynatrace ® Infrastructure Monitoring provides complete visibility into the infrastructure layer across public and private clouds and hybrid, multicloud environments.
It removes blind spots and helps development teams more quickly determine the cause of vulnerabilities, which we believe provides organizations with confidence in the security of their applications. 7 Table of Contents Log Management and Analytics Dynatrace ingests and analyzes petabytes of log data into our data lakehouse, Grail TM .
Removed
Applications are no longer monolithic and have become fragmented into thousands, potentially millions, of microservices, written in multiple software languages. These applications run in environments that extend across IaaS platforms, including Amazon Web Services, or AWS, Microsoft Azure, or Azure, and Google Cloud Platform, or GCP, and more traditional mainframe environments.
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ITEM 1. BUSINESS Overview Dynatrace offers a unified observability and security platform with analytics and automation at its core, purpose-built for dynamic, hybrid, multicloud environments. Our comprehensive solutions help global organizations simplify cloud complexity, innovate faster, and do more with less in the modern cloud. Our mission is to deliver answers and intelligent automation from data at an enormous scale.
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We believe the scale, complexity, and dynamic nature of modern hybrid, multicloud environments require a comprehensive observability, continuous runtime application security, and advanced AIOps strategy we refer to as software intelligence. Dynatrace offers the market-leading software intelligence platform, purpose-built for dynamic hybrid, multicloud environments.
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Our purpose is to enable flawless and secure digital interactions. Our vision is a world where software works perfectly. Digital transformation is ubiquitous, with software defining how we bank, manufacture, deliver healthcare, educate, receive government services, transact business, and communicate with our colleagues, friends, and families.
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This enables teams to modernize and automate cloud operations, deliver software faster and more securely, and ensure flawless digital experiences. The Dynatrace platform provides the following key benefits: • Single agent, fully automated configuration.
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These applications run in environments that may extend across Infrastructure as a Service (“IaaS”), Platform as a Service (“PaaS”), and Functions as a Service (“FaaS”), offered through hyperscaler vendor solutions such as Amazon Web Services (“AWS”), Microsoft Azure (“Azure”), and Google Cloud Platform (“GCP”), and more traditional data center solutions such as mainframe environments.
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The initial average Dynatrace ® ARR for these new customers was approximately $120 thousand, in fiscal year 2022. In addition, we expect to leverage our global partner ecosystem to add new customers in geographies where we have direct coverage and work jointly with our partners.
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To monitor and secure their IT environments, organizations increasingly need to move from manual processes, static dashboards, and remediating after the fact to solutions that deliver vastly improved insights, analytics, answers, and automation.
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Once customers are on the Dynatrace ® platform, we have seen significant dollar-based net expansion due to the ease of use and power of our new platform. Sustained a net expansion rate at or above 120% for the sixteenth consecutive quarter. • Enhance our strategic partner ecosystem.
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As enterprises and public sector institutions embrace modern cloud environments as the underlying foundation of their 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.
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Davis ® processes this observability data in real time to deliver answers to issues, bottlenecks, degradations, and more. In addition, the Dynatrace platform provides extensive automation, including continuous discovery, proactive anomaly detection, and optimization across the software lifecycle.
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This approach enables IT, development, security, and business operations teams to modernize and automate operations, deliver software faster and more securely, and provide better digital experiences. The Dynatrace Platform We engineered the Dynatrace® platform to automatically capture a wide variety of high-fidelity application, infrastructure, user experience, and open-source telemetry data at scale.
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We believe this combination of unparalleled observability, runtime application security, and advanced AI and automation across hybrid, multicloud ecosystems enables our customers to modernize and automate cloud operations more efficiently, develop and release higher quality software faster, and ensure flawless digital experiences consistently.
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PurePath ® , our patented distributed tracing and code-level analysis technology, automatically integrates high-fidelity distributed tracing with user experience data, data from open source technologies, including OpenTelemetry, and code level analytics. • Topology mapping and visualization.
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Customers As of March 31, 2022, we had more than 3,300 customers in over 90 countries. Our customers reflect diverse industries and include Air Canada, American Fidelity Assurance, Asics, BT Consumer, Dish Network Corporation, KeyBank, The Kroger Co., Porsche Informatik GmbH, SAP SE, Temenos AG, and U-Haul.
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As OneAgent ® discovers all of the components and dependencies in the application environment, our proprietary Smartscape ® technology simultaneously builds an interactive map of how everything in the environment is interconnected. 6 Table of Contents • AI-powered, answer-centric insights.
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As an example, Deloitte is leveraging the Dynatrace platform to power its expanded observability practice. Professional Services Our Dynatrace Services Organization empowers our customers to innovate, automate, and transform the way they work with the Dynatrace Platform.
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Grail TM , our proprietary data lakehouse architecture with massively parallel processing (“MPP”) technology, allows customers to analyze large volumes of data in modern cloud-native environments quickly and cost effectively without the overhead, expense and limitation of storage tiering, re-indexing, and rehydration imposed by alternative solutions. • Automated workflow processes.
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Intellectual Property Dynatrace relies on a combination of patent, copyright, trademark, trade dress, and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our proprietary rights. These laws, procedures, and restrictions provide only limited protection.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs a result, our 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 currencies in the markets where we do business; • 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; • compliance with United States and foreign import and export control and economic sanctions laws and regulations, including the Export Administration Regulations administered by the United States Department of Commerce’s Bureau of Industry and Security and the executive orders and laws implemented by the United States Department of the Treasury’s Office of Foreign Asset Controls; • compliance with anti-bribery laws, including the United States Foreign Corrupt Practices Act, and the U.K.
Biggest changeAs 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 currencies in the markets where we do business, including the recently strengthened dollar, 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; • compliance with United States and foreign import and export control and economic sanctions laws and regulations, including the Export Administration Regulations administered by the U.S.
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, the size and growth rate of the market for our solutions.
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.
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 our subsidiary guarantors’ assets.
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 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.
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.
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 we incur in connection with new solutions or solution enhancements.
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.
You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before making a decision to invest in our common stock.
You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, 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.
However, because the techniques used to obtain unauthorized access or to 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.
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.
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 will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
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.
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 and services that compete with ours. In the past, we have been made aware of public postings of portions of our source code.
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.
As the market for our solutions matures, or as new or existing competitors introduce new products 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.
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.
We 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, we may at times fail to do so or be alleged to have failed to do so.
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, we may at times fail to do so or be alleged to have failed to do so.
This 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.
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.
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; 36 Table of Contents • the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those 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 chairperson 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.
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 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.
Corporate-level U.S. federal, state and local taxes, were paid by us in connection with the Compuware Spin-Off and in connection therewith, Compuware distributed to us $265.0 million pursuant to a Master Structuring Agreement.
Corporate-level U.S. federal, state, and local taxes were paid by us in connection with the Compuware spin-off and in connection therewith, Compuware distributed to us $265.0 million pursuant to a structuring agreement.
For customers who purchase our Dynatrace platform, whether they purchase SaaS 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.
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.
Our 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.
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.
This subscription revenue growth may not be indicative of our future subscription revenue growth and we may not be able to sustain revenue growth consistent with recent history, or at all.
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 cannot be certain as to the standards a court would use to determine whether or not Compuware was insolvent at the relevant time.
We cannot be certain as to the standards that a court would use to determine whether or not Compuware was insolvent at the relevant time.
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 the customer’s applications.
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.
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 products, we contribute software program code to certain open source projects, managed by organizations such as Microsoft, Google and Cloud Native Computing Foundation.
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.
Our business is subject to regulation by various 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, import and export controls, federal acquisition regulations and guidelines, federal securities laws and tax laws and regulations.
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, import and export controls, federal acquisition regulations and guidelines, federal securities laws, and tax laws and regulations.
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 increases, this may not result in increased sales of our solutions or higher revenue.
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 charter provides that none of our officers or directors who are also an officer, director, employee, partner, managing director, principal, independent contractor or other affiliate of Thoma Bravo will be liable to us or our stockholders for breach of any fiduciary duty by reason of the fact that any such individual pursues or acquires a corporate opportunity for its own account or the account of an affiliate, as applicable, instead of us, directs a corporate opportunity to any other person, instead of us or does not communicate information regarding a corporate opportunity to us.
Our charter provides that none of our officers or directors who are also an officer, director, employee, partner, managing director, principal, independent contractor, or other affiliate of Thoma Bravo will be liable to us or our stockholders for breach of any fiduciary duty by reason of the fact that any such individual pursues or acquires a corporate opportunity for its own account or the account of an 35 Table of Contents affiliate, as applicable, instead of us, directs a corporate opportunity to any other person, instead of us or does not communicate information regarding a corporate opportunity to us.
Our solutions and our platform are often 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.
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.
A prolonged AWS 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.
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 did not obtain a tax insurance policy relating to the SIGOS Spin-Off. Any tax liabilities determined to be owed by us relating to the Compuware Spin-Off or the SIGOS Spin-Off following an audit or other tax dispute may adversely affect our results of operations.
We did not obtain a tax insurance policy relating to the SIGOS spin-off. Any tax liabilities determined to be owed by us relating to either spin-off following an audit or other tax dispute may adversely affect our results of operations.
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 customer’s critical business 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.
Any integration process 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.
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 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 (collectively, “Acquisitions”).
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.
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.
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, 24 Table of Contents trademarks, or trade secrets, and to pay judgments entered on such assertions. Large indemnity payments could harm our business, operating results, and financial condition.
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. Our ability to succeed depends on the experience and expertise of our senior management team.
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. 20 Table of Contents Our ability to succeed depends on the experience and expertise of our senior management team.
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.
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. 30 Table of Contents Our revenue recognition policy and other factors may distort our financial results in any given period and make them difficult to predict.
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, our prices and pricing plans, the competitiveness of other software products and services, reductions in our customers’ spending levels, user adoption of our solutions, deployment success, utilization rates by our customers, new product releases and changes to our product offerings.
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, 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.
Security incidents have become more prevalent across industries and may occur on our systems, or on the systems of third parties we use to host our solutions or SaaS solutions that we use in the operation of our business, or on those third party hosting platforms on which our customers’ host their systems.
In general, security incidents have increased in sophistication and have become more prevalent across industries and may occur on our systems, or on the systems of third parties we use to host our solutions or SaaS solutions that we use in the operation of our business, or on those third party hosting platforms on which our customers’ host their systems.
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.
Th e 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.
We are subject to federal, state, and international laws, regulations and standards relating to the collection, use, disclosure, retention, security, transfer and other processing of personal data.
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.
Thus, substantially all of the revenue we report in each quarter from the Dynatrace platform, which constituted over 90% of our total revenue reported for the year ended March 31, 2022, is derived from the recognition of revenue relating to contracts entered into during previous quarters.
Thus, substantially all of the revenue we report in each quarter from the Dynatrace platform, which constituted over 90% of our total revenue reported for the quarter ended March 31, 2023, is derived from the recognition of revenue relating to contracts entered into during previous quarters.
Factors that could cause fluctuations in the trading price of our common stock include the following: • announcements of new products 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 perpetual licenses, term licenses and SaaS subscriptions from quarter to quarter; • departures of our Chief Executive Officer, Chief Financial Officer, one or more 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, including by the Thoma Bravo Funds; • 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; 34 Table of Contents • 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.
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, including by the Thoma Bravo Funds; • 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.
They may also make such assertions against our customers or partners. 23 Table of Contents 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.
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.
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 effectively identify, hire, on-board, train, develop, motivate and retain highly skilled personnel for all areas of our organization.
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.
Although our customer retention rate has historically been strong, some of our customers have elected not to renew their 15 Table of Contents agreements with us, and it is difficult to accurately predict long-term customer retention, churn and expansion rates.
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 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; and increased price competition.
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.
If we are unable to achieve any of these requirements, our subscription revenue growth will be adversely affected. 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.
If we are unable to achieve any of these, our revenue growth could be adversely affected. 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.
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.
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 affecting personal information.
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. Sales and use, value added, and similar tax laws and rates vary greatly by jurisdiction.
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.
Weak or turbulent global economic conditions or a reduction in software intelligence 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.
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.
We have invested in and plan to continue expanding our sales and marketing organizations, both domestically 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.
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.
These security incidents may be caused by or result in but are not limited to security breaches, computer malware or malicious software, ransomware, computer hacking, denial of service attacks, security system control failures in our own systems or from vendors we or our customers use, email phishing, software vulnerabilities, social engineering, sabotage, drive-by downloads and the malfeasance of our own or our customers’ employees.
These security incidents 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.
As announced on March 7, 2022, we have 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 may impact our ability to sell or export our platform in Ukraine, Russia, Belarus and surrounding countries.
In March 2022, we announced that 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 may impact our ability to sell or export our platform in Ukraine, Russia, Belarus and surrounding countries.
In addition to developing new solutions or enhancements using internal resources, we may acquire technologies from a third party, or acquire another company. Such acquisition(s) 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.
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.
We have invested, and expect to continue to invest, substantial resources to promote and maintain our brand and generate sales leads, both domestically and internationally, but there is no guarantee that our brand development strategies will enhance the recognition of our brand or lead to increased sales.
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 brand development strategies will enhance the recognition of our brand or lead to increased sales.
Competition in our industry is intense, and often leads to significant 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.
Competition in our industry is intense, and often leads to significant increased compensation and other personnel costs. In addition, competition for employees with experience in our industry can be intense, particularly in Europe, where our R&D operations are concentrated and where other technology companies compete for management and engineering talent.
The successful promotion of our brand and the market’s awareness of our solutions and platform will depend largely upon our ability to continue to offer enterprise-grade software intelligence solutions, our ability to be thought leaders in application intelligence, our marketing efforts and our ability to successfully differentiate our solutions from those of our competitors.
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 enterprise-grade observability and security solutions, our ability to be thought leaders in application intelligence, our marketing efforts, and our ability to successfully differentiate our solutions from those of our competitors.
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 Controls. Exports, re-exports and transfers of our software and services must be made in compliance with these laws and regulations.
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.
If we are unable to effectively identify, hire, on-board, train, develop, motivate and retain talented sales personnel or marketing personnel or if our new sales personnel or marketing personnel or online investments are unable to achieve desired productivity levels in a reasonable period of time, our ability to increase our customer base and achieve broader market acceptance of our applications could be harmed.
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 or online investments are unable to achieve desired productivity levels in a reasonable period of time, our ability to increase our customer base and achieve broader market acceptance of our offerings could be harmed.
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, and the timing of purchases by our customers, particularly larger purchases; 11 Table of Contents • fluctuations in the rate of utilization by customers of the cloud to manage their business needs, or a slow-down in the migration of enterprise systems to the cloud; • 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 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 products 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 market for software intelligence, monitoring, application security, and analytics 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 products 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 products are designed to monitor; • our ability to maintain and expand our relationships with strategic technology partners, who 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 geopoliticial 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 time-based licenses, SaaS subscriptions and perpetual licenses on the timing of revenue recognition; • extraordinary expenses, such as litigation or other dispute-related settlement payments; and • future accounting pronouncements or changes in our accounting policies.
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 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; 14 Table of Contents • changes in the demand and growth rate of the market for observability, application security, and analytics 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 who 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; • extraordinary expenses, such as litigation or other dispute-related settlement payments; and • future accounting pronouncements or changes in our accounting policies.
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.
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).
After his or her 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.
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.
If our solutions fail to interoperate effectively with the hyperscalers’ products, or if our partnership(s) with one or more of these hyperscalers is not successful or is terminated, our ability to sell additional products to these customers and our ability to grow our business will be harmed.
If our solutions fail to interoperate effectively with the hyperscalers’ products, or if our partnerships with one or more of these hyperscalers is not successful or is terminated, our ability to sell additional products or offerings to these customers and our ability to grow our business will be harmed.
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.
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, our international subsidiaries maintain assets and liabilities that are denominated in currencies other than the functional operating currencies of these 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.
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.
We believe that maintaining and enhancing our brand and increasing market awareness of our company and our solutions are critical to achieving broad market acceptance of our existing and future solutions and are important elements in attracting and retaining customers, partners and employees, particularly as we continue to expand internationally and introduce new products.
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 acceptance of our existing and future solutions and are important elements in attracting and retaining customers, partners, and employees, particularly as we continue to expand internationally and introduce new capabilities and enhancements.
We would be responsible for any such additional amounts, and for the costs of responding to such challenge, 28 Table of Contents which would not be reimbursed to us by Compuware.
We would be responsible for any such additional amounts, and for the costs of responding to such challenge, which would not be reimbursed to us by Compuware.
Government entities may have statutory, contractual or other legal rights to terminate contracts with our distributors and resellers for convenience 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.
Government entities may have statutory, contractual, or 31 Table of Contents 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.
As the market for software intelligence solutions is 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.
As the market for observability and security solutions is 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.
If vulnerabilities in our solutions are exploited by third parties, our customers could experience damages or losses for which our customers seek to hold us accountable.
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.
If we are unable to protect our intellectual property rights, our business, operating results and financial condition will be harmed. 24 Table of Contents Our use of open source technology could impose limitations on our ability to commercialize our solutions and platform and application intelligence software platform.
If we are unable to protect our intellectual property rights, our business, operating results, and financial condition will be harmed. 25 Table of Contents Our use of open source technology could impose limitations on our ability to commercialize our solutions and platform.
Furthermore, our partners may cease marketing our offerings with limited or no notice and with little or 17 Table of Contents no penalty, and new partners could require extensive training and may take several months or more to achieve productivity.
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.
In the event that our AWS 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.
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.
We cannot be certain that our future operating results will be sufficient to ensure compliance with the covenants in our Credit Agreement or to remedy any defaults under our Credit Agreement. In addition, 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.
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 21 Table of Contents accelerated payments.
Because data security is a critical competitive factor in our industry, we make statements in our privacy policies 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 products.
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.
This is likewise true in the event SolarWinds has an impact on our supply chain or vendors in ways that are not yet known. A vendor breach could spread to our own systems or affect our operations or financial systems in material ways we cannot yet anticipate.
This is likewise true in the event SolarWinds has an impact on our supply chain or 22 Table of Contents vendors in ways that are not yet known. A vendor or other supply chain-related breach could spread to our own systems or affect our operations or financial systems in material ways that we cannot yet anticipate.
Although we have disaster recovery plans, including the use of multiple AWS locations, any incident affecting AWS’ infrastructure that may be caused by fire, flood, severe storm, earthquake or other natural disasters, actual or threatened public health emergencies (e.g., COVID-19), 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.
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.
We are subject to governmental export, import and sanctions controls that could impair our ability to compete in international markets due to licensing requirements 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.
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.
The regulatory framework 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.
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.
The effects of the CCPA and the CPRA are potentially significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and/or litigation.
The effects of the recently amended 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.
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 made significant investments in our new application security offering.
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 Grail TM core technology, AutomationEngine, and AppEngine.
Real or perceived errors, failures, defects or vulnerabilities in our solutions 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.
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.
Acquisitions may involve additional significant challenges, uncertainties, and risks, including, but not limited to, challenges of integrating new employees, systems, technologies, and business cultures; failure to develop the acquired business adequately; disruption of our ongoing operations and diversion of our management’s attention; inadequate data security, cybersecurity and operational and information technology 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; 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 32 Table of Contents uncertain or evolving legal, regulatory, and compliance requirements; failure of the Acquisitions to advance our business strategy and of its anticipated benefits to materialize; 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.
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.
Increased volatility, further declines in the European credit, equity and foreign currency markets or geopolitical disruptions, including the military conflict between Russia and Ukraine, could cause delays in or cancellations of orders or have other negative impacts on our business operations in Europe and other regions throughout the world.
Increased volatility, further declines in the European credit, equity, and foreign currency markets or geopolitical disruptions, including the military conflict between Russia and Ukraine, 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 R&D operations are concentrated) and other regions throughout the world.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn addition to our headquarters, we lease approximately 47,000 square feet of space in Detroit, Michigan under a lease that expires in January 2025, approximately 28,000 square feet of space in Maidenhead, England under a lease that expires in March 2027, and approximately 26,000 square feet of space in Denver, Colorado for sales and customer support under a lease that expires in August 2032.
Biggest changeIn addition to our headquarters, we lease approximately 47,000 square feet of space in Detroit, Michigan, approximately 28,000 square feet of space in Maidenhead, England, and approximately 26,000 square feet of space in Denver, Colorado for sales and customer support.
ITEM 2. PROPERTIES Our corporate headquarters is located in Waltham, Massachusetts and consists of approximately 50,000 square feet of space under a lease that expires in September 2027.
ITEM 2. PROPERTIES Our corporate headquarters is located in Waltham, Massachusetts and consists of approximately 60,000 square feet of space under a lease that expires in September 2027.
Our primary research and development facilities are located in Linz, Austria, Vienna, Austria, Gdansk, Poland, and Barcelona, Spain, and consist of approximately 96,000, 67,000, 57,000, and 36,000 square feet, respectively.
Our primary research and development facilities are located in Linz, Austria, Vienna, Austria, Gdansk, Poland, and Barcelona, Spain, and consist of approximately 96,000, 67,000, 57,000, and 36,000 square feet, respectively. We also lease other facilities in the United States and internationally.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS We are not currently a party to any litigation or claims that, if determined adversely to us, would have a material adverse effect on our business, operating results, financial condition, or cash flows. We are, from time to time, party to litigation and subject to claims in the ordinary course of business.
Biggest changeAlthough 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, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II - OTHER INFORMATION
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 4. MINE SAFETY DISCLOSURES Not applicable. PART II - OTHER INFORMATION
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ITEM 3. LEGAL PROCEEDINGS We are, from time to time, party to legal proceedings and subject to claims in the ordinary course of business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn addition, our credit facility places restrictions on the ability of our subsidiaries to pay cash dividends or make distributions to us. 38 Table of Contents Securities Authorized for Issuance under Equity Compensation Plans See Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” for information regarding securities authorized for issuance.
Biggest changeSecurities Authorized for Issuance under Equity Compensation Plans Information required by Item 5 of Form 10-K regarding our Equity Compensation Plans is incorporated herein by reference to Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” of this Annual Report.
Base Period 8/1/2019 3/31/2020 3/31/2021 3/31/2022 Dynatrace, Inc. $ 100.00 $ 99.96 $ 202.26 $ 197.48 S&P 500 $ 100.00 $ 87.51 $ 134.51 $ 153.39 S&P 500 Information Technology $ 100.00 $ 100.32 $ 165.35 $ 198.19 Unregistered Sales of Equity Securities None. Use of Proceeds None. Issuer Purchases of Equity Securities None. 39 Table of Contents ITEM 6.
Base Period 8/1/2019 3/31/2020 3/31/2021 3/31/2022 3/31/2023 Dynatrace, Inc. $ 100.00 $ 99.96 $ 202.26 $ 197.48 $ 177.36 S&P 500 $ 100.00 $ 87.51 $ 134.51 $ 153.39 $ 139.13 S&P 500 Information Technology $ 100.00 $ 100.32 $ 165.35 $ 198.19 $ 187.19 39 Table of Contents Unregistered Sales of Equity Securities None. Use of Proceeds None.
Holders of Record As of May 20, 2022, there were 126 registered stockholders of record of our common stock. We believe a substantially greater number of beneficial owners hold shares through brokers, banks or other nominees. Dividend Policy We have never declared or paid any cash dividend on our common stock.
Holders of Record As of May 22, 2023, there were 53 stockholders of record of our common stock. We believe a substantially greater number of beneficial owners hold shares through brokers, banks or other nominees. 38 Table of Contents Dividend Policy We have never declared or paid any cash dividend on our common stock.
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In addition, our credit facility places restrictions on the ability of our subsidiaries to pay cash dividends or make distributions to us.
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Issuer Purchases of Equity Securities None. ITEM 6. RESERVED Not applicable. 40 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWe expect this fluctuation in income tax rates, as well as its potential impact on our results of operations, to continue. 43 Table of Contents Results of Operations The following tables set forth our results of operations for the periods presented: Fiscal Year Ended March 31, 2022 2021 2020 Amount Percent Amount Percent Amount Percent (in thousands, except percentages) Revenue: Subscription $ 870,385 94 % $ 655,180 93 % $ 487,817 89 % License 54 — % 1,446 — % 12,686 3 % Service 59,006 6 % 46,883 7 % 45,300 8 % Total revenue 929,445 100 % 703,509 100 % 545,803 100 % Cost of revenue: Cost of subscription 111,646 12 % 77,488 11 % 73,193 13 % Cost of service 45,717 5 % 34,903 5 % 39,289 7 % Amortization of acquired technology 15,513 2 % 15,317 2 % 16,449 4 % Total cost of revenue (1) 172,876 19 % 127,708 18 % 128,931 24 % Gross profit 756,569 81 % 575,801 82 % 416,872 76 % Operating expenses: Research and development (1) 156,342 17 % 111,415 16 % 119,281 22 % Sales and marketing (1) 362,116 39 % 245,487 35 % 266,175 49 % General and administrative (1) 126,622 14 % 92,219 13 % 161,983 30 % Amortization of other intangibles 30,157 3 % 34,744 5 % 40,280 7 % Restructuring and other 25 40 1,092 Total operating expenses 675,262 483,905 588,811 Income (loss) from operations 81,307 91,896 (171,939) Other expense, net (9,648) (14,043) (46,594) Income (loss) before income taxes 71,659 77,853 (218,533) Income tax expense (19,208) (2,139) (195,284) Net income (loss) $ 52,451 $ 75,714 $ (413,817) _________________ (1) Includes share-based compensation expense as follows: Fiscal Year Ended March 31, 2022 2021 2020 (in thousands) Cost of revenue $ 12,863 $ 7,307 $ 18,685 Research and development 21,316 11,684 38,670 Sales and marketing 35,957 24,153 84,698 General and administrative 29,400 14,640 80,425 Total share-based compensation expense $ 99,536 $ 57,784 $ 222,478 44 Table of Contents Fiscal Years Ended March 31, 2022 and 2021 Revenue Fiscal Year Ended March 31, Change 2022 2021 Amount Percent (in thousands, except percentages) Subscription $ 870,385 $ 655,180 $ 215,205 33 % License 54 1,446 (1,392) (96 %) Service 59,006 46,883 12,123 26 % Total revenue $ 929,445 $ 703,509 $ 225,936 32 % Subscription Subscription revenue increased by $215.2 million, or 33%, for the year ended March 31, 2022, as compared to the year ended March 31, 2021, primarily due to the growing adoption of the Dynatrace ® platform by new customers combined with existing customers expanding their use of our solutions.
Biggest changeThese 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. 44 Table of Contents Results of Operations The following tables set forth our results of operations for the periods presented: Fiscal Year Ended March 31, 2023 2022 2021 Amount Percent Amount Percent Amount Percent (in thousands, except percentages) Revenue: Subscription $ 1,083,330 94 % $ 870,439 94 % $ 656,626 93 % Service 75,200 6 % 59,006 6 % 46,883 7 % Total revenue 1,158,530 100 % 929,445 100 % 703,509 100 % Cost of revenue: Cost of subscription 144,445 12 % 111,646 12 % 77,488 11 % Cost of service 62,882 6 % 45,717 5 % 34,903 5 % Amortization of acquired technology 15,564 1 % 15,513 2 % 15,317 2 % Total cost of revenue (1) 222,891 19 % 172,876 19 % 127,708 18 % Gross profit 935,639 81 % 756,569 81 % 575,801 82 % Operating expenses: Research and development (1) 218,349 19 % 156,342 17 % 111,415 16 % Sales and marketing (1) 448,015 39 % 362,116 39 % 245,487 35 % General and administrative (1) 150,031 13 % 126,622 14 % 92,219 13 % Amortization of other intangibles 26,292 2 % 30,157 3 % 34,744 5 % Restructuring and other 141 25 40 Total operating expenses 842,828 675,262 483,905 Income from operations 92,811 81,307 91,896 Other expense, net (2,844) (9,648) (14,043) Income before income taxes 89,967 71,659 77,853 Income tax benefit (expense) 17,992 (19,208) (2,139) Net income $ 107,959 $ 52,451 $ 75,714 _________________ (1) Includes share-based compensation expense as follows: Fiscal Year Ended March 31, 2023 2022 2021 (in thousands) Cost of revenue $ 18,383 $ 12,863 $ 7,307 Research and development 41,406 21,316 11,684 Sales and marketing 51,147 35,957 24,153 General and administrative 35,938 29,400 14,640 Total share-based compensation expense $ 146,874 $ 99,536 $ 57,784 45 Table of Contents Fiscal Years Ended March 31, 2023 and 2022 Revenue Fiscal Year Ended March 31, Change 2023 2022 Amount Percent (in thousands, except percentages) Subscription $ 1,083,330 $ 870,439 $ 212,891 24 % Service 75,200 59,006 16,194 27 % Total revenue $ 1,158,530 $ 929,445 $ 229,085 25 % Subscription Subscription revenue increased by $212.9 million, or 24%, for the year ended March 31, 2023, as compared to the year ended March 31, 2022, primarily due to the growing adoption of the Dynatrace ® platform by new customers combined with existing customers expanding their use of our solutions.
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.
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.
These changes were partially offset by an increase in accounts receivable of $108.8 million due to the timing of receipts of payments from customers, an increase in deferred commissions of $29.5 million due to commissions paid on new bookings, and an increase in prepaid expenses and other assets of $8.1 million driven by the timing of payments in advance of future services.
These changes were partially offset by an increase in accounts receivable of $108.8 million due to the timing of receipts of payments from customers, an increase in deferred commissions of $29.5 million due to commissions paid on new bookings, and an increase in prepaid expenses and other assets of $8.1 driven by the timing of payments in advance of future services.
Investing Activities Cash used in investing activities during the year ended March 31, 2022 was $30.9 million, as a result of purchases of property and equipment of $17.7 million and two acquisitions made in the first half of fiscal 2022 of $13.2 million.
Cash used in investing activities during the year ended March 31, 2022 was $30.9 million as a result of the purchases of property and equipment of $17.7 million and two acquisitions made in the first half of fiscal 2022 of $13.2 million.
Cash used in investing activities during the year ended March 31, 2021 was $13.9 million, as a result of the purchases of property and equipment of $14.1 million and capitalized software additions of $0.3 million, gross of $0.5 million of derecognized software costs.
Cash used in investing activities during the year ended March 31, 2021 was $13.9 million as a result of purchases of property and equipment of $14.1 million and capitalized software additions of $0.3 million, gross of $0.5 million of derecognized software costs.
Financing Activities Cash used in financing activities during the year ended March 31, 2022 was $80.7 million, primarily as a result of repayments of our term loans of $120.0 million, partially offset by proceeds from the exercise of our stock options of $25.5 million and proceeds from our employee stock purchase plan of $13.9 million.
Cash used in financing activities during the year ended March 31, 2022 was $80.7 million, primarily as a result of repayments of our term loans of $120.0 million, partially offset by proceeds from the exercise of our stock options of $25.5 million and proceeds from our employee stock purchase plan of $13.9 million.
Operating Expenses Fiscal Year Ended March 31, Change 2022 2021 Amount Percent (in thousands, except percentages) Operating expenses: Research and development $ 156,342 $ 111,415 $ 44,927 40 % Sales and marketing 362,116 245,487 116,629 48 % General and administrative 126,622 92,219 34,403 37 % Amortization of other intangibles 30,157 34,744 (4,587) (13 %) Restructuring and other 25 40 (15) (38 %) Total operating expenses $ 675,262 $ 483,905 $ 191,357 40 % Research and development Research and development expenses increased $44.9 million, or 40%, for the year ended March 31, 2022 as compared to the year ended March 31, 2021.
Operating Expenses Fiscal Year Ended March 31, Change 2022 2021 Amount Percent (in thousands, except percentages) Operating expenses: Research and development $ 156,342 $ 111,415 $ 44,927 40 % Sales and marketing 362,116 245,487 116,629 48 % General and administrative 126,622 92,219 34,403 37 % Amortization of other intangibles 30,157 34,744 (4,587) (13 %) Restructuring and other 25 40 (15) (38 %) Total operating expenses $ 675,262 $ 483,905 $ 191,357 40 % Research and development Research and development expenses increased by $44.9 million, or 40%, for the year ended March 31, 2022, as compared to the year ended March 31, 2021.
Amortization of acquired technology includes amortization expense for technology acquired in business combinations and the Thoma Bravo Funds’ acquisition of the Company in 2014. 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.
Amortization expense for technology acquired in the Thoma Bravo Funds’ acquisition of the Company in 2014 and business combinations. 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.
Partially offsetting this increase was $1.3 million in lower amortization due to the completion of amortization of certain internally developed capitalized software technology. Cost of service Cost of service increased by $10.8 million, or 31%, for the year ended March 31, 2022 as compared to the year ended March 31, 2021.
Partially offsetting this increase was $1.3 million in lower amortization due to the completion of amortization of certain internally developed capitalized software technology. Cost of service Cost of service revenue increased by $10.8 million, or 31%, for the year ended March 31, 2022, as compared to the year ended March 31, 2021.
Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on their relative standalone selling price. We determine standalone selling price (“SSP”) for all our performance obligations using observable inputs, such as standalone sales and historical contract pricing.
Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on their relative standalone selling price (“SSP”). We determine SSP for all our performance obligations using observable inputs, such as standalone sales and historical contract pricing.
Gross profit has been and will continue to be affected by various factors, including the mix of our license, subscription, and services and other 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.
Gross profit has been and will continue to be affected by various factors, including the mix of our subscription and service and other 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.
Further contributing to the increase were higher professional fees of $1.1 million, and increased travel expenses related to global restrictions lifting of $0.8 million. Amortization of other intangibles Amortization of other intangibles decreased by $4.6 million, or 13%, for the year ended March 31, 2022 as compared to the year ended March 31, 2021.
Also contributing to the increase were higher professional fees of $1.1 million, and increased travel expenses related to global restrictions lifting of $0.8 million. Amortization of other intangibles Amortization of other intangibles decreased by $4.6 million, or 13%, for the year ended March 31, 2022, as compared to the year ended March 31, 2021.
Restructuring and other expenses primarily consists of various restructuring activities we have undertaken to achieve strategic and financial objectives. Restructuring activities include, but are not limited to, product offering cancellation and termination of related employees, office relocation, administrative cost of structure realignment and consolidation of resources.
Restructuring and other. Restructuring and other expenses primarily consist of various restructuring activities we have undertaken to achieve strategic and financial objectives. Restructuring activities include, but are not limited to, product offering cancellation and termination of related employees, office relocation, administrative cost of structure realignment, and consolidation of resources.
Further contributing to the increase were higher advertising and marketing costs of $29.0 million, higher professional fees of $4.2 million, increased travel expenses related to global restrictions lifting of $4.0 million, higher information technology costs of $2.4 million, and increased allocated overhead costs of $1.5 million to support the growth of the business and related infrastructure.
Also contributing to the increase were higher advertising and marketing costs of $29.0 million, higher professional fees of $4.2 million, increased travel expenses related to global restrictions lifting of $4.0 million, higher information technology costs of $2.4 million, and increased allocated overhead costs of $1.5 million to support the growth of the business and related infrastructure.
The change in our net operating assets and liabilities was primarily the result of an increase in deferred revenue of $96.5 51 Table of Contents million due to seasonality in our sales cycle, which is higher in the third and fourth quarters of our fiscal year, an increase in accounts payable and accrued expenses of $26.6 million driven by the timing of payments, and a decrease in prepaid expenses and other assets of $5.7 million driven by the timing of payments in advance of future services.
The change in our net operating assets and liabilities was primarily the result of an increase in deferred revenue of $96.5 million due to to seasonality in our sales cycle, which is higher in the third and fourth quarters of our fiscal year, an increase in accounts payable and accrued expenses of $26.6 million driven by the timing of payments, and a decrease in prepaid expenses and other assets of $5.7 million driven by the timing of payments in advance of future services.
The decrease is 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.
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.
The decrease is 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.
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.
The increase is primarily due to higher personnel costs to support the growth of our subscription cloud-based offering of $19.5 million, higher cloud-based hosting costs and subscriptions of $10.7 million, as well as higher share-based compensation of $3.0 million.
The increase was primarily due to higher personnel costs to support the growth of our subscription cloud-based offering of $19.5 million, higher cloud-based hosting costs and subscriptions of $10.7 million, as well as higher share-based compensation of $3.0 million.
These changes were partially offset by an increase in accounts receivable of $82.0 million due to the timing of receipts of payments from customers and an increase in deferred commissions of $16.3 million due to commissions paid on new bookings.
These changes were partially offset by an increase of $82.0 million due to the timing of receipts of payments from customers and an increase in deferred commissions of $16.3 million due to commissions paid on new bookings.
We adjust reserves for our uncertain tax positions due to changing facts and circumstances. To the extent that the final outcome of these matters is different than the amounts recorded, such differences will impact our tax provision in our consolidated statements of operations in the period in which such determination is made.
We adjust reserves for our uncertain tax positions due to changing facts and circumstances. To the extent that 53 Table of Contents the final outcome of these matters is different than the amounts recorded, such differences will impact our tax provision in our consolidated statements of operations in the period in which such determination is made.
We anticipate continuing to incur additional expenses as we continue to invest in the growth of our operations, as well as incur ongoing costs of compliance associated with being a publicly traded company. Amortization of other intangibles. Amortization of other intangibles primarily consists of amortization of customer relationships and capitalized software and tradenames. Restructuring and other.
We anticipate continuing to incur additional expenses as we continue to invest in the growth of our operations, as well as incur ongoing costs primarily associated with other transactional activities and the compliance of being a publicly traded company. Amortization of other intangibles. Amortization of other intangibles primarily consists of amortization of customer relationships and capitalized software and tradenames.
The increase in gross profit is primarily due to an increase in service revenue driven by higher utilization of personnel. The decrease in gross margin is primarily due to higher personnel and share-based compensation costs.
The increase in gross profit was primarily due to an increase in service revenue driven by higher utilization of personnel. The decrease in gross margin was primarily due to higher personnel and share-based compensation costs.
The increase in gross profit is primarily due to the growth of the Dynatrace ® platform by new customers combined with existing customers expanding their use of our solutions.
The increase in gross profit was primarily due to the growth of the Dynatrace ® platform by new customers combined with existing customers expanding their use of our solutions.
The increase is primarily the result of higher personnel costs of $6.8 million, higher share-based compensation of $2.6 million, and an increase in subscription costs of $1.0 million.
The increase was primarily the result of higher personnel costs of $6.8 million, higher share-based compensation of $2.6 million, and an increase in subscription costs of $1.0 million.
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. 42 Table of Contents Sales and marketing.
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.
The non-cash charges are primarily comprised of share-based compensation of $99.5 million and depreciation and amortization of $56.9 million.
The non-cash charges were primarily comprised of share-based compensation of $99.5 million and depreciation and amortization of $56.9 million.
The non-cash charges are primarily comprised of depreciation and amortization of $61.0 million and share-based compensation of $57.8 million.
The non-cash charges were primarily comprised depreciation and amortization of $61.0 million and share-based compensation of $57.8 million.
Recent Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies, of our accompanying audited consolidated financial statements included in this Annual Report for a description of recently issued accounting pronouncements. 54 Table of Contents
Recent Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies, of our accompanying audited consolidated financial statements included in this Annual Report for a description of recently issued accounting pronouncements.
The identification of our performance obligations involves review and consideration for the contractual terms, the implied rights of our customers, if any, product demonstrations and published website and marketing materials. Our performance obligations consist of (i) subscription and support services, (ii) licenses for our Classic products, and (iii) professional and other services.
The identification of our performance obligations involves review and consideration for the contractual terms, the implied rights of our customers, if any, product demonstrations and published website and marketing materials. Our performance obligations consist of (i) subscription and support services and (ii) professional and other services.
The Dynatrace ® Managed offering allows customers to maintain control of the environment where their data resides, whether in the cloud or on-premises, combining the simplicity of SaaS with the ability to adhere to their own data security and sovereignty requirements.
This offering allows customers the flexibility to maintain control of the environment where their data resides, whether in the cloud or on-premises, combining the simplicity of SaaS with the ability to adhere to their own data security and sovereignty requirements.
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 software intelligence platform through increased investment in research and development and continued innovation.
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 continued innovation.
Other Expense, Net Other expense, net decreased by $4.4 million, or 31%, for the year ended March 31, 2022 as compared to the year ended March 31, 2021. The decline is primarily the result of lower interest expense on our term loan as we had less principal outstanding compared to last fiscal year.
Other Expense, Net Other expense, net, decreased by $4.4 million, or 31%, for the year ended March 31, 2022, as compared to the year ended March 31, 2021. The decline was primarily the result of lower interest expense on our former term loan as we had less principal outstanding compared to the prior fiscal year.
Service Service gross profit increased by $1.3 million, or 11%, during the year ended March 31, 2022 compared to the year ended March 31, 2021. Service gross margin decreased from 26% to 23% during the year ended March 31, 2022 compared to the year ended March 31, 2021.
Service Service gross profit increased by $1.3 million, or 11%, during the year ended March 31, 2022 compared to the year ended March 31, 2021. Service gross margin decreased from 26% to 23%, during the year ended March 31, 2022 compared to the year ended March 31, 49 Table of Contents 2021.
At contract inception we evaluate whether two or more contracts 52 Table of Contents should be combined and accounted for as a single contract and whether the combined or single contract includes more than one performance obligation.
At contract inception, we evaluate whether two or more contracts should be combined and accounted for as a single contract and whether the combined or single contract includes more than one performance obligation.
Cost of Revenue Fiscal Year Ended March 31, Change 2022 2021 Amount Percent (in thousands, except percentages) Cost of subscription $ 111,646 $ 77,488 $ 34,158 44 % Cost of service 45,717 34,903 10,814 31 % Amortization of acquired technology 15,513 15,317 196 1 % Total cost of revenue $ 172,876 $ 127,708 $ 45,168 35 % Cost of subscription Cost of subscription increased by $34.2 million, or 44%, for the year ended March 31, 2022 as compared to the year ended March 31, 2021.
We recognize the revenues associated with professional services as we deliver the services. 48 Table of Contents Cost of Revenue Fiscal Year Ended March 31, Change 2022 2021 Amount Percent (in thousands, except percentages) Cost of subscription $ 111,646 $ 77,488 $ 34,158 44 % Cost of service 45,717 34,903 10,814 31 % Amortization of acquired technology 15,513 15,317 196 1 % Total cost of revenue $ 172,876 $ 127,708 $ 45,168 35 % Cost of subscription Cost of subscription revenue increased by $34.2 million, or 44%, for the year ended March 31, 2022, as compared to the year ended March 31, 2021.
Sales and marketing Sales and marketing expenses increased by $116.6 million, or 48%, for the year ended March 31, 2022, as compared to the year ended March 31, 2021, driven by a 24% increase in headcount which resulted in an increase of $54.4 million in personnel costs, related share-based compensation of $11.8 million, and other employee-related expenses of $5.3 million.
Sales and marketing Sales and marketing expenses increased by $116.6 million, or 48%, for the year ended March 31, 2022, as compared to the year ended March 31, 2021, driven by increased personnel costs of $54.4 million, related share-based compensation of $11.8 million, and other employee-related expenses of $5.3 million.
General and administrative General and administrative expenses increased by $34.4 million, or 37%, for the year ended March 31, 2022, as compared to the year ended March 31, 2021, primarily due to a 40% increase in headcount which resulted in an increase of $14.1 million in personnel costs, related share-based compensation of $14.8 million, and other employee-related expenses of $1.9 million.
General and administrative General and administrative expenses increased by $34.4 million, or 37%, for the year ended March 31, 2022, as compared to the year ended March 31, 2021, primarily due to increased personnel costs of $14.1 million, related share-based compensation of $14.8 million, and other employee-related expenses of $1.9 million.
We exclude from our calculation of ARR any revenues derived from month-to-month agreements and/or product usage overage billings, where customers are billed in arrears based on product usage. Total ARR was $995 million as of March 31, 2022. Over the past year, Total ARR has grown by $221 million, or 29%.
We exclude from our calculation of ARR any revenues derived from month-to-month agreements and/or product usage overage billings, where customers are billed in arrears based on product usage. Total ARR was $1,247 million as of March 31, 2023. Over the past year, Total ARR has grown by $252 million, or 25%.
Dynatrace ® Net Expansion Rate: We define the Dynatrace ® net expansion rate as the ARR derived from the Dynatrace ® platform 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.
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.
Further contributing to the 46 Table of Contents increase were higher cloud-based hosting costs of $4.1 million, increased allocated overhead costs of $2.5 million to support the growth of the business and related infrastructure, and higher travel expenses of $0.8 million as global travel restrictions begin to decrease and as travel resumes.
Also contributing to the increase were higher cloud-based hosting costs of $4.1 million, increased allocated overhead costs of $2.5 million to support the growth of the business and related infrastructure, and higher travel expenses of $0.8 million as global travel restrictions began to decrease and as travel resumed.
The increase is primarily due to a 27% increase in headcount, resulting in increased personnel and other costs to expand our product offerings of $26.4 million, and higher share-based compensation of $9.6 million.
The increase was primarily due to increased personnel and other costs to expand our product offerings of $26.4 million, and higher share-based compensation of $9.6 million.
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.
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.
However, we believe that our existing cash, cash equivalents, short-term investment balances, funds available under our debt agreement, and cash generated from operations, will be sufficient to meet our cash requirements for at least the next twelve months.
However, we believe that our existing cash, cash equivalents, 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 twelve months.
Cash used in financing activities during the year ended March 31, 2021 was $97.8 million, primarily as a result of repayments of our term loans of $120.0 million, partially offset by proceeds from the exercise of our stock options of $13.1 million and proceeds from our employee stock purchase plan of $9.2 million.
Financing Activities Cash used in financing activities during the year ended March 31, 2023 was $232.3 million, primarily as a result of repayments of our term loans of $281.1 million, partially offset by proceeds from the exercise of our stock options of $32.9 million and proceeds from our employee stock purchase plan of $17.8 million.
GAAP financial information, we monitor the following key metrics to help us measure and evaluate the effectiveness of our operations: As of 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020 Total ARR (in thousands) $ 995,121 $ 929,906 $ 863,863 $ 823,222 $ 774,090 $ 721,995 $ 638,063 $ 601,376 Dynatrace ® Net Expansion Rate 120%+ 120%+ 120%+ 120%+ 120%+ 120%+ 120%+ 120%+ Annual Recurring Revenue “ARR”: We define annual recurring revenue, or 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.
GAAP financial information, we monitor the following key metrics to help us measure and evaluate the effectiveness of our operations: As of 3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Total ARR (in thousands) $ 1,246,681 $ 1,162,591 $ 1,064,951 $ 1,031,284 $ 995,121 $ 929,906 $ 863,863 $ 823,222 Dollar-based Net Retention Rate 119 % 119 % 120%+ 120%+ 120%+ 120%+ 120%+ 120%+ Annual Recurring Revenue (“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.
Our subscription revenue increased to 94% of total revenue for the year ended March 31, 2022 compared to 93% of total revenue for the year ended March 31, 2021.
Our subscription revenue increased to 94% of total revenue for the year ended March 31, 2022 compared to 93% of total revenue for the year ended March 31, 2021. Service Service revenue increased by $12.1 million, or 26%, for the year ended March 31, 2022, as compared to the year ended March 31, 2021.
Summary of Cash Flows Fiscal Year Ended March 31, 2022 2021 2020 (in thousands) Net cash provided by (used in) operating activities (1) $ 250,917 $ 220,436 $ (142,455) Net cash used in investing activities (30,890) (13,879) (20,613) Net cash (used in) provided by financing activities (80,664) (97,802) 329,392 Effect of exchange rate changes on cash and cash equivalents (1,358) 3,037 (4,468) Net increase in cash and cash equivalents $ 138,005 $ 111,792 $ 161,856 _________________ (1) Net cash provided by (used in) operating activities includes cash payments for interest and tax as follows: Fiscal Year Ended March 31, 2022 2021 2020 (in thousands) Cash paid for interest $ 8,375 $ 12,475 $ 39,568 Cash paid for (received from) tax, net $ 24,247 $ (7,337) $ 266,708 Operating Activities For the year ended March 31, 2022, cash provided by operating activities was $250.9 million as a result of net income of $52.5 million, and adjusted by non-cash charges of $145.5 million and a change of $53.0 million in our operating assets and liabilities.
Summary of Cash Flows Fiscal Year Ended March 31, 2023 2022 2021 (in thousands) Net cash provided by operating activities (1) $ 354,885 $ 250,917 $ 220,436 Net cash used in investing activities (21,540) (30,890) (13,879) Net cash used in financing activities (232,344) (80,664) (97,802) Effect of exchange rate changes on cash and cash equivalents (8,620) (1,358) 3,037 Net increase in cash and cash equivalents $ 92,381 $ 138,005 $ 111,792 _________________ (1) Net cash provided by operating activities includes cash payments for interest and tax as follows: Fiscal Year Ended March 31, 2023 2022 2021 (in thousands) Cash paid for interest $ 7,109 $ 8,375 $ 12,475 Cash (received from) paid for tax, net $ (14,311) $ 24,247 $ (7,337) 51 Table of Contents Operating Activities For the year ended March 31, 2023, cash provided by operating activities was $354.9 million as a result of net income of $108.0 million, and adjusted by non-cash charges of $148.9 million and a change of $92.1 million in our operating assets and liabilities.
We plan to continue to increase penetration within our existing customers by expanding the breadth of our platform capabilities to provide for continued cross-selling opportunities. In addition, we believe the ease of implementation for Dynatrace ® provides us the opportunity to expand adoption within our existing customers, across new customer applications, and into additional business units or divisions.
In addition, we believe the ease of implementation for Dynatrace® provides us the opportunity to expand adoption within our existing enterprise customers, across new customer applications, and into additional business units or divisions.
Since inception we have 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 and borrowings on our term loan facilities.
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.
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. Overview We offer the market-leading software intelligence platform, purpose-built for dynamic hybrid, multicloud environments.
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. Overview Dynatrace offers a unified observability and security platform with analytics and automation at its core, purpose-built for dynamic, hybrid, multicloud environments.
Amortization of acquired technologies For the years ended March 31, 2022 and 2021, amortization of acquired technologies is primarily related to amortization expense for technology acquired in connection with Thoma Bravo’s acquisition of us in 2014. 45 Table of Contents Gross Profit and Gross Margin Fiscal Year Ended March 31, Change 2022 2021 Amount Percent (in thousands, except percentages) Gross profit: Subscription $ 758,739 $ 577,692 $ 181,047 31 % License 54 1,446 (1,392) (96 %) Service 13,289 11,980 1,309 11 % Amortization of acquired technology (15,513) (15,317) (196) 1 % Total gross profit $ 756,569 $ 575,801 $ 180,768 31 % Gross margin: Subscription 87 % 88 % License 100 % 100 % Service 23 % 26 % Amortization of acquired technology (100 %) (100 %) Total gross margin 81 % 82 % Subscription Subscription gross profit increased by $181.0 million, or 31%, during the year ended March 31, 2022 compared to the year ended March 31, 2021.
Gross Profit and Gross Margin Fiscal Year Ended March 31, Change 2022 2021 Amount Percent (in thousands, except percentages) Gross profit: Subscription $ 758,793 $ 579,138 $ 179,655 31 % Service 13,289 11,980 1,309 11 % Amortization of acquired technology (15,513) (15,317) (196) 1 % Total gross profit $ 756,569 $ 575,801 $ 180,768 31 % Gross margin: Subscription 87 % 88 % Service 23 % 26 % Amortization of acquired technology (100) % (100 %) Total gross margin 81 % 82 % Subscription Subscription gross profit increased by $179.7 million, or 31%, during the year ended March 31, 2022 compared to the year ended March 31, 2021.
Cash used in investing activities during the year ended March 31, 2020 was $20.6 million, as a result of purchases of property and equipment of $19.7 million and capitalized software additions of $0.9 million.
Investing Activities Cash used in investing activities during the year ended March 31, 2023 was $21.5 million as a result of purchases of property and equipment.
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.
For further information regarding our contractual commitments, see Note 11, Commitments and Contingencies, of our audited consolidated financial statements included in this Annual Report. 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.
We expect to continue to make these investments. See the section titled “Risk Factors” included under Part I, Item 1A for further discussion of the possible impact of the ongoing COVID-19 pandemic on our business.
Please see the section titled “Risk Factors” included under Part I, Item 1A for further discussion of the possible impact of macroeconomic conditions on our business.
Therefore, we consider these to be our critical accounting policies and estimates. Accordingly, we believe these are the most critical to fully understand and evaluate our financial condition and results of operations.
We believe that the assumptions and estimates associated with revenue recognition, income taxes, and business combinations have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. Accordingly, we believe these are the most critical to fully understand and evaluate our financial condition and results of operations.
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.
Sales and marketing expenses primarily consist of personnel 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.
Income Tax Expense Income tax expense decreased by $193.1 million resulting in an expense of $2.1 million for the year ended March 31, 2021, as compared to an expense of $195.3 million for the year ended March 31, 2020.
Income Tax Benefit (Expense) Income tax expense decreased by $37.2 million resulting in a benefit of $18.0 million for the year ended March 31, 2023, as compared to an expense of $19.2 million for the year ended March 31, 2022.
In addition, we expect to leverage our global partner ecosystem to add new customers in geographies where we have direct coverage and work jointly with our partners. In other geographies, such as Africa, Japan, the Middle East, and South Korea, we utilize a multi-tier “master reseller” model. • Increase penetration within existing customers.
In addition, we plan to leverage our global partner ecosystem to add new customers in geographies where we have direct coverage and work jointly with our partners. • Increase penetration within existing customers.
Our Mission Control functionality automatically upgrades all Dynatrace ® instances and offers on-premise cluster customers auto-deployment options that suit their specific enterprise management processes.
Our Mission Control center automatically upgrades all Dynatrace® instances and offers on-premises cluster customers auto-deployment options that suit their specific enterprise management processes. The Dynatrace® platform has been commercially available since 2016 and is the primary offering that we sell.
We also incur other non-personnel costs such as an allocation of our general overhead expenses. Research and development . Research and development expenses primarily consists 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, reliability, performance and flexibility of existing solutions.
We focus our research and development efforts on developing new solutions, core technologies, and to further enhance the functionality, reliability, performance and flexibility of existing solutions.
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.
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.
We intend to drive new customer growth by expanding our direct sales force focused on the largest 15,000 global accounts, which generally have annual revenues in excess of $1 billion. We added 706 new customers during the year ended March 31, 2022.
We believe this strategy will enable new growth opportunities and allow us to continue to deliver differentiated high-value outcomes to our customers. • Grow our customer base. We intend to drive new customer growth by expanding our direct sales force focused on the largest 15,000 global enterprise accounts, which generally have annual revenues in excess of $1 billion.
Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the United States. The preparation of 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.
The preparation of 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.
Fiscal Years Ended March 31, 2021 and 2020 Revenue Fiscal Year Ended March 31, Change 2021 2020 Amount Percent (in thousands, except percentages) Subscription $ 655,180 $ 487,817 $ 167,363 34 % License 1,446 12,686 (11,240) (89 %) Service 46,883 45,300 1,583 3 % Total revenue $ 703,509 $ 545,803 $ 157,706 29 % Subscription Subscription revenue increased by $167.4 million, or 34%, for the year ended March 31, 2021, as compared to the year ended March 31, 2020, primarily due to the growing adoption of the Dynatrace ® platform by new customers combined with existing customers expanding their use of our solutions.
Fiscal Years Ended March 31, 2022 and 2021 Revenue Fiscal Year Ended March 31, Change 2022 2021 Amount Percent (in thousands, except percentages) Subscription $ 870,439 $ 656,626 $ 213,813 33 % Service 59,006 46,883 12,123 26 % Total revenue $ 929,445 $ 703,509 $ 225,936 32 % Subscription Subscription revenue increased by $213.8 million, or 33%, for the year ended March 31, 2022, as compared to the year ended March 31, 2021, primarily due to the growing adoption of the Dynatrace ® platform by new customers combined with existing customers expanding their use of our solutions.
Our income tax rate varies from the U.S. federal statutory rate mainly due to (1) foreign earnings taxed at rates higher than the U.S. statutory tax rate, (2) the inability to realize certain tax benefits subject to a valuation allowance in the U.S., (3) foreign withholding taxes, partially offset by (4) the vesting of share-based compensation that generated excess tax benefits, and (5) the utilization of U.S. foreign tax credits generated in the current year.
Our income tax rate varies from the U.S. federal statutory rate mainly due to (1) a change in the Company’s assessment of realization of certain tax benefits previously subject to a valuation allowance in the U.S., (2) the generation of U.S. foreign tax credits, and (3) the foreign derived intangibles deduction, partially offset by (4) foreign withholding taxes, and (5) an increase in uncertain tax positions.
The non-cash charges are primarily comprised of share-based compensation of $222.5 million and depreciation and amortization of $66.3 million, net of deferred income taxes of $46.2 million.
The non-cash charges were primarily comprised of share-based compensation of $146.9 million and depreciation and amortization of $54.6 million, partially offset by deferred income taxes of $53.5 million.
For the year ended March 31, 2020, cash used in operating activities was $142.5 million as a result of a net loss of $413.8 million, inclusive of a $255.8 million income tax payment related to the reorganization transactions, and adjusted by non-cash charges of $248.7 million and a change of $22.7 million in our operating assets and liabilities.
For the year ended March 31, 2022, cash provided by operating activities was $250.9 million as a result of net income of $52.5 million, and adjusted by non-cash charges of $145.5 million and a change of $53.0 million in our operating assets and liabilities.
This increase was primarily due to the one-time impact of tax return to provision true-up benefits resulting from changes in estimates to the reorganization transaction tax during fiscal year 2021.
This increase was primarily due to the one-time impact of tax return to provision true-up benefits resulting from changes in estimates to the reorganization transaction tax during fiscal year 2021. 50 Table of Contents Liquidity and Capital Resources As of March 31, 2023, we had $555.3 million of cash and cash equivalents and $384.5 million available under our revolving credit facility.
Service Service gross profit increased by $6.0 million, or 99%, during the year ended March 31, 2021 compared to the year ended March 31, 2020. Service gross margin increased from 13% to 26%, during the year ended March 31, 2021 compared to the year ended March 31, 2020.
Service Service gross profit decreased by $1.0 million, or 7%, during the year ended March 31, 2023 compared to the year ended March 31, 2022. Service gross margin decreased from 23% to 16% of total gross margin during the year ended March 31, 2023 compared to the year ended March 31, 2022.
Cost of service Cost of service revenue decreased by $4.4 million, or 11%, for the year ended March 31, 2021, as compared to the year ended March 31, 2020. The decrease was the result of lower share-based compensation of $3.1 million and decreased travel costs of $2.1 million. Partially offsetting this decrease was increased personnel costs.
Cost of service Cost of service increased by $17.2 million, or 38%, for the year ended March 31, 2023 as compared to the year ended March 31, 2022. The increase was primarily the result of higher personnel and resourcing costs of $12.3 million.
Other Expense, Net Other expense, net decreased by $32.6 million, or 70%, for the year ended March 31, 2021, as compared to the year ended March 31, 2020. The decrease in other expense was primarily a result of lower interest expense on our term loans as we had less principal outstanding compared to last fiscal year.
Other Expense, Net Other expense, net, decreased by $6.8 million, or 71%, for the year ended March 31, 2023 as compared to the year ended March 31, 2022. The decline was primarily the result of lower interest expense due to the reduction in debt. The loss on our debt extinguishment was also slightly offset by interest income.
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. We believe that the assumptions and estimates associated with revenue recognition, share-based compensation, income taxes, and business combinations have the greatest potential impact on our consolidated financial statements.
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.
The increase is primarily due to higher personnel costs to support the growth of our subscription cloud-based offering of $9.7 million and cloud-based hosting costs and software subscriptions of $7.4 million. Partially offsetting this increase was lower share-based compensation of $8.3 million as well as decreases in costs for data centers closed during fiscal 2021.
The increase was primarily due to higher personnel costs to support the growth of our subscription cloud-based offering of $17.1 million and higher cloud-based hosting costs and subscriptions of $6.2 million. Also contributing to the increase were higher share-based compensation expense of $4.6 million and increased allocated overhead costs of $3.2 million.
We deploy our platform as a SaaS solution, with the option of retaining the data in the cloud, or at the edge in customer-provisioned infrastructure, which we refer to as Dynatrace ® Managed.
Our SaaS solution provides customers with the ability to scale up and down rapidly, without having to purchase, provision, and manage their hardware. We also provide options to deploy our platform at the edge in customer-provisioned infrastructure, which we refer to as Dynatrace Managed.
Interest expense, net of interest income, consists primarily of interest on our term loan facility, amortization of debt issuance costs, loss on debt extinguishment and prepayment penalties. 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.
Interest expense, net of interest income, consists primarily of interest on our former term loan facility, fees on our revolving credit facility, loss on debt extinguishment, and amortization of debt issuance costs.
Amortization of acquired technologies For the years ended March 31, 2021 and 2020, amortization of acquired technologies is primarily related to amortization expense for technology acquired in connection with Thoma Bravo’s acquisition of us in 2014. 48 Table of Contents Gross Profit and Gross Margin Fiscal Year Ended March 31, Change 2021 2020 Amount Percent (in thousands, except percentages) Gross profit: Subscription $ 577,692 $ 414,624 $ 163,068 39 % License 1,446 12,686 (11,240) (89 %) Service 11,980 6,011 5,969 99 % Amortization of acquired technology (15,317) (16,449) 1,132 (7 %) Total gross profit $ 575,801 $ 416,872 $ 158,929 38 % Gross margin: Subscription 88 % 85 % License 100 % 100 % Service 26 % 13 % Amortization of acquired technology (100) % (100 %) Total gross margin 82 % 76 % Subscription Subscription gross profit increased by $163.1 million, or 39%, during the year ended March 31, 2021 compared to the year ended March 31, 2020.
Amortization of acquired technologies For the years ended March 31, 2023 and 2022, amortization of acquired technologies was primarily related to amortization expense for technology acquired in connection with Thoma Bravo’s acquisition of our company in 2014. 46 Table of Contents Gross Profit and Gross Margin Fiscal Year Ended March 31, Change 2023 2022 Amount Percent (in thousands, except percentages) Gross profit: Subscription $ 938,885 $ 758,793 $ 180,092 24 % Service 12,318 13,289 (971) (7 %) Amortization of acquired technology (15,564) (15,513) (51) — % Total gross profit $ 935,639 $ 756,569 $ 179,070 24 % Gross margin: Subscription 87 % 87 % Service 16 % 23 % Amortization of acquired technology (100 %) (100 %) Total gross margin 81 % 81 % Subscription Subscription gross profit increased by $180.1 million, or 24%, during the year ended March 31, 2023 compared to the year ended March 31, 2022.
The decrease is primarily attributable to higher share-based compensation of $27.0 million, partially offset by a 24% increase in headcount and related allocated overhead, resulting in increased personnel and other costs to expand our product offerings of $15.3 million, and increased cloud-based hosting costs of $2.6 million. 49 Table of Contents Sales and marketing Sales and marketing expenses decreased by $20.7 million, or 8%, for the year ended March 31, 2021, as compared to the year ended March 31, 2020.
Sales and marketing Sales and marketing expenses increased by $85.9 million, or 24%, for the year ended March 31, 2023, as compared to the year ended March 31, 2022, primarily driven by increased personnel costs of $51.7 million and higher share-based compensation of $15.2 million.
We market Dynatrace ® through a combination of our global direct sales team and a network of partners, including cloud service providers (Amazon, Microsoft, and Google), resellers and system integrators. We target the largest 15,000 global accounts, which generally have annual revenues in excess of $1 billion.
We take Dynatrace® to market through a combination of our global direct sales team and a network of partners, including global system integrators, cloud providers (such as AWS, Azure, and GCP), resellers and technology alliance partners.
Our credit facilities are discussed further in Note 9 of the notes to the consolidated financial statements in this Annual Report.
As of March 31, 2023, we were in compliance with all applicable covenants pertaining to the Credit Facility. The Credit Facility is discussed further in Note 9, Long-term Debt, of our audited consolidated financial statements included in this Annual Report.
Sponsor costs were reduced to zero as we stopped incurring these costs upon completion of our initial public offering. Amortization of other intangibles Amortization of other intangibles decreased by $5.5 million, or 14%, for the year ended March 31, 2021, as compared to the year ended March 31, 2020.
Amortization of other intangibles Amortization of other intangibles decreased by $3.9 million, or 13%, for the year ended March 31, 2023 as compared to the year ended March 31, 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+2 added−1 removed8 unchanged
Biggest changeWe 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. Due to the short-term nature of these investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates.
Biggest changeWe 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.
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 income (expense), net” in our consolidated statements of operations.
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 income, net” in our consolidated statements of operations.
Interest Rate Risk We had cash and cash equivalents of $463.0 million and $325.0 million as of March 31, 2022 and 2021, respectively, consisting of bank deposits, commercial paper, and money market funds. These interest-earning instruments carry a degree of interest rate risk. To date, fluctuations in our interest income have not been significant.
Interest Rate Risk We had cash and cash equivalents of $555.3 million and $463.0 million as of March 31, 2023 and 2022, respectively, consisting of bank deposits, commercial paper, and money market funds. These interest-earning instruments carry a degree of interest rate risk. To date, fluctuations in our interest income have not been significant.
Removed
As of March 31, 2022, we also had in place a $60.0 million revolving credit facility, with availability of $44.4 million, and $281.1 million in term loans. The revolving credit facility and the term loan bear interest based on the adjusted LIBOR rate, as defined in the agreement, plus an applicable margin, equivalent to 2.7% at March 31, 2022.
Added
A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our consolidated financial statements. 54 Table of Contents As of March 31, 2023, we also had the Credit Facility in place, with availability of $384.5 million.
Added
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 Dollar Offered Rate, (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.

Other DT 10-K year-over-year comparisons