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Dynatrace, Inc. (NYSE:DT) shares fell in the early part of Wednesday’s session after the company reported its fiscal second quarter 2023 results.
The company posted adjusted earnings per share of $0.22 on revenue of $279 million, topping analyst consensus expectations for both metrics.
However, investors were mixed about the company’s outlook after it said foreign exchange headwinds will impact its full-year expectations. Total FY23 FX impact on a constant currency basis is expected to be approximately $60 million on ARR, up from prior quarter expectations of roughly $40 million, while total FY23 FX impact is expected to be around $60 million on revenue, up from previous quarter expectations of approximately $47 million.
The company sees revenue for the third quarter between $283 million and $286 million, with adjusted earnings per share for the quarter expected to be between $0.21 and $0.22.
Following the news, Citi analysts said the company’s guidance is likely to be the source of debate.
“DT’s $60M NNARR adj-cc +11% YoY and 3% YoY new logos was strong, landing modestly ahead of expectations – a welcome positive given Europe-macro and large-deal trepidation into results – yielding 33% adj-cc AAR, a 1pt decel sequentially and 5pt decel YoY albeit against year’s toughest compare. Telegraphed expense discipline was also on strong display with 26% OPM +3pts ahead of Street and FCF upside, and F3QE OPM ~25% +2.5pts ahead,” wrote the analysts.
“Some of this beat is being rolled thru to FY with OPMs lifted ~2pts to 24.5% (FCFM reit) but another -3pt cut to FY adj-cc ARR growth at 24% (F1Q -2pt cut from ~29%) is likely to be debated, as it implies worse 2H NNARR declines from what was digested as a “derisked” starting point.”
Elsewhere, RBC Capital analysts said the company “reported Q2/23 results with virtually all numbers above consensus estimates in CC and the high-end of guidance.”
“ARR of $1,065M +23% (+30% cc), which was slightly below as reported consensus at $1,067.5M due to currency, and only decelerated slightly from Q1/23 where ARR grew +31% cc,” the analysts stated.
“Quarterly outperformance was driven by new logo additions of 164, vs. 135 last quarter and 160 in the year-ago quarter as well as a net expansion rate that remains +120%. Management also noted strong results were driven by the growing importance of observability to digital transformation and cloud modernization, which it views as one of the most durable areas of investment for enterprises. That said, management also noted not being immune to the macro environment and feel it is taking an appropriately cautious approach to ARR growth in the 2H of FY/23 as it continues to invest in product innovation and go-to-market,” explained the analysts.
Dynatrace shares are currently down over 2%.
