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5

Dynatrace

Power Score: 44.05

Momentum Score: 42.0 (6)

HQ: Waltham, MA

CEO: John Van Siclen

On Power

If Dynatrace had an IMDb page, it might look a bit like Robert Downey Jr.'s: They've both had turbulent histories while managing to reinvent themselves along the way. Founded in 2005 within a still-emerging market, Dynatrace was backed by Bain Capital Ventures through its series B round, before being sold to Compuware in 2011, beginning a quieter period for the company that extended past its subsequent acquisition by PE firm Thoma Bravo in 2014. Over the next five years, Dynatrace put an emphasis on its subscription revenue over its licensing revenue and was ultimately given new life as a spin-out via a big IPO in 2019, making it one of the most bankable stars in APM space.

As the focus has shifted to observability, specifically within multicloud environments, Dynatrace has followed suit by leaning into the Dynatrace platform , a more comprehensive subscription-based build out of its observability and AIOps capabilities. To that end, the company now says 99% of its Annual Recurring Revenue comes from its platform, and 93% of the company's total revenue comes from subscriptions. When it comes to observability, Dynatrace may not have invented the technology, but it did write the book on it (or at least a book ) .

On Disruption

Dynatrace's headcount growth rate was behind only Splunk and Datadog in the last year, and if it weren't for its decrease in R&D spending the company would've rated high in the momentum category. What doesn't show up in the data, though, is the recent push to include deeper cybersecurity capabilities within the scope of its observability platform, a similar tack to Datadog vis a vis compliance. The company's entrance into the application security market in late 2020 gives it another business line to help differentiate its offering in the coming year.

Tea Leaves

When Dynatrace was spun out and went public in 2019, it did so saddled with a "substantial level of indebtedness," and the company is still in the process of finding its way out of that. In FY2021, the company shrank its long-term debt from over half a billion dollars to a shade under $400 million, a rate slower than the previous year, but it's worth noting it didn't have a major funding vehicle, like its IPO, this time around to help pay that down. Still, as Dynatrace continues to grow, its long-term debt will continue to play a role in its profitability, even as the company forecasts nearly 30% ARR growth in the fiscal year just underway.

They Said It

" The unique value of combining the broadest cloud observability with powerful automation and AIOps capabilities continues to resonate with customers as they accelerate their digital transformation and modern cloud initiatives ." — CEO John Van Siclen in a July 2021 earnings call