From Buyout to Spinout to IPO? Dynatrace Eyes $300M Public Offering

Dynatrace, a 14-year-old enterprise software intelligence company, has filed papers to raise $300 million from an initial public stock offering aimed at restocking its war chest and shrinking its sizable debt.

If it follows through on the IPO plans, the Waltham, MA-based company would list its shares on the New York Stock Exchange under the ticker symbol “DT,” according to Dynatrace’s filing with the SEC. It has not said how many shares it plans to sell and at what price.

Proceeds from the public offering will be used “to increase our capitalization and financial flexibility,” as well as liquidity for existing shareholders, the company says. Some amount of the cash raised from the stock sale will go to paying down a portion of the company’s debts, which are more than $1 billion.

Dynatrace’s software platform helps businesses manage applications and software that are operating in increasingly complex environments. Think multiple cloud providers, on-demand computing, and more stringent expectations for a seamless experience from users.

Dynatrace says its product uses artificial intelligence technologies to sort through what’s going on with an application to give details on performance, how well the underlying cloud systems are working, and how users are experiencing the software. And businesses want answers to these questions quicker and quicker.

“Five years ago, it was OK to drill down for half an hour to find a problem,” Dynatrace CEO John Van Siclen told Xconomy back in 2015. “Now, they don’t want to even look.”

Dynatrace says its software competes with Cisco (NASDAQ: CSCO), Broadcom (NASDAQ: AVGO), New Relic (NYSE: NEWR), Datadog, Nagios, Akamai (NASDAQ: AKAM), Catchpoint, as well as cloud computing providers including Amazon (NASDAQ: AMZN) and Google (NASDAQ: GOOGL).

Dynatrace launched in Austria in 2005, but was brought to the Boston area through an investment from Bain Capital Ventures in 2006. Dynatrace’s venture investors sold the company to Detroit-based Compuware in 2011 for $256 million. Tech private equity investor Thoma Bravo bought Compuware in 2014 for $2.5 billion and decided to spin out Dynatrace as its own company. Thoma Bravo is expected to continue to own a controlling interest in Dynatrace after the IPO, an amount that is not detailed in the filing. The private equity owner had considered a sale or a public offering as early as mid-2018 that would have valued the company at $4 billion, according to Bloomberg.

Dynatrace says it took in $431 million in revenue in the fiscal year ending March 31, from more than 2,300 customers in 70 countries and industries spanning banking, insurance, retail, manufacturing, travel, and software. The company’s revenue, though, hasn’t recently led to profits. The company recorded a $116 million loss over the past year that was mostly driven by higher share-based compensation for employees and interest expenses.

Headcount at the company was 1,981 as of June 30, with 647 employees in sales and marketing, 631 in research, 203 in administrative functions, 224 in services, and 276 in customer support, the company says in its filing. Most workers (940) are in Europe, the Middle East, and Africa; 799 are in North America.

Trending on Xconomy