- On Thursday, software monitoring company Dynatrace — majority-owned by private equity firm Thoma Bravo — went public, and its stock soared 49%.
- In the last three years or so, Dynatrace changed its business model to be centered around subscriptions.
- Dynatrace CTO and founder Bernd Greifeneder and CFO Kevin Burns say the momentum in its growth motivated the company to go public.
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On Thursday, Dynatrace became the latest tech company to go public — and soared as high as 58% in its first day of trading, before closing the day up 49% at $23.85.
The software intelligence company, which is majority-owned by private equity firm Thoma Bravo, creates software that helps companies monitor and manage their business applications, spotting performance bottlenecks and spotting cybersecurity problems. It competes with companies like Cisco and Broadcom.
In 2014, Thoma Bravo bought a company called Compuware for $2.5 billion. That same year, Thoma Bravo took some of Compuware’s business and spun it out as an independent company that we now know as Dynatrace, though it kept a controlling interest.
Dynatrace raised $570 million in its IPO, which it sees as giving it some fuel to continue chasing growth.
“This is a huge opportunity with this market,” Bernd Greifeneder, founder and CTO of Dynatrace, told Business Insider. “It gives us the right funding to invest more. Honestly, I’m primarily driven by the best solutions for our customers.”
According to that filing, Dynatrace posted revenues of $431 million in its 2019 fiscal year which ended March 31, up 8% from the previous year. It reported a net loss of $116 million in FY19, down from a profit of $9 million the previous year.
A ‘significant technology refresh’
Dynatrace CFO Kevin Burns says that over the last three years or so, the company went through a “significant technology refresh.” Before, Dynatrace sold tradtional software licenses, but in the last two to three years, it transitioned to a subscription business.
Now, he says, over 80% of Dynatrace’s revenue comes from subscriptions. The company saw 35% growth in subscription and services revenue in the most recent quarter.
“For the last couple of years, technology transformation, we’ve been starting an acceleration in revenue growth,” Burns said.
This change in business model has been the biggest motivation for the company to go public, Burns says. With the faster pace of growth, he says, the company has a better position from which to reach customers, and being publicly traded
“We’ve got a lot of momentum in the business,” Burns said. “As a public company, there’s bigger podium to speak from.”
Read more: Dynatrace, a Cisco and Broadcom rival, is going public in an IPO that could raise as much as $300 million
Burns says that going forward, he wants Dynatrace to continue on the path it’s been on. It plans to continue growing its customers and hiring more talent to its company.
“We’ve been a market leader, a technology leader,” Burns said. “We continue to reinvent and innovate. We want to continue to scale.”
Dynatrace is the latest in a string of other enterprise tech companies, like Zoom, PagerDuty, CrowdStrike, Slack, Fastly, and Medallia, that have all gone public this year.
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