Dynatrace Inc

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business. In particular, we encourage you to review the risks and uncertainties described in the section titled “Risk Factors” included elsewhere in this Form 10-Q and in our Annual Report on Form 10-K. These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this report or implied by past results and trends. 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, and our interim results are not necessarily indicative of the results we expect for the full fiscal year or any other period.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. We prepare our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United State of America (“U.S. GAAP”) and applicable rules and regulation of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business. In particular, we encourage you to review the risks and uncertainties described in the section titled “Risk Factors” included elsewhere in this Form 10-Q and in our Form 10-K for the fiscal year ended March 31, 2024 (the “Annual Report”). These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this report or implied by past results and trends. 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, and our interim results are not necessarily indicative of the results we expect for the full fiscal year or any other period.

Previous wording

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. 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 for IT operations (“AIOps”) to provide answers and intelligent automation from data at enormous scale. 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.

Current wording

Dynatrace offers the only end-to-end unified platform that combines broad and deep observability and continuous runtime application security with advanced AI for IT operations to provide answers and intelligent automation from data at an enormous scale. Our comprehensive solutions help IT, development, security, and business operations teams at global organizations modernize and automate cloud operations, deliver software faster and more securely, and provide significantly improved digital experiences.

Previous wording

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 (such as Amazon Web Services (“AWS”), Microsoft Azure (“Azure”), and Google Cloud Platform “GCP”)), resellers and technology alliance partners. We target the largest 15,000 global enterprise accounts, which generally have annual revenues in excess of $1 billion, which we believe see more value from our integrated full-stack platform.

Current wording

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. We target the largest 15,000 global enterprise accounts, which generally have annual revenues in excess of $1 billion, which we believe see more value from our integrated full-stack platform.

Previous wording

We generate revenue primarily by selling subscriptions, which we define as Software-as-a-Service (“SaaS”) agreements, Dynatrace term-based licenses, Dynatrace perpetual licenses, and maintenance and support agreements.

Current wording

We generate revenue primarily by selling subscriptions, which we define as Software-as-a-Service (“SaaS”) agreements, term-based licenses, perpetual licenses, and maintenance and support agreements. The majority of our customers deploy Dynatrace as a SaaS solution to get the latest Dynatrace features and updates with greatly reduced administrative effort. We also provide options to deploy our platform in customer-provisioned infrastructure.

Previous wording

Our Dynatrace platform has been commercially available since 2016 and is the primary offering we sell.

Current wording

The Dynatrace platform has been commercially available since 2016 and is the primary offering we sell.

Previous wording

•Our annual recurring revenue (“ARR”) was $1,425 million as of December 31, 2023, which reflected 23% growth year-over-year;

Current wording

•Our annual recurring revenue (“ARR”) was $1,541 million as of June 30, 2024, which reflected 19% growth year-over-year;

Previous wording

•Total revenue and subscription revenue for the three months ended December 31, 2023 was $365 million and $348 million, respectively; and

Current wording

•Total revenue and subscription revenue was $399 million and $382 million, respectively;

Previous wording

We believe this approach is even more important at this time as we navigate a rapidly evolving and uncertain macroeconomic environment, which can include geopolitical considerations, fluctuations in credit, equity, and foreign currency markets, changes in inflation, interest rates, consumer confidence and spending, and other factors that may affect the buying patterns of our customers and prospective customers, including the size of transactions and length of sales cycles. Although macroeconomic uncertainty persists, we remain confident in our ability to execute in this environment. Please see the section titled “Risk Factors” included under Part II, Item 1A for further discussion of the possible impact of macroeconomic conditions on our business and regarding fluctuations in our annual and quarterly operating results.

Current wording

We believe this approach is even more important at this time as we navigate the current macroeconomic environment, which can include geopolitical considerations, fluctuations in credit, equity, and foreign currency markets, changes in inflation, interest rates, consumer confidence and spending, and other factors that may affect the buying patterns of our customers and prospective customers, including the size of transactions and length of sales cycles. In the ongoing dynamic macroeconomic landscape, we continue to factor a challenging climate. We have seen resiliency in our industry and we remain confident in our ability to execute in this environment. Please see the section titled “Risk Factors” included under Part II, Item 1A of this Quarterly Report for further discussion of the possible impact of macroeconomic conditions on our business and regarding fluctuations in our annual and quarterly operating results.

Previous wording

•Extend our technology and market leadership position. We intend to maintain our position as the market-leading unified observability and security platform that utilizes analytics and automation at its core 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. We also plan to continue evolving our predictive, causal, and generative AI capabilities to drive differentiation through precise answers and broad-based automation. We believe this strategy will enable new growth opportunities and allow us to continue to deliver differentiated high-value outcomes to our customers.

Current wording

•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 innovation. We plan to expand the functionality of our end-to-end Dynatrace platform and invest in capabilities that address new market opportunities. We also plan to evolve our AI capabilities to drive differentiation. We believe this strategy will enable new growth opportunities and allow us to deliver differentiated high-value outcomes to our customers.

Previous wording

•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 and 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 enterprise customers, across new customer applications, and into additional business units or divisions. Once customers are on the Dynatrace platform, we have seen dollar-based net retention rate expansion due to the ease of use and power of our platform.

Current wording

•Expand and strengthen our relationships with existing customers. We plan to establish new and deeper relationships within our existing customers’ organizations (notably, development teams) and expand the breadth of our platform capabilities to provide for expansion opportunities. In addition, we believe the ease of implementation of Dynatrace provides us with the opportunity to expand adoption within our existing enterprise customers, across new customer applications, and into additional business units or divisions. While still in its early stages, we also believe that our DPS licensing model will drive further expansion opportunities for customers that prefer the flexibility and predictability of pricing under that model.

Previous wording

•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. 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.

Current wording

•Grow our customer base. We intend to drive new customer growth through a focus on the largest 15,000 global enterprise accounts, which generally have annual revenues in excess of $1 billion and more complex IT ecosystems and cloud environments. In particular, we are increasing the focus of our sales force on the largest 500 global companies and strategic enterprise accounts. In addition, we plan to expand our reach internationally to what we believe are large, mostly untapped markets for our company, while leveraging our sector specialization globally.

Previous wording

•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. By working more closely with strategic partners, our objective is to participate in digital transformation projects earlier in the purchasing cycle and enable customers to establish more resilient cloud deployments from the start.

Current wording

•Leverage our strategic partner ecosystem. We intend to invest in our strategic partner ecosystem, with a particular emphasis on building cloud-focused, loyal and comprehensive 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. By working more closely with strategic partners, our objective is to participate in digital transformation projects earlier in the purchasing cycle and enable customers to establish more resilient cloud deployments from the start.

Previous wording

In addition to our U.S. GAAP financial information, we monitor the following key metrics to help us measure and evaluate the effectiveness of our operations:

Current wording

We monitor the following key metrics to help us measure and evaluate the effectiveness of our operations:

Previous wording

Annual Recurring Revenue: 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. 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.

Current wording

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. We exclude from our calculation of ARR any revenues derived from month-to-month agreements and/or product usage overage billings.

Previous wording

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. Our dollar-based net retention rate reflects customer renewals, expansion, contraction and churn, and excludes the benefit of Dynatrace ARR resulting from the conversion of Classic products to the Dynatrace platform. Dollar-based net retention rate is presented on a constant currency basis.

Current wording

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. Our dollar-based net retention rate reflects customer renewals, expansion, contraction and churn, and excludes the benefit of Dynatrace ARR resulting from the conversion of Classic products to the Dynatrace platform. Beginning in fiscal 2023, we began to exclude the headwind associated with the Dynatrace perpetual license ARR given the diminishing impact of perpetual license ARR. We believe that eliminating the perpetual license headwind results in a dollar-based net retention rate metric that better reflects Dynatrace’s ability to expand existing customer relationships. Dollar-based net retention rate is presented on a constant currency basis.

Previous wording

Cost of subscription. Cost of subscription revenue includes all direct costs to deliver and support our subscription products, including salaries, benefits, share-based compensation and related expenses such as employer taxes, third-party hosting fees related to our cloud services, allocated overhead for facilities, IT, and amortization of internally developed capitalized software technology. We recognize these expenses as they are incurred.

Current wording

Cost of subscription. Cost of subscription revenue includes all direct costs to deliver and support our subscription products, including salaries, benefits, bonuses, share-based compensation and related expenses such as employer taxes, third-party hosting fees related to our cloud services, allocated overhead for depreciation, facilities, and IT, and amortization of internally developed capitalized software technology. We recognize these expenses as they are incurred.

Previous wording

Cost of service. Cost of service revenue includes salaries, benefits, share-based compensation and related expenses, such as employer taxes for our services organization, allocated overhead for depreciation of equipment, facilities and IT. We recognize these expenses as they are incurred.

Current wording

Cost of service. Cost of service revenue includes salaries, benefits, bonuses, share-based compensation, and related expenses such as employer taxes for our services organization, and allocated overhead for depreciation, facilities, and IT. We recognize these expenses as they are incurred.

Previous wording

Personnel costs, which consist of salaries, benefits, bonuses, share-based compensation and, with regard to sales and marketing expenses, sales commissions, are the most significant component of our operating expenses. We also incur other non-personnel costs, such as an allocation of our general overhead expenses, including facilities, IT, and other costs.

Current wording

Personnel costs, which consist of salaries, benefits, bonuses, share-based compensation and, with regard to sales and marketing expenses, sales commissions, are the most significant component of our operating expenses. We also incur other non-personnel costs, such as an allocation of our general overhead expenses, including depreciation, facilities, IT, and other costs.

Previous wording

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. 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 compliance associated with being a publicly traded company.

Current wording

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. We anticipate continuing to incur additional expenses as we continue to invest in the growth of our operations.

Previous wording

Interest income (expense), net consists primarily of interest income primarily from money market funds, bank deposits, and certificates of deposits, interest expense on our former term loan facility, fees on our revolving credit facility, loss on debt extinguishment and amortization of debt issuance costs.

Current wording

Interest income, net, consists primarily of interest income, primarily from money market funds, bank deposits, debt securities held as investments and certificates of deposits, fees on our revolving credit facility, and amortization of debt issuance costs.

Previous wording

Our income tax rate varies from the U.S. federal statutory rate mainly due to (1) the foreign derived intangibles deduction, (2) the generation of U.S. foreign tax credits, and (3) share-based compensation windfalls, partially offset by (4) foreign withholding taxes, (5) nondeductible executive compensation, and (6) foreign earnings taxed at rates higher than the U.S. statutory tax rate. We expect this fluctuation in income tax rates, as well as its potential impact on our results of operations, to continue.

Current wording

Our income tax rate varies from the U.S. federal statutory rate mainly due to (1) the foreign derived intangibles deduction and, (2) the generation of U.S. foreign tax credits, partially offset by (3) foreign withholding taxes, (4) nondeductible executive compensation, and (5) foreign earnings taxed at rates higher than the U.S. statutory tax rate. We expect this fluctuation in income tax rates, as well as its potential impact on our results of operations, to continue.

Previous wording

For tax years beginning on or after January 1, 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to currently deduct research and development expenses and requires taxpayers to capitalize and amortize them over five years for research activities performed in the United States and 15 years for research activities performed outside the United States pursuant to IRC Section 174. This law change increases our U.S. federal and state cash taxes and reduces cash flows in fiscal year 2024 and future years.

Current wording

For tax years beginning on or after January 1, 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to currently deduct research and development expenses and requires taxpayers to capitalize and amortize them over five years for research activities performed in the United States and 15 years for research activities performed outside the United States pursuant to IRC Section 174. This law change has increased our U.S. federal and state cash taxes and reduced cash flows since fiscal year 2024.

Previous wording

Subscription revenue increased by $69.1 million, or 25%, for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022, primarily due to the growth of the Dynatrace platform by adding new customers combined with existing customers expanding their use of our solutions.

Current wording

Subscription revenue increased by $65.1 million, or 21%, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily due to the growth of the Dynatrace platform by adding new customers combined with existing customers expanding their use of our solutions.

Previous wording

Service revenue decreased by $3.6 million, or 7%, for the nine months ended December 31, 2023 as compared to the nine months ended December 31, 2022. The decrease was primarily due to timing of delivery of services.

Current wording

Service revenue increased by $1.2 million, or 7%, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was primarily due to timing of delivery of services.

Previous wording

Cost of subscription increased $29.2 million, or 28%, for the nine months ended December 31, 2023 as compared to the nine months ended December 31, 2022. The increase was primarily due to higher personnel costs of $12.8 million to support the growth of our subscription cloud-based offering and higher share-based compensation of $5.4 million. Also contributing to the increase were increased cloud-based hosting costs and subscriptions of $5.8 million and increased overhead costs of $5.4 million to support the growth of the business and related infrastructure.

Current wording

Cost of subscription increased by $10.7 million, or 25%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was primarily due to higher personnel costs of $3.1 million to support the growth of our subscription cloud-based offering and higher share-based compensation of $1.7 million. Also contributing to the increase were higher cloud-based hosting costs of $3.2 million and software subscription costs of $1.5 million to support the growth of the business and related infrastructure and higher depreciation expense of $0.6 million.

Previous wording

Cost of service increased by $1.7 million, or 11%, for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022. The increase was primarily the result of higher share-based compensation of $0.7 million and higher professional fees of $0.7 million.

Current wording

Cost of service increased by $1.3 million, or 8%, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was primarily the result of higher share-based compensation of $0.5 million and higher software subscription costs of $0.4 million.

Previous wording

Subscription gross profit increased by $59.1 million, or 24%, during the three months ended December 31, 2023 compared to the three months ended December 31, 2022 and subscription gross margin remained consistent at 87%. The increase in gross profit was primarily due to subscription revenue growth.

Current wording

Subscription gross profit increased by $54.5 million, or 20%, during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 and subscription gross margin remained consistent at 86%. 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.

Previous wording

Subscription gross profit increased by $180.0 million, or 26%, during the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022 and subscription gross margin remained consistent at 87%. The increase in gross profit was primarily due to subscription revenue growth.

Current wording

Service gross profit decreased slightly during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 and service gross margin remained consistent at 5%. The decrease in gross profit was primarily due to higher share-based compensation expense.

Previous wording

Research and development expenses increased by $25.6 million, or 47%, for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022. The increase was due to increased personnel and other costs of $11.5 million to expand our product offerings and higher share-based compensation of $7.6 million. Also contributing were higher overhead costs of $4.8 million and higher cloud-based hosting costs and subscriptions of $0.8 million.

Current wording

Research and development expenses increased by $21.3 million, or 32%, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase was due to increased personnel costs of $9.8 million to expand our product offerings and higher share-based compensation of $8.3 million. Also contributing were higher software subscription costs of $1.8 million and cloud-based hosting costs of $1.1 million.

Previous wording

Sales and marketing expenses increased by $20.4 million, or 18%, for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022, primarily driven by an increase in personnel costs of $12.6 million and higher share-based compensation of $2.6 million. Further contributing to the increase were higher commissions of $3.0 million and increased overhead costs of $2.5 million.

Current wording

Sales and marketing expenses increased by $20.0 million, or 16%, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily driven by an increase in personnel costs of $10.8 million and higher share-based compensation of $2.0 million. Further contributing to the increase were higher commissions of $3.0 million, increased partner fees of $2.5 million, and increased software subscription costs of $2.0 million.

Previous wording

Amortization of other intangibles decreased by $1.1 million, or 17%, for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022. 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.

Current wording

Amortization of other intangibles decreased by $1.0 million, or 17%, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. 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.

Previous wording

Other expense, net, of $3.9 million for the three months ended December 31, 2023 compared to income of $1.6 million for the three months ended December 31, 2022. The change was primarily the result of foreign currency realized and unrealized gains and losses related to the impact of transactions denominated in a foreign currency, including balances between subsidiaries.

Current wording

Other expense, net, was $2.0 million for the three months ended June 30, 2024 compared to income of $0.3 million for the three months ended June 30, 2023. The change was primarily the result of foreign currency realized and unrealized gains and losses related to the impact of transactions denominated in a foreign currency, including balances between subsidiaries.

Previous wording

As of December 31, 2023, we had $782.6 million of cash and cash equivalents and $387.9 million available under our revolving credit facility.

Current wording

We have historically maintained a disciplined and balanced approach to optimizing costs and improving the efficiency and profitability of our business, while continuing to invest in future growth opportunities that we expect will drive long-term value. Our principal sources of liquidity are cash and cash equivalents, marketable securities (investments) and cash provided by operating activities. From time to time, we may borrow under our revolving credit facility. As of June 30, 2024, we had $930.3 million of cash and cash equivalents, $136.9 million of investments, consisting of U.S. Treasury securities, commercial paper, corporate debt securities, and U.S. agency securities that have maturities between one and 30 months, and $399.2 million available under our revolving credit facility.

Previous wording

Our material cash requirements from known contractual and other obligations consist of our rent payments required under operating lease agreements and non-cancelable purchase obligations for cloud hosting support. As of December 31, 2023, total contractual commitments were $343.1 million, with $39.0 million committed within the next 12 months.

Current wording

Our material cash requirements from known contractual and other obligations consist of our rent payments required under operating lease agreements and non-cancelable purchase obligations for cloud hosting support. As of June 30, 2024, total contractual commitments were $387.7 million, with $113.7 million committed within the next 12 months.

Previous wording

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” under Part II, Item 1A in this Quarterly Report and our Annual Report. 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 12 months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts, the continued expansion of sales and marketing activities, the introduction of new and enhanced products, seasonality of our billing activities, timing and extent of spending to support our growth strategy, and the continued market acceptance of our products. In the event that additional financing is required from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results, and financial condition would be adversely affected.

Current wording

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 of this Quarterly Report. However, we believe that our existing cash, cash equivalents, investments, 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 12 months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts, the continued expansion of sales and marketing activities, the introduction of new and enhanced products, seasonality of our billing activities, timing and extent of spending to support our growth strategy, and the continued market acceptance of our products. In the event that additional financing is required from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results, and financial condition would be adversely affected.

Previous wording

In December 2022, we entered into a senior secured revolving credit facility in an aggregate amount of $400.0 million (the “Credit Facility”). As of December 31, 2023, we had $387.9 million available under the Credit Facility with $12.1 million of letters of credit outstanding. As of December 31, 2023, we were in compliance with all applicable covenants pertaining to the Credit Facility. The Credit Facility is discussed further in Note 7, Long-term Debt, of the condensed consolidated financial statements in this Quarterly Report.

Current wording

In December 2022, we entered into a senior secured revolving credit facility in an aggregate amount of $400.0 million (as amended to date, the “Credit Facility”). As of June 30, 2024, we had $399.2 million available under the Credit Facility with $0.8 million of letters of credit outstanding. As of June 30, 2024, we were in compliance with all applicable covenants pertaining to the Credit Facility. The Credit Facility is discussed further in Note 8, Long-term Debt, of the condensed consolidated financial statements in this Quarterly Report.

Previous wording

For the nine months ended December 31, 2022, cash provided by operating activities was $234.5 million as a result of net income of $27.7 million, and adjusted by non-cash charges of $156.5 million and a change of $50.3 million in our operating assets and liabilities. The non-cash charges were primarily comprised of share-based compensation of $104.9 million, depreciation and amortization of $40.6 million, and a loss on extinguishment of debt of $5.9 million. The change in our net operating assets and liabilities was primarily the result of a decrease in accounts receivable of $40.3 million due to the timing of receipts of payments from customers, a decrease in prepaid expenses and other assets of $29.6 million driven by the receipt of an income tax refund and timing of payments in advance of future services, and an increase in accounts payable and accrued expenses of $19.4 million driven by timing of payments. Partially offsetting this was a decrease in deferred revenue of $21.8 million due to seasonality in our sales cycle, which is higher in the third and fourth quarters of our fiscal year, and an increase in deferred commissions of $17.2 million due to commissions paid on new bookings.

Current wording

For the three months ended June 30, 2024, cash provided by operating activities was $230.7 million as a result of net income of $38.6 million, and adjusted by non-cash charges of $50.6 million and a change of $141.5 million in our operating assets and liabilities. The non-cash charges were primarily comprised of share-based compensation of $57.7 million and depreciation and amortization of $14.0 million, partially offset by deferred income taxes of $22.6 million. The change in our net operating assets and liabilities was primarily the result of a decrease in accounts receivable of $355.4 million due to the timing of receipts of payments from customers, partially offset by a decrease in deferred revenue of $131.5 million due to seasonality in our sales cycle, which is higher in the third and fourth quarters of our fiscal year, a decrease in accounts payable and accrued expenses of $78.3 million driven by timing of payments, including the payments of our annual bonus plans and year-end commissions, and an increase in prepaid expenses and other assets of $8.1 million driven by the timing of payments in advance of future services.

Previous wording

For the nine months ended December 31, 2023, cash provided by operating activities was $246.4 million as a result of net income of $116.7 million, and adjusted by non-cash charges of $151.6 million and a change of $21.8 million in our operating assets and liabilities. The non-cash charges were primarily comprised of share-based compensation of $153.3 million and depreciation and amortization of $40.8 million, partially offset by deferred income taxes of $49.6 million. The change in our net operating assets and liabilities was primarily the result of a decrease in deferred revenue of $55.9 million due to seasonality in our sales cycle, which is higher in the third and fourth quarters of our fiscal year, a decrease in accounts payable and accrued expenses of $24.0 million driven by timing of payments, and an increase in prepaid expenses and other assets of $27.4 million driven by the timing of payments in advance of future services. Partially offsetting this was a decrease in accounts receivable of $83.4 million due to the timing of receipts of payments from customers.

Current wording

For the three months ended June 30, 2023, cash provided by operating activities was $133.9 million as a result of net income of $38.2 million, and adjusted by non-cash charges of $34.6 million and a change of $61.1 million in our operating assets and liabilities. The non-cash charges were primarily comprised of share-based compensation of $40.5 million, depreciation and amortization of $13.6 million, partially offset by deferred income taxes of $19.3 million. The change in our net operating assets and liabilities was primarily the result of a decrease in accounts receivable of $204.2 million due to the timing of receipts of payments from customers and a decrease in deferred commissions of $8.5 million due to commissions paid on new bookings. Partially offsetting this was a decrease in deferred revenue of $95.9 million due to seasonality in our sales cycle, which is higher in the third and fourth quarters of our fiscal year, a decrease in accounts payable and accrued expenses of $39.6 million driven by timing of payments, and an increase in prepaid expenses and other assets of $16.4 million driven by the timing of payments in advance of future services.

Previous wording

Cash used in investing activities during the nine months ended December 31, 2022 was $15.6 million as a result of purchases of property and equipment.

Current wording

Cash used in investing activities during the three months ended June 30, 2023 was $10.3 million as a result of purchases of property and equipment.

Previous wording

Cash used in financing activities during the nine months ended December 31, 2022 was $250.2 million as a result of repayments of our term loan of $281.1 million, partially offset by proceeds from our employee stock purchase plan of $17.8 million and proceeds from the exercise of our stock options of $15.1 million.

Current wording

Cash used in financing activities during the three months ended June 30, 2024 was $42.8 million, primarily as a result of repurchases of common stock of $48.6 million and taxes paid related to net share settlement of equity awards of $8.3 million, partially offset from proceeds from our employee stock purchase plan of $10.4 million and proceeds from the exercise of our stock options of $4.2 million.