Application monitoring heavyweight Dynatrace LLC is headed to the stock market.

The company on Friday filed for an initial public offering on the New York Stock Exchange, where it will trade under the ticker symbol “DT.” Dynatrace hopes to raise up to $300 million in the IPO. The decision to disclose the funding target so early is somewhat unusual, since tech firms normally provide a placeholder in their first filing and publish the final figure later. 

It’s not the only unusual thing about the IPO. Whereas most of the tech firms that have gone public this year are high-growth companies firmly in the red (with one notable exception), Dynatrace is an incumbent player with a 14-year history. It’s currently owned by private equity firm Thoma Bravo LLC and was previously a subsidiary of Compuware Inc., which Thoma Bravo acquired in 2014 for $2.5 billion.

Dynatrace’s IPO filing provides a glimpse at its finances. The company wrapped up the 2019 fiscal year ended March 31 with over 2,300 customers and revenue of $431 million, up 8% year-over-year. That moderate sales bump was accompanied by a big swing in earnings: Dynatrace went from a $9 million profit in 2018 to a $116 million loss in 2019.

Several factors are responsible for that drop. One of them is that Dynatrace has been investing heavily in expanding sales, marketing and product engineering activities as part of an effort to move customers from its old, license-based application monitoring solution to the cloud-based platform it launched in 2016. 

The push is bearing fruit. Dynatrace raised subscription revenues by 36% last year, to $349.8 million, and the cloud platform now accounts for 81% of total sales, up from 57% in 2017. Gross subscription profit jumped 40% in 2019, to $83.6 million.

Dynatrace’s cloud platform uses artificial intelligence to help organizations pinpoint and resolve issues in their applications. The AI maintains a “baseline” of each workload’s normal activity that it uses to detect deviations, such as a sudden performance drop for users. The software also gives administrators suggestions to fix issues. 

“One thing you don’t want to have an AI system tell you is you should restart this service because some neural network told you to do so,” Alois Reitbauer, Dynatrace’s chief technical strategist, said in a recent interview on SiliconANGLE Media’s theCUBE livestreaming studio. “That’s why our approach is what we call a deterministic AI.”

Dynatrace’s platform can “explain back to the user why it came to a certain conclusion, why I should restart this service, why I should roll back this deployment, or why the AI believe that if I fix this problem then the bigger problem will be solved,” Reitbauer added. 

According to Dynatrace’s prospectus, the company plans to use some of the capital it will raise through the IPO to expand the platform’s feature set. Dynatrace will expand its partner ecosystem and work to add more customers in markets where it already has a direct presence. 

Goldman Sachs Group Inc., JP Morgan & Co. and Citi Citigroup Inc are underwriting the offering. 

Photo: Dynatrace