Datadog Announces First Quarter Results
First quarter revenue grew 87% year-over-year to
Strong growth of larger customers, with 960 $100k+ ARR customers versus 508 a year ago
Launched Security Monitoring to break down the silos between security, dev, and ops
Surpassed 400 out-of-the-box supported integrations
“We are very pleased with our first quarter performance, in which we delivered 87% year-over-year revenue growth,” said
Pomel added, “In response to the COVID-19 pandemic, we are focused on ensuring the safety of our employees, continuing to best serve our customers, and investing in our platform. This crisis has demonstrated the need to be digital-first and agile, has underscored the importance of observability into cloud environments, and reaffirmed the long-term opportunity for Datadog.”
First Quarter 2020 Financial Highlights:
• | Revenue was |
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• | GAAP operating income was |
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• | Non-GAAP operating income was |
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• | GAAP net income per diluted share was |
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• | Operating cash flow was |
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• | Cash, cash equivalents, restricted cash, and marketable securities were |
• | As of |
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• | Launched the general availability of Security Monitoring, to provide unified visibility across security, dev, and ops teams. Our differentiated approach provides turn-key Detection Rules to flag attacks or misconfigurations, adds context-rich Security Signals to identify trends over time, and detects threats in real time across the full stream of ingested data at a fraction of the cost of traditional solutions. As with all our products, Security Monitoring is available in the same easy to use and integrated SaaS platform. | |||
• | Surpassed over 400 out-of-the-box supported integrations. Among others, we released integrations with Amazon Managed Streaming for Apache Kafka, Apache Airflow, Apache Flink, AWS Step Functions, Cisco Meraki, Confluent Platform, ClickHouse, Hashicorp Vault, Tenable Nessus, and VMware Carbon Black. Our broad and deep set of integrations enable customers to gain visibility and insights into their existing IT stacks without the need for ma nual instrumentation and with a quick time to value. In addition to continually adding new integrations, all existing integrations are continually refined and improved. | |||
• | Continued product innovations, including extending Watchdog, our machine-learning-based auto-detection engine, to additional infrastructure use-cases in order to automatically surface anomalies, as well as enabling it to pinpoint patterns of errors in application traces. We extended our Network Performance Monitoring (NPM), to provide visibility into network flows that extend beyond internal networks. Additionally, we have enhanced our serverless capabilities, to provide further visibility and debugging capabilities into functions through metadata collected in real-time and with superior granularity. We have achieved the AWS Lambda Ready designation, demonstration of our platform’s deep integration with AWS Lambda. | |||
• | Achieved certification to the |
Second Quarter and Full Year 2020 Outlook:
Based on information as of today,
• | Second Quarter 2020 Outlook: | |||
• | Revenue between |
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• | Non-GAAP operating (loss) income between |
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• | Non-GAAP net income per share between |
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• | Full Year 2020 Outlook: | |||
• | Revenue between |
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• | Non-GAAP operating income between |
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• | Non-GAAP net income per share between |
Conference Call Details:
• | What: Datadog financial results for the first quarter of 2020 and outlook for the second quarter and the full year of 2020 | |
• | When: May 11, 2020 at |
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• | Dial in: To access the call in the |
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• | Webcast: https://investors.datadoghq.com (live and replay) | |
• | Replay: Following the completion of the call through |
About
Forward-Looking Statements
This press release and the earnings call referencing this press release contain “forward-looking” statements, as that term is defined under the federal securities laws, including but not limited to statements regarding Datadog’s future financial performance, including our outlook for the second quarter and for the full year of 2020 and the long-term opportunity for
The risks and uncertainties referred to above include, but are not limited to (1) our recent rapid growth may not be indicative of our future growth; (2) our history of operating losses; (3) our limited operating history; (4) our business depends on our existing customers purchasing additional subscriptions and products from us and renewing their subscriptions; (5) our ability to attract new customers; (6) our ability to effectively develop and expand our sales and marketing capabilities; (7) risk of a security breach; (8) risk of interruptions or performance problems associated with our products and platform capabilities; (9) our ability to adapt and respond to rapidly changing technology or customer needs; (10) the competitive markets in which we participate; (11) risks associated with successfully manage our growth; (12) general market, political, economic, and business conditions and (13) the potential impact that the recent COVID-19 pandemic and any related economic downturn could have on our business, financial condition and results of operations. These risks and uncertainties are more fully described in our filings with the
About Non-GAAP Financial Measures
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. A reconciliation of the historical non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release.
Management believes these non-GAAP financial measures are useful to investors and others in assessing Datadog’s operating performance due to the following factors:
Stock-based compensation and amortization of stock-based compensation capitalized in software development costs. Datadog utilizes stock-based compensation to attract and retain employees. It is principally aimed at aligning their interests with those of its stockholders and at long-term retention, rather than to address operational performance for any particular period. As a result, stock-based compensation expenses vary for reasons that are generally unrelated to financial and operational performance in any particular period.
Amortization of purchased intangibles and transaction costs related to acquisition. Datadog views amortization of purchased intangible assets as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are evaluated for impairment regularly, amortization of the cost of purchased intangibles is an expense that is not typically affected by operations during any particular period. Similarly,
Non-cash benefit related to one-time tax adjustment.
Assumed preferred stock conversion. As a result of Datadog’s initial public offering, all outstanding shares of preferred stock were automatically converted into shares of Class B common stock. Consequently, non-GAAP diluted net income per share for the year ended
Additionally, Datadog’s management believes that the non-GAAP financial measure free cash flow is meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures and the capitalization of software development costs due to the fact that these expenditures are considered to be a necessary component of ongoing operations.
Operating Metrics
Datadog’s number of customers with ARR of
We define the number of customers as the number of accounts with a unique account identifier for which we have an active subscription in the period indicated. A single organization with multiple divisions, segments or subsidiaries is generally counted as a single customer. However, in some cases where they have separate billing terms, we may count separate divisions, segments or subsidiaries as multiple customers.
We define ARR as the annualized revenue run-rate of subscription agreements from all customers at a point in time. We calculate ARR by taking the monthly recurring revenue, or MRR, and multiplying it by 12. MRR is defined as the revenue run-rate of subscription agreements from all customers for the last month of the period, including committed amounts and any additional usage. ARR and MRR should be viewed independently of revenue as they are operating metrics and are not intended to be replacements or forecasts of revenue.
Condensed Consolidated Statements of Operations
(In thousands, except per share data; unaudited)
Three Months | |||||||
Ended |
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2020 | 2019 | ||||||
Revenue | $ | 131,248 | $ | 70,050 | |||
Cost of revenue (1)(2) | 26,479 | 18,950 | |||||
Gross profit | 104,769 | 51,100 | |||||
Operating expenses: | |||||||
Research and development (1) | 40,824 | 22,815 | |||||
Sales and marketing (1) | 45,215 | 30,107 | |||||
General and administrative (1) | 14,952 | 7,840 | |||||
Total operating expenses | 100,991 | 60,762 | |||||
Operating income (loss) | 3,778 | (9,662 | ) | ||||
Other income, net | 2,896 | 230 | |||||
Income (loss) before provision for income taxes | 6,674 | (9,432 | ) | ||||
Provision for income taxes | (195 | ) | (59 | ) | |||
Net income (loss) | $ | 6,479 | $ | (9,491 | ) | ||
Net income (loss) per share – basic | $ | 0.02 | $ | (0.12 | ) | ||
Net income (loss) per share – diluted | $ | 0.02 | $ | (0.12 | ) | ||
Weighted average shares used in calculating net income (loss) per share: | |||||||
Basic | 295,455 | 77,061 | |||||
Diluted | 327,801 | 77,061 | |||||
(1) Includes stock-based compensation expense as follows: | |||||||
Cost of revenue | $ | 231 | $ | 99 | |||
Research and development | 5,847 | 786 | |||||
Sales and marketing | 3,074 | 729 | |||||
General and administrative | 2,908 | 831 | |||||
Total | $ | 12,060 | $ | 2,445 | |||
(2) Includes amortization of acquired intangibles as follows: | |||||||
Cost of revenue | $ | 247 | $ | 175 | |||
Total | $ | 247 | $ | 175 | |||
Condensed Consolidated Balance Sheets
(In thousands; unaudited)
2020 | 2019 | ||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | $ | 194,350 | $ | 597,297 | |||
Marketable securities | 600,384 | 176,674 | |||||
Accounts receivable, net of allowance for credit losses of |
108,437 | 102,394 | |||||
Deferred contract costs, current | 9,314 | 8,346 | |||||
Prepaid expenses and other current assets | 20,580 | 19,231 | |||||
Total current assets | 933,065 | 903,942 | |||||
Property and equipment, net | 34,084 | 32,749 | |||||
Operating lease assets | 51,286 | 53,002 | |||||
8,891 | 9,058 | ||||||
Intangible assets, net | 1,176 | 1,435 | |||||
Deferred contract costs, non-current | 18,875 | 17,409 | |||||
Restricted cash | 3,382 | 3,456 | |||||
Other assets | 15,897 | 16,990 | |||||
TOTAL ASSETS | $ | 1,066,656 | $ | 1,038,041 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Accounts payable | $ | 14,205 | $ | 15,429 | |||
Accrued expenses and other current liabilities | 41,755 | 38,746 | |||||
Operating lease liabilities, current | 13,436 | 11,916 | |||||
Deferred revenue, current | 141,242 | 134,148 | |||||
Total current liabilities | 210,638 | 200,239 | |||||
Operating lease liabilities, non-current | 46,042 | 48,510 | |||||
Deferred revenue, non-current | 3,940 | 4,340 | |||||
Other liabilities | 3,141 | 2,611 | |||||
Total liabilities | 263,761 | 255,700 | |||||
STOCKHOLDERS' EQUITY | |||||||
Common stock | 3 | 3 | |||||
Additional paid-in capital | 921,091 | 905,821 | |||||
Accumulated other comprehensive (loss) income | (1,062 | ) | 133 | ||||
Accumulated deficit | (117,137 | ) | (123,616 | ) | |||
Total stockholders’ equity | 802,895 | 782,341 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 1,066,656 | $ | 1,038,041 | |||
Condensed Consolidated Statements of Cash Flow
(In thousands; unaudited)
Three Months | |||||||
Ended |
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2020 | 2019 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income (loss) | $ | 6,479 | $ | (9,491 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | 3,688 | 2,111 | |||||
Amortization of discounts or premiums on marketable securities | 244 | — | |||||
Amortization of deferred contract costs | 2,185 | 1,028 | |||||
Stock-based compensation, net of amounts capitalized | 12,060 | 2,445 | |||||
Non-cash lease expense | 3,226 | 117 | |||||
Provision for accounts receivable allowance | 1,073 | 74 | |||||
Loss on disposal of property and equipment | 2 | 4 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable, net | (7,116 | ) | (7,585 | ) | |||
Deferred contract costs | (4,619 | ) | (3,390 | ) | |||
Prepaid expenses and other current assets | (1,404 | ) | (8,492 | ) | |||
Other assets | 919 | (8,219 | ) | ||||
Accounts payable | (1,391 | ) | 14,524 | ||||
Accrued expenses and other liabilities | 2,025 | 1,408 | |||||
Deferred revenue | 6,884 | 18,884 | |||||
Net cash provided by operating activities | 24,255 | 3,418 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of marketable securities | (427,482 | ) | — | ||||
Maturities of marketable securities | 2,620 | — | |||||
Purchases of property and equipment | (1,526 | ) | (2,197 | ) | |||
Capitalized software development costs | (3,417 | ) | (2,096 | ) | |||
Net cash used in investing activities | (429,805 | ) | (4,293 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Proceeds from exercise of stock options | 2,813 | 1,776 | |||||
Initial public offering costs | (153 | ) | — | ||||
Net cash provided by financing activities | 2,660 | 1,776 | |||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (141 | ) | (87 | ) | |||
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (403,031 | ) | 814 | ||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period | 601,189 | 64,980 | |||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period | $ | 198,158 | $ | 65,794 | |||
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH WITHIN THE CONSOLIDATED BALANCE SHEETS TO THE AMOUNTS SHOWN IN THE STATEMENTS OF CASH FLOWS ABOVE: | |||||||
Cash and cash equivalents | $ | 194,350 | $ | 54,554 | |||
Restricted cash – Including amounts in prepaid expense and other current assets and other assets | 3,808 | 11,240 | |||||
Total cash, cash equivalents and restricted cash | $ | 198,158 | $ | 65,794 | |||
Reconciliation from GAAP to Non-GAAP Results
(In thousands, except per share data; unaudited)
Three Months | |||||||
Ended |
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2020 | 2019 | ||||||
Reconciliation of gross profit and gross margin | |||||||
GAAP gross profit | $ | 104,769 | $ | 51,100 | |||
Plus: Stock-based compensation expense | 231 | 99 | |||||
Plus: Amortization of acquired intangibles | 247 | 175 | |||||
Non-GAAP gross profit | $ | 105,247 | $ | 51,374 | |||
GAAP gross margin | 80 | % | 73 | % | |||
Non-GAAP gross margin | 80 | % | 73 | % | |||
Reconciliation of operating expenses | |||||||
GAAP research and development | $ | 40,824 | $ | 22,815 | |||
Less: Stock-based compensation expense | 5,847 | 786 | |||||
Non-GAAP research and development | $ | 34,977 | $ | 22,029 | |||
GAAP sales and marketing | $ | 45,215 | $ | 30,107 | |||
Less: Stock-based compensation expense | 3,074 | 729 | |||||
Non-GAAP sales and marketing | $ | 42,141 | $ | 29,378 | |||
GAAP general and administrative | $ | 14,952 | $ | 7,840 | |||
Less: Stock-based compensation expense | 2,908 | 831 | |||||
Non-GAAP general and administrative | $ | 12,044 | $ | 7,009 | |||
Reconciliation of operating income (loss) and operating margin | |||||||
GAAP operating income (loss) | $ | 3,778 | $ | (9,662 | ) | ||
Plus: Stock-based compensation expense | 12,060 | 2,445 | |||||
Plus: Amortization of acquired intangibles | 247 | 175 | |||||
Non-GAAP operating income (loss) | $ | 16,085 | $ | (7,042 | ) | ||
GAAP operating margin | 3 | % | -14 | % | |||
Non-GAAP operating margin | 12 | % | -10 | % | |||
Reconciliation of net income (loss) | |||||||
GAAP net income (loss) | $ | 6,479 | $ | (9,491 | ) | ||
Plus: Stock-based compensation expense | 12,060 | 2,445 | |||||
Plus: Amortization of acquired intangibles | 247 | 175 | |||||
Non-GAAP net income (loss) | $ | 18,786 | $ | (6,871 | ) | ||
Net income (loss) per share - basic | $ | 0.06 | $ | (0.09 | ) | ||
Net income (loss) per share - diluted | $ | 0.06 | $ | (0.09 | ) | ||
Shares used in non-GAAP per share calculations: | |||||||
Basic | 295,455 | 77,061 | |||||
Diluted | 327,801 | 77,061 |
Reconciliation of GAAP Cash Flow from Operating Activities to Free Cash Flow
(In thousands; unaudited)
Three Months | |||||||
Ended |
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2020 | 2019 | ||||||
Net cash provided by operating activities | $ | 24,255 | $ | 3,418 | |||
Less: Purchases of property and equipment | (1,526 | ) | (2,197 | ) | |||
Less: Capitalized software development costs | (3,417 | ) | (2,096 | ) | |||
Free cash flow | $ | 19,312 | $ | (875 | ) | ||
Contact Information
AJ Ljubich, CFA
Datadog Investor Relations
(866) 329-4466
IR@datadog.com
(866) 329-4466
Press@datadog.com
All product and company names herein may be trademarks of their registered owners.
Source: Datadog, Inc.