Fourth quarter revenue grew 85% year-over-year to $114 million

Strong growth of larger customers, with 858 $100k+ ARR customers versus 453 a year-ago

Announced Security Monitoring to break the silos between security, dev, and ops

Launched Network Performance Monitoring and Real User Monitoring

NEW YORK, Feb. 13, 2020 (GLOBE NEWSWIRE) -- Datadog, Inc. (NASDAQ:DDOG), the monitoring and analytics platform for developers, IT operations teams and business users in the cloud age, today announced financial results for its fourth quarter ended December 31, 2019.

“We are very pleased with our fourth quarter performance, which was highlighted by 85% year-over-year revenue growth, and very strong platform adoption,” said Olivier Pomel, co-founder and CEO of Datadog. “The quarter closes an excellent year, in which we generated 83% revenue growth and approximately breakeven free cash flow. We are delivering very strong growth at scale, and have demonstrated robust operating efficiencies.”

Pomel added, “Datadog has established itself as the leading monitoring and analytics platform. We accelerated our pace of innovation throughout 2019, including the fourth quarter announcement of Security Monitoring to break down the silos between developer, operations, and security teams. We are proud of what we have accomplished this year and remain committed to delivering continued innovation to solve our customer pain points.”

Fourth Quarter 2019 Financial Highlights:

  • Revenue was $113.6 million, an increase of 85% year-over-year.

  • GAAP operating loss was $(2.3) million; GAAP operating margin was (2.0)%.

  • Non-GAAP operating income was $7.0 million; non-GAAP operating margin was 6.1%.

  • GAAP net income per diluted share was $0.00; non-GAAP net income per diluted share was $0.03.

  • Operating cash flow was $17.4 million, with free cash flow of $10.9 million.

  • Cash, cash equivalents, restricted cash, and marketable securities were $777.9 million as of December 31, 2019.

Full Year 2019 Financial Highlights:

  • Revenue was $362.8 million, an increase of 83% year-over-year.

  • GAAP operating loss was $(20.1) million; GAAP operating margin was (5.6)%.

  • Non-GAAP operating loss was $(5.4) million; non-GAAP operating margin was (1.5)%.

  • GAAP net loss per diluted share was $(0.12); non-GAAP net loss per diluted share was $(0.01).

  • Operating cash flow was $24.2 million, with free cash flow of $0.8 million.

Fourth Quarter & Recent Business Highlights:

  • As of December 31, 2019, we had 858 customers with ARR of $100,000 or more, an increase of 89% from 453 as of December 31, 2018. As of December 31, 2019, we had 50 customers with ARR of $1 million or more, an increase of 72% from 29 as of December 31, 2018.

  • Announced Security Monitoring, currently available in beta, to break down the silos between security, dev, and ops. Our vision is to offer security teams the same visibility into their infrastructure, network, and applications that developers and operations teams have, as well as to offer developers and operations the ability to surface possible threats. Our solution is designed to help our customers better operationalize IT security, as the security and performance of applications can no longer be the responsibility of separate and isolated teams.

  • Announced the general availability of Network Performance Monitoring (NPM). An extension of our leading infrastructure monitoring, NPM enables visibility into network flows in granular detail across public cloud, private cloud, and on-premise environments, to provide immediate insight into performance and dependencies. Our Simple Network Management Protocol (SNMP) integration, a component of NPM, is available in beta and extends visibility to physical network devices.

  • Announced the general availability of Real User Monitoring (RUM). An extension of our user experience monitoring suite, RUM provides real-time visibility into the experience of individual users, in order to quickly spot and correct otherwise costly website performance issues. All new products are available in the same tightly integrated platform, offering the benefits of metrics, traces, and logs in one place with cross-correlations between them.

  • Launched the Datadog Partner Network, a new program expanding Datadog’s support for channel partners. This program is available for Managed Service Providers, System Integrators, Resellers and Referral Partners, as well as Technology Partners who build custom solutions on the Datadog platform, to provide them with resources such as go-to-market collateral, self-service training, and opportunity registration.

  • Continued product innovations, including enhanced APM functionality, deeper visibility into containers and serverless environments, and enhanced machine learning capabilities. Announcements included but were not limited to, the introduction of always-on Profiling for APM, a new integration with SAP HANA, support for Amazon EKS on AWS Fargate, integration with Azure DevOps, support for AWS CloudFormation Registry and CLI, the introduction of Metrics Correlations, and updated AWS Lambda integration to include Provisioned Concurrency, enhanced metrics, and distributed tracing.

First Quarter and Full Year 2020 Outlook:

Based on information as of today, February 13, 2020, Datadog is providing the following guidance for the first quarter and full year 2020:

  • First Quarter 2020 Outlook:

    • Revenue between $117 million and $119 million.

    • Non-GAAP operating loss between $(7.0) million and $(5.0) million.

    • Non-GAAP net loss per share between $(0.02) and $(0.01), assuming approximately 296 million weighted average shares outstanding.

  • Full Year 2020 Outlook:

    • Revenue between $535 million and $545 million.

    • Non-GAAP operating loss between $(30.0) million and $(20.0) million.

    • Non-GAAP net loss per share between $(0.07) and $(0.03), assuming approximately 302 million weighted average shares outstanding.

Datadog has not reconciled its expectations as to non-GAAP operating loss, or as to non-GAAP net loss per share, to their most directly comparable GAAP measure as a result of uncertainty regarding, and the potential variability of, reconciling items such as stock-based compensation and employer payroll taxes on equity incentive plans. Accordingly, reconciliation is not available without unreasonable effort, although it is important to note that these factors could be material to Datadog’s results computed in accordance with GAAP.

Conference Call Details:

  • What: Datadog financial results for the fourth quarter of 2019 and outlook for the first quarter and the full year of 2020

  • When: February 13, 2020 at 5:00 P.M. Eastern Time (2:00 P.M. Pacific Time)

  • Dial in: To access the call in the U.S., please dial (844) 873-9663, and for international callers, please dial (602) 563-8494. Callers may provide confirmation number 4064778 to access the call more quickly, and are encouraged to dial into the call 10 to 15 minutes prior to the start to prevent any delay in joining.

  • Webcast: https://investors.datadoghq.com (live and replay)

  • Replay: Following the completion of the call through 11:59 PM Eastern Time on February 20, 2020, a telephone replay will be available by dialing (855) 859-2056 from the United States or (404) 537-3406 internationally with conference ID 4064778.

About Datadog
Datadog is the monitoring and analytics platform for developers, IT operations teams and business users in the cloud age. Our SaaS platform integrates and automates infrastructure monitoring, application performance monitoring and log management to provide unified, real-time observability of our customers’ entire technology stack. Datadog is used by organizations of all sizes and across a wide range of industries to enable digital transformation and cloud migration, drive collaboration among development, operations and business teams, accelerate time to market for applications, reduce time to problem resolution, understand user behavior and track key business metrics.

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 first quarter and for the full year of 2020. These forward-looking statements are based on Datadog’s current assumptions, expectations and beliefs and are subject to substantial risks, uncertainties, assumptions and changes in circumstances that may cause Datadog’s actual results, performance or achievements to differ materially from those expressed or implied in any forward-looking statement.

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 and (12) general market, political, economic, and business conditions.  These risks and uncertainties are more fully described in our filings with the Securities and Exchange Commission (SEC), including in the section entitled “Risk Factors” in our Quarterly Report on Form 10-Q filed with the SEC on November 13, 2019. Additional information will be made available in our Annual Report on Form 10-K for the year ended December 31, 2019 and other filings and reports that we may file from time to time with the SEC.  Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, we cannot guarantee future results, levels of activity, performance, achievements, or events and circumstances reflected in the forward-looking statements will occur. Forward-looking statements represent our beliefs and assumptions only as of the date of this press release. We disclaim any obligation to update forward-looking statements.

About Non-GAAP Financial Measures
Datadog discloses the following non-GAAP financial measures in this release and the earnings call referencing this press release: non-GAAP operating income (loss), non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses (sales and marketing, research and development, general and administrative), non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per diluted share, non-GAAP net income (loss) per basic share, and free cash flow. Datadog uses each of these non-GAAP financial measures internally to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, and to evaluate Datadog’s financial performance. Datadog believes they are useful to investors, as a supplement to GAAP measures, in evaluating its operational performance, as further discussed below. Datadog’s non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in its industry, as other companies in its industry may calculate non-GAAP financial results differently, particularly related to non-recurring and unusual items. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact on Datadog’s reported financial results.

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.

Datadog defines non-GAAP gross profit, non-GAAP operating expenses (sales and marketing, research and development, general and administrative), non-GAAP gross margin, non-GAAP operating margin, non-GAAP operating income (loss) and non-GAAP net income (loss) as the respective GAAP balances, adjusted for, as applicable: (1) stock-based compensation expense; (2) the amortization of purchased intangibles and (3) non-cash benefit related to a one-time tax adjustment. Datadog defines free cash flow as Net cash provided by (used in) operating activities, minus capital expenditures and minus capitalized software development costs. Investors are encouraged to review the reconciliation of these historical non-GAAP financial measures to their most directly comparable GAAP financial measures.

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, Datadog views acquisition related expenses as events that are not necessarily reflective of operational performance during a period.

Non-cash benefit related to one-time tax adjustment. Datadog recorded a contingent payroll tax liability in conjunction with a common stock repurchase transaction in 2015. In 2019, the period of limitations for assessing the contingent Federal payroll tax liability expired and the Company was legally released from being the primary obligor, and recognized a benefit in the consolidated statement of operations. Datadog does not believe this is reflective of on-going results and therefore adjusted for this benefit.

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 December 31, 2019 has been calculated assuming the conversion of all outstanding shares of preferred stock into shares of Class B common stock.

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 $100,000 or more and number of customers with ARR of $1 million or more are based on the ARR of each customer, as of the last month of the quarter.

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  Year 
  Ended December 31,  Ended December 31, 
  2019  2018  2019  2018 
Revenue $113,644  $61,610  $362,780  $198,077 
Cost of revenue (1)(2)  25,724   15,839   88,949   46,529 
Gross profit  87,920   45,771   273,831   151,548 
Operating expenses:                
Research and development (1)  35,894   17,720   111,425   55,176 
Sales and marketing (1)  41,596   29,102   146,657   88,849 
General and administrative (1)  12,696   5,623   35,889   18,556 
Total operating expenses  90,186   52,445   293,971   162,581 
Operating loss  (2,266)  (6,674)  (20,140)  (11,033)
Other income, net  3,518   181   4,164   793 
Income (loss) before provision for income taxes  1,252   (6,493)  (15,976)  (10,240)
Provision for income taxes  (361)  (94)  (734)  (522)
Net income (loss) $891  $(6,587) $(16,710) $(10,762)
Net income (loss) per share - basic $0.00  $(0.09) $(0.12) $(0.15)
Net income (loss) per share - diluted $0.00  $(0.09) $(0.12) $(0.15)
Weighted average shares used in calculating net income (loss) per share:                
Basic  294,515   74,640   139,873   70,951 
Diluted  327,333   74,640   139,873   70,951 
                 
(1) Includes stock-based compensation expense as follows:                
Cost of revenue $210  $105  $582  $287 
Research and development  4,263   710   7,972   1,641 
Sales and marketing  2,262   669   5,538   1,910 
General and administrative  2,283   709   4,942   1,406 
Total $9,018  $2,193  $19,034  $5,244 
                 
(2) Includes amortization of acquired intangibles as follows:                
Cost of revenue $221  $179  $752  $511 
Total $221  $179  $752  $511 
                 


Condensed Consolidated Balance Sheets

(In thousands; unaudited)

  December 31,  December 31, 
  2019  2018 
ASSETS        
CURRENT ASSETS:        
Cash and cash equivalents $597,297  $53,639 
Marketable securities  176,674    
Accounts receivable, net of allowance for doubtful accounts of $817 and $477 as of December 31, 2019 and December 31, 2018, respectively  102,394   55,822 
Deferred contract costs, current  8,346   3,717 
Prepaid expenses and other current assets  19,231   8,773 
Total current assets  903,942   121,951 
Property and equipment, net  32,749   21,649 
Operating lease assets  53,002    
Goodwill  9,058   7,626 
Intangible assets, net  1,435   1,288 
Deferred contract costs, non-current  17,409   7,292 
Restricted cash  3,456   11,341 
Other assets  16,990   8,603 
TOTAL ASSETS $1,038,041  $179,750 
         
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)        
CURRENT LIABILITIES:        
Accounts payable $15,429  $12,638 
Accrued expenses and other current liabilities  38,746   30,290 
Operating lease liabilities, current  11,916    
Deferred revenue, current  134,148   69,306 
Total current liabilities  200,239   112,234 
Operating lease liabilities, non-current  48,510    
Deferred revenue, non-current  4,340   1,393 
Other liabilities  2,611   1,359 
Total liabilities  255,700   114,986 
         
         
CONVERTIBLE PREFERRED STOCK     140,805 
         
STOCKHOLDERS' EQUITY (DEFICIT):        
Common stock  3    
Additional paid-in capital  905,821   30,834 
Accumulated other comprehensive income  133   31 
Accumulated deficit  (123,616)  (106,906)
Total stockholders’ equity (deficit)  782,341   (76,041)
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) $1,038,041  $179,750 
         


Condensed Consolidated Statements of Cash Flow

(In thousands; unaudited)

 Three Months  Year 
 Ended December 31,  Ended December 31, 
 2019  2018  2019  2018 
CASH FLOWS FROM OPERATING ACTIVITIES:               
Net income (loss)$891  $(6,587) $(16,710) $(10,762)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:               
Depreciation and amortization 3,594   1,787   12,370   6,026 
Amortization of discounts or premiums on marketable securities 12      12    
Amortization of deferred contract costs 1,712   865   5,400   2,671 
Stock-based compensation, net of amounts capitalized 9,018   2,193   19,034   5,244 
Non-cash lease expense 3,360      11,763    
Provision for accounts receivable allowance 360   192   1,195   477 
Loss on disposal of property and equipment 266   10   708   9 
Changes in operating assets and liabilities:               
Accounts receivable, net (15,286)  (16,745)  (47,510)  (25,322)
Deferred contract costs (9,252)  (2,880)  (20,146)  (8,925)
Prepaid expenses and other current assets (570)  (585)  (10,046)  (1,331)
Other assets (6)  (2,016)  (8,486)  (6,955)
Accounts payable (1,729)  2,427   2,484   7,241 
Accrued expenses and other liabilities 8,366   4,537   6,376   10,857 
Deferred revenue 16,694   12,247   67,790   31,599 
Net cash provided by (used in) operating activities 17,430   (4,555)  24,234   10,829 
CASH FLOWS FROM INVESTING ACTIVITIES:               
Purchases of marketable securities (176,639)     (176,639)   
Purchases of property and equipment (3,502)  (1,457)  (13,315)  (9,662)
Capitalized software development costs (3,070)  (1,636)  (10,128)  (6,176)
Cash paid for acquisition of businesses; net of cash acquired (2,138)     (2,138)  (1,618)
Net cash used in investing activities (185,349)  (3,093)  (202,220)  (17,456)
CASH FLOWS FROM FINANCING ACTIVITIES:               
Proceeds from exercise of stock options 593   949   7,899   7,782 
Proceeds from initial public offering, net of underwriting discounts and commissions and other offering costs (2,342)     706,317    
Net cash (used in) provided by financing activities (1,749)  949   714,216   7,782 
                
Effect of exchange rate changes on cash, cash equivalents and restricted cash (70)  34   (21)  47 
                
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (169,738)  (6,665)  536,209   1,202 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period 770,927   71,645   64,980   63,778 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period$601,189  $64,980  $601,189  $64,980 
                
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$597,297  $53,639  $597,297  $53,639 
Restricted cash – Including amounts in prepaid expense and other current assets and other assets 3,892   11,341   3,892   11,341 
Total cash, cash equivalents and restricted cash$601,189  $64,980  $601,189  $64,980 
                


Reconciliation from GAAP to Non-GAAP Results

(In thousands, except per share data; unaudited)

  Three Months  Year 
  Ended December 31,  Ended December 31, 
  2019  2018  2019  2018 
Reconciliation of gross profit and gross margin                
GAAP gross profit $87,920  $45,771  $273,831  $151,548 
Plus: Stock-based compensation expense  210   105   582   287 
Plus: Amortization of acquired intangibles  221   179   752   511 
Non-GAAP gross profit $88,351  $46,055  $275,165  $152,346 
GAAP gross margin  77%  74%  75%  77%
Non-GAAP gross margin  78%  75%  76%  77%
                 
Reconciliation of operating expenses                
GAAP research and development $35,894  $17,720  $111,425  $55,176 
Less: Stock-based compensation expense  4,263   710   7,972   1,641 
Less: Non-cash benefit related to a one-time tax adjustment        (2,344)   
Non-GAAP research and development $31,631  $17,010  $105,797  $53,535 
                 
GAAP sales and marketing $41,596  $29,102  $146,657  $88,849 
Less: Stock-based compensation expense  2,262   669   5,538   1,910 
Less: Non-cash benefit related to a one-time tax adjustment        (397)   
Non-GAAP sales and marketing $39,334  $28,433  $141,516  $86,939 
                 
GAAP general and administrative $12,696  $5,623  $35,889  $18,556 
Less: Stock-based compensation expense  2,283   709   4,942   1,406 
Less: Non-cash benefit related to a one-time tax adjustment        (2,266)   
Non-GAAP general and administrative $10,413  $4,914  $33,213  $17,150 
                 
Reconciliation of operating income (loss) and operating margin                
GAAP operating loss $(2,266) $(6,674) $(20,140) $(11,033)
Plus: Stock-based compensation expense  9,018   2,193   19,034   5,244 
Plus: Amortization of acquired intangibles  221   179   752   511 
Plus: Non-cash benefit related to a one-time tax adjustment        (5,007)   
Non-GAAP operating income (loss) $6,973  $(4,302) $(5,361) $(5,278)
GAAP operating margin  (2.0%)  (10.8%)  (5.6%)  (5.6%)
Non-GAAP operating margin  6.1%  (7.0%)  (1.5%)  (2.7%)
                 
Reconciliation of net income (loss)                
GAAP net income (loss) $891  $(6,587) $(16,710) $(10,762)
Plus: Stock-based compensation expense  9,018   2,193   19,034   5,244 
Plus: Amortization of acquired intangibles  221   179   752   511 
Plus: Non-cash benefit related to a one-time tax adjustment        (5,007)   
Non-GAAP net income (loss) $10,130  $(4,215) $(1,931) $(5,007)
Net income (loss) per share - basic $0.03  $(0.06) $(0.01) $(0.07)
Net income (loss) per share - diluted $0.03  $(0.06) $(0.01) $(0.07)
Shares used in non-GAAP per share calculations:                
Basic  294,515   74,640   139,873   70,951 
Diluted  327,333   74,640   139,873   70,951 
                 


Reconciliation of GAAP Cash Flow from Operating Activities to Free Cash Flow

(In thousands; unaudited)

 Three Months  Year 
 Ended December 31,  Ended December 31, 
 2019  2018  2019  2018 
Net cash provided by (used in) operating activities$17,430  $(4,555) $24,234  $10,829 
Less: Purchases of property and equipment (3,502)  (1,457)  (13,315)  (9,662)
Less: Capitalized software development costs (3,070)  (1,636)  (10,128)  (6,176)
Free cash flow$10,858  $(7,648) $791  $(5,009)
                


Contact Information

AJ Ljubich, CFA
Datadog Investor Relations
(866) 329-4466
IR@datadog.com

Martin Bergman
Datadog Communications
(866) 329-4466
Press@datadog.com

Datadog is a registered trademark of Datadog, Inc.

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