Earnings season is upon us. As time permits, I intend to summarize the prior quarter’s earnings report for a few of the board’s most popular companies. I invite other board members to pitch in on these summaries as I will not cover all our companies by myself.
I apologize for not getting more of these reviews posted. I have been very busy with activities not directly related to the interests of this board. As a result, I just haven’t had time to get more of these reviews written and posted.
DataDog (DDOG) reported 1Q22 earnings on May 5 of this year. DDOG will report 2Q22 earnings on Thursday, August 4. If you have been reading the monthly portfolio summaries provided by several board members you should be aware that DDOG is the #1 holding for many of them. Keep that in mind as you read the following. As an aside, you may have noticed that I do not post a monthly portfolio summary. It’s not like I’m hiding anything, in fact my portfolio is quite similar to several that are posted. I refrain from posting only because I have no useful information to report that hasn’t already been posted by other members. Anything I might write would just be redundant, therefore I don’t post anything at all.
Following are most of the important financial numbers and highly condensed review of the prepared remarks and what I considered the most important information from the Q&A. As I do these summaries I reread the CC transcripts and press release. I have noticed that I sometimes have discrepancies in my financial tracking. Please, don’t nitpick these summaries, however, if you think I’ve made a significant error, I would appreciate a correction. Unless otherwise stated, these numbers are non-GAAP. Also, keep in mind that at times I will consolidate the response to a few questions on the same subject and/or provide an interpretation of the response to a question. I make an effort to try and accurately report what was said, but it’s possible I may have misunderstood something. If you think I am in error I encourage you to read the CC transcript for yourself. I have provided a link.
I do not intend to speculate on the 2Q22 report. I leave it to each board member to do that for themselves. The transcript and press release are available here:
Press Release: https://investors.datadoghq.com/static-files/23d358e0-eba2-4…
CC Transcript: https://www.fool.com/earnings/call-transcripts/2022/05/05/da…
DDOG IR: https://investors.datadoghq.com
CEO: Oliver Pomel
CFO: David Obstler
FINANCIALS (non-GAAP unless otherwise stated)
Revenue: $363.03M representing an 82.8% YOY increase and an 11.3% sequential increase.
Operating Expense: $208.6M representing a 55.9% YOY increase and an 8.7% sequential increase.
S&M Expense: $85.26M representing 23.5% of revenue and a 10.0% sequential increase.
R&D Expense: $102.62M representing 28.3% of revenue and a 12.3% sequential increase.
G&A Expense: $20.18M representing 5.6% of revenue and a 11.4% sequential increase.
Gross Margin was 80.4%
Gross Profit: $291.74M representing 90.6% of revenue and a 12.3% sequential increase.
RPO: $858M representing an 84.9% YOY increase and a 5.3% sequential increase.
NRR 130+%
Total Customers: 19,800 representing 30.3% of revenue and a 19.5% sequential increase.
Customers w/ $100K+ ARR: 2,250 representing 35.0% YOY increase and an 11.9% sequential increase.
Customers w/ 2+ products: 6,930 representing 81.0% of total customers and a 9.4% sequential increase.
Customers w/ 4+ products: 16,038 representing 81.0% of total customers and an 11.7% sequential increase.
Customers w/ 6+ products: 2,376 representing 12.0% of total customers and a 26.4% sequential increase.
Net Income: $83.4M representing 23.1% of revenue and 19.5% sequential increase.
Operating Cash Flow: $147.39 representing 40.6% of revenue and a 21.8% sequential increase.
FCF: $129.9 representing 35.8% of revenue and a 21.8% sequential increase.
EPS: $0.24 representing 300.0% increase YOY and a 20.0% sequential increase.
COMMENTARY
(I won’t repeat the financials already posted.)
CEO:
- $1.7B cash
- 14 products
- Launched Application Security Monitoring. This product breaks down silos between Security and Operations Teams, leveraging distributed tracing to accurately identify OWASP (I don’t know what that stands for) threats targeting codelevel vulnerabilities in web applications and APIs.
- Expanded the Watchdog AI Engine with Root Cause Analysis and Log Anomaly Detection. The new AI/ ML capabilities enable IT teams to detect, investigate and resolve application performance issues more quickly and reduce alert fatigue.
- Partnered with Microsoft for the Azure Cloud Adoption Framework. This partnership adds Datadog’s leading monitoring and security capabilities to Microsoft’s roadmap for successful cloud implementations.
GUIDANCE: - Revenue between $376 million and $380 million.
- Non-GAAP operating income between $49 million and $53 million.
- Non-GAAP net income per share between $0.13 and $0.15, assuming approximately 347 million weighted average diluted shares outstanding.
FULL YEAR - Revenue between $1.60 billion and $1.62 billion.
- Non-GAAP operating income between $240 million and $260 million.
- Non-GAAP net income per share between $0.70 and $0.77, assuming approximately 349 million weighted average diluted shares outstanding.
Q&A
(I will only provide important observations rather than quotes) - Increased usage, module adoption and low churn driving ARR
- 81% of customers using 2 or more modules compared to 75% last year. 35% of customers using 4 or more modules compared to 25% last year. 12% of customers using 6 or more modules compared to 4% last year.
- Security products are in the early stages and already seeing enthusiastic reception and rapid adoption in the marketplace
- Signed largest deal ever with an 8 figure upsell to an existing customer. Also, signed a 6 figure upsell. And a 7 figure upsell with a US federal agency
- The referenced customers consolidated existing home grown / open source / commercial tools and repaired blind spots with DataDog. Cut engineering staff by 50%.
- DataDog tools helps identify PII and achieve security regulations compliance
- Cloud migration and digital transformation remain long term, multi-year drivers of opportunities, presently seen to be in a very early stage.
- DataDog has not partnered with cyber-security firms because their customer base is devops teams rather than security teams. DataDog is in near constant use by their end-users
- Majority of customers tend to start small and grow. A smaller, but significant number of customers start large by replacing disconnected home-grown and commercial tools. DataDog provides an integrated toolset which not only replaces formerly used tools but repairs blind spots as well.
- A number of Q’s about pricing - DD’s strategy is to provide more value per $ which allows them to even raise prices at times during negotiations
I hope this helps you prepare for the upcoming report. Please, don’t add posts unless you think I got something materially wrong or missed something important. Let’s try to avoid board clutter. Thank you.