DDOG Q2 FY 21
8/5/2021 7:00 AM Central
Q Please provide color on large customer growth
A Still rely on land and expand and upselling
Q Hiring Plans?
A Aggressive hiring plans and quota expansion.
Q What drives expansion?
A Size of networks to be monitored and customer size
Q How much of a driver has APM been?
A Significant. APM and log are neck and neck in terms of adoption and maturity.
Q Talk through overages in 1st half of last year. How is usage and consumption growing now.
A During Q2 of last year, they had flattening. Now since Q3 of last year, they’re back on track which is reflective of cloud migration and cloud projects. Usage growth was balanced .
Q When you gave guidance, can you give a sense for how much of the sequential increase is due to headcount and travel?
A Not having travel, has some volatility. Very aggressive hiring plans, which takes some time, yet they expect accelerated hiring growth in the 2nd half of the year.
Q What are the sales cycles looking like and how do you do the kind of hiring that you do. How does this get DDOG into the upper end of hires this as you grow?
A At this point, not planning any major changes in their sales process. On the opening of the economy, the main thing they’re working on is to work on the platform to add more product options while simultaneously growing their sales team.
Q Pricing environment, how do you feel re: your pricing strategy and do you think you’ll be able to increase prices in the future?
A Thinking long term, they hope to increase pricing to align with the value their customers receive from their products.
Q Are you seeing more legacy observability replacements?
A On-prem converting to the cloud is what they’re mainly replacing.
Q Building security of solutions, how are you building out the sales motion there?
A Sales motion is built on observability, and relying on selling security to existing customers.
Q Higher level of multi-year commitments. What drove that?
A Correlation to larger customers investing to DDOG, which is coming from the customers and not DDOG, as a factor of committing to DDOG as a longer term platform they need to most effectively run their business.
Q Accelerated R&D and impact on sales
A Still think they are very, very early and lots of runway. In terms of go to market, they’ll see their first increased number of needs to increase go to market (sales) spend as they continue to add product modules.
Q New customer growth, are they ramping faster than they were 2 years ago?
A Yes in terms of number of large customer adds.
Q As you push more into security, what are the lessons-learned that can be taken from dev ops?
A How to reduce friction is first part. 2nd part is that buyers are different since they’re larger.
Q How are you keeping your sales force and partners up to speed re: your value proposition?
A IT’s a major focus to scale their sales team.
Q What are your differentiators in posture management and security protection, everyone is chasing this.
A it shows up automatically, and there’s nothing to be done by their customers, which is a major differentiator.
Q Need to change prices at some point to combat commoditizing their offering and how does this impact your pricing?
A This has not had an impact on them
Q Legacy replacement, what do you need to do to enable this?
A Right now, still early in replacing non-cloud equipment w/ customers. Today customers want to standardize.
Q RE: Cloud security platform, what other options will there be in the future?
A Thinking about how this can be packaged most effectively.
Q Partnership expansions –please discuss.
A Getting more and more partnerships in the cloud, working on ways to make it easy to deploy DDOG w/ them.
Q Going to CIDC, whole new market. Talk about how big of an opportunity is this re: option ability?
A It’s very early in the opportunity now. It pushes the boundary of where they operate.
Q Is DBNRR trending up or down from the 130% that has been quoted in this quarter and in previous quarters?
A Increase from 130% quoted in previous quarters. Strong sales and continued uptick of adoption and flattening from previous Q2 has created an increase.
OTHER POINTS IN ADDITION TO THE PREPARED EARNINGS CALL REMARKS:
Record number of net and gross new logo lands this quarter. New logo wins do not immediately generate revenue.
Big wins
Had an 8 figure upsell with an existing customer
7 figure upsell w/ European ecommerce company
7 figure upsell w/ a large accounting firm
6 figure upsell
7 figure land
80% Y/Y RPO growth
Revenue is a better indicator of their growth than RPO and ARR
Large customers provide +80% of total revenue
DBNRR is over 130%
78% of customers are using 2 or more modules
28% of customers are using 4 or more modules, up from 15%
Announced 2nd and 3rd building block of their security offerings
Y/Y decrease in margin is due to investments, and they expect their margins to be consistent with past numbers (north of +80%).
Not striving for operating margins, rather they’re attempting to take advantage of maximizing growth.
Outlook
Addressing a very large market and executing well.
Guidance notes, planning to continue to invest heavily in R&D and Go To Market.
DDOG now has 11 products to offer their customers.
DDOG’s Dash user conference will be held in late October
Oliver Pommel, CEO has a thick French accent, which made it difficult to catch every exact word he said.
Hope this is helpful information. Thank you to all who make this board the unique and special place it is and has become.
sjo