DDOG expectation

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DDOG reports earnings before the market opens tomorrow morning. I think it has to produce at least $314M in revenues to hold its stock price in this uncertain market which is punishing stocks with high EV/S. DDOG’s TTM EV/S is about 55. Revenues of $314M would be a 16% sequential gain, 76% yoy and about an 8% beat of its quarterly projection.

        
        Q3	Q2	Q1	Q4	Q3	Q2	Q1	Q4       
Rev	270.5	233.5	198.5	178	155	140	131	114		
Seq     16%	18%	12%	15%	11%	7%	15%			
yoy	74.5%	67%	51.5%	56.1%	61%					
Gro Pro 207.2	176.5	151.9	136.7	121	111	105	87.9			
Gro Mar 77%	76%	77%	77%	78%	79%	80%	 
Lg cust	1,800	1,610	1,437	1,253	1,082	1,015	960	858					
seq	12%	12%	15%	16%	7%	6%	12%						
yoy	66%	59%	50%	46%
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Correction: DDOG reports Thursday morning.

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If they report 312, it is still an acceleration in YoY and QoQ revenue. Its a pretty decent QoQ acceleration in comparison to the year ago’s quarter and still sets up for the next Q to hit the 80s YoY. Note, this is a 7% beat. They have only had 1 q over the past 5 under 7.4% and that was at 6.15% in Q1 2021.

What really excites me is if they beat by a similar amount as last quarter (8.87%). If they pull that off, then YoY is over 78% and aQoQ (Annualized QoQ) is over 92% setting up for likely at least 2 quarters of YoY clocking in the 80s.

aQoQ - 91%, 79%, 92% and whatever happens during this quarter. Even if it comes in at 75%, the top line YoY will sit in the 80s.

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Hi Magellan,

…to hold its stock price in this uncertain market which is punishing stocks with high EV/S

Yes, we just saw how BILL got punished! “Only” up about 35% or so the day after earnings!

And I suspect that using TTM earnings on a company growing at 75% last quarter doesn’t make a lot of sense. For example, your expectation for this quarter means adding a quarter with $314 million revenue and subtracting the year-ago quarter, one with only $178 million. That adds $136 million right there, just two days from now.

If you don’t want to make a forward guess because you don’t know how much they will grow, using a run-rate of four times your $314 million estimate for the quarter, or $1,256 million would be guaranteed to be way under actual. After all, you don’t know for sure how much revenue will rise each quarter, but you know that it WILL rise, that each subsequent quarter will be more than $314 million (and growing each quarter), so using TTM revenue to get a high EV/S seems to be just cheating to make the company look more expensive than it actually is.

Saul

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As we all know, DataDog is reporting before the bell tomorrow. I’ve found it good practice to document my expectations in advance, so I know how to react to earnings. Price action is often swift, so I want to take advantage of after hours trading to react, and to do this quickly, I want to have clear expectations going in. Posting it here in case anyone finds it helpful or has meaningful disagreement and rationale around why my expectations may be off base. I like to track and predict the metrics that the company include in the press release as “important” numbers. For DataDog, this is Revenue Growth, Free Cash Flow (FCF), and the number of accounts with annual recurring revenue >$100k (ARR >100k). I’m expecting another strong quarter from DataDog, as shown in the table below. If I see numbers that are Below my expectations, that is an indicator to sell and shrink my position. If the report meets my expectations, I typically hold my existing postition. In most cases I would add if the numbers come in and exceed expectations (although for DataDog this is unlikely as it is already my largest holding).

DataDog Earnings Expectations


            Rev    YoY   SQoQ    TTM    YoY       FCF    GM   DBNRR      ARR >100k    YoY      SQoQ
F18 Q3      51.1                                   1.1   76%
F18 Q4      61.6           21%                    -7.7   74%
F19 Q1      70.1           14%                    -0.9   73%
F19 Q2      83.2           19%  266.0             -5.5   75%
F19 Q3      95.9    88%    15%  310.7             -3.7   76%
F19 Q4     113.6    84%    19%  362.8             10.9   77%                    858
F20 Q1     131.2    87%    15%  424.0             19.3   80%                    960
F20 Q2     140.0    68%     7%  480.8    81%      18.6   79%                   1015
F20 Q3     154.7    61%    10%  539.6    74%      28.6   78%                   1082
F20 Q4     177.5    56%    15%  603.4    66%      16.7   77%  >130%            1253    46%       16%
F21 Q1     198.5    51%    12%  670.7    58%      44.5   77%  >130%            1437    50%       15%
F21 Q2     233.5    67%    18%  764.3    59%      42.3   76%  >130%            1610    59%       12%
F21 Q3     270.5    75%    16%  880.1    63%      57.1   77%  >130%            1800    66%       12%

**Guidance:**
F21 Q4 (G) 291.0            8%

**My Expectations:**
Below      <297.5        <12%                     <64         <130%          <2000
Meets      ~308.5        12-16%                 64-68.8       >130%      2000-2100
Exceeds    >314          >16%                   >68.8                        >2100

I hope you find this helpful.

Cheers,
Daws (Long DDOG ~23%)

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Dawsdaws,

I appreciate you sharing your thoughts. Two things caught my eye that I thought might be worthwhile mentioning.

First is the sequential (100k+) customer increase. The last three quarters, they added 184, 173, and 190 in Q’s 1,2 and 3 of 2021 respectively. I can’t say I personally expect the customer count to increase too much, and also recognize there’s a potential for a drop in sequential add’s compared to last quarter. I’m curious how you’d feel if they fell below your stated expectation in this metric if they exceed in revenue and fcf (or on par in fcf).

Second, their Q4 guide is their strongest ever. Based on their guide, I would think and hope they could do a tad better than 314. Using the upper bound of their guides, I’ve noted that in Q1 they guided for 7.3% qoq but did 17.63% qoq, and in Q2 they guided for 6.21 qoq but did 15.85% qoq. With the last two differences in percent of guide vs actual increase of 10.33 and 9.64 respectively, I would personally be disappointed (slightly) if they only beat their guided qoq% by 8%. Especially since this is their strongest guide ever.

Would love to hear the thoughts of others on this!
FlyForest

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Hmmm… I tend to look at beats and expectations differently.

I just look at how much above their guide beat their actual. So (actual-guide)/guide gives me a % beat.

If I look at their last eight quarters, I see that their actual revenue was above their guided revenue by 3.9%, 2.9%, 2.9%, 5.4%, 4.8%, 6.8%, 5.8%, and 7.6%. The average is 5.0%, though I do note that their last few quarters have been stronger.

Since DDOG typically beats their revenue guidance by 5.0%, I might expect the same this quarter. That would yield $305.5. Even if I take just the last three quarters’ “beat percentage” (which averages to 6.7%), I would still only expect $310.6 in revenue. If DDOG has to get to $314 to “meet”… that would mean they would beat their guidance by 7.9%, something they have never done.

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“I would personally be disappointed (slightly) if they only beat their guided qoq% by 8%”

If their guidance is particularly strong, that doesn’t mean their “beat percentage” should increase too.

Suppose that I run Acme Inc., and I have been in business for 25 years, and I’ve given guidance for 100 quarters. And consistently, I beat my guidance by 5%. Quarter after quarter. Every time.

Now suppose that at my latest earnings call I give guidance that indicates my strongest growth yet. How much would you expect me to beat that by? It should still be 5%! Yes, I gave strong guidance, but that was reflected in the number I gave. That doesn’t mean you should also expect my beat percentage to be higher – that’s already factored in to the fact that I gave a high guidance number.

Over the last eight quarters, DDOG has never beaten guidance by “only 8%”.

Maybe I’m not looking at this right, but if not, I’m now concerned that others might be expecting too much.

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DoctorStrange,

According to my calculations based on DDOG’s best history, ‘$314’ is well within reach.

I track how much DDOG beat their high-end guidance; for DDOG to achieve revenue of ‘$314’ then they have to beat their high-end guidance for Q4 by 7.5%; note that they have beaten their high-end guidance by more than 7.5% in four of the last seven quaters - so in my view it is incorrect to say that in order for DDOG to acheive Q4 revenue of ‘$314’ that they would need to beat their guidance by more than they have ever done before:


	High Guide	Actual	+/-	% BEAT	Raw Rev QoQ (Seq)	% QoQ Rev
1Q20	$119,00	      $131,25	$12,25	10,3%		 
2Q20	$136,00	      $140,01	$4,01	2,9%	$8,76	                 6,7%
3Q20	$145,00	      $154,68	$9,68	6,7%	$14,67	                 10,5%
4Q20	$164,00	      $177,53	$13,53	8,3%	$22,86	                 14,8%
1Q21	$187,00	      $198,55	$11,55	6,2%	$21,02	                 11,8%
2Q21	$213,00	      $233,55	$20,55	9,6%	$35,00	                 17,6%
3Q21	$248,00	      $270,00	$22,00	8,9%	$36,45	                 15,6%
4Q21	$292,00	      $314,00	$22,00	7,5%	$44,00	                 16,3%
1Q22	$0,00	      $0,00	$0,00	#DIV/0!	-$314,00	         -100,0%
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DoctorStrange,

I probably could have been a lot more clear with what I meant in my message, so let me take a moment to clarify.

In my sheet for datadog, three of the things I keep track of are their “Revenue guidance beat”, which I define as what Current q revenue / last Qs estimate for this Q, their normal QoQ revenue percentages, and their “Guided QoQ”, which is essentially, we just produced x revenue this quarter, and are projecting y revenue for next quarter, where Guided QoQ = y/x.

The numbers I was using were comparing their actual qoq revenue rates with their ‘Guided QoQ.’ But to simplify, maybe I should have stuck with their “revenue guidance beat %” as I just defined it.

When I look at my revenue guidance beat numbers, I get the following:
20Q4 Actual rev / upper guide = 177.5/164 = 1.0823 (which I would call a ‘8.23% beat’)
21Q1 Actual rev / upper guide = 198.5/187 = 1.0615 (which I would call a ‘6.15% beat’)
21Q2 Actual rev / upper guide = 233.5/213 = 1.0962 (which I would call a ‘9.62% beat’)
21Q3 Actual rev / upper guide = 270.5/248 = 1.0907 (which I would call a ‘9.07% beat’)

So in light of these numbers, yes I think a 8% beat, defined in this manner, is ‘slightly’ lower than what I am hoping for, even though in my prior post I was meaning I expect the number they end up with for their qoq% will exceed the % beat they’re guiding for by over 8%.

Also Doctor Strange, wanted to ask how you are getting those percentages, because our guides seem like they should give us the same numbers, but we are getting different numbers. And if you were using the low end or midpoint of their guidance, it should cause you to end up with higher percentages than me. So clearly one of us has bad numbers and for both of our sakes I’d love to get that fixed up before earnings haha!

FlyForest

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@ DoctorStrange

"Since DDOG typically beats their revenue guidance by 5.0%
Over the last eight quarters, DDOG has never beaten guidance by “only 8%”."

I think you are confused with “company guidance” with “guidance beat”

guidance beat = company guidance % increase - actual % increase

I look at lower end of guidance because that’s the minimum hurdle.

Here’s what I have:

Average QoQ guidance from past 5 quarters: 5.46%
Average beat: 9.24%

If we use the average, current guidance is 7.4% QoQ + 9.24% beat = 16.6% QoQ or 314m

My own expectation is: 316m to $320m(17% to 19% QoQ). Hopefully it can be slightly more than $320m.

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Thanks to those who questioned my numbers. I understood the concept, but my formulas in my spreadsheet were wrong. Doh!

I now come up with expectations of $316.1M (using the middle of the guidance).
I do think there’s been tailwinds, so I’d probably bump that up to closer to $320M.
But I don’t know if it’s fair for me to assume tailwinds however, so I’ll go with a range of $316M to $320M… and looking back at CloudL’s post, I see he came up with the exact same range. Excellent :slight_smile:

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I’m taking the liberty to respond to this post as being one of the top posters about Datadog on this board ( when it wasn’t a very common name; do search my posts on Datadog to get some perspective) and I’m hoping that this post doesn’t get deleted because many of us have a common cause of finding the best investing forums that have lead us to this board or ( else I’ll have to find another forum!) I’m quite sure that some of my posts about Datadog have helped investors to hold onto their positions amidst this downturn and others in the past couple of years.

The reason I contribute to this board is due to my respect for Saul and his investing strategy! I don’t post on any other board in Motley Fool or any other place except my very new twitter account! I’ve been a software developer for all my life, working for some of the biggest software companies and world class products/services but all my investments since 2000 didn’t amount to much, as I never followed Saul’s style. I owned AMZN, APPL, NFLX, GOOG, NVDA, SHOP, TSLA and almost all the high flyers but that didn’t make a huge difference as I was invested in more than 20 companies! Saul taught me the effectiveness of a highly concentrated hypergrowth portfolio with laser focus!

After Datadog’s earnings today, I’m hard pressed to do a little trimming in the next few day’s just to be consistent with my Investing Discipline of NOT investing more than 25% of my portfolio in any one stock.

And then, all this while, I was in search of the next Datadog and fortunately maybe I have found it already!

Here’s another perspective… When we think about any SaaS businesses, it makes sense to think about their “technical moat.” "Note that switching SaaS vendor’s is no longer easy!. This moat is created and gets larger due to the adoption by the developer community ( Datadog is testimony!) and the consumers on the service. I would like to coin this term as “Platform and Dev Community as a Service!”… as it all comes down to that; think about Apple and Google’s success and Facebook’s decline in the recent days! Apple and Google emerged winners because they strived to build a platform; even if that meant giving away stuff for free ( think Gmail, Google Docs etc.) And that’s how iOS and Android were built and lead to mass adoption; and Facebook made a huge blunder by betting on iOS and Android instead of their own platform! Imagine if Facebook had the power of a dev platform akin to iOS or Android; that would have changed the dynamics of the game! So the platform and ecosystem matters! And above all, it’s very important that the company innovates to stay ahead of it’s competition ( read “Amp It Up” by Snowflake CEO Frank Slootman if you haven’t). Datadog is a perfect example!

The other companies I think are at this level of innovation and execution are Zscaler and Snowflake. All of these three are my top positions with around 20% allocations; and I’m about to add a 4th!

And to let the secret out, the under the radar company that not too many are interested are is perhaps MongoDB! I’ve been using MongoDB a lot for the past few years and adding to my position and love it! ( coming from a developer that has worked for a long time with SQL Server).

Cheers!

ronjonb ( https://twitter.com/ronjonbSaaS)

ref:https://www.mongodb.com/who-uses-mongodb

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RONJONB, Reading your post led me to think about another company who “Rather than depositing our profits in the bank, we will core them back into our business, investing in innovation and bringing more customers onto our platform” who also has “the fastest security, zero trust and all around delivery network in the world” their “strategy has always been to get these products to market early and then relentlessly iterate to improve them until they’re best-of-breed” I am talking about Cloudflare Workers, serverless computing platform “the network they can plug into and not have to worry about anything else”

So lets talk developers “our (NET) developers build most of our own features” how about outside NET, “we have an eager pool excited to test new features before they’re released. While traditional B2B companies have extensive QA teams, we regularly ask volunteers from our community to be our earliest alpha testers” not enough outside dev well “A Fortune 500 retailer adopted Cloudflare Workers to build scalable online retail applications ahead of Black Friday. Theyre using durable objects to manage what they anticipate will be extremely high traffic volume this holiday season” along with that companies are being built on Workers.

I wish I had more time to pile on more quotes from Matthew Prince, but I will leave you with one I agree with “we are going to continue to reinvest our profits back into the business in order to build what we really believe is going to be one of the truly iconic technology companies”

So everyone is talking dead money putting all the earnings back into the business, the market will price the company based on the future oh wait already doing that as its expensive Yes for a good reason. Starters “we want to deliver and what were building, if you fast forward 10 years from now, its going to look like a traditional enterprise sales team” and “were excited for building out R2 and seeing how that further enhances our Workers platform, which every day, people are building more and more complicated applications on. And I think this is going to allow that to just accelerate.” and “being that fabric that can connect those different networks together is a very powerful position for us to be in. And so R2 is both, I think, an opportunity for us to grow TAM. But its also an opportunity for us to accelerate what I think is the inevitable next generation of the cloud” along with " Web 3.0 and the crypto space, again, I think that we want to be the bridge between what was the traditional web and what may be coming with Web 3.0"

It goes on and on, I will be keeping my NET as one of my top holdings along with DDOG not selling a share for a Rainy Day.

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Well it seems like Coinbase’s Super Bowl ad was a huge success! It managed to crashed the app!!!

The reason for my excitement is not Coinbase or the ad BUT the fact that MongoDB is the database that Coinbase uses!

MongoDB CEO Dev Ittycheria had mentioned that Coinbase has begun moving more workloads to Atlas amid “unprecedented growth in the cryptocurrency markets.”

As earlier indicated in this thread, I’ve increased my MongoDB allocation from 3% to 8%.

As per IDC, the DB market is going to be $121B+ by 2025 & by 2023 over 500 Million Digital Apps & Services Will Be Developed and Deployed Using Cloud-Native Approaches!

Also IDC predicts digitized data will hit 175 Zettabytes in 2025! That’ll be a Huge explosion of data. MongoDB is undeniably the best database solution for big data (text, audio, video, geospatial, 3D) and they’re witnessing huge adoption from enterprises to startups. So, things are still early and kind of just getting started!

MongoDB is leading the disruption in this very important area were churn rates are low; once customers are on MongoDB, it’s quite likely they’ll be there for a long long time!

Cheers!

ronjonb ( https://twitter.com/ronjonbSaaS)

https://www.theverge.com/2022/2/13/22932397/coinbases-qr-cod…

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