I like this sentence from IRdoc
Have you been following along with guidance and actual results?
That prompted me to write this Revenue metric story of DDOG as I tell myself when looking at spreadsheets, to help me understand my conviction in an ongoing financial journey of my portfolio.
There are more metrics to dig into but I think Revenue is the basic one to grasp.
What helps me, is to look at timeframes as context for the Revenue, especially the expected Revenue
How? I will address comparing:
- Quarter (Q) over Previous Q: QoQ for short
- Q of this Fiscal Year (FY) over the Q of Previous FY: Year over Year, YoY for short
- and Fiscal Year (FY) over previous FY: FYoFY for short.
Why? I want to make a letter to my younger self when I didn’t understand what was going on. Perhaps others are in a similar boat.
All the following numbers can be found in DDOG Quarterly statements, short documents, and it deals only with one metric: Revenue. All other metrics omitted on purpose
here are the docs: https://investors.datadoghq.com/financial-information/quarte…
It’s also a note about importance of paying attention to the DATEs when a COMPANY delivers the news, AND about what past time frames and future time frames the news is about
let’s begin:
On 2/13/2020 DDOG announced their Q4 and FY2019 Earnings.
(it’s important to think of those as two distinct timeframe metrics Q versus FY numbers, you will see why)
Q4 Rev was 113.6 (all numbers in Millions henceforth). Their Q4 is OCT-DEC timeframe. (Their Fiscal Year matches Calendar Year)
FY19 Rev was 362.8 which was 83% growth over FY18 (198.1).
How did the Revenue unfold over Fiscal Year 2020 ?
On 2/13/2020 they were already a month and a half into Q1 FY20 and they could look into their forecasting machinery, which I will call a crystal ball, and tell us how much Revenue they could expect to report sometime in the middle of May 2020 for Q1 JAN-MARCH
They told us they would make up to 119 for Q1, guiding for 5% sequential growth, and 82% YoY growth (compared to Q1 FY19)
How about for Fiscal Year 2020? It’s early in the FY2020 (ending in DEC 2020), but
they told us they would make 545, guiding for 50% growth over FY19, which they just told us was at 362.5.
We are only a month and a half into fiscal year, so we can’t be confident in this number of 50% FY growth, but it’s good to have it for context.
I assume by the next day the news of Earnings and Outlook have been digested, and
Mr Market prices our DDOG accordingly at $47 per share, sweet
On 5/11/2020 (we are in full pandemic mode) DDOG announces Earnings for Q1 JAN-MARCH
(remember the last 2 weeks of March? It wasn’t awesome)
They told us they made 131.2, beating the expected 119 by 10.3%. They made 15% more than previous Q, and 87% YoY
To reiterate: a month and a half before the end of Q1 they guided for 119, but they actually made 131.2
I like to remind myself of those timeframes
And now to a crystal ball:
On 5/11, a month and 11 days into Q2
they told us they would make up to 136 next Q2, guiding for 4% sequential growth, and 63% YoY.
And they also told us that for the FY20 they increased their outlook to 565, guiding for FY growth of 56% (6% more than last guidance/outlook/crystal ball readings)
And Mr Market after digesting the news gives us a price of $69, some 46% appreciation from previous Q Earnings, sweet.
Some of you have have bought DDOG during the March meltdown around $30 so all is great, we are going to the moon, maybe…
On 8/6/2020 DDOG announced their Q2, for APR-JUNE timeframe.
They told us they made 140, beating their guided 136, by 3%. They made 7% more than previous Q, and 68% YoY.
(we are in the pandemic and full on digital transformation for many industries.)
And now the crystal ball:
On 8/6, (we are a month and 6 days into Q3 at this point. note to self: pay attention to the time passed into the next Q when outlook for next Q is presented)
They told us they would make up to 145, guiding for 4% growth over previous Q
And they told us that for FY20 they see 575, guiding for 58% FY on FY growth, a 2% increase over the last Q guidance.
We are now 7 months and 6 days into FY2020
Mr Market after digesting the story prices DDOG at $75, increasing about 9% over last Q price.
On 11/10/2020, DDOG announces Q3 JUL-SEPT timeframe Earnings.
They told us they made 154.7, beating their guided 145, by 6.7%, a 11% sequential Q growth, and 61% YoY.
And the crystal ball: They tell us the next Q4 they will make up to 164, expecting 6% sequential growth,
We are 10 months and 10 days into FY2020, and they tell us that for the FISCAL YEAR they will make 590, guiding for 63% FY on FY growth, a 5% increase from the last Q guidance
We are getting closer to the end of FY, if they beat Q4 we may end up over 60% FY on FY growth.
Mr Market, after digesting the story, prices DDOG at $87, a 15.6% price appreciation over the last Q, and 118% YoY.
On 2/11/2021, DDOG announces Q4 and FY2020 earnings
They told us they made 177.5, beating their guided 164, by 8.2%. They grew sequentially 15%, and 56% YoY.
AND for Full Fiscal Year 2020
They told us they made 603.5, a 66% growth over FY 2019 (362.8)
We are now back where we started this story, Q4 of FY ending and starting a new FISCAL YEAR, FY2021
And the crystal ball on 2/11/2021:
They tell us that for Q1 JAN-MARCH, they will make up to 187, guiding for 5% sequential growth, and 43% YoY
And they also tell us that for FY21 (well, we are only a month and a half in) they will make 835, a 38% FY o FY growth
Mr Market, after digesting the story, prices DDOG at $113, a 29% appreciation over the last Q, and 140% YoY. (price took a tumble after that but that’s Mr Market sneezing)
FINALLY.
On 5/6/2021, DDOG announced Q1 JAN-MARCH earnings for FY2021
They told us they made 198.5, beating their outlook of 187, by over 6%. They grew sequentially 12%, and 51% YoY
The last crystal ball:
They tell us the next Q, they will now make up to 213, expecting 7% sequential growth
And for FY2021 they expect to make 890, a 47% FY on FY ( a 9% increase over what they told us last Q )
Mr Market, after digesting the story, prices DDOG at $77, a drop of -31%
Some sort of closing
Will they beat? by how much? Will we get 225 next Q beating by ~6%? who knows?
And will they up the FY guidance to 950 for the FY2021: Maybe, maybe not.
How will Mr Market react? These are the fun questions to entertain but not to obsess about
It’s good to compare current Q in this fiscal year over the same Quarter in the prvious fiscal year
It’s good to compare current Q to previous Q
It’s good to note what the Company tells us what they expect and that they actually delivered on Earnings day.
It’s good to know that Earnings date is usually a month and a half into the next Q.
It’s ok to see how Mr Market prices our company at any time, but especially the next day after earnings when facts are known.
I think all those are partial stories that can help us in building confidence in a company.
I rounded some numbers, what matters is how I look at the company numbers progresssing.
Revenue, expected and actual, is one of the metrics that matters. There are more metrics to track (like Cusomers count with ARR over $100K)
I like to track the next day closing price, as a proxy for how Mr Market prices the stock after earnings event.
Thanks for reading.
DDOG is 14% of my portfolio with high confidence over the next 12 months