DDOG Q3 2021 Fiscal Results
Analyst Q/A and Additional Remarks From Prepared Earnings Report
4:00 PM Central Time
Q Higher level product question re: hearing more about observability in 2021 than 2020. More
opportunities for growth of existing vs. new product?
A Long-term, yes, see new use cases. Today still remain focused on what they have as products now and
those that are in beta.
Q Usage and expansion trends are higher than pre-pandemic levels. Are you seeing longer-term
A Two main trends underpinning success are the pace of cloud migration has come back. Newer products
are reaching scale and the combination of these two things is what has driven growth per CEO. About
1/3 of growth has been new product adoption per CFO.
Q Large renewal and penetration. What are drivers?
A Different for all customers.
Q Looking at billings growth, do you think you can quantify 10-20 point swing?
A 7 months +/- and then had contraction into the 6’s and now back to the 7-8 months billing duration.
Expanded RPO duration.
Q What factors contribute to revenue acceleration and what drove it?
A 2 main factors are resumption of cloud migration (we don’t control that) and 2nd is success of their
products that contribute to the revenue of the company. 3rd factor is demand environment is good and
they’ve successfully scaled their go to market sales teams.
Q Hyper-scalers of Azure, etc. How important is this?
A No drastic change from what they’ve seen in the past. Partnerships are perhaps more defined than
they were before. They are not the main way they go to market, however, they continue to invest in
Q Existing customer growth. How much is their expansion and how much is adoption/expansion of the DDOG
A 1/3 has been expansion of their existing DDOG product use and 2/3 is landing of new DDOG products.
Q Where are you in sales capacity?
A Investing significantly in additional sales capacity. They continue to keep investing in this. No
Q How much influence did the large existing on-prem have on the existing client expansion?
A We probably will hear more about it on future calls.
Q Strength you saw on larger lands…At a higher level do you see this as the product set maturing or is
A Product strength solves the customer’s product really well. With a product that is growing really
fast, you have to continue to acquire new customers. They’re always tweeking their incentives of
their go to market teams so they continue to land new customers and don’t just get revenue from
Q What products and how does security play into this?
A Land with observability and eventually expand into security.
Q Technically, what are you adding that is enhancing revenue growth?
A The same way you can use a de-bugger on your laptop, this is technology that identifies issues within
the code. Something that allows developers to do this. Growing their team of engineers within
Q Is there a way DDOG thinks about the 3 areas?
A 3 things that are very massive. There are very many more developers than others who influence their
sale. 2nd thing that is massive is ??__ and 3rd thing is data volumes that are increasingly
Q Numbers are accelerating. Is there any common theme in the numbers that is really driving
A 3 main Drivers are: Strong lands over a number of quarters, strong acceleration of budgets/spend by
customers and cross-selling with expanding to additional DDOG products.
Q Sales force: How are you addressing different buying centers? How is the sales force evolving from
people who sell 1 product to other DDOG products?
A With security, we think there may need to be training with this. However, adoption of the products
is frictionless, and they don’t need to land it all up-front, rather they can expand in the future as
the customer grows into use of the product and using what product when.
Q As your largest customers scale, are there changes and areas where you’re seeing pushback on specific
A The largest. Data loads are going to increase far faster than DDOG’s pricing and costs are going to
Q R&D is up more than 80%, can you give more detail on the decision to expand R&D? It’s obviously
A Very confident that platform lands are solving bigger problems. Important to go fast. There’s a
lead time between determining the problem and designing the solution.
Q You’re already growing faster than your biggest competitors. Are you seeing more standardization and
more displacement rather than selling into a greenfield?
A Depends on each customers’ cloud migration status. Legacy shops are going to be replaced. Majority
of their work is net new cloud deployment.
Q Are you seeing a mixture of new vs. competitor’s products?
A Anytime they land into a large enterprise, they’re going to have all their competitors. Eventually
DDOG will displace their competitors products as their customers grow and evolve into their
enterprise cloud migration. Do not expect much, perhaps a small amount of seasonality, but not a
Q Sales team readiness
A Feel good about it for now and will up the ante in the future as needed.
Q Looking at calendar 22, any changes or enhancements as you look at go to market in 2022? Are you
planning a sales force that focuses on mega-deals in the way Salesforce does?
A Definitely becoming one of the platforms they will standardize around vs. smaller customers who are
not implementing across their company/enterprise. There is some segmentation in this regard at DDOG,
but are still not looking at the very large deals. They land small and expand from there. Large
deals is not something they actively seek. Their product is very sticky.
Stronger than expected financial results per CEO
DBNRR is +130%
Record quarter of ARR and exceeded $1B in Q3
31% using +4 products
Whole platform saw strong growth in Q3,
Y/Y growth accelerated this quarter
Product and R&D:
40 new products announced in Q3
Advancing efforts to enhance service with customers who have large amounts of data
Online archives to store data in the cloud to re-trace what’s happened in the past.
Sales & Marketing:
Added net 1,001 new customers
Largest deal ever took place $60M multi-national customer
7 figure upsell with a large global customer
US based sports league is now a customer
7 figure land w/ a top 10 advertising company
Large 6 figure land w/ plumbing and building equipment company
See video from recent investor day
Early days of this market
1 next step is in security offering expansion, in other words, we’re just getting started.
Growth of customers was robust
+130% DBNRR for 30th consecutive quarter
Significant renewals with existing customers
Record ARR adds in all of their major products
Geographical expansion in all of their geographies
New logo ARR was up strongly
Given usage basis cost model, lands and expansion do not immediately show up on their top line.
RPO was $719M, up 120% y/y
Current RPO growth was about 100% y/y
Gross profit of $210 M w/ 78% gross margin
Expect gross margin to increase next quarter, and remain approx… the same in the longer term.
Continue to plan for increased travel for sales and marketing teams.
Product innovation and frictionless land and expand model is driving strong efficiencies and sales growth.
Free cash flow margin of 21%
Highly optimistic about the future
4th qtr expect 64% y/y revenue growth at the mid-point
$993-$995M revenue growth which is 65% y/y
Typically see growth leveling-out/stabilizing in 4th qtr, since many employees take vacation during the holidays.
Do not expect to pay taxes this year.
Continue to invest aggressively in R&D
Currently have 13 marketable products to sell.
Hope this is helpful information.