Just out
https://investors.datadoghq.com/static-files/f312154e-5bac-4…
Revenue up +61%
Guidance for Q4 of +43% which they are probably sandbagging a bit.
Looks good to me at least on the top line, yes stock is down nearly 10% at the moment.
Maybe they don’t like the expenses and bottom line? Or just need something really spectacular in this environment right now?
I’ll be listening to the conference call…
-mekong
A strong announcement, overall. Maybe folks were expecting a bigger revenue beat or a bigger Q4’20 rev. guide.
Things I liked:
Third quarter revenue grew 61% year-over-year to $155 million
Strong growth of larger customers, with 1,107 $100k+ ARR customers, up from 727 a year ago
Gross margin % improved (a whopping) 3% to 79%
Things I looked closely at:
Q4’20 revenue outlook $164M, which if they came in at $164M, would be a 44% YoY
To be at or greater than 61% YoY revenue growth, will need to come in at or north of $187M, which represents a 14% beat, which is about twice their Q3 beat in %.
The last point might be why it’s getting a haircut in extended hours trading.
I said this after the TDOC/LVGO report when they both blew the doors off with a strong next Q guide and still sold off… it’s not a good sign for other high growth/high valuation stocks.
I am guessing the market is disappointed in the Q4 guide of 43%. As am I, the growth is declining quickly here. Was mid to upper 80% few Qs ago, now about 60%, and the guide for next Q is for 43% (maybe ends up at 50%). Need to find out what is causing the deceleration… The virus?
Bnh
Need to find out what is causing the deceleration… The virus?
I don’t see how the need for DDOG monitoring software would change. Perhaps most of the possible “big” customers who would spend > 100k are already with them. Of all the quarterly growth numbers, that was the weakest compared to last Q.
Yes, strong growth of larger customers.
Q1 customers > $100k = 960 plus 102 from Q4.
Q2 customers > $100K = 1,015 plus 55 sequentially
Q3 customers > $100k = 1,107 plus 92 sequentially.
Another important observation (channeling Saul’s scrutiny of large customer adds), it looks like they added 92 large customers sequentially, which is good in this climate.
from their Q2’20 announcement: Strong growth of larger customers, with 1,015 $100k+ ARR customers, up from 594 a year ago
from their Q3’20 announcement: Strong growth of larger customers, with 1,107 $100k+ ARR customers, up from 727 a year ago
I think the ~30% drop over the last 2 weeks or so is justified. It’s a fantastic company with a long road map for growth ahead, but the stock was priced as if it was going back to 80% YoY revenue growth.
They just reported 61% YoY revenue growth and guided for something around 42%.
I sold my shares a couple weeks ago and will look to add in the low 80s or high 70s… or basically once it seems like #saaspocalypse3.0 is over. Maybe tomorrow or Thursday.
Perhaps most of the possible “big” customers who would spend > 100k are already with them. Of all the quarterly growth numbers, that was the weakest compared to last Q.
Oops, I should have written down the number before posting on someone else’s thread. Not the weakest, actually pretty good. Apologies.
Growth of topline is clearly decelerating. If they beat their guidance by 10% it will be low/mid 50s. Trend is clear - from 80 to high 60, low 60 and now probably 50s. Still decent, but where is the bottom? Will it become a steady 40s or 50s grower or 30s?
I‘m reducing my position. Not selling out yet, but will be reducing.
XMFA Lieberman,
“It’s a fantastic company with a long road map for growth ahead, but the stock was priced as if it was going back to 80% YoY revenue growth.”
I am curious why you sold DDOG a couple of weeks ago. Was it just that you did not see it continuing to grow at 80% YoY, and thus you were looking at valuation? I ask this because I am intrigued when some of the heavy hitters on this board sell out of a position and then buy it back later. This sounds like market timing to me, but I may be missing something. Were you thinking the story changed? Please don’t take this as offensive or calling you out, but I really want to know your reasons for selling out originally.
Kind regards,
Dave
Customer additions with >$100k ARR are slowing quite significantly, though:
Q1 Q2 Q3 Q4
2019 508 594 727 858
2020 960 1.015 1.107
Sequential growth:
Q1 Q2 Q3 Q4
2019 16,93% 22,39% 18,02%
2020 11,89% 5,73% 9,06%
YoY Growth:
Q1 Q2 Q3 Q4
2020 88,98% 70,88% 52,27%
Overall it was still a good report in a very tough environment. Let’s also not forget that DDOG is not really the typical company benefitting from WFH. This can be seen in the numbers above. Still, they managed to grow by a lot. Guidance is a bit light but that was to be expected and can be ignored I think. Maybe a buying opportunity? Even after the drop, they are quite expensive… Definitely waiting for the earnings call before doing anything.
Hey Dave,
No offense taken. Ultimately, every investing decision we make is “market-timing” or at least “opportunity-timing” in a way.
The dollars we put into one company can’t be put into another unless we sell. I ultimately felt like Datadog was valued as if management completely sandbagged guidance and it was returning to 80% YoY growth, but everything I saw from the big cloud vendors (who’s revenue DDOG kind of tracks) told me otherwise.
They’re all growing nicely, but have commented about sales normalizing and some people being more careful about spending.
Here’s a post I wrote on another site on October 28. I actually sold like the day before the MSFT partnership announcement (oops). You can email me and I’ll share the link (it has a chart too)
"Specifically for this post, let’s focus on YoY revenue growth and FWD PS Ratio.
Datadog has 1/3 the revenue growth rate of Zoom and its FWD PS ratio is only 20% lower than Zoom’s.
As of last quarter, it’s also growing slower than Crowdstrike, Fiverr, and barely faster than Fastly, but it’s fwd PS ratio is significantly higher than all of theirs.
So what does this mean? Well it means the market either believes Datadog will continue growing revenue at the same rate longer or they’ll reaccelerate and YoY revenue growth will pick back up to 70% like it once was.
However, during the company’s last earnings call, management actually guided to around 40% revenue growth moving forward (don’t have the exact number in front of me) but it was significantly lower.
I believe the company will come in closer to their guided number.
I think wall street believes it will come in much higher.
This chart might be a lot to take in, but purple = Forward PS ratio and the dotted lines going horizontally show the High, Average, and Low.
We can see the PS Hi was around 45 hit this month and the average over the last year is around 26. Right now we’re sitting at around 37 which is exactly where it was prior to the last earnings report (see the “E”) before the shares dropped significantly after disappointing earnings/guidance.
I’m not one to “time” stocks, but I do believe in owning the best companies that give me the best opportunities for long-term returns.
Right now, I need to see Datadog pick reaccelerate its growth or expectations come back closer to reality before considering owning shares again."
So, come early December, if it turns out that no-one-at-all is growing at 60, 70 or 80% will the market pay for 45% growth, or not?
I really liked the growth in Op-Income, fwiw. 15x consensus estimates, positive Op-Inc with a strong pipeline of new products/modules/whatever they call them…
I take back all the bad things I said about DDOG… will prob be snatching up some shares tomorrow ; )
Hi Austin,
I am currently in a lab so I am not able to listen to the ongoing conference call, probably not until later tonight.
We’re you being humorous above or is there something interesting going on in the EC?
Monkey is listening to the conference call, and being a simple simian, only understands a few of the fancy human words the suits used and these suits seem to be straight shooters. Here are the ones he understood:
Big growth that’s super early on in a big market."
Consequently, Monkey will plant his bananas right here in the DataDog soil, and make him some more banana trees with water, sunshine, patience and a sprinkling of extra data, of which there doesn’t seem to be a shortage.
Humbly Yours,
Monkey (long DDOG)
P.S. Because Monkey would rather drink daiquiris in his jungle hammock than to be like his bald human friends-- extra clever in timing and exiting positions and buying back in and doing the hula-hoopa dance of dizzy flips–he’s just gonna buy companies that are growing fast and essential and leaving them alone. Wake up this humble swinger-of-branches in three years to discuss how lucrative his less is more strategy is.
Stop it with your relaxing wisdom, Monkey!
Austin,
Don’t remember you commenting about DDOG valuation concerns before this ER report and subsequent drop. I do however recall “Bear” mentioning it extensively in his posts.
In light of that, still want to say Thanks for contributing to the board.
Also, I’ll say that the distribution line at publiccomps.com with Revenue Growth on the X-Axis and EV/ NTM Revenue always showed us that Datadog was priced richly. The only thing I’ve ever been worried about, about that chart is that ZM defines the line, being so far out to the right and therefore just under the line, too.
Pretty sure SNOW is now right about where DDOG used to sit in that distribution, too.