The DDOG metrics I watch

Greetings,

After DDOG’s report, did a little back-of-the-envolope math on the two (non-reported) metrics I watch the most.

Number of customers with 2+ products
Grew from 7,245 customers last year to 11,400 this year. That’s 57% growth y-o-y and 12% sequentially

Number of customers with 4+ products
Grew from 1,380 customers last year to 3,800 this year. That’s 175% growth y-o-y and 22% sequentially

Why do I watch these? Because they demonstrate a moat (high switching costs as products become part of operational DNA), and optionality (the company only had two products a few years back and has 10+ now).

Brian
Happy camper and long DDOG

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of customers with 2+ products
Grew from 7,245 customers last year to 11,400 this year. That’s 57% growth y-o-y and 12% sequentially

Number of customers with 4+ products
Grew from 1,380 customers last year to 3,800 this year. That’s 175% growth y-o-y and 22% sequentially

Why do I watch these? Because they demonstrate a moat (high switching costs as products become part of operational DNA), and optionality (the company only had two products a few years back and has 10+ now).

Just a few embellishments recited during the conference call.

Pomiel remarked that 75% of their customers were using 2 or more products.25% of customers were using 4 or more products more than twice the 12% using 4 or more products in 2020. Hundreds of customers were using 6 or more products.

New products added more to ARR this quarter than the entire business did a year ago.

So apart from demonstrating a moat the facts show a quite successful execution of land and expand as well as the attractiveness of new modules that DDOG has introduced. The rate of increased usage among existing and new customers and the size and number of 7 figure deals portend accelerating growth rather than slackening as some have suggested.

So IMHO DDOg will beat estimates for 2021 and it appears they will continue introducing new products that will be adopted by their customers old and new.

So its at least a hold

cheers

draj

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Most of the excellent numbers reported this quarter have been recited already so I won’t go back through those. It was a great quarter all around.

I just wanted to point out the Money Quote from the conference call at the end of the Q&A session. The question doesn’t matter so I won’t bother posting that. Just the quote…

But look, we feel good about the business, right? I think we just increased the guidance for the full year. I think it went from 38% or so growth to 47%.

How much more bullish can a company get? Sure, they started off quite low as all companies do, but we usually don’t see this type of raise in guidance. And they will probably continue to raise it!

Great quarter.

A.J.

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Number of customers with 2+ products
Grew from 7,245 customers last year to 11,400 this year. That’s 57% growth y-o-y and 12% sequentially

The main issue for quality, superfast growth firms with very high valuations isn’t even what the topline rate of growth is [first derivative] but the change in that %rate of growth [2nd derivative].

Valuations, whether p/s, p/e or EV/ebitda, get compressed sometimes massively so when the 2nd derivative slows and then flattens out/turns negative. No company trades at 30-50x p/s forever.

This slowing in the 2nd derivative is why DDOG, and similar SaaS firms, are off 35-50% from their highs.

Even though 51% growth is obviously stellar. It gets priced in by investors which is why they ran up 3-4x over 15 months in the first place.

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