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Datadog Announces Third Quarter Results

Datadog, Inc.
·24 min read

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

Announced 8 new products and features at annual Dash conference

Announced a strategic partnership with Microsoft and an extended partnership with Google

NEW YORK, Nov. 10, 2020 (GLOBE NEWSWIRE) -- Datadog, Inc. (NASDAQ:DDOG), the monitoring and security platform for cloud applications, today announced financial results for its third quarter ended September 30, 2020.

“We are pleased with our strong results for the third quarter, which demonstrated continued high growth at scale.” said Olivier Pomel, co-founder and CEO of Datadog. “The pandemic has driven organizations globally and across industries to prioritize their digital operations like never before, further strengthening the cloud’s position as the IT architecture of choice. Datadog continues to be a trusted partner in enabling digital transformation and cloud migration.”

Pomel added, “With eight new products and major features announced at our annual user conference, Dash, we have maintained our strong track record of innovation and extended our leadership as the most complete and cloud native end-to-end observability platform. We continue to make meaningful R&D investments toward what is a very significant long-term opportunity.”

Third Quarter 2020 Financial Highlights:

  • Revenue was $154.7 million, an increase of 61% year-over-year.

  • GAAP operating loss was ($9.3) million; GAAP operating margin was (6%).

  • Non-GAAP operating income was $13.8 million; non-GAAP operating margin was 9%.

  • GAAP net loss per diluted share was ($0.05); non-GAAP net income per diluted share was $0.05.

  • Operating cash flow was $36.3 million, with free cash flow of $28.6 million.

  • Cash, cash equivalents, restricted cash, and marketable securities were $1.5 billion as of September 30, 2020.

Third Quarter & Recent Business Highlights:

  • As of September 30, 2020, we had 1,107 customers with ARR of $100,000 or more, an increase of 52% from 727 as of September 30, 2019.

  • Announced 8 new products and features at our annual user conference Dash, which was attended by over 7,000 people in what was our first all-virtual event. Product announcements included:

    • The introduction of the Datadog Marketplace, to enable technology partners to build applications on our platform, and allow our customers to browse, purchase and use these applications.

    • The general availability of Continuous Profiler, which extends our APM product suite to measure code-level performance through an always-on and low-overhead solution.

    • Extending Synthetics to CI/CD pipelines, which enables customers to test the viability of new features earlier in the development process.

    • Introducing Mobile Real User Monitoring (RUM), to enable full visibility into the performance of mobile applications, both Android and iOS.

    • The general availability of Error Tracking, which enables engineering teams to aggregate, triage, and prioritize frontend application errors.

    • The beta launch of Incident Management, which unifies documentation, data, and collaboration in a centralized pane of glass for DevOps and security teams when an incident occurs.

    • The beta launch of Compliance Monitoring, which extends on our security solutions to proactively notify DevSecOps teams of misconfigurations and compliance drift.

    • The beta launch of Recommended Monitors, a suite of preconfigured, curated, and customizable alert queries for key infrastructure technologies.

  • Announced a strategic partnership with Microsoft, currently in public preview, which will make Datadog available directly from the Azure console. Azure customers will be able to purchase a Datadog plan with the ability to draw from their committed Azure spend, implement Datadog few just a few clicks, as well as manage Datadog natively from the Azure Portal. Lastly, Azure and Datadog sales teams will increase collaboration for co-selling to enterprise clients.

  • Announced the extension of a strategic partnership with Google Cloud Platform (GCP). In addition to expanding the current partnership from EMEA to North America, this will extend go-to-market collaboration and deliver deeper sales alignment between Datadog and GCP.

  • Achieved “In Process” status on the Federal Risk and Authorization Management Program (FedRAMP) Marketplace for moderate-impact SaaS. Datadog is currently working with the U.S. Department of Veterans Affairs and the General Services Administration (GSA) FedRAMP Program Management Office (PMO) to achieve FedRAMP Authorization status for Moderate Impact. This follows Datadog’s earlier FedRAMP Authorization for Low Impact SaaS workloads.

  • Delivered additional product innovations and integrations, including Tracing without LimitsTM to enable ingestion of all tracing with no sampling and live search, Deployment Tracking to identify when performance issues are caused by new code deploys, a suite of DNS monitoring features to troubleshoot internal and external DNS resolution issues, and the extension of Watchdog anomaly detection to Kubernetes clusters, as well as new or enhanced integrations with Alcide kAudit, Auth0, AWS Step Functions, ServiceNow Graph Connector, Snowflake, Slack, and xMatters,.

  • Recognized as a 2020 Gartner Peer Insights Customers’ Choice for Application Performance Monitoring. The Gartner Peer Insights Customers' Choice distinction is based on feedback and ratings from end-user professionals who have experience purchasing, implementing and using Datadog’s products. Datadog scored an overall rating of 4.6 stars out of 5.0 based and a recommendation rating of 91% based on 132 verified IT customers.

  • Achieved AWS Outposts Ready designation, part of the Amazon Web Services (AWS) Service Ready Program. This designation recognizes that Datadog has demonstrated successful integration with AWS Outposts, a fully managed service that extends AWS infrastructure, AWS services, APIs, and tools to virtually any datacenter, co-location space, or on-premises facility.

Fourth Quarter and Full Year 2020 Outlook:

Based on information as of today, November 10, 2020, Datadog is providing the following guidance for the fourth quarter and full year 2020:

  • Fourth Quarter 2020 Outlook:

    • Revenue between $162 million and $164 million.

    • Non-GAAP operating income between $3 million and $5 million.

    • Non-GAAP net income per share between $0.01 and $0.02, assuming approximately 335 million weighted average diluted shares outstanding.

  • Full Year 2020 Outlook:

    • Revenue between $588 million and $590 million.

    • Non-GAAP operating income between $48.5 and $50.5 million.

    • Non-GAAP net income per share between $0.17 and $0.18, assuming approximately 332 million weighted average shares outstanding.

Datadog has not reconciled its expectations as to non-GAAP operating income, or as to non-GAAP net income per share, to their most directly comparable GAAP measure as a result of uncertainty regarding, and the potential variability of, reconciling items such as stock-based compensation and employer payroll taxes on equity incentive plans. Accordingly, reconciliation is not available without unreasonable effort, although it is important to note that these factors could be material to Datadog’s results computed in accordance with GAAP.

Conference Call Details:

  • What: Datadog financial results for the third quarter of 2020 and outlook for the fourth quarter and the full year of 2020

  • When: Nov 10, 2020 at 5:00 P.M. Eastern Time (2:00 P.M. Pacific Time)

  • Dial in: To access the call in the U.S., please dial (844) 873-9663, and for international callers, please dial (602) 563-8494. Callers may provide confirmation number 2275529 to access the call more quickly, and are encouraged to dial into the call 10 to 15 minutes prior to the start to prevent any delay in joining.

  • Webcast: https://investors.datadoghq.com (live and replay)

  • Replay: Following the completion of the call through 11:59 PM Eastern Time on November 17, 2020, a telephone replay will be available by dialing (855) 859-2056 from the United States or (404) 537-3406 internationally with conference ID 2275529.

About Datadog

Datadog is the monitoring and security platform for cloud applications. Our SaaS platform integrates and automates infrastructure monitoring, application performance monitoring and log management to provide unified, real-time observability of our customers’ entire technology stack. Datadog is used by organizations of all sizes and across a wide range of industries to enable digital transformation and cloud migration, drive collaboration among development, operations, security and business teams, accelerate time to market for applications, reduce time to problem resolution, secure applications and infrastructure, understand user behavior and track key business metrics.

Forward-Looking Statements

This press release and the earnings call referencing this press release contain “forward-looking” statements, as that term is defined under the federal securities laws, including but not limited to statements regarding the impact of the COVID-19 pandemic on digital transformation and cloud migration trends and the ability of Datadog to benefit from these trends, Datadog’s strategy, partnerships, investments and long-term opportunity, and Datadog’s future financial performance, including its outlook for the fourth quarter and full year 2020. These forward-looking statements are based on Datadog’s current assumptions, expectations and beliefs and are subject to substantial risks, uncertainties, assumptions and changes in circumstances that may cause Datadog’s actual results, performance or achievements to differ materially from those expressed or implied in any forward-looking statement.

The risks and uncertainties referred to above include, but are not limited to (1) our recent rapid growth may not be indicative of our future growth; (2) our history of operating losses; (3) our limited operating history; (4) our business depends on our existing customers purchasing additional subscriptions and products from us and renewing their subscriptions; (5) our ability to attract new customers; (6) our ability to effectively develop and expand our sales and marketing capabilities; (7) risk of a security breach; (8) risk of interruptions or performance problems associated with our products and platform capabilities; (9) our ability to adapt and respond to rapidly changing technology or customer needs; (10) the competitive markets in which we participate; (11) risks associated with successfully manage our growth; (12) general market, political, economic, and business conditions; and (13) the impact that the recent COVID-19 pandemic and any related economic downturn could have on our or our customers’ businesses, financial condition and results of operations. These risks and uncertainties are more fully described in our filings with the Securities and Exchange Commission (SEC), including in the section entitled “Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020, filed with the SEC on August 10, 2020. Additional information will be made available in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020 and other filings and reports that we may file from time to time with the SEC. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, we cannot guarantee future results, levels of activity, performance, achievements, or events and circumstances reflected in the forward-looking statements will occur. Forward-looking statements represent our beliefs and assumptions only as of the date of this press release. We disclaim any obligation to update forward-looking statements.

About Non-GAAP Financial Measures

Datadog discloses the following non-GAAP financial measures in this release and the earnings call referencing this press release: non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses (sales and marketing, research and development, general and administrative), non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per diluted share, non-GAAP net income (loss) per basic share, and free cash flow. Datadog uses each of these non-GAAP financial measures internally to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, and to evaluate Datadog’s financial performance. Datadog believes they are useful to investors, as a supplement to GAAP measures, in evaluating its operational performance, as further discussed below. Datadog’s non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in its industry, as other companies in its industry may calculate non-GAAP financial results differently, particularly related to non-recurring and unusual items. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact on Datadog’s reported financial results.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. A reconciliation of the historical non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release.

Datadog defines non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses (sales and marketing, research and development, general and administrative), non-GAAP operating income (loss), non-GAAP operating margin and non-GAAP net income (loss) as the respective GAAP balances, adjusted for, as applicable: (1) stock-based compensation expense; (2) the amortization of acquired intangibles; (3) non-cash benefit related to tax adjustment; (4) employer payroll taxes on employee stock transactions; and (5) amortization of debt discount and issuance costs. Datadog defines free cash flow as Net cash provided by operating activities, minus capital expenditures and minus capitalized software development costs. Investors are encouraged to review the reconciliation of these historical non-GAAP financial measures to their most directly comparable GAAP financial measures.

Management believes these non-GAAP financial measures are useful to investors and others in assessing Datadog’s operating performance due to the following factors:

Stock-based compensation. Datadog utilizes stock-based compensation to attract and retain employees. It is principally aimed at aligning their interests with those of its stockholders and at long-term retention, rather than to address operational performance for any particular period. As a result, stock-based compensation expenses vary for reasons that are generally unrelated to financial and operational performance in any particular period.

Amortization of acquired intangibles. Datadog views amortization of acquired intangible assets as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are evaluated for impairment regularly, amortization of the cost of acquired intangibles is an expense that is not typically affected by operations during any particular period.

Non-cash benefit related to tax adjustment. Datadog recorded a contingent payroll tax liability in conjunction with a common stock repurchase transaction in 2016. In 2020, the period of limitations for assessing the contingent Federal payroll tax liability expired and the Company was legally released from being the primary obligor, and recognized a benefit in the consolidated statement of operations. Datadog does not believe this is reflective of on-going results and therefore adjusted for this benefit.

Employer payroll taxes on employee stock transactions. Datadog excludes employer payroll tax expense on equity incentive plans as these expenses are tied to the exercise or vesting of underlying equity awards and the price of Datadog’s common stock at the time of vesting or exercise. As a result, these taxes may vary in any particular period independent of the financial and operating performance of Datadog’s business.

Amortization of debt discount and issuance costs. In May 2020, Datadog issued $747.5M of convertible senior notes due 2025, which bears interest at an annual fixed rate of 0.125%. The effective interest rate of the convertible senior notes was approximately 5.97%. This is a result of the debt discount recorded for the conversion feature that is required to be separately accounted for as equity, and debt issuance costs, which reduce the carrying value of the convertible debt instrument. The debt discount is amortized as interest expense together with the issuance costs of the debt. The expense for the amortization of debt discount and debt issuance costs is a non-cash item, and we believe the exclusion of this interest expense will provide for a more useful comparison of our operational performance in different periods.

Additionally, Datadog’s management believes that the non-GAAP financial measure free cash flow is meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures and the capitalization of software development costs due to the fact that these expenditures are considered to be a necessary component of ongoing operations.

Operating Metrics

Datadog’s number of customers with ARR of $100,000 or more and number of customers with ARR of $1 million or more are based on the ARR of each customer, as of the last month of the quarter.

We define the number of customers as the number of accounts with a unique account identifier for which we have an active subscription in the period indicated. A single organization with multiple divisions, segments or subsidiaries is generally counted as a single customer. However, in some cases where they have separate billing terms, we may count separate divisions, segments or subsidiaries as multiple customers.

We define ARR as the annualized revenue run-rate of subscription agreements from all customers at a point in time. We calculate ARR by taking the monthly recurring revenue, or MRR, and multiplying it by 12. MRR is defined as the revenue run-rate of subscription agreements from all customers for the last month of the period, including committed amounts and any additional usage. ARR and MRR should be viewed independently of revenue as they are operating metrics and are not intended to be replacements or forecasts of revenue.

Condensed Consolidated Statements of Operations

(In thousands, except per share data; unaudited)

Three Months

Nine Months

Ended September 30,

Ended September 30,

2020

2019

2020

2019

Revenue

$

154,675

$

95,864

$

425,935

$

249,136

Cost of revenue (1)(2)(4)

33,984

23,297

89,340

63,225

Gross profit

120,691

72,567

336,595

185,911

Operating expenses:

Research and development (1)(3)(4)

56,440

28,684

142,928

75,531

Sales and marketing (1)(3)(4)

57,142

38,836

153,626

105,061

General and administrative (1)(3)(4)

16,376

9,265

44,876

23,193

Total operating expenses

129,958

76,785

341,430

203,785

Operating loss

(9,267

)

(4,218

)

(4,835

)

(17,874

)

Other (expense) income, net:

Interest expense (5)

(12,423

)

(17,424

)

Interest income and other income, net

7,135

90

15,204

646

Other (expense) income, net

(5,288

)

90

(2,220

)

646

Loss before provision for income taxes

(14,555

)

(4,128

)

(7,055

)

(17,228

)

Provision for income taxes

(595

)

(33

)

(1,332

)

(373

)

Net loss

$

(15,150

)

$

(4,161

)

$

(8,387

)

$

(17,601

)

Basic and diluted net loss per share

$

(0.05

)

$

(0.04

)

$

(0.03

)

$

(0.20

)

Weighted average shares used in calculating basic and diluted

net loss per share:

302,554

103,876

299,105

87,758

(1) Includes stock-based compensation expense as follows:

Cost of revenue

$

529

$

161

$

1,167

$

372

Research and development

10,173

1,934

24,723

3,709

Sales and marketing

6,068

1,540

13,683

3,276

General and administrative

3,946

1,042

10,037

2,659

Total

$

20,716

$

4,677

$

49,610

$

10,016

(2) Includes amortization of acquired intangibles as follows:

Cost of revenue

$

274

$

179

$

668

$

531

Total

$

274

$

179

$

668

$

531


(3) Includes non-cash benefit related to tax adjustment as follows:

Research and development

$

$

$

(2,729

)

$

(2,344

)

Sales and marketing

(449

)

(397

)

General and administrative

(2,383

)

(2,266

)

$

$

$

(5,561

)

$

(5,007

)

(4) Includes employer payroll taxes on employee stock transactions as follows:

Cost of revenue

$

32

$

$

154

$

Research and development

418

1,877

262

Sales and marketing

1,354

88

3,014

279

General and administrative

282

552

19

Total

$

2,086

$

88

$

5,597

$

560

(5) Includes amortization of debt discount and issuance costs as follows:

Interest expense

$

8,062

$

$

10,546

$

Condensed Consolidated Balance Sheets

(In thousands; unaudited)

September 30,

December 31,

2020

2019

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

198,523

$

597,297

Marketable securities

1,296,261

176,674

Accounts receivable, net of allowance for credit losses of $2,589 and $817 as of
September 30, 2020 and December 31, 2019, respectively

120,992

102,394

Deferred contract costs, current

11,544

8,346

Prepaid expenses and other current assets

25,655

19,231

Total current assets

1,652,975

903,942

Property and equipment, net

42,059

32,749

Operating lease assets

55,365

53,002

Goodwill

17,211

9,058

Intangible assets, net

2,327

1,435

Deferred contract costs, non-current

22,667

17,409

Restricted cash

3,607

3,456

Other assets

18,073

16,990

TOTAL ASSETS

$

1,814,284

$

1,038,041

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable

$

21,199

$

15,429

Accrued expenses and other current liabilities

54,383

38,746

Operating lease liabilities, current

15,058

11,916

Deferred revenue, current

164,010

134,148

Total current liabilities

254,650

200,239

Operating lease liabilities, non-current

49,675

48,510

Convertible senior notes, net

567,683

Deferred revenue, non-current

2,444

4,340

Other liabilities

3,644

2,611

Total liabilities

878,096

255,700

STOCKHOLDERS' EQUITY

Common stock

3

3

Additional paid-in capital

1,065,543

905,821

Accumulated other comprehensive income

2,645

133

Accumulated deficit

(132,003

)

(123,616

)

Total stockholders’ equity

936,188

782,341

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

1,814,284

$

1,038,041

Condensed Consolidated Statements of Cash Flow

(In thousands; unaudited)

Three Months

Nine Months

Ended September 30,

Ended September 30,

2020

2019

2020

2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(15,150

)

$

(4,161

)

$

(8,387

)

$

(17,601

)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

3,972

4,007

11,367

8,776

Amortization of discounts or premiums on marketable securities

3,884

5,344

Amortization of debt discount and issuance costs

8,062

10,546

Amortization of deferred contract costs

2,721

1,436

7,348

3,688

Stock-based compensation, net of amounts capitalized

20,716

4,677

49,610

10,016

Non-cash lease expense

3,453

3,788

10,004

8,403

Allowance for credit losses on accounts receivable

655

282

2,656

835

Loss on disposal of property and equipment

(4

)

438

4

442

Changes in operating assets and liabilities:

Accounts receivable, net

2,431

(20,045

)

(21,253

)

(32,224

)

Deferred contract costs

(4,567

)

(4,782

)

(15,804

)

(10,894

)

Prepaid expenses and other current assets

(340

)

2,730

(6,821

)

(9,476

)

Other assets

310

(4,451

)

(605

)

(8,480

)

Accounts payable

3,714

(3,260

)

6,406

4,213

Accrued expenses and other liabilities

5,236

6,611

6,884

(1,990

)

Deferred revenue

1,177

16,554

27,964

51,096

Net cash provided by operating activities

36,270

3,824

85,263

6,804

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of marketable securities

(273,550

)

(1,477,063

)

Maturities of marketable securities

146,646

268,500

Proceeds from sale of marketable securities

85,700

85,700

Purchases of property and equipment

(1,412

)

(4,834

)

(4,336

)

(9,813

)

Capitalized software development costs

(6,217

)

(2,650

)

(14,371

)

(7,058

)

Cash paid for acquisition of businesses; net of cash acquired

(2,363

)

Net cash used in investing activities

(48,833

)

(7,484

)

(1,143,933

)

(16,871

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from exercise of stock options

5,119

2,109

12,354

7,306

Proceeds from initial public offering, net of underwriting discounts and commissions and other offering costs

708,815

(421

)

708,659

Proceeds for issuance of common stock under the employee stock purchase plan

7,680

Employee payroll taxes paid related to net share settlement under the employee stock purchase plan

(118

)

(977

)

Proceeds from issuance of convertible senior notes, net of issuance costs

(474

)

730,207

Purchase of capped call related to convertible senior notes

(89,625

)

Net cash provided by financing activities

4,527

710,924

659,218

715,965

Effect of exchange rate changes on cash, cash equivalents and restricted cash

506

72

393

49

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND
RESTRICTED CASH

(7,530

)

707,336

(399,059

)

705,947

CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period

$

209,660

$

63,591

601,189

64,980

CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period

$

202,130

$

770,927

$

202,130

$

770,927

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED
CASH WITHIN THE CONSOLIDATED BALANCE SHEETS TO THE
AMOUNTS SHOWN IN THE STATEMENTS OF CASH FLOWS ABOVE:

Cash and cash equivalents

$

198,523

$

760,945

$

198,523

$

760,945

Restricted cash – Including amounts in prepaid expense and other current assets and other assets

3,607

9,982

3,607

9,982

Total cash, cash equivalents and restricted cash

$

202,130

$

770,927

$

202,130

$

770,927

Reconciliation from GAAP to Non-GAAP Results

(In thousands, except per share data; unaudited)

Three Months

Nine Months

Ended September 30,

Ended September 30,

2020

2019

2020

2019

Reconciliation of gross profit and gross margin

GAAP gross profit

$

120,691

$

72,567

$

336,595

$

185,911

Plus: Stock-based compensation expense

529

161

1,167

372

Plus: Amortization of acquired intangibles

274

179

668

531

Plus: Employer payroll taxes on employee stock transactions

32

154

Non-GAAP gross profit

$

121,526

$

72,907

$

338,584

$

186,814

GAAP gross margin

78

%

76

%

79

%

75

%

Non-GAAP gross margin

79

%

76

%

79

%

75

%

Reconciliation of operating expenses

GAAP research and development

$

56,440

$

28,684

$

142,928

$

75,531

Less: Stock-based compensation expense

(10,173

)

(1,934

)

(24,723

)

(3,709

)

Plus: Non-cash benefit related to tax adjustment

2,729

2,344

Less: Employer payroll taxes on employee stock transactions

(418

)

(1,877

)

(262

)

Non-GAAP research and development

$

45,849

$

26,750

$

119,057

$

73,904

GAAP sales and marketing

$

57,142

$

38,836

$

153,626

$

105,061

Less: Stock-based compensation expense

(6,068

)

(1,540

)

(13,683

)

(3,276

)

Plus: Non-cash benefit related to tax adjustment

449

397

Less: Employer payroll taxes on employee stock transactions

(1,354

)

(88

)

(3,014

)

(279

)

Non-GAAP sales and marketing

$

49,720

$

37,208

$

137,378

$

101,903

GAAP general and administrative

$

16,376

$

9,265

$

44,876

$

23,193

Less: Stock-based compensation expense

(3,946

)

(1,042

)

(10,037

)

(2,659

)

Plus: Non-cash benefit related to tax adjustment

2,383

2,266

Less: Employer payroll taxes on employee stock transactions

(282

)

(552

)

(19

)

Non-GAAP general and administrative

$

12,148

$

8,223

$

36,670

$

22,781

Reconciliation of operating income (loss) and operating margin

GAAP operating loss

$

(9,267

)

$

(4,218

)

$

(4,835

)

$

(17,874

)

Plus: Stock-based compensation expense

20,716

4,677

49,610

10,016

Plus: Amortization of acquired intangibles

274

179

668

531

Less: Non-cash benefit related to tax adjustment

(5,561

)

(5,007

)

Plus: Employer payroll taxes on employee stock transactions

2,086

88

5,597

560

Non-GAAP operating income (loss)

$

13,809

$

726

$

45,479

$

(11,774

)

GAAP operating margin

-6

%

-4

%

-1

%

-7

%

Non-GAAP operating margin

9

%

1

%

11

%

-5

%

Reconciliation of net income (loss)

GAAP net loss

$

(15,150

)

$

(4,161

)

$

(8,387

)

$

(17,601

)

Plus: Stock-based compensation expense

20,716

4,677

49,610

10,016

Plus: Amortization of acquired intangibles

274

179

668

531

Less: Non-cash benefit related to tax adjustment

(5,561

)

(5,007

)

Plus: Employer payroll taxes on employee stock transactions

2,086

88

5,597

560

Plus: Amortization of debt discount and issuance costs

8,062

10,546

Non-GAAP net income (loss)

$

15,988

$

783

$

52,473

$

(11,501

)

Net income (loss) per share - basic

$

0.05

$

0.01

$

0.18

$

(0.13

)

Net income (loss) per share - diluted

$

0.05

$

0.00

$

0.16

$

(0.13

)

Shares used in non-GAAP per share calculations:

Basic

302,554

103,876

299,105

87,758

Diluted

333,011

285,397

330,831

87,758

Reconciliation of GAAP Cash Flow from Operating Activities to Free Cash Flow

(In thousands; unaudited)

Three Months

Nine Months

Ended September 30,

Ended September 30,

2020

2019

2020

2019

Net cash provided by operating activities

$

36,270

$

3,824

$

85,263

$

6,804

Less: Purchases of property and equipment

(1,412

)

(4,834

)

(4,336

)

(9,813

)

Less: Capitalized software development costs

(6,217

)

(2,650

)

(14,371

)

(7,058

)

Free cash flow

$

28,641

$

(3,660

)

$

66,556

$

(10,067

)

Contact Information

AJ Ljubich, CFA
Datadog Investor Relations
(866) 329-4466
IR@datadog.com

Martin Bergman
Datadog Communications
(866) 329-4466
Press@datadog.com

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