10-KPeriod: FY2019

Datadog, Inc. Annual Report, Year Ended Dec 31, 2019

Filed February 25, 2020For Securities:DDOG

Summary

Datadog, Inc.'s 2020 10-K filing for the fiscal year ending December 31, 2019, highlights a period of significant growth and transition as a newly public company. The company demonstrated robust revenue expansion, with an 83% year-over-year increase in 2019 to $362.8 million, driven by both new and existing customer growth. Despite this strong top-line performance, Datadog continued to operate at a net loss, reporting a loss of $16.7 million for the year, reflecting substantial investments in research and development and sales and marketing to fuel its land-and-expand business model. The filing also emphasizes Datadog's position as an emerging growth company, allowing for certain regulatory exemptions but also noting the upcoming responsibilities and costs associated with full public company compliance. The company's balance sheet shows a healthy cash position following its September 2019 IPO, which generated approximately $705.9 million in net proceeds, providing ample liquidity for future investments and operations. Investors should note the company's ongoing reinvestment strategy and its commitment to innovation and platform expansion as key drivers for future growth, alongside the associated expenses.

Financial Highlights

52 data points
Beta

Revenue

$362.78M

75.5% Gross Margin

Net Income

-$16.71M

-4.6% Net Margin

EPS (Diluted)

$-0.12

Total Assets

$1.04B

Cash & Equivalents

$597.30M

Free Cash Flow

$10.92M

Financial Statements
Beta
Revenue$362.78M
Cost of Revenue$88.95M
Gross Profit$273.83M
R&D Expenses$111.42M
Operating Expenses$293.97M
Operating Income-$20.14M
Interest Expense$32K
Net Income-$16.71M
EPS (Basic)$-0.12
EPS (Diluted)$-0.12
Shares Outstanding (Basic)139.87M
Shares Outstanding (Diluted)139.87M

Key Highlights

  • 1Revenue grew by 83% year-over-year to $362.8 million in 2019, indicating strong market adoption and expansion.
  • 2The company operates as an emerging growth company, benefiting from certain regulatory exemptions but facing increased compliance costs as it matures.
  • 3Datadog reported a net loss of $16.7 million in 2019, reflecting significant investments in R&D and sales & marketing to support growth.
  • 4A strong liquidity position was established with approximately $705.9 million in net proceeds from the IPO in September 2019.
  • 5The 'land-and-expand' business model is a key growth driver, with 60% of customers using more than one product in 2019, up from 25% in 2018.
  • 6Significant investments in research and development (R&D) and sales and marketing (S&M) continue, with R&D expenses increasing 102% and S&M expenses increasing 65% in 2019.

Frequently Asked Questions

Datadog's primary growth strategy is a 'land-and-expand' model. This involves acquiring new customers with an easy-to-adopt platform that offers quick value, and then expanding their usage of the platform over time. They achieve this by encouraging customers to increase their usage of existing products and adopt new products offered on their unified observability platform, especially as customers migrate more workloads to the cloud.

As of the fiscal year ended December 31, 2019, Datadog was not profitable. The company reported a net loss of $16.7 million for the year. This loss is attributed to substantial investments in research and development, and sales and marketing efforts aimed at capturing market share and driving future growth. While revenue is growing rapidly, the company is prioritizing investment over immediate profitability.

Datadog's Initial Public Offering (IPO) in September 2019 significantly strengthened its financial position. The company raised approximately $705.9 million in net proceeds, substantially increasing its cash and cash equivalents to $597.3 million as of December 31, 2019. This provides the company with ample liquidity to fund its ongoing investments in growth, innovation, and operations for at least the next 12 months.

As an 'emerging growth company' (EGC), Datadog can take advantage of certain exemptions from reporting requirements applicable to larger public companies. These include exemptions from auditor attestation requirements for internal controls (Section 404 of SOX), reduced executive compensation disclosures, and exemptions from non-binding advisory votes on executive compensation and golden parachute payments. However, Datadog has elected to use an extended transition period for new accounting standards, which may make its financial statements less comparable to those of companies that adopt standards earlier. While these exemptions reduce compliance burdens and costs, they may also make the stock less attractive to some investors. The company anticipates increased costs and management time devoted to public company responsibilities as it matures.