10-QPeriod: Q1 FY2023

Datadog, Inc. Quarterly Report for Q1 Ended Mar 31, 2023

Filed May 5, 2023For Securities:DDOG

Summary

Datadog, Inc. reported revenue of $481.7 million for the first quarter of 2023, a 33% increase year-over-year. While the company experienced revenue growth, it also posted a net loss of $24.1 million for the quarter, a significant shift from the $9.7 million net income reported in the same period last year. This net loss was primarily driven by increased operating expenses, particularly in research and development (up 52%) and sales and marketing (up 43%), as the company continued to invest in growth. Despite the net loss, Datadog maintained a strong cash position with $222.5 million in cash and cash equivalents and $1.8 billion in marketable securities as of March 31, 2023. Operating cash flow remained solid at $133.8 million, though slightly down from the prior year. The company highlighted its land-and-expand business model, with a dollar-based net retention rate above 130% and continued growth in customers with Annual Recurring Revenue (ARR) of $100,000 or more. Investments in product development and international expansion are key strategic priorities.

Financial Highlights

50 data points
Beta

Revenue

$481.71M

79.3% Gross Margin

Net Income

-$24.09M

-5.0% Net Margin

EPS (Diluted)

$-0.08

Total Assets

$3.14B

Cash & Equivalents

$222.55M

Free Cash Flow

$125.05M

Financial Statements
Beta
Revenue$481.71M
Cost of Revenue$99.91M
Gross Profit$381.80M
R&D Expenses$229.48M
Operating Expenses$416.77M
Operating Income-$34.97M
Interest Expense$2.18M
Net Income-$24.09M
EPS (Basic)$-0.08
EPS (Diluted)$-0.08
Shares Outstanding (Basic)319.29M
Shares Outstanding (Diluted)319.29M

Key Highlights

  • 1Revenue increased 33% year-over-year to $481.7 million.
  • 2Net loss of $24.1 million for the quarter, compared to a net income of $9.7 million in Q1 2022.
  • 3Operating expenses increased significantly, with R&D up 52% and Sales & Marketing up 43%.
  • 4Strong cash and marketable securities balance of $2.02 billion combined.
  • 5Dollar-based net retention rate remained above 130%.
  • 6Customer base continued to grow, with 2,910 customers having ARR of $100,000 or more.
  • 7Free cash flow was $116.3 million, demonstrating continued operational cash generation despite the net loss.

Frequently Asked Questions

Datadog reported a 33% year-over-year increase in revenue to $481.7 million for the first quarter of 2023. However, the company reported a net loss of $24.1 million for the quarter, a reversal from the $9.7 million net income reported in the same period of 2022. This shift is primarily due to increased investments in operating expenses.

Datadog maintains a strong liquidity position with $222.5 million in cash and cash equivalents and $1.8 billion in marketable securities as of March 31, 2023, totaling over $2 billion. The company generated $133.8 million in cash flow from operating activities and $116.3 million in free cash flow for the quarter, indicating healthy operational cash generation.

The significant increase in operating expenses is primarily attributed to investments in growth initiatives. Research and Development expenses increased by 52% due to higher personnel costs for engineering, product, and design teams. Sales and Marketing expenses rose by 43%, also driven by increased headcount and variable compensation for sales personnel. General and Administrative expenses increased by 60%, largely due to increased personnel costs.

Datadog continues to show strong customer retention and expansion, with a dollar-based net retention rate above 130%. The number of customers with an Annual Recurring Revenue (ARR) of $100,000 or more increased to 2,910, up from 2,250 in the prior year's quarter, demonstrating the company's ability to grow revenue from its existing customer base.