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$DDOG: The Linchpin Behind Digital Transformation
Datadog, Inc. ($DDOG) is a leading monitoring and analytics platform for a company’s entire tech stack.
Its stock dropped 16%(!) after the Q2 2020 ER.
It may incur more ST pain, but should provide LT gains.
Time for a thread
Datadog, Inc. ($DDOG) is a leading monitoring and analytics platform for a company’s entire tech stack.
Its stock dropped 16%(!) after the Q2 2020 ER.
It may incur more ST pain, but should provide LT gains.
Time for a thread
1/ The Basics
Pillars of Observability:
- Infrastructure Monitoring (Metrics, Traffic, etc.)
- Log Management (Services, Triggers & Events)
- Application Performance Monitoring (APM)
Security Monitoring was also added to product offering
APM and Logs are in "hyper growth."
Pillars of Observability:
- Infrastructure Monitoring (Metrics, Traffic, etc.)
- Log Management (Services, Triggers & Events)
- Application Performance Monitoring (APM)
Security Monitoring was also added to product offering
APM and Logs are in "hyper growth."
2/ Market Dynamic
Top players: $DDOG, $NEWR, $DT, $SPLK, $ESTC, cloud providers (AWS, Azure, etc.)
DDOG is the fastest growing by a wide margin (LTM Rev Growth: 81%, ESTC is 2nd at 57%)
Highly competitive market, no identifiable moat
Named as top APM leader by Forrester Wave
Top players: $DDOG, $NEWR, $DT, $SPLK, $ESTC, cloud providers (AWS, Azure, etc.)
DDOG is the fastest growing by a wide margin (LTM Rev Growth: 81%, ESTC is 2nd at 57%)
Highly competitive market, no identifiable moat
Named as top APM leader by Forrester Wave
3/ Massive Opportunity
Only 25% of application workloads are currently run in the cloud
This is expected to reach 49% by the end of 2023
Unlike cloud providers, DDOG is cloud agnostic
$DDOG has 400+ integrations officially listed
Custom integrations available via DDOG API
Only 25% of application workloads are currently run in the cloud
This is expected to reach 49% by the end of 2023
Unlike cloud providers, DDOG is cloud agnostic
$DDOG has 400+ integrations officially listed
Custom integrations available via DDOG API
4/ Great Growth (YoY)
Rule of 40: 86%
Total Rev: $140.0MM (+68%, decelerated from 87%)
Customers w/ ARR > $100K: 1,015 (+71%) – 75% of total ARR
GM: 80% (+500 Bps)
RPO: $287MM (+53%)
Total Customers: 12,100 (+37%)
NER > 130%
Billing: $160.1MM (+62%)
Growth slowed in Q2
Rule of 40: 86%
Total Rev: $140.0MM (+68%, decelerated from 87%)
Customers w/ ARR > $100K: 1,015 (+71%) – 75% of total ARR
GM: 80% (+500 Bps)
RPO: $287MM (+53%)
Total Customers: 12,100 (+37%)
NER > 130%
Billing: $160.1MM (+62%)
Growth slowed in Q2
5/ Consistency
$DDOG is consistently one of the fastest growing SaaS companies (along with $CRWD)
Margin expansion indicative of high retention rates and cloud cost saving
COVID-19 had material impact on top line growth
Saw activity pick up in July
https://twitter.com/SeifelCapital/status/1290769719713243141?s=20
$DDOG is consistently one of the fastest growing SaaS companies (along with $CRWD
)Margin expansion indicative of high retention rates and cloud cost saving
COVID-19 had material impact on top line growth
Saw activity pick up in July
https://twitter.com/SeifelCapital/status/1290769719713243141?s=20
6/ Customer Adoption
Existing customers using 2+ products: 68% (40% a year ago)
- Using 4+ products: 15% (0% a year ago)
75% of new logos landed with 2+ products
Great uptake with new products (Synthetics, RUM, NPM, Security Monitoring)
Long runway (start of cloud transition)
Existing customers using 2+ products: 68% (40% a year ago)
- Using 4+ products: 15% (0% a year ago)
75% of new logos landed with 2+ products
Great uptake with new products (Synthetics, RUM, NPM, Security Monitoring)
Long runway (start of cloud transition)
7/ Not Fully Insulated
$DDOG utilizes usage-based pricing model (right thing LT)
Decreased activity (data usage) & customers seeking savings led to slowing revenue growth in Q2
< 10% of ARR from the most negatively impacted industries
Impacted by companies seeking ST savings.
$DDOG utilizes usage-based pricing model (right thing LT)
Decreased activity (data usage) & customers seeking savings led to slowing revenue growth in Q2
< 10% of ARR from the most negatively impacted industries
Impacted by companies seeking ST savings.
8/ Management
Founder-led: Olivier & Alexis
Innovators: Constantly rolling out new products
Led Dev & Tech Ops teams (respectively) at Wireless Generation
Mission: solve friction b/w developers (writing code) and tech ops (making sure code ran properly)
CEO of $MDB on Board
Founder-led: Olivier & Alexis
Innovators: Constantly rolling out new products
Led Dev & Tech Ops teams (respectively) at Wireless Generation
Mission: solve friction b/w developers (writing code) and tech ops (making sure code ran properly)
CEO of $MDB on Board
9/ Go-to-Market Strategy
Low friction land & expand:
- Easy to adopt / short time-to-value
- Self-service, quick install (no Prof Svcs. needed)
- Single integrated platform – view into entire IT stack on one screen
- 14 day free trial model (no cc required)
- End-to-end solution
Low friction land & expand:
- Easy to adopt / short time-to-value
- Self-service, quick install (no Prof Svcs. needed)
- Single integrated platform – view into entire IT stack on one screen
- 14 day free trial model (no cc required)
- End-to-end solution
