DDOG Realignment

All,

I went back and pulled all of the available data from the DDOG earnings releases. I have summarized the data and made some comfortable projections in order to gain some insight into where things are going. I was happy with the press release overall but especially with the earnings conference call. This seems like a company where the patient investor will reap the rewards in due time. They reiterated over and over how they are early innings and how they are prioritizing future growth over short-term profitability.

Below is a table with all of the relevant information from their press releases. To estimate Q1 2021 revenue I assumed they beat their average guidance by the average of their previous beats (average beat is 8.6%). This represents QoQ revenue growth of 13.5%. This is then carried into the Q2 2021 estimate to get $229.1, which reflects the exact same QoQ growth rate which they “saw” in Q1 2021. The realignment comes when you look at the YoY growth rate of 63.7%, which represents an “acceleration.” We all know this isn’t an acceleration but rather a washing of the woes from Q2 2020, but I suspect the market at large won’t know that.


Quarters	Q2-2021	Q1-2021	Q4-2020	Q3-2020	Q2-2020	Q1-2020	Q4-2019
Guidance (M)		$186.0	$163.0	$144.0	$135.0	$118.0	$102.0
Revenue (M)	$229.1	$202.0	$178.0	$154.7	$140.0	$131.2	$113.6
$100K+ ARR			1,253	1,107	1,015	960	858
% Guidance Diff		8.6%	9.2%	7.4%	3.7%	11.2%	11.4%
Revenue QoQ	13.5%	13.5%	15.1%	10.5%	6.7%	15.5%	18.5%
Revenue YoY	63.7%	53.9%	56.7%	61.3%	68.0%	87.0%	85.0%
$100K+ ARR QoQ			13.2%	9.1%	5.7%	11.9%	18.0%
$100K+ ARR YoY			46.0%	52.3%	70.9%	89.0%	89.4%

Below I put another table with the same information except the Q1 2021 revenue estimate is based on the average beats excluding the Q2 2020 low beat of 3.7%. This brings the Q1 2021 revenue estimate to $204.2 (using average beat of 9.8%), a QoQ growth rate of 14.7%, and then a Q2 2021 estimated YoY revenue growth of 67.4% based on revenue of $234.3. Although this is all hypothetical, I don’t believe it is anywhere outside the realm of possibilities. Especially given that in their conference call they said many times that they are overly cautious with their estimates.


Quarters	Q2-2021	Q1-2021	Q4-2020	Q3-2020	Q2-2020	Q1-2020	Q4-2019
Guidance (M)		$186.0	$163.0	$144.0	$135.0	$118.0	$102.0
Revenue (M)	$234.3	$204.2	$178.0	$154.7	$140.0	$131.2	$113.6
$100K+ ARR			1,253	1,107	1,015	960	858
% Guidance Diff		9.8%	9.2%	7.4%	3.7%	11.2%	11.4%
Revenue QoQ	14.7%	14.7%	15.1%	10.5%	6.7%	15.5%	18.5%
Revenue YoY	67.4%	55.7%	56.7%	61.3%	68.0%	87.0%	85.0%
$100K+ ARR QoQ			13.2%	9.1%	5.7%	11.9%	18.0%
$100K+ ARR YoY			46.0%	52.3%	70.9%	89.0%	89.4%

Another important point from the conference call was that they expect to be live with the Azure integration in the first half of the year. This will conveniently coincide with the time in which we have lapped the bad comparable from Q2 2020.

I hope this has been useful for some. It was good for me to see that this is really a strong ~65% YoY growth company (at least) that is just experiencing tough compares at the moment. We all know this to be true, the management has expressed it over and over again, but the numbers really show the true story. Any commentary would be appreciated by all as this company is making a real strong attempt at moving from my second tier to my first tier.

  • Junomean2
    Long DDOG
117 Likes

All,

I figured I would give a quick update to this post since it had a fair amount of recs. Below I have filled in the actuals for Q1 2021 and then gave a guidance update and estimated actual/beat for Q2. First table assumes average of all previous beats. Second table assumes average of all previous beats with the infamous Q2 2020 removed. For the guidance number I continued to use the midpoint of their guidance range.


Quarters	Q2-2021	Q1-2021	Q4-2020	Q3-2020	Q2-2020	Q1-2020	Q4-2019
Guidance (M)	$212.0	$186.0	$163.0	$144.0	$135.0	$118.0	$102.0
Revenue (M)	**$229.6**	$199.0	$178.0	$154.7	$140.0	$131.2	$113.6
$100K+ ARR		1,437	1,253	1,107	1,015	960	858
% Guidance Diff	**8.3%**	7.0%	9.2%	7.4%	3.7%	11.2%	11.4%
Revenue QoQ	**15.4%**	11.8%	15.1%	10.5%	6.7%	15.5%	18.5%
Revenue YoY	**64.0%**	51.7%	56.7%	61.3%	68.0%	87.0%	85.0%
$100K+ ARR QoQ		14.7%	13.2%	9.1%	5.7%	11.9%	18.0%
$100K+ ARR YoY		49.7%	46.0%	52.3%	70.9%	89.0%	89.4%

Q2 2020 beat removed from average beat calculation (doesn’t make a huge difference).


Quarters	Q2-2021	Q1-2021	Q4-2020	Q3-2020	Q2-2020	Q1-2020	Q4-2019
Guidance (M)	$212.0	$186.0	$163.0	$144.0	$135.0	$118.0	$102.0
Revenue (M)	**$231.6**	$199.0	$178.0	$154.7	$140.0	$131.2	$113.6
$100K+ ARR		1,437	1,253	1,107	1,015	960	858
% Guidance Diff	**9.2%**	7.0%	9.2%	7.4%	3.7%	11.2%	11.4%
Revenue QoQ	**16.4%**	11.8%	15.1%	10.5%	6.7%	15.5%	18.5%
Revenue YoY	**65.4%**	51.7%	56.7%	61.3%	68.0%	87.0%	85.0%
$100K+ ARR QoQ		14.7%	13.2%	9.1%	5.7%	11.9%	18.0%
$100K+ ARR YoY		49.7%	46.0%	52.3%	70.9%	89.0%	89.4%

So it actually aligns almost exactly with the “prediction” in the previous post. The main difference is that their Q1 revenue was lower but their guidance was strong for Q2 2021. I also really like that you can see the reacceleration of “$100K+ ARR QoQ” despite the fact that revenue was down QoQ. This and their NRR solidly proves just how much their customers love the product and continue to expand within Datadog’s offerings.

I am still waiting for news that the Azure integration is fully available to everyone now. Their Q4 2020 earnings call mentioned it was limited availability and they were expecting full availability 1H 2021 but no mention (that I noticed) on this most recent earnings call. I see this as a big growth driver and want it live nowwwww (picture Veruca Salt wanting her golden goose in Willy Wonka).

I am cautiously optimistic towards DDOG. They seem like a great company that is well run with a great product. I got a little antsy at its peak and loaded up more than I should have but investing is about learning lessons so you don’t repeat your mistakes in the future (patience). Regardless I am a happy shareholder and will let this guy continue to run its course until the story changes but as of right now, the story is fully intact for me.

-Junomean2
Long DDOG

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