10-Q 1 ddog-10q_20190930.htm 10-Q ddog-10q_20190930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission File Number: 001-39051

 

Datadog, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

27-2825503

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

 

620 8th Avenue, 45th Floor

New York, NY

 

10018

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (866) 329-4466

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, par value $0.00001 per share

DDOG

The Nasdaq Stock Market LLC

(Nasdaq Global Select Market)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Small reporting company

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of November 6, 2019, there were 27,600,000 shares of the registrants Class A common stock and 268,230,402 shares of the registrants Class B common stock, each with a par value of $0.00001 per share, outstanding.

 

 


TABLE OF CONTENTS

 

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

3

Item 1.

 

Financial Statements

 

3

 

 

Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018 (unaudited)

 

3

 

 

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and nine months ended September 30, 2019 and September 30, 2018 (unaudited)

 

4

 

 

Condensed Consolidated Statement of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the nine months ended September 30, 2019 (unaudited)

 

5

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and September 30, 2018 (unaudited)

 

7

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

8

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

24

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

34

Item 4.

 

Controls and Procedures

 

34

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

36

Item 1.

 

Legal Proceedings

 

36

Item 1A.

 

Risk Factors

 

36

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

59

Item 3.

 

Defaults Upon Senior Securities

 

60

Item 4.

 

Mine Safety Disclosures

 

60

Item 5.

 

Other Information

 

60

Item 6.

 

Exhibits

 

61

Signatures

 

62

 

1


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

 

 

our expectations regarding our revenue, expenses and other operating results;

 

 

our ability to acquire new customers and successfully retain existing customers;

 

 

our ability to increase usage of our platform and upsell and cross sell additional products;

 

 

our ability to achieve or sustain our profitability;

 

 

future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements;

 

 

the costs and success of our sales and marketing efforts, and our ability to promote our brand;

 

 

our reliance on key personnel and our ability to identify, recruit and retain skilled personnel;

 

 

our ability to effectively manage our growth, including any international expansion;

 

 

our ability to protect our intellectual property rights and any costs associated therewith;

 

 

our ability to compete effectively with existing competitors and new market entrants; and

 

 

the growth rates of the markets in which we compete.

 

You should not rely on forward-looking statements as predictions of future events. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in under the header “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained herein. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

 

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made, and we undertake no obligation to update them to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.

 

 

Unless the context otherwise indicates, references in this report to the terms “Datadog”, “the Company,” “we,” “our” and “us” refer to Datadog, Inc. and its subsidiaries.

 

We may announce material business and financial information to our investors using our investor relations website (www.investors.datadoghq.com). We therefore encourage investors and others interested in Datadog to review the information that we make available on our website, in addition to following our filings with the Securities and Exchange Commission, webcasts, press releases and conference calls.

 

2


PART I-FINANCIAL INFORMATION

Item 1. Financial Statements

DATADOG, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)

 

 

September 30,

2019

 

 

December 31,

2018

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

760,945

 

 

$

53,639

 

Accounts receivable, net of allowance for doubtful accounts of $516 and $477 as of

   September 30, 2019 and December 31, 2018, respectively

 

 

87,208

 

 

 

55,822

 

Deferred contract costs, current

 

 

6,151

 

 

 

3,717

 

Prepaid expenses and other current assets

 

 

18,172

 

 

 

8,773

 

Total current assets

 

 

872,476

 

 

 

121,951

 

Property and equipment, net

 

 

31,266

 

 

 

21,649

 

Operating lease assets

 

 

55,695

 

 

 

 

Goodwill

 

 

7,626

 

 

 

7,626

 

Intangible assets, net

 

 

759

 

 

 

1,288

 

Deferred contract costs, non-current

 

 

12,064

 

 

 

7,292

 

Restricted cash

 

 

9,507

 

 

 

11,341

 

Other assets

 

 

17,360

 

 

 

8,603

 

TOTAL ASSETS

 

$

1,006,753

 

 

$

179,750

 

LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS'

   EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

18,992

 

 

$

12,638

 

Accrued expenses and other current liabilities

 

 

30,481

 

 

 

30,290

 

Operating lease liabilities, current

 

 

10,222

 

 

 

 

Deferred revenue, current

 

 

116,966

 

 

 

69,306

 

Total current liabilities

 

 

176,661

 

 

 

112,234

 

Operating lease liabilities, non-current

 

 

51,684

 

 

 

 

Deferred revenue, non-current

 

 

4,827

 

 

 

1,393

 

Other liabilities

 

 

2,346

 

 

 

1,359

 

Total liabilities

 

 

235,518

 

 

 

114,986

 

COMMITMENTS AND CONTINGENCIES (NOTE 7)

 

 

 

 

 

 

 

 

CONVERTIBLE PREFERRED STOCK:

 

 

 

 

 

 

 

 

Convertible preferred stock; $0.00001 par value per share; 0 and 179,814,912 shares authorized as of

   September 30, 2019 and December 31, 2018, respectively; 0 and 179,814,912 shares issued and

   outstanding as of September 30, 2019 and December 31, 2018, respectively

 

 

 

 

 

140,805

 

STOCKHOLDERS' EQUITY (DEFICIT):

 

 

 

 

 

 

 

 

Preferred stock; $0.00001 par value per share; 20,000,000 and 0 shares authorized as of September 30, 2019

   and December 31, 2018, respectively; 0 shares issued and outstanding as of September 30, 2019

   and December 31, 2018, respectively

 

 

 

 

 

 

Common stock, $0.00001 par value per share; 0 and 380,000,000 shares authorized as of September 30, 2019

   and December 31, 2018, respectively; 0 and 78,180,606 shares issued and outstanding as of

   September 30, 2019 and December 31, 2018, respectively

 

 

 

 

 

 

Class A common stock, $0.00001 par value per share; 2,000,000,000 and 0 shares authorized as of

   September 30, 2019 and December 31, 2018, respectively; 27,600,000 and 0 shares issued and outstanding

   as of September 30, 2019 and December 31, 2018, respectively

 

 

 

 

 

 

Class B common stock, $0.00001 par value per share; 310,000,000 and 0 shares authorized as of

   September 30, 2019 and December 31, 2018, respectively; 268,113,075 and 0 shares issued and outstanding

   as of September 30, 2019 and December 31, 2018, respectively

 

 

3

 

 

 

 

Additional paid-in capital

 

 

895,793

 

 

 

30,834

 

Accumulated other comprehensive (loss) income

 

 

(54

)

 

 

31

 

Accumulated deficit

 

 

(124,507

)

 

 

(106,906

)

Total stockholders’ equity (deficit)

 

 

771,235

 

 

 

(76,041

)

TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND

   STOCKHOLDERS' EQUITY (DEFICIT)

 

$

1,006,753

 

 

$

179,750

 

 

See accompanying notes to condensed consolidated financial statements.

3


DATADOG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue

 

$

95,864

 

 

$

51,074

 

 

$

249,136

 

 

$

136,467

 

Cost of revenue

 

 

23,297

 

 

 

12,098

 

 

 

63,225

 

 

 

30,690

 

Gross profit

 

 

72,567

 

 

 

38,976

 

 

 

185,911

 

 

 

105,777

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

28,684

 

 

 

14,159

 

 

 

75,531

 

 

 

37,456

 

Sales and marketing

 

 

38,836

 

 

 

25,130

 

 

 

105,061

 

 

 

59,747

 

General and administrative

 

 

9,265

 

 

 

4,322

 

 

 

23,193

 

 

 

12,933

 

Total operating expenses

 

 

76,785

 

 

 

43,611

 

 

 

203,785

 

 

 

110,136

 

Operating loss

 

 

(4,218

)

 

 

(4,635

)

 

 

(17,874

)

 

 

(4,359

)

Other income, net

 

 

90

 

 

 

311

 

 

 

646

 

 

 

612

 

Loss before provision for income taxes

 

 

(4,128

)

 

 

(4,324

)

 

 

(17,228

)

 

 

(3,747

)

Provision for income taxes

 

 

(33

)

 

 

(349

)

 

 

(373

)

 

 

(428

)

Net loss

 

$

(4,161

)

 

$

(4,673

)

 

$

(17,601

)

 

$

(4,175

)

Other comprehensive (loss) income—foreign currency translation

   adjustments

 

 

(45

)

 

 

(10

)

 

 

(85

)

 

 

32

 

Comprehensive loss

 

$

(4,206

)

 

$

(4,683

)

 

$

(17,686

)

 

$

(4,143

)

Net loss attributable to common stockholders

 

$

(4,161

)

 

$

(4,673

)

 

$

(17,601

)

 

$

(4,175

)

Basic and diluted net loss per share

 

$

(0.04

)

 

$

(0.06

)

 

$

(0.20

)

 

$

(0.06

)

Weighted average shares used in calculating basic and diluted net loss per share:

 

 

103,876

 

 

 

73,353

 

 

 

87,758

 

 

 

69,708

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

4


DATADOG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share data)

(unaudited)

 

 

 

Convertible

 

 

Class A and Class B

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated

Other

 

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss) Income

 

 

Deficit

 

 

Equity (Deficit)

 

BALANCE—June 30, 2019

 

 

179,011,431

 

 

$

140,752

 

 

 

 

 

$

 

 

 

86,823,234

 

 

$

 

 

$

41,132

 

 

$

(9

)

 

$

(120,346

)

 

$

(79,223

)

Issuance of common stock upon exercise of stock

   options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,278,410

 

 

 

 

 

 

2,106

 

 

 

 

 

 

 

 

 

2,106

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,177

 

 

 

 

 

 

 

 

 

1,177

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,691

 

 

 

 

 

 

 

 

 

4,691

 

Issuance of class A common stock in connection with

   initial public offering, net of underwriting discounts

   and issuance costs

 

 

 

 

 

 

 

 

27,600,000

 

 

 

1

 

 

 

 

 

 

 

 

 

705,937

 

 

 

 

 

 

 

 

 

705,938

 

Conversion of convertible preferred stock to

   common stock in connection with initial public

   offering

 

 

(179,011,431

)

 

 

(140,752

)

 

 

179,011,431

 

 

 

2

 

 

 

 

 

 

 

 

 

140,750

 

 

 

 

 

 

 

 

 

140,752

 

Change in accumulated other comprehensive

   (loss) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(45

)

 

 

 

 

 

(45

)

Reclassification of common stock to class A and class B

   common stock

 

 

 

 

 

 

 

 

89,101,644

 

 

 

 

 

 

(89,101,644

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,161

)

 

 

(4,161

)

BALANCE—September 30, 2019

 

 

 

 

$

 

 

 

295,713,075

 

 

$

3

 

 

 

 

 

$

 

 

$

895,793

 

 

$

(54

)

 

$

(124,507

)

 

$

771,235

 

 

 

 

Convertible

 

 

 

 

 

 

 

 

 

 

Non-Voting

 

 

Additional

 

 

Accumulated

Other

 

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss) Income

 

 

Deficit

 

 

Deficit

 

BALANCE—June 30, 2018

 

 

179,814,912

 

 

$

140,805

 

 

 

73,587,747

 

 

$

 

 

 

 

 

$

 

 

$

25,652

 

 

$

(6

)

 

$

(95,646

)

 

$

(70,000

)

Issuance of common stock upon exercise of stock

   options

 

 

 

 

 

 

 

 

2,572,725

 

 

 

 

 

 

 

 

 

 

 

 

433

 

 

 

 

 

 

 

 

 

433

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

109

 

 

 

 

 

 

 

 

 

109

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,369

 

 

 

 

 

 

 

 

 

1,369

 

Conversion of non-voting common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in accumulated other comprehensive

   (loss) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10

)

 

 

 

 

 

(10

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,673

)

 

 

(4,673

)

BALANCE—September 30, 2018

 

 

179,814,912

 

 

$

140,805

 

 

 

76,160,472

 

 

$

 

 

 

 

 

$

 

 

$

27,563

 

 

$

(16

)

 

$

(100,319

)

 

$

(72,772

)

5


DATADOG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share data)

(unaudited)

 

 

 

Convertible

 

 

Class A and Class B

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated

Other

 

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss) Income

 

 

Deficit

 

 

Equity (Deficit)

 

BALANCE—December 31, 2018

 

 

179,814,912

 

 

$

140,805

 

 

 

 

 

$

 

 

 

78,180,606

 

 

$

 

 

$

30,834

 

 

$

31

 

 

$

(106,906

)

 

$

(76,041

)

Issuance of common stock upon exercise of stock

   options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,117,557

 

 

 

 

 

 

6,576

 

 

 

 

 

 

 

 

 

6,576

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,490

 

 

 

 

 

 

 

 

 

1,490

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,153

 

 

 

 

 

 

 

 

 

10,153

 

Issuance of class A common stock in

   connection with initial public offering, net of

   underwriting discounts and issuance costs

 

 

 

 

 

 

 

 

27,600,000

 

 

 

1

 

 

 

 

 

 

 

 

 

705,937

 

 

 

 

 

 

 

 

 

705,938

 

Conversion of convertible preferred stock to common

   stock in connection with third-party tender offer

 

 

(803,481

)

 

 

(53

)

 

 

 

 

 

 

 

 

803,481

 

 

 

 

 

 

53

 

 

 

 

 

 

 

 

 

53

 

Conversion of convertible preferred stock to

   common stock in connection with initial public

   offering

 

 

(179,011,431

)

 

 

(140,752

)

 

 

179,011,431

 

 

 

2

 

 

 

 

 

 

 

 

 

140,750

 

 

 

 

 

 

 

 

 

140,752

 

Change in accumulated other comprehensive

   (loss) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(85

)

 

 

 

 

 

(85

)

Reclassification of common stock to class A and class B

   common stock

 

 

 

 

 

 

 

 

89,101,644

 

 

 

 

 

 

(89,101,644

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,601

)

 

 

(17,601

)

BALANCE—September 30, 2019

 

 

 

 

$

 

 

 

295,713,075

 

 

$

3

 

 

 

 

 

$

 

 

$

895,793

 

 

$

(54

)

 

$

(124,507

)

 

$

771,235

 

 

 

 

Convertible

 

 

 

 

 

 

 

 

 

 

Non-Voting

 

 

Additional

 

 

Accumulated

Other

 

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss) Income

 

 

Deficit

 

 

Deficit

 

BALANCE—December 31, 2017

 

 

179,814,912

 

 

$

140,805

 

 

 

62,160,984

 

 

$

 

 

 

1,137,000

 

 

$

 

 

$

20,491

 

 

$

(48

)

 

$

(96,144

)

 

$

(75,701

)

Issuance of common stock upon exercise of stock

   options

 

 

 

 

 

 

 

 

12,862,488

 

 

 

 

 

 

 

 

 

 

 

 

3,608

 

 

 

 

 

 

 

 

 

3,608

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

277

 

 

 

 

 

 

 

 

 

277

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,187

 

 

 

 

 

 

 

 

 

3,187

 

Conversion of non-voting common stock