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Datadog (DDOG) Q4 Earnings Top Estimates, Revenues Rise Y/Y

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Datadog (DDOG - Free Report) reported fourth-quarter 2020 non-GAAP earnings of 6 cents per share that beat the Zacks Consensus Estimate by 200% and increased 100% from the year-ago quarter.

The company reported net revenues of $177.5 million, well above the guided range of $162 million and $164 million. The figure beat the consensus mark by 8.9% and increased 56.2% from the year-ago quarter.

Quarter Details

Datadog’s revenue growth was driven by robust customer additions during the fourth quarter as well as continued growth of existing customers.

Notably, the company had over 14,200 customers as of the end of the third quarter, up from 10,500 in the year-ago quarter. Moreover, Datadog added 1,100 customers in the quarter, up from 1,000 customers added in the previous quarter.
 
Of these customers, 1,253 have an annual run rate (ARR) of $100K or more, up 46% year over year. These customers generate about 75% of total ARR.

Datadog, Inc. Price, Consensus and EPS Surprise

Datadog, Inc. Price, Consensus and EPS Surprise

Datadog, Inc. price-consensus-eps-surprise-chart | Datadog, Inc. Quote

Markedly, Datadog’s dollar-based retention rate was above 130% for the 14th consecutive quarter, driven by increased usage and adoption of existing and new products.

The company benefited from robust adoption of its cloud-based monitoring and SaaS-based data analytics platform.

In the fourth quarter, Datadog announced the general availability of Incident Management, which allows users to declare incidents, investigate root cause and dependencies, collaborate around a shared view of the incident, follow to resolution, and auto-generate post-mortem documentations, all within the Datadog platform.

Additionally, the company enhanced security solutions offerings with beta introductions of Runtime Security and Threat Intelligence. Runtime Security extends the data sources used for threat detection from logs to infrastructure and workload data.

Moreover, the company rolled out a Log Rehydration feature, which allows customers to efficiently archive all logs, and later easily pull archived logs back into the Datadog platform to analyze and investigate old events.

Operating Details

In the fourth quarter, Datadog’s adjusted gross margin contracted 20 basis points (bps) on a year-over-year basis to 77.5%.

Research & development, as a percentage of revenues, expanded 310 bps to 30.1%, driven by increased investments in Datadog’s platform.

Sales and marketing expenses, as a percentage of revenues, contracted 500 bps to 29.6%. General & administrative expenses, as a percentage of revenues, contracted 150 bps to 7.6%.

Datadog reported non-GAAP operating income of $18.1 million. The company had reported a non-GAAP operating income of $7.9 million in the year-ago reported quarter.

Balance Sheet & Cash Flow

As of Dec 31, 2020, Datadog had cash, cash equivalents and marketable securities of $1.5 billion million compared with $1.49 billion as of Sep 30, 2020.

Operating cash flow was $23.8 million in the reported quarter compared with $36.3 million in the previous quarter.

Free cash flow during the quarter was $16.6 million compared with $28.6 million reported in the previous quarter.

Key Q4 Developments

During the fourth quarter, Datadog announced an agreement to acquire Sqreen, a SaaS-based security platform that enables enterprises to detect, block and respond to application level attacks. The addition of Sqreen’s capabilities will provide development, security and operations teams a unified platform to deliver and manage secure and resilient applications.

Moreover, the company acquired Timber Technologies, the developers of Vector, a vendor-agnostic and high-performance observability data pipeline. With Vector, customers can collect, enrich, and transform logs, and other signals across multiple tools and data sources, in both on-premises and cloud environments, and route this data to the destination of their choice.

Guidance

For the first quarter of 2021, Datadog anticipates revenues between $185 million and $187 million. Non-GAAP earnings are expected between 2-3 cents per share.

Non-GAAP operating income is expected to be in the range of $8 million to $10 million.

For full-year 2021, Datadog anticipates revenues between $825 million and $835 million. Non-GAAP earnings is expected between 10-14 cents per share.

Non-GAAP operating income is expected to be in the range of $35 million to $45 million.

Zacks Rank & Stocks to Consider

Currently, Datadog carries a Zacks Rank #3 (Hold).

Zoom Video Communications, Inc. (ZM - Free Report) , Anaplan, Inc. (PLAN - Free Report) and CrowdStrike Holdings Inc. (CRWD - Free Report) are some better-ranked stocks in the broader computer and technology sector. While Zoom Video sports a Zacks Rank #1 (Strong Buy), Anaplan and CrowdStrike Holdings carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Anaplan, Zoom Video and CrowdStrike Holdings are set to report quarterly results on Feb 25, Mar 1 and Mar 16, respectively.

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