Datadog Announces Third Quarter 2024 Financial Results

Third quarter revenue grew 26% year-over-year to $690 million

Robust growth of larger customers, with about 3,490 $100k+ ARR customers, up from about 3,130 a year ago

Announced general availability of Datadog Monitoring for Oracle Cloud Infrastructure

NEW YORK, Nov. 7, 2024 /PRNewswire/ -- Datadog, Inc. (NASDAQ:DDOG), the monitoring and security platform for cloud applications, today announced financial results for its third quarter ended September 30, 2024.

"Datadog executed well in the third quarter, with 26% year-over-year revenue growth. We continued to broaden our platform to help our customers observe, secure, and act on their mission-critical cloud applications," said Olivier Pomel, co-founder and CEO of Datadog.

Pomel added, "We are pleased to have been named a Leader in the 2024 Gartner Magic Quadrant for Observability Platforms and the 2024 Gartner Magic Quadrant for Digital Experience Monitoring."

Third Quarter 2024 Financial Highlights:

    --  Revenue was $690 million, an increase of 26% year-over-year.


    --  GAAP operating income was $20 million; GAAP operating margin was 3%.


    --  Non-GAAP operating income was $173 million; non-GAAP operating margin
        was 25%.


    --  GAAP net income per diluted share was $0.14; non-GAAP net income per
        diluted share was $0.46.


    --  Operating cash flow was $229 million, with free cash flow of $204
        million.
    --  Cash, cash equivalents, and marketable securities were $3.2 billion as
        of September 30, 2024.

Third Quarter & Recent Business Highlights:

    --  As of September 30, 2024, we had about 3,490 customers with ARR of
        $100,000 or more, an increase of 12% from about 3,130 as of September
        30, 2023.


    --  Named a Leader in the 2024 Gartner Magic Quadrant for Digital Experience
        Monitoring. Datadog's DEM solution includes Synthetic Monitoring and
        Testing, Real User Monitoring (RUM), Product Analytics, Session Replay,
        and Error Tracking capabilities for browser and mobile applications.


    --  Released its State of Cloud Security 2024 report. The report found that
        long-lived credentials continue to be a major risk for organizations
        across all cloud providers.


    --  Announced the General Availability of Datadog Monitoring for Oracle
        Cloud Infrastructure, which provides visibility into Oracle Cloud
        Infrastructure, on-premises and other cloud environments.
    --  Named a Leader in the 2024 Gartner Magic Quadrant for Observability
        Platforms. This is the fourth year in a row Gartner has positioned
        Datadog as a Leader in its Magic Quadrant.

Fourth Quarter and Full Year 2024 Outlook:

Based on information as of today, November 7, 2024, Datadog is providing the following guidance:

    --  Fourth Quarter 2024 Outlook:


        --  Revenue between $709 million and $713 million.


        --  Non-GAAP operating income between $163 million and $167 million.
        --  Non-GAAP net income per share between $0.42 and $0.44, assuming
            approximately 361 million weighted average diluted shares
            outstanding.
    --  Full Year 2024 Outlook:


        --  Revenue between $2.656 billion and $2.660 billion.


        --  Non-GAAP operating income between $658 million and $662 million.
        --  Non-GAAP net income per share between $1.75 and $1.77, assuming
            approximately 359 million weighted average diluted shares
            outstanding.

Datadog has not reconciled its expectations as to non-GAAP operating income, or as to non-GAAP net income per share, to their most directly comparable GAAP measure as a result of uncertainty regarding, and the potential variability of, reconciling items such as stock-based compensation and employer payroll taxes on equity incentive plans. Accordingly, reconciliation is not available without unreasonable effort, although it is important to note that these factors could be material to Datadog's results computed in accordance with GAAP.

Conference Call Details:

    --  What: Datadog financial results for the third quarter of 2024 and
        outlook for the fourth quarter and the full year 2024


    --  When: November 7, 2024 at 8:00 A.M. Eastern Time (5:00 A.M. Pacific
        Time)


    --  Dial in: To access the call in the U.S., please register here. Callers
        are encouraged to dial into the call 10 to 15 minutes prior to the start
        to prevent any delay in joining.


    --  Webcast: https://investors.datadoghq.com (live and replay)
    --  Replay: A replay of the call will be archived on the investor relations
        website

About Datadog

Datadog is the observability and security platform for cloud applications. Our SaaS platform integrates and automates infrastructure monitoring, application performance monitoring, log management, user experience monitoring, cloud security and many other capabilities to provide unified, real-time observability and security for our customers' entire technology stack. Datadog is used by organizations of all sizes and across a wide range of industries to enable digital transformation and cloud migration, drive collaboration among development, operations, security and business teams, accelerate time to market for applications, reduce time to problem resolution, secure applications and infrastructure, understand user behavior, and track key business metrics.

Forward-Looking Statements

This press release and the earnings call referencing this press release contain "forward-looking" statements, as that term is defined under the federal securities laws, including but not limited to statements regarding Datadog's strategy, product and platform capabilities, the growth in and ability to capitalize on long-term market opportunities including the pace and scope of cloud migration and digital transformation, gross margins and operating margins including with respect to sales and marketing, research and development expenses, net interest and other income, cash taxes, investments and capital expenditures, and Datadog's future financial performance, including its outlook for the fourth quarter and the full year 2024 and related notes and assumptions. These forward-looking statements are based on Datadog's current assumptions, expectations and beliefs and are subject to substantial risks, uncertainties, assumptions and changes in circumstances that may cause Datadog's actual results, performance or achievements to differ materially from those expressed or implied in any forward-looking statement.

The risks and uncertainties referred to above include, but are not limited to (1) our recent rapid growth may not be indicative of our future growth; (2) our history of operating losses; (3) our limited operating history; (4) our dependence on existing customers purchasing additional subscriptions and products from us and renewing their subscriptions; (5) our ability to attract new customers; (6) our ability to effectively develop and expand our sales and marketing capabilities; (7) risk of a security breach; (8) risk of interruptions or performance problems associated with our products and platform capabilities; (9) our ability to adapt and respond to rapidly changing technology or customer needs; (10) the competitive markets in which we participate; (11) risks associated with successfully managing our growth; and (12) general market, political, economic, and business conditions including concerns about reduced economic growth and associated decreases in information technology spending. These risks and uncertainties are more fully described in our filings with the Securities and Exchange Commission (SEC), including in the section entitled "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 24, 2024. Additional information will be made available in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 and other filings and reports that we may file from time to time with the SEC. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, we cannot guarantee future results, levels of activity, performance, achievements, or events and circumstances reflected in the forward-looking statements will occur. Forward-looking statements represent our beliefs and assumptions only as of the date of this press release. We disclaim any obligation to update forward-looking statements.

About Non-GAAP Financial Measures

Datadog discloses the following non-GAAP financial measures in this release and the earnings call referencing this press release: non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses (research and development, sales and marketing and general and administrative), non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per diluted share, non-GAAP net income (loss) per basic share, free cash flow and free cash flow margin. Datadog uses each of these non-GAAP financial measures internally to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, and to evaluate Datadog's financial performance. Datadog believes they are useful to investors, as a supplement to GAAP measures, in evaluating its operational performance, as further discussed below. Datadog's non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in its industry, as other companies in its industry may calculate non-GAAP financial results differently, particularly related to non-recurring and unusual items. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact on Datadog's reported financial results.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. A reconciliation of the historical non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release.

Datadog defines non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses (research and development, sales and marketing and general and administrative), non-GAAP operating income (loss), non-GAAP operating margin and non-GAAP net income (loss) as the respective GAAP balances, adjusted for, as applicable: (1) stock-based compensation expense; (2) the amortization of acquired intangibles; (3) employer payroll taxes on employee stock transactions; (4) amortization of issuance costs; and (5) an assumed provision for income taxes based on our long-term projected tax rate. Our estimated long-term projected tax rate is subject to change for a variety of reasons, including the rapidly evolving global tax environment, significant changes in Datadog's geographic earnings mix, or other changes to our strategy or business operations. We will re-evaluate our long-term projected tax rate as appropriate. Datadog defines free cash flow as net cash provided by operating activities, minus capital expenditures and minus capitalized software development costs, if any. Investors are encouraged to review the reconciliation of these historical non-GAAP financial measures to their most directly comparable GAAP financial measures.

Management believes these non-GAAP financial measures are useful to investors and others in assessing Datadog's operating performance due to the following factors:

Stock-based compensation. Datadog utilizes stock-based compensation to attract and retain employees. It is principally aimed at aligning their interests with those of its stockholders and at long-term retention, rather than to address operational performance for any particular period. As a result, stock-based compensation expenses vary for reasons that are generally unrelated to financial and operational performance in any particular period.

Amortization of acquired intangibles. Datadog views amortization of acquired intangible assets as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are evaluated for impairment regularly, amortization of the cost of acquired intangibles is an expense that is not typically affected by operations during any particular period.

Employer payroll taxes on employee stock transactions. Datadog excludes employer payroll tax expense on equity incentive plans as these expenses are tied to the exercise or vesting of underlying equity awards and the price of Datadog's common stock at the time of vesting or exercise. As a result, these taxes may vary in any particular period independent of the financial and operating performance of Datadog's business.

Amortization of issuance costs. In June 2020, Datadog issued $747.5 million of convertible senior notes due 2025, which bear interest at an annual fixed rate of 0.125%. Debt issuance costs, which reduce the carrying value of the convertible debt instrument, are amortized as interest expense over the term. The expense for the amortization of debt issuance costs is a non-cash item, and we believe the exclusion of this interest expense will provide for a more useful comparison of our operational performance in different periods.

Additionally, Datadog's management believes that the non-GAAP financial measure free cash flow is meaningful to investors because it is a measure of liquidity that provides useful information in understanding and evaluating the strength of our liquidity and future ability to generate cash that can be used for strategic opportunities or investing in our business. Free cash flow represents net cash provided by operating activities, reduced by capital expenditures and capitalized software development costs, if any. The reduction of capital expenditures and amounts capitalized for software development facilitates comparisons of Datadog's liquidity on a period-to-period basis and excludes items that management does not consider to be indicative of our liquidity.

Operating Metrics

Datadog's number of customers with ARR of $100,000 or more is based on the ARR of each customer, as of the last month of the quarter.

We define the number of customers as the number of accounts with a unique account identifier for which we have an active subscription in the period indicated. Users of our free trials or tier are not included in our customer count. A single organization with multiple divisions, segments or subsidiaries is generally counted as a single customer. However, in some cases where they have separate billing terms, we may count separate divisions, segments or subsidiaries as multiple customers.

We define ARR as the annualized revenue run-rate of subscription agreements from all customers at a point in time. We calculate ARR by taking the monthly recurring revenue, or MRR, and multiplying it by 12. MRR for each month is calculated by aggregating, for all customers during that month, monthly revenue from committed contractual amounts, additional usage, usage from subscriptions for a committed contractual amount of usage that is delivered as used, and monthly subscriptions. ARR and MRR should be viewed independently of revenue, and do not represent our revenue under GAAP on a monthly or annualized basis, as they are operating metrics that can be impacted by contract start and end dates and renewal rates. ARR and MRR are not intended to be replacements or forecasts of revenue.


                                                                                     
            
              Datadog, Inc.


                                                                    
            
              Condensed Consolidated Statements of Operations


                                                                         
            (In thousands, except per share data; unaudited)




                                                                                                                                                      Three Months Ended                        Nine Months Ended

                                                                                                                                                      September 30,                        September 30,


                                                                                                                                            2024     2023                  2024       2023



     Revenue                                                                                                                           $690,016 $547,536            $1,946,548 $1,538,710



     Cost of revenue (1)(2)(3)                                                                                                          137,756  103,319               371,353    305,079



     Gross profit                                                                                                                       552,260  444,217             1,575,195  1,233,631



     Operating expenses:



     Research and development (1)(3)                                                                                                    291,802  240,225               836,389    709,197



     Sales and marketing (1)(2)(3)                                                                                                      187,772  156,870               548,658    449,296



     General and administrative (1)(3)                                                                                                   52,408   51,352               145,256    136,344



     Total operating expenses                                                                                                           531,982  448,447             1,530,303  1,294,837



     Operating income (loss)                                                                                                             20,278  (4,230)               44,892   (61,206)



     Other income:



     Interest expense (4)                                                                                                               (1,574) (1,303)              (4,425)   (5,010)



     Interest income and other income, net                                                                                               37,432   29,833               109,647     69,184



     Other income, net                                                                                                                   35,858   28,530               105,222     64,174



     Income before provision for income taxes                                                                                            56,136   24,300               150,114      2,968



     Provision for income taxes                                                                                                           4,439    1,670                11,962      8,393



     Net income (loss)                                                                                                                  $51,697  $22,630              $138,152   $(5,425)



     Net income (loss) per share - basic                                                                                                  $0.15    $0.07                 $0.41    $(0.02)



     Net income (loss) per share - diluted                                                                                                $0.14    $0.06                 $0.39    $(0.02)



     Weighted average shares used in calculating net income (loss) per share:



     Basic                                                                                                                              337,562  325,557               334,779    322,395



     Diluted                                                                                                                            357,635  351,309               357,331    322,395





     (1) Includes stock-based compensation expense as follows:



     Cost of revenue                                                                                                                     $6,249   $4,570               $18,169    $12,452



     Research and development                                                                                                            90,507   79,174               266,025    229,607



     Sales and marketing                                                                                                                 30,749   26,159                88,481     75,057



     General and administrative                                                                                                          14,685   13,211                39,200     37,063



     Total                                                                                                                             $142,190 $123,114              $411,875   $354,179





     (2) Includes amortization of acquired intangibles as follows:



     Cost of revenue                                                                                                                     $1,230   $1,974                $4,538     $6,054



     Sales and marketing                                                                                                                    208      208                   618        617



     Total                                                                                                                               $1,438   $2,182                $5,156     $6,671





     (3) Includes employer payroll taxes on employee stock transactions as follows:



     Cost of revenue                                                                                                                       $118     $107                  $378       $276



     Research and development                                                                                                             6,316    5,260                23,724     15,213



     Sales and marketing                                                                                                                  1,060    2,980                 3,821      5,008



     General and administrative                                                                                                           1,621    1,342                 5,199      3,450



     Total                                                                                                                               $9,115   $9,689               $33,122    $23,947





     (4) Includes amortization of issuance costs as follows:



     Interest expense                                                                                                                      $912     $848                $2,672     $2,539



     Total                                                                                                                                 $912     $848                $2,672     $2,539


                                                                                             
          
                Datadog, Inc.


                                                                                 
              
            Condensed Consolidated Balance Sheets


                                                                                              
          (In thousands; unaudited)




                                                                                                                                           September 30, December 31,
                                                                                                                                                    2024          2023



              
                ASSETS



              CURRENT ASSETS:



              Cash and cash equivalents                                                                                                        $337,418      $330,339



              Marketable securities                                                                                                           2,861,536     2,252,559



              Accounts receivable, net of allowance for credit losses of $14,310 and $12,096 as of                                              487,064       509,279
    September 30, 2024 and December 31, 2023, respectively



              Deferred contract costs, current                                                                                                   52,225        44,938



              Prepaid expenses and other current assets                                                                                          51,191        41,022



              Total current assets                                                                                                            3,789,434     3,178,137



              Property and equipment, net                                                                                                       215,810       171,872



              Operating lease assets                                                                                                            168,610       126,562



              Goodwill                                                                                                                          352,870       352,694



              Intangible assets, net                                                                                                              4,424         9,617



              Deferred contract costs, non-current                                                                                               79,996        73,728



              Other assets                                                                                                                       20,327        23,462



              TOTAL ASSETS                                                                                                                   $4,631,471    $3,936,072



              
                LIABILITIES AND STOCKHOLDERS' EQUITY



              CURRENT LIABILITIES:



              Accounts payable                                                                                                                  $92,005       $87,712



              Accrued expenses and other current liabilities                                                                                    120,234       127,631



              Operating lease liabilities, current                                                                                               27,342        21,974



              Convertible senior notes, net, current                                                                                            744,858



              Deferred revenue, current                                                                                                         795,824       765,735



              Total current liabilities                                                                                                       1,780,263     1,003,052



              Operating lease liabilities, non-current                                                                                          197,044       138,128



              Convertible senior notes, net, non-current                                                                                                     742,235



              Deferred revenue, non-current                                                                                                      18,404        21,210



              Other liabilities                                                                                                                   6,615         6,093



              Total liabilities                                                                                                               2,002,326     1,910,718



              STOCKHOLDERS' EQUITY:



              Common stock                                                                                                                            3             3



              Additional paid-in capital                                                                                                      2,632,085     2,181,267



              Accumulated other comprehensive income (loss)                                                                                      12,603       (2,218)



              Accumulated deficit                                                                                                              (15,546)    (153,698)



              Total stockholders' equity                                                                                                      2,629,145     2,025,354



              TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                     $4,631,471    $3,936,072


                                                                                              
              
                Datadog, Inc.


                                                                             
              
                Condensed Consolidated Statements of Cash Flow


                                                                                              
              (In thousands; unaudited)




                                                                                                                                                              Three Months Ended                         Nine Months Ended

                                                                                                                                                              September 30,                         September 30,


                                                                                                                                                         2024       2023                 2024           2023



              
                CASH FLOWS FROM OPERATING ACTIVITIES:



              Net income (loss)                                                                                                                      $51,697    $22,630             $138,152       $(5,425)



              Adjustments to reconcile net income (loss) to net cash provided by operating
    activities:



              Depreciation and amortization                                                                                                           13,892     11,609               39,227         32,434



              (Accretion) amortization of (discounts) premiums on marketable securities                                                             (12,844)  (12,965)            (39,539)      (26,256)



              Amortization of issuance costs                                                                                                             912        848                2,672          2,539



              Amortization of deferred contract costs                                                                                                 13,474     10,227               37,768         28,223



              Stock-based compensation, net of amounts capitalized                                                                                   142,190    123,114              411,875        354,179



              Non-cash lease expense                                                                                                                   6,670      7,136               20,261         19,332



              Allowance for credit losses on accounts receivable                                                                                       3,800      2,786               10,374          9,097



              Loss on disposal of property and equipment                                                                                                   9        (2)                 352            419



              Changes in operating assets and liabilities:



              Accounts receivable, net                                                                                                                42,428   (70,333)              11,842       (10,194)



              Deferred contract costs                                                                                                               (19,153)  (14,994)            (51,323)      (42,612)



              Prepaid expenses and other current assets                                                                                              (1,630)     6,509             (10,073)      (10,314)



              Other assets                                                                                                                             1,465      (998)               3,636          1,243



              Accounts payable                                                                                                                      (22,994)    32,371                8,576         57,268



              Accrued expenses and other liabilities                                                                                                  10,147   (24,153)             (5,709)      (68,242)



              Deferred revenue                                                                                                                       (1,382)    58,998               27,284         98,037



              Net cash provided by operating activities                                                                                              228,681    152,783              605,375        439,728



              
                CASH FLOWS FROM INVESTING ACTIVITIES:



              Purchases of marketable securities                                                                                                   (905,632) (621,523)         (2,145,933)   (2,011,857)



              Maturities of marketable securities                                                                                                    624,402    449,658            1,590,387      1,467,975



              Proceeds from sale of marketable securities                                                                                               (40)     (240)                (32)        36,393



              Purchases of property and equipment                                                                                                    (8,385)   (6,113)            (26,958)      (17,191)



              Capitalized software development costs                                                                                                (16,692)   (8,481)            (44,286)      (26,279)



              Cash paid for acquisition of businesses; net of cash acquired                                                                            (210)   (4,344)               (654)       (6,369)



              Net cash used in investing activities                                                                                                (306,557) (191,043)           (627,476)     (557,328)



              
                CASH FLOWS FROM FINANCING ACTIVITIES:



              Proceeds from exercise of stock options                                                                                                  1,257      9,870                5,201         17,404



              Proceeds for issuance of common stock under the employee stock                                                                                                        22,507         19,986
    purchase plan



              Repayments of convertible senior notes                                                                                                    (24)                          (49)



              Net cash provided by financing activities                                                                                                1,233      9,870               27,659         37,390





              Effect of exchange rate changes on cash, cash equivalents and restricted cash                                                            3,098    (1,605)               1,521          (769)





              NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH                                                                            (73,545)  (29,995)               7,079       (80,979)



              CASH, CASH EQUIVALENTS AND RESTRICTED CASH-Beginning of period                                                                         410,963    291,304              330,339        342,288



              CASH, CASH EQUIVALENTS AND RESTRICTED CASH-End of period                                                                              $337,418   $261,309             $337,418       $261,309





              
                RECONCILIATION OF CASH AND CASH EQUIVALENTS WITHIN THE CONDENSED CONSOLIDATED BALANCE SHEETS TO THE AMOUNTS
    SHOWN IN THE STATEMENTS OF CASH FLOWS ABOVE:



              Cash and cash equivalents                                                                                                             $337,418   $261,309             $337,418       $261,309



              Total cash and cash equivalents                                                                                                       $337,418   $261,309             $337,418       $261,309


                                                                               
              
                Datadog, Inc.


                                                                
              
                Reconciliation from GAAP to Non-GAAP Results


                                                                    
              (In thousands, except per share data; unaudited)




                                                                                                                                              Three Months Ended                  Nine Months Ended

                                                                                                                                              September 30,                  September 30,


                                                                                                                                         2024          2023             2024           2023



       
                
                  Reconciliation of gross profit and gross margin

    ---


       
                GAAP gross profit                                                                                               $552,260      $444,217       $1,575,195     $1,233,631



       Plus: Stock-based compensation expense                                                                                          6,249         4,570           18,169         12,452



       Plus: Amortization of acquired intangibles                                                                                      1,230         1,974            4,538          6,054



       Plus: Employer payroll taxes on employee stock transactions                                                                       118           107              378            276



       
                Non-GAAP gross profit                                                                                           $559,857      $450,868       $1,598,280     $1,252,413



       
                GAAP gross margin                                                                                                   80 %         81 %            81 %          80 %



       
                Non-GAAP gross margin                                                                                               81 %         82 %            82 %          81 %





       
                
                  Reconciliation of operating expenses

    ---


       
                GAAP research and development                                                                                   $291,802      $240,225         $836,389       $709,197



       Less: Stock-based compensation expense                                                                                       (90,507)     (79,174)       (266,025)     (229,607)



       Less: Employer payroll taxes on employee stock transactions                                                                   (6,316)      (5,260)        (23,724)      (15,213)



       
                Non-GAAP research and development                                                                               $194,979      $155,791         $546,640       $464,377





       
                GAAP sales and marketing                                                                                        $187,772      $156,870         $548,658       $449,296



       Less: Stock-based compensation expense                                                                                       (30,749)     (26,159)        (88,481)      (75,057)



       Less: Amortization of acquired intangibles                                                                                      (208)        (208)           (618)         (617)



       Less: Employer payroll taxes on employee stock transactions                                                                   (1,060)      (2,980)         (3,821)       (5,008)



       
                Non-GAAP sales and marketing                                                                                    $155,755      $127,523         $455,738       $368,614





       
                GAAP general and administrative                                                                                  $52,408       $51,352         $145,256       $136,344



       Less: Stock-based compensation expense                                                                                       (14,685)     (13,211)        (39,200)      (37,063)



       Less: Employer payroll taxes on employee stock transactions                                                                   (1,621)      (1,342)         (5,199)       (3,450)



       
                Non-GAAP general and administrative                                                                              $36,102       $36,799         $100,857        $95,831





       
                
                  Reconciliation of operating income (loss) and operating margin

    ---


       
                GAAP operating income (loss)                                                                                     $20,278      $(4,230)         $44,892      $(61,206)



       Plus: Stock-based compensation expense                                                                                        142,190       123,114          411,875        354,179



       Plus: Amortization of acquired intangibles                                                                                      1,438         2,182            5,156          6,671



       Plus: Employer payroll taxes on employee stock transactions                                                                     9,115         9,689           33,122         23,947



       
                Non-GAAP operating income                                                                                       $173,021      $130,755         $495,045       $323,591



       
                GAAP operating margin                                                                                                3 %        (1) %             2 %         (4) %



       
                Non-GAAP operating margin                                                                                           25 %         24 %            25 %          21 %


                                                                                      
              
                Datadog, Inc.


                                                                      
              
                Reconciliation from GAAP to Non-GAAP Results


                                                                           
              (In thousands, except per share data; unaudited)




                                                                                                                                                                    Three Months Ended               Nine Months Ended

                                                                                                                                                                    September 30,               September 30,


                                                                                                                                                               2024         2023           2024         2023



              
                
                  Reconciliation of net income (loss)

    ---


              
                GAAP net income (loss)                                                                                                          $51,697      $22,630       $138,152     $(5,425)



              Plus: Stock-based compensation expense                                                                                                       142,190      123,114        411,875      354,179



              Plus: Amortization of acquired intangibles                                                                                                     1,438        2,182          5,156        6,671



              Plus: Employer payroll taxes on employee stock transactions                                                                                    9,115        9,689         33,122       23,947



              Plus: Amortization of issuance costs                                                                                                             912          848          2,672        2,539



              
                Non-GAAP net income before non-GAAP tax adjustments                                                                            $205,352     $158,463       $590,977     $381,911



              Income tax effects and adjustments (1)                                                                                                        39,617       31,958        114,655       73,571



              
                Non-GAAP net income after non-GAAP tax adjustments                                                                             $165,735     $126,505       $476,322     $308,340



              Net income per share before non-GAAP tax adjustments - basic                                                                                   $0.61        $0.49          $1.77        $1.18



              Net income per share before non-GAAP tax adjustments - diluted                                                                                 $0.57        $0.45          $1.65        $1.09





              Net income per share after non-GAAP tax adjustments - basic                                                                                    $0.49        $0.39          $1.42        $0.96



              Net income per share after non-GAAP tax adjustments - diluted                                                                                  $0.46        $0.36          $1.33        $0.88





              
                Shares used in non-GAAP net income per share calculations:



              Basic                                                                                                                                        337,562      325,557        334,779      322,395



              Diluted                                                                                                                                      357,635      351,309        357,331      348,846





              1)     Non-GAAP financial information for the periods shown are adjusted for an assumed provision for income taxes based on our long-term projected
    tax rate of 21%. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, our estimated tax rate on non-GAAP
    income may differ from our GAAP tax rate and from our actual tax liabilities.

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                Datadog, Inc.


                       
              
                Reconciliation of GAAP Cash Flow from Operating Activities to Free Cash Flow


                                                       
              (In thousands; unaudited)




                                                                                                                           Three Months Ended                      Nine Months Ended

                                                                                                                           September 30,                      September 30,


                                                                                                           2024                 2023                2024        2023



     Net cash provided by operating activities                                                        $228,681             $152,783            $605,375    $439,728



     Less: Purchases of property and equipment                                                         (8,385)             (6,113)           (26,958)   (17,191)



     Less: Capitalized software development costs                                                     (16,692)             (8,481)           (44,286)   (26,279)



     Free cash flow                                                                                   $203,604             $138,189            $534,131    $396,258



     Free cash flow margin                                                                                30 %                25 %               27 %       26 %

Contact Information
Yuka Broderick
Datadog Investor Relations
IR@datadoghq.com

Dan Haggerty
Datadog Public Relations
Press@datadoghq.com

Datadog is a registered trademark of Datadog, Inc.

All product and company names herein may be trademarks of their registered owners.

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SOURCE Datadog, Inc.