GlobeNewswire Inc | Aug 5, 2021 07:00AM EDT

August 05, 2021

Second quarter revenue grew 67% year-over-year to $234 million

Strong growth of larger customers, with 1,610 $100k+ ARR customers, up from 1,015 a year ago

Launched general availability of Cloud Security Posture Management and Cloud Workload Security products

Announced beta of CI Visibility product

NEW YORK, Aug. 05, 2021 (GLOBE NEWSWIRE) -- Datadog, Inc. (NASDAQ:DDOG), the monitoring and security platform for cloud applications, today announced financial results for its second quarter ended June 30, 2021.

"We had a strong second quarter, with revenue growth accelerating to 67% year-over-year and 18% quarter-over-quarter. We saw broad-based strength across customer segments and products," said Olivier Pomel, co-founder and CEO of Datadog. "Our high growth at scale demonstrates that we continue to be a trusted partner in our customers' digital transformation and cloud migration journeys."

Pomel added, "We continue to expand the features and functionality of our cloud native end-to-end observability platform. Meanwhile, we are just getting started on our journey to break down silos between DevOps and Security teams with our Cloud Security Platform."

Second Quarter 2021 Financial Highlights:

-- Revenue was $233.5 million, an increase of 67% year-over-year. -- GAAP operating loss was $(9.9)million; GAAP operating margin was (4)%. -- Non-GAAP operating income was $30.9 million; non-GAAP operating margin was 13%. -- GAAP net loss per diluted share was $(0.03); non-GAAP net income per diluted share was $0.09. -- Operating cash flow was $51.7 million, with free cash flow of $42.3 million. -- Cash, cash equivalents, restricted cash, and marketable securities were $1.4 billion as of June30, 2021.

Second Quarter & Recent Business Highlights:

-- As of June 30, 2021, we had 1,610 customers with ARR of $100,000 or more, an increase of 59% from 1,015 as of June 30, 2020. -- Announced the launch of the Datadog Cloud Security Platform, adding full-stack security context to Datadog's deep observability capabilities. This new offering enables organizations to use a single platform to correlate security insights with monitoring data across infrastructure, network and application tiers, providing Security teams with the visibility they need to understand and respond to potential threats faster. The Cloud Security Platform includes Cloud Security Posture Management, Cloud Workload Security, Security Monitoring, and Application Security (in beta), as well as Unified Observability and Security Reporting capabilities. -- Cloud Security Posture Management (CSPM) and Cloud Workload Security (CWS) became generally available. Cloud Security Posture Management (CSPM) makes it easy to track whether production environments comply with industry standards. Cloud Workload Security (CWS) detects threats to production workloads by monitoring file and process activity across environments to help catch host and infrastructure-based attacks. -- Announced the beta launch of CI Visibility, a way to bring production level visibility earlier into the development process by shifting left and bringing observability throughout the CI/CD pipeline. -- Announced support for application monitoring with AWS App Runner, joining Amazon Web Services (AWS) as a Launch Partner for the new fully managed service. This new functionality will help engineering and product teams scale, deploy, and monitor their apps without the burden of managing their own infrastructure. -- Announced the general availability of Datadogs AWS Lambda extension. This feature enables engineering teams to send their metrics, traces, and logs securely to Datadog with minimal overhead to their business-critical serverless applications. -- Announced our integration with the Salesforce platform. This new integration provides Salesforce admins and security teams with the ability to detect and respond to suspicious behavior through visibility into user, platform and API activity. -- Achieved Amazon Web Services (AWS) Government Competency status. This designation reflects Datadog's deep experience working with government customers to deliver mission-critical workloads and applications on AWS. -- Announced availability on the Google Cloud Marketplace. Google Cloud customers can now purchase Datadog with just a few clicks on the Google Cloud Marketplace, allowing them to quickly and easily monitor the health of their applications and infrastructure across their Google Cloud and hybrid cloud environments. -- Delivered numerous product innovations, including cross-browser testing in Synthetics; support for Android, iOS, and cross-platform frameworks like React Native in mobile RUM; automatic detection of faulty deployments in APM; and anomaly detection in Security Monitoring.

Third Quarter and Full Year 2021 Outlook:

Based on information as of today, August 5, 2021, Datadog is providing the following guidance:

-- Third Quarter 2021 Outlook: Revenue between $246 million and $248 million.Non-GAAP operating income between $18 million and $20 million.Non-GAAP net income per share between $0.05 and $0.06, assuming approximately 344 million weighted average diluted shares outstanding. -- Full Year 2021 Outlook: Revenue between $938 million and $944 million.Non-GAAP operating income between $87 million and $93 million.Non-GAAP net income per share between $0.26 and $0.28, assuming approximately 344 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 Datadogs results computed in accordance with GAAP.

Conference Call Details:

-- What:Datadog financial results for the second quarter of 2021 and outlook for the third quarter and the full year of 2021 -- When:August 5, 2021 at 8:00 A.M. Eastern Time (5:00 A.M. Pacific Time) -- Dial in:To access the call in the U.S., please dial (800) 708-4539, and for international callers, please dial (847) 619-6396. Callers may provide confirmation number 50198098 to access the call more quickly, and 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 monitoring and security platform for cloud applications. Our SaaS platform integrates and automates infrastructure monitoring, application performance monitoring and log management to provide unified, real-time observability of 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 the impact of the COVID-19 pandemic on digital transformation and cloud migration trends and the ability of Datadog to benefit from these trends, Datadogs strategy, partnerships, investments and long-term opportunity, and Datadogs future financial performance, including its outlook for the third quarter and full year 2021. These forward-looking statements are based on Datadogs current assumptions, expectations and beliefs and are subject to substantial risks, uncertainties, assumptions and changes in circumstances that may cause Datadogs 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 business depends on our 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; (12) general market, political, economic, and business conditions; and (13) the impact that the ongoing COVID-19 pandemic and any related economic downturn could have on our or our customers businesses, financial condition and results of operations. 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, filed with the SEC on May 7, 2021. Additional information will be made available in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 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 (sales and marketing, research and development, 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, and free cash flow. 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 Datadogs financial performance. Datadog believes they are useful to investors, as a supplement to GAAP measures, in evaluating its operational performance, as further discussed below. Datadogs 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 Datadogs 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 (sales and marketing, research and development, 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) non-cash benefit related to tax adjustment; (4) employer payroll taxes on employee stock transactions; and (5) amortization of issuance costs. Datadog defines free cash flow as Net cash provided by operating activities, minus capital expenditures and minus capitalized software development costs. 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 Datadogs 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.

Non-cash benefit related to tax adjustment. Datadog recorded a contingent payroll tax liability in conjunction with a common stock repurchase transaction in 2016. In 2020, the period of limitations for assessing the contingent Federal payroll tax liability expired and the Company was legally released from being the primary obligor, and recognized a benefit in the consolidated statement of operations. Datadog does not believe this is reflective of on-going results and therefore adjusted for this benefit.

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 Datadogs 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 Datadogs business.

Amortization of issuance costs. In May 2020, Datadog issued $747.5M 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, Datadogs management believes that the non-GAAP financial measure free cash flow is meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures and the capitalization of software development costs due to the fact that these expenditures are considered to be a necessary component of ongoing operations.

Operating Metrics

Datadogs number of customers with ARR of $100,000 or more and number of customers with ARR of $1 million or more are 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. 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 is defined as the revenue run-rate of subscription agreements from all customers for the last month of the period, including committed amounts and any additional usage. ARR and MRR should be viewed independently of revenue as they are operating metrics and are not intended to be replacements or forecasts of revenue.

Condensed Consolidated Statements of Operations

(In thousands, except per share data; unaudited)

Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020Revenue $ 233,549 $ 140,012 $ 432,098 $ 271,260 Cost of revenue 57,098 28,878 103,764 55,357 ^ (1)(2)(4)Gross profit 176,451 111,134 328,334 215,903 Operating expenses:Research anddevelopment^ 94,779 45,664 174,045 86,488 (1)(3)(4)Sales andmarketing^ (1) 70,412 51,269 134,765 96,484 (2)(3)(4)General andadministrative^ 21,146 13,547 42,240 28,499 (1)(3)(4)Total operating 186,337 110,480 351,050 211,471 expensesOperating (9,886 ) 654 (22,716 ) 4,432 (loss) incomeOther income: Interest (5,064 ) (4,294 ) (10,536 ) (5,001 )expense^ (5)Interest incomeand other 5,292 4,466 11,065 8,069 income, netOther income, 228 172 529 3,068 net(Loss) incomebefore benefitfrom (provision (9,658 ) 826 (22,187 ) 7,500 for) incometaxesBenefit from(provision for) 296 (542 ) (243 ) (737 )income taxesNet (loss) $ (9,362 ) $ 284 $ (22,430 ) $ 6,763 incomeNet (loss)income per $ (0.03 ) $ 0.00 $ (0.07 ) $ 0.02 share - basicNet (loss)income per $ (0.03 ) $ 0.00 $ (0.07 ) $ 0.02 share - dilutedWeightedaverage sharesused in calculating net(loss) incomeper share:Basic 308,019 299,267 307,032 297,361 Diluted 308,019 330,847 307,032 329,402

^(1) Includesstock-based compensationexpense as follows:Cost of revenue $ 829 $ 407 $ 1,530 $ 638 Research and 21,639 8,703 37,708 14,550 developmentSales and marketing 6,606 4,541 13,616 7,615 General and 5,441 3,183 10,522 6,091 administrativeTotal $ 34,515 $ 16,834 $ 63,376 $ 28,894

^(2) Includes amortization of acquired intangibles as follows:Cost of revenue $ 908 $ 147 $ 1,263 $ 394 Sales and marketing 163 ? 163 ? Total $ 1,071 $ 147 $ 1,426 $ 394

^(3) Includes non-cash benefit related to tax adjustment as follows:Research and development $ ? $ (2,729 ) $ ? $ (2,729 )Sales and marketing ? (449 ) ? (449 )General and administrative ? (2,383 ) ? (2,383 )Total $ ? $ (5,561 ) $ ? $ (5,561 )

^(4) Includes employerpayroll taxes onemployee stock transactions asfollows:Cost of revenue $ 96 $ 121 $ 191 $ 121 Research and 2,101 1,423 3,872 1,460 developmentSales and marketing 2,776 1,508 3,955 1,659 General and 194 212 318 270 administrativeTotal $ 5,167 $ 3,264 $ 8,336 $ 3,510

^(5) Includesamortization of issuance costs as follows:Interest expense $ 837 $ 2,484 $ 1,672 $ 2,484 Total $ 837 $ 2,484 $ 1,672 $ 2,484

Condensed Consolidated Balance Sheets

(In thousands; unaudited)

June 30, December 31, 2021 2020ASSETS CURRENT ASSETS: Cash and cash equivalents $ 247,442 $ 224,927 Marketable securities 1,162,717 1,292,532 Accounts receivable, net of allowance forcredit losses of $2,267 and $2,468 as of 188,326 163,359 June30, 2021 and December31, 2020,respectivelyDeferred contract costs, current 17,612 13,638 Prepaid expenses and other current assets 26,289 23,624 Total current assets 1,642,386 1,718,080 Property and equipment, net 60,511 47,197 Operating lease assets 49,233 57,829 Goodwill 258,682 17,609 Intangible assets, net 11,743 2,069 Deferred contract costs, non-current 31,624 26,750 Restricted cash 3,662 3,784 Other assets 18,892 16,967 TOTAL ASSETS $ 2,076,733 $ 1,890,285 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 29,257 $ 21,342 Accrued expenses and other current liabilities 70,524 55,351 Operating lease liabilities, current 16,626 16,326 Deferred revenue, current 264,650 204,825 Total current liabilities 381,057 297,844 Operating lease liabilities, non-current 42,448 51,433 Convertible senior notes, net 733,805 575,864 Deferred revenue, non-current 1,277 3,450 Other liabilities 5,267 4,262 Total liabilities 1,163,854 932,853 STOCKHOLDERS' EQUITY Common stock 3 3 Additional paid-in capital 1,065,835 1,103,305 Accumulated other comprehensive income 832 2,287 Accumulated deficit (153,791 ) (148,163 )Total stockholders? equity 912,879 957,432 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,076,733 $ 1,890,285

Condensed Consolidated Statements of Cash Flow

(In thousands; unaudited)

Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income $ (9,362 ) $ 284 $ (22,430 ) $ 6,763 Adjustments toreconcile net (loss)income to net cash provided by operatingactivities:Depreciation and 5,463 3,707 9,865 7,395 amortizationAmortization ofdiscounts or premiums 3,854 1,216 8,113 1,460 on marketablesecuritiesAmortization of 837 2,484 1,672 2,484 issuance costsAmortization ofdeferred contract 4,074 2,442 7,853 4,627 costsStock-basedcompensation, net of 34,515 16,834 63,376 28,894 amounts capitalizedNon-cash lease expense 4,049 3,325 8,061 6,551 Allowance for creditlosses on accounts 502 928 527 2,001 receivableLoss on disposal of 153 6 156 8 property and equipmentChanges in operatingassets and liabilities:Accounts receivable, (34,131 ) (16,568 ) (24,908 ) (23,684 )netDeferred contract (9,990 ) (6,618 ) (16,701 ) (11,237 )costsPrepaid expenses and 3,461 (5,077 ) (2,537 ) (6,481 )other current assetsOther assets (1,504 ) (1,834 ) (932 ) (915 )Accounts payable 16,598 4,083 7,372 2,692 Accrued expenses and (2,374 ) (377 ) 7,308 1,648 other liabilitiesDeferred revenue 35,578 19,903 56,578 26,787 Net cash provided by 51,723 24,738 103,373 48,993 operating activitiesCASH FLOWS FROM INVESTING ACTIVITIES:Purchases of (340,652 ) (776,031 ) (490,983 ) (1,203,513 )marketable securitiesMaturities of 316,972 119,234 570,206 121,854 marketable securitiesProceeds from sale of 35,218 ? 41,715 ? marketable securitiesPurchases of property (3,229 ) (1,398 ) (4,227 ) (2,924 )and equipmentCapitalized software (6,209 ) (4,737 ) (12,392 ) (8,154 )development costsCash paid foracquisition of (188,839 ) (2,363 ) (200,348 ) (2,363 )businesses; net ofcash acquiredNet cash used in (186,739 ) (665,295 ) (96,029 ) (1,095,100 )investing activitiesCASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from exercise 2,887 4,422 6,162 7,235 of stock optionsInitial public ? (268 ) ? (421 )offering costsProceeds for issuanceof common stock under 9,794 7,680 9,794 7,680 the employee stockpurchase planEmployee payroll taxespaid related to netshare settlement under ? (859 ) (245 ) (859 )the employee stockpurchase planProceeds from issuanceof convertible senior ? 730,681 ? 730,681 notes, net of issuancecostsPurchase of cappedcall related to ? (89,625 ) ? (89,625 )convertible seniornotesNet cash provided by 12,681 652,031 15,711 654,691 financing activities Effect of exchangerate changes on cash, 120 28 (662 ) (113 )cash equivalents andrestricted cash NET (DECREASE)INCREASE IN CASH, CASH (122,215 ) 11,502 22,393 (391,529 )EQUIVALENTS ANDRESTRICTED CASHCASH, CASH EQUIVALENTSAND RESTRICTED 373,319 198,158 228,711 601,189 CASH?Beginning ofperiodCASH, CASH EQUIVALENTSAND RESTRICTED $ 251,104 $ 209,660 $ 251,104 $ 209,660 CASH?End of period RECONCILIATION OFCASH, CASH EQUIVALENTSAND RESTRICTED CASHWITHIN THE CONDENSEDCONSOLIDATED BALANCE SHEETS TO THE AMOUNTSSHOWNIN THE STATEMENTS OFCASH FLOWS ABOVE:Cash and cash $ 247,442 $ 206,202 $ 247,442 $ 206,202 equivalentsRestricted cash ?Including amounts inprepaid expense and 3,662 3,458 3,662 3,458 other current assetsand other assetsTotal cash, cashequivalents and $ 251,104 $ 209,660 $ 251,104 $ 209,660 restricted cash

Reconciliation from GAAP to Non-GAAP Results(In thousands, except per share data; unaudited)

Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020Reconciliation of gross profit and gross marginGAAP gross profit $ 176,451 $ 111,134 $ 328,334 $ 215,903 Plus: Stock-based 829 407 1,530 638 compensation expensePlus: Amortization of 908 147 1,263 394 acquired intangiblesPlus: Employer payrolltaxes on employee stock 96 121 191 121 transactionsNon-GAAP gross profit $ 178,284 $ 111,809 $ 331,318 $ 217,056 GAAP gross margin 76 % 79 % 76 % 80 %Non-GAAP gross margin 76 % 80 % 77 % 80 % Reconciliation of operating expensesGAAP research and $ 94,779 $ 45,664 $ 174,045 $ 86,488 developmentLess: Stock-based (21,639 ) (8,703 ) (37,708 ) (14,550 )compensation expensePlus: Non-cash benefitrelated to tax ? 2,729 ? 2,729 adjustmentLess: Employer payrolltaxes on employee stock (2,101 ) (1,423 ) (3,872 ) (1,460 )transactionsNon-GAAP research and $ 71,039 $ 38,267 $ 132,465 $ 73,207 development GAAP sales and $ 70,412 $ 51,269 $ 134,765 $ 96,484 marketingLess: Stock-based (6,606 ) (4,541 ) (13,616 ) (7,615 )compensation expenseLess: Amortization of (163 ) ? (163 ) ? acquired intangiblesPlus: Non-cash benefitrelated to tax ? 449 ? 449 adjustmentLess: Employer payrolltaxes on employee stock (2,776 ) (1,508 ) (3,955 ) (1,659 )transactionsNon-GAAP sales and $ 60,867 $ 45,669 $ 117,031 $ 87,659 marketing GAAP general and $ 21,146 $ 13,547 $ 42,240 $ 28,499 administrativeLess: Stock-based (5,441 ) (3,183 ) (10,522 ) (6,091 )compensation expensePlus: Non-cash benefitrelated to tax ? 2,383 ? 2,383 adjustmentLess: Employer payrolltaxes on employee stock (194 ) (212 ) (318 ) (270 )transactionsNon-GAAP general and $ 15,511 $ 12,535 $ 31,400 $ 24,521 administrative Reconciliation ofoperating income and operating marginGAAP operating (loss) $ (9,886 ) $ 654 $ (22,716 ) $ 4,432 incomePlus: Stock-based 34,515 16,834 63,376 28,894 compensation expensePlus: Amortization of 1,071 147 1,426 394 acquired intangiblesLess: Non-cash benefitrelated to tax ? (5,561 ) ? (5,561 )adjustmentPlus: Employer payrolltaxes on employee stock 5,167 3,264 8,336 3,510 transactionsNon-GAAP operating $ 30,867 $ 15,338 $ 50,422 $ 31,669 incomeGAAP operating margin (4 ) 0 % (5 ) 2 % % %Non-GAAP operating 13 % 11 % 12 % 12 %margin Reconciliation of net (loss) incomeGAAP net (loss) income $ (9,362 ) $ 284 $ (22,430 ) $ 6,763 Plus: Stock-based 34,515 16,834 63,376 28,894 compensation expensePlus: Amortization of 1,071 147 1,426 394 acquired intangiblesLess: Non-cash benefitrelated to tax ? (5,561 ) ? (5,561 )adjustmentPlus: Employer payrolltaxes on employee stock 5,167 3,264 8,336 3,510 transactionsPlus: Amortization of 837 2,484 1,672 2,484 issuance costsNon-GAAP net income $ 32,228 $ 17,452 $ 52,380 $ 36,484 Net income per share - $ 0.10 $ 0.06 $ 0.17 $ 0.12 basicNet income per share - $ 0.09 $ 0.05 $ 0.15 $ 0.11 dilutedShares used in non-GAAP per share calculations:Basic 308,019 299,267 307,032 297,361 Diluted 342,307 330,847 342,229 329,402

Reconciliation of GAAP Cash Flow from Operating Activities to Free Cash Flow(In thousands; unaudited)

Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020Net cash providedby operating $ 51,723 $ 24,738 $ 103,373 $ 48,993 activitiesLess: Purchases ofproperty and (3,229 ) (1,398 ) (4,227 ) (2,924 )equipmentLess: Capitalizedsoftware (6,209 ) (4,737 ) (12,392 ) (8,154 )development costsFree cash flow $ 42,285 $ 18,603 $ 86,754 $ 37,915

Datadog is a registered trademark of Datadog, Inc.

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



Contact InformationYuka BroderickDatadog Investor Relations(866) 329-4466IR@datadog.com

Sharmin JassalDatadog CommunicationsPress@datadog.com