GlobeNewswire Inc | Nov 10, 2020 04:10PM EST

November 10, 2020

Third quarter revenue grew 61% year-over-year to $155 million

Strong growth of larger customers, with 1,107 $100k+ ARR customers, up from 727 a yearago

Announced 8 new products and features at annual Dash conference

Announced a strategic partnership with Microsoft and an extended partnership with Google

NEW YORK, Nov. 10, 2020 (GLOBE NEWSWIRE) -- Datadog, Inc. (NASDAQ:DDOG), the monitoring and security platform for cloud applications, today announced financial results for its third quarter ended September 30, 2020.

We are pleased with our strong results for the third quarter, which demonstrated continued high growth at scale. said Olivier Pomel, co-founder and CEO of Datadog. The pandemic has driven organizations globally and across industries to prioritize their digital operations like never before, further strengthening the clouds position as the IT architecture of choice. Datadog continues to be a trusted partner in enabling digital transformation and cloud migration.

Pomel added, With eight new products and major features announced at our annual user conference, Dash, we have maintained our strong track record of innovation and extended our leadership as the most complete and cloud native end-to-end observability platform. We continue to make meaningful R&D investments toward what is a very significant long-term opportunity.

ThirdQuarter 2020 Financial Highlights:

-- Revenue was $154.7 million, an increase of 61% year-over-year. -- GAAP operating loss was ($9.3) million; GAAP operating margin was (6%). -- Non-GAAP operating income was $13.8 million; non-GAAP operating margin was 9%. -- GAAP net loss per diluted share was ($0.05); non-GAAP net income per diluted share was $0.05. -- Operating cash flow was $36.3 million, with free cash flow of $28.6 million. -- Cash, cash equivalents, restricted cash, and marketable securities were $1.5 billion as of September 30, 2020.

Third Quarter & Recent Business Highlights:

-- As of September 30, 2020, we had 1,107 customers with ARR of $100,000 or more, an increase of 52% from 727 as of September 30, 2019. -- Announced 8 new products and features at our annual user conference Dash, which was attended by over 7,000 people in what was our first all-virtual event. Product announcements included: The introduction of the Datadog Marketplace, to enable technology partners to build applications on our platform, and allow our customers to browse, purchase and use these applications.The general availability of Continuous Profiler, which extends our APM product suite to measure code-level performance through an always-on and low-overhead solution.Extending Synthetics to CI/CD pipelines, which enables customers to test the viability of new features earlier in the development process.Introducing Mobile Real User Monitoring (RUM), to enable full visibility into the performance of mobile applications, both Android and iOS.The general availability of Error Tracking, which enables engineering teams to aggregate, triage, and prioritize frontend application errors.The beta launch of Incident Management, which unifies documentation, data, and collaboration in a centralized pane of glass for DevOps and security teams when an incident occurs.The beta launch of Compliance Monitoring, which extends on our security solutions to proactively notify DevSecOps teams of misconfigurations and compliance drift.The beta launch of Recommended Monitors, a suite of preconfigured, curated, and customizable alert queries for key infrastructure technologies. -- Announced a strategic partnership with Microsoft, currently in public preview, which will make Datadog available directly from the Azure console. Azure customers will be able to purchase a Datadog plan with the ability to draw from their committed Azure spend, implement Datadog few just a few clicks, as well as manage Datadog natively from the Azure Portal. Lastly, Azure and Datadog sales teams will increase collaboration for co-selling to enterprise clients. -- Announced the extension of a strategic partnership with Google Cloud Platform (GCP). In addition to expanding the current partnership from EMEA to North America, this will extend go-to-market collaboration and deliver deeper sales alignment between Datadog and GCP. -- Achieved In Process status on the Federal Risk and Authorization Management Program (FedRAMP) Marketplace for moderate-impact SaaS. Datadog is currently working with the U.S. Department of Veterans Affairs and the General Services Administration (GSA) FedRAMP Program Management Office (PMO) to achieve FedRAMP Authorization status for Moderate Impact. This follows Datadogs earlier FedRAMP Authorization for Low Impact SaaS workloads. -- Delivered additional product innovations and integrations, including Tracing without LimitsTM to enable ingestion of all tracing with no sampling and live search, Deployment Tracking to identify when performance issues are caused by new code deploys, a suite of DNS monitoring features to troubleshoot internal and external DNS resolution issues, and the extension of Watchdog anomaly detection to Kubernetes clusters, as well as new or enhanced integrations with Alcide kAudit, Auth0, AWS Step Functions, ServiceNow Graph Connector, Snowflake, Slack, and xMatters,. -- Recognized as a 2020 Gartner Peer Insights Customers Choice for Application Performance Monitoring. The Gartner Peer Insights Customers' Choice distinction is based on feedback and ratings from end-user professionals who have experience purchasing, implementing and using Datadogs products. Datadog scored an overall rating of 4.6 stars out of 5.0 based and a recommendation rating of 91% based on 132 verified IT customers. -- Achieved AWS Outposts Ready designation, part of the Amazon Web Services (AWS) Service Ready Program. This designation recognizes that Datadog has demonstrated successful integration with AWS Outposts, a fully managed service that extends AWS infrastructure, AWS services, APIs, and tools to virtually any datacenter, co-location space, or on-premises facility.

Fourth Quarter and Full Year 2020 Outlook:

Based on information as of today, November 10, 2020, Datadog is providing the following guidance for the fourth quarter and full year 2020:

-- Fourth Quarter 2020 Outlook: Revenue between $162 million and $164 million.Non-GAAP operating income between $3 million and $5 million.Non-GAAP net income per share between $0.01 and $0.02, assuming approximately 335 million weighted average diluted shares outstanding. -- Full Year 2020 Outlook: Revenue between $588 million and $590 million.Non-GAAP operating income between $48.5 and $50.5 million.Non-GAAP net income per share between $0.17 and $0.18, assuming approximately 332 million weighted average 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 third quarter of 2020 and outlook for the fourth quarter and the full year of 2020 -- When:Nov 10, 2020 at 5:00 P.M. Eastern Time (2:00 P.M. Pacific Time) -- Dial in:To access the call in the U.S., please dial (844) 873-9663, and for international callers, please dial (602) 563-8494. Callers may provide confirmation number 2275529 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:Following the completion of the call through 11:59 PM Eastern Time on November 17, 2020, a telephone replay will be available by dialing (855) 859-2056 from the United States or (404) 537-3406 internationally with conference ID 2275529.

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 fourth quarter and full year 2020. 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 manage our growth; (12) general market, political, economic, and business conditions; and (13) the impact that the recent 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 quarterly period ended June 30, 2020, filed with the SEC on August 10, 2020. Additional information will be made available in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020 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 debt discount and 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 debt discount and issuance costs. In May 2020, Datadog issued $747.5M of convertible senior notes due 2025, which bears interest at an annual fixed rate of 0.125%. The effective interest rate of the convertible senior notes was approximately 5.97%. This is a result of the debt discount recorded for the conversion feature that is required to be separately accounted for as equity, and debt issuance costs, which reduce the carrying value of the convertible debt instrument. The debt discount is amortized as interest expense together with the issuance costs of the debt. The expense for the amortization of debt discount and 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 Nine Months Ended September 30, Ended September 30, 2020 2019 2020 2019 Revenue $ 154,675 $ 95,864 $ 425,935 $ 249,136 Cost of revenue ^(1)(2) 33,984 23,297 89,340 63,225 (4)Gross profit 120,691 72,567 336,595 185,911 Operating expenses: Research and development 56,440 28,684 142,928 75,531 ^(1)(3)(4)Sales and marketing ^(1) 57,142 38,836 153,626 105,061 (3)(4)General and 16,376 9,265 44,876 23,193 administrative ^(1)(3)(4)Total operating expenses 129,958 76,785 341,430 203,785 Operating loss (9,267 ) (4,218 ) (4,835 ) (17,874 )Other (expense) income, net:Interest expense ^(5) (12,423 ) ? (17,424 ) ? Interest income and other 7,135 90 15,204 646 income, netOther (expense) income, (5,288 ) 90 (2,220 ) 646 netLoss before provision for (14,555 ) (4,128 ) (7,055 ) (17,228 )income taxesProvision for income (595 ) (33 ) (1,332 ) (373 )taxesNet loss $ (15,150 ) $ (4,161 ) $ (8,387 ) $ (17,601 )Basic and diluted net $ (0.05 ) $ (0.04 ) $ (0.03 ) $ (0.20 )loss per shareWeighted average sharesused in calculating basic and dilutednet loss per share: 302,554 103,876 299,105 87,758 ^(1) Includes stock-basedcompensation expense as follows:Cost of revenue $ 529 $ 161 $ 1,167 $ 372 Research and development 10,173 1,934 24,723 3,709 Sales and marketing 6,068 1,540 13,683 3,276 General and 3,946 1,042 10,037 2,659 administrativeTotal $ 20,716 $ 4,677 $ 49,610 $ 10,016 ^(2) Includesamortization of acquired intangibles as follows:Cost of revenue $ 274 $ 179 $ 668 $ 531 Total $ 274 $ 179 $ 668 $ 531

^(3) Includes non-cash benefitrelated to tax adjustment as follows:Research and development $ ? $ ? $ (2,729 ) $ (2,344 )Sales and marketing ? ? (449 ) (397 )General and administrative ? ? (2,383 ) (2,266 ) $ ? $ ? $ (5,561 ) $ (5,007 ) ^(4) Includes employer payrolltaxes on employee stock transactions as follows:Cost of revenue $ 32 $ ? $ 154 $ ? Research and development 418 ? 1,877 262 Sales and marketing 1,354 88 3,014 279 General and administrative 282 ? 552 19 Total $ 2,086 $ 88 $ 5,597 $ 560 ^(5) Includes amortization of debtdiscount and issuance costs as follows:Interest expense $ 8,062 $ ? $ 10,546 $ ?

Condensed Consolidated Balance Sheets

(In thousands; unaudited)

September December 30, 31, 2020 2019 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 198,523 $ 597,297 Marketable securities 1,296,261 176,674 Accounts receivable, net of allowance for creditlosses of $2,589 and $817 as of 120,992 102,394 September 30, 2020 and December 31, 2019,respectivelyDeferred contract costs, current 11,544 8,346 Prepaid expenses and other current assets 25,655 19,231 Total current assets 1,652,975 903,942 Property and equipment, net 42,059 32,749 Operating lease assets 55,365 53,002 Goodwill 17,211 9,058 Intangible assets, net 2,327 1,435 Deferred contract costs, non-current 22,667 17,409 Restricted cash 3,607 3,456 Other assets 18,073 16,990 TOTAL ASSETS $ 1,814,284 $ 1,038,041 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 21,199 $ 15,429 Accrued expenses and other current liabilities 54,383 38,746 Operating lease liabilities, current 15,058 11,916 Deferred revenue, current 164,010 134,148 Total current liabilities 254,650 200,239 Operating lease liabilities, non-current 49,675 48,510 Convertible senior notes, net 567,683 ? Deferred revenue, non-current 2,444 4,340 Other liabilities 3,644 2,611 Total liabilities 878,096 255,700 STOCKHOLDERS' EQUITY Common stock 3 3 Additional paid-in capital 1,065,543 905,821 Accumulated other comprehensive income 2,645 133 Accumulated deficit (132,003 ) (123,616 )Total stockholders? equity 936,188 782,341 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,814,284 $ 1,038,041

Condensed Consolidated Statements of Cash Flow

(In thousands; unaudited)

Three Months Nine Months Ended September 30, Ended September 30, 2020 2019 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES:Net loss $ (15,150 ) $ (4,161 ) $ (8,387 ) $ (17,601 )Adjustments toreconcile net loss to net cash provided byoperating activities:Depreciation and 3,972 4,007 11,367 8,776 amortizationAmortization ofdiscounts or premiums 3,884 ? 5,344 ? on marketablesecuritiesAmortization of debtdiscount and issuance 8,062 ? 10,546 ? costsAmortization ofdeferred contract 2,721 1,436 7,348 3,688 costsStock-basedcompensation, net of 20,716 4,677 49,610 10,016 amounts capitalizedNon-cash lease 3,453 3,788 10,004 8,403 expenseAllowance for creditlosses on accounts 655 282 2,656 835 receivableLoss on disposal ofproperty and (4 ) 438 4 442 equipmentChanges in operatingassets and liabilities:Accounts receivable, 2,431 (20,045 ) (21,253 ) (32,224 )netDeferred contract (4,567 ) (4,782 ) (15,804 ) (10,894 )costsPrepaid expenses and (340 ) 2,730 (6,821 ) (9,476 )other current assetsOther assets 310 (4,451 ) (605 ) (8,480 )Accounts payable 3,714 (3,260 ) 6,406 4,213 Accrued expenses and 5,236 6,611 6,884 (1,990 )other liabilitiesDeferred revenue 1,177 16,554 27,964 51,096 Net cash provided by 36,270 3,824 85,263 6,804 operating activitiesCASH FLOWS FROM INVESTING ACTIVITIES:Purchases of (273,550 ) ? (1,477,063 ) ? marketable securitiesMaturities of 146,646 ? 268,500 ? marketable securitiesProceeds from sale of 85,700 ? 85,700 ? marketable securitiesPurchases of property (1,412 ) (4,834 ) (4,336 ) (9,813 )and equipmentCapitalized software (6,217 ) (2,650 ) (14,371 ) (7,058 )development costsCash paid foracquisition of ? ? (2,363 ) ? businesses; net ofcash acquiredNet cash used in (48,833 ) (7,484 ) (1,143,933 ) (16,871 )investing activitiesCASH FLOWS FROM FINANCING ACTIVITIES:Proceeds fromexercise of stock 5,119 2,109 12,354 7,306 optionsProceeds from initialpublic offering, netof underwriting ? 708,815 (421 ) 708,659 discounts andcommissions and otheroffering costsProceeds for issuanceof common stock under ? ? 7,680 ? the employee stockpurchase planEmployee payrolltaxes paid related tonet share settlement (118 ) ? (977 ) ? under the employeestock purchase planProceeds fromissuance ofconvertible senior (474 ) ? 730,207 ? notes, net ofissuance costsPurchase of cappedcall related to ? ? (89,625 ) ? convertible seniornotesNet cash provided by 4,527 710,924 659,218 715,965 financing activities Effect of exchangerate changes on cash, 506 72 393 49 cash equivalents andrestricted cash NET (DECREASE)INCREASE IN CASH, (7,530 ) 707,336 (399,059 ) 705,947 CASH EQUIVALENTS ANDRESTRICTED CASHCASH, CASHEQUIVALENTS ANDRESTRICTED $ 209,660 $ 63,591 601,189 64,980 CASH?Beginning ofperiodCASH, CASHEQUIVALENTS AND $ 202,130 $ 770,927 $ 202,130 $ 770,927 RESTRICTED CASH?Endof period RECONCILIATION OFCASH, CASHEQUIVALENTS ANDRESTRICTEDCASH WITHIN THE CONSOLIDATED BALANCESHEETS TO THEAMOUNTS SHOWN IN THESTATEMENTS OF CASHFLOWS ABOVE:Cash and cash $ 198,523 $ 760,945 $ 198,523 $ 760,945 equivalentsRestricted cash ?Including amounts inprepaid expense and 3,607 9,982 3,607 9,982 other current assetsand other assetsTotal cash, cashequivalents and $ 202,130 $ 770,927 $ 202,130 $ 770,927 restricted cash

Reconciliation from GAAP to Non-GAAP Results

(In thousands, except per share data; unaudited)

Three Months Nine Months Ended September 30, Ended September 30, 2020 2019 2020 2019 Reconciliation of gross profit and gross marginGAAP gross profit $ 120,691 $ 72,567 $ 336,595 $ 185,911 Plus: Stock-based 529 161 1,167 372 compensation expensePlus: Amortization of 274 179 668 531 acquired intangiblesPlus: Employer payrolltaxes on employee stock 32 ? 154 ? transactionsNon-GAAP gross profit $ 121,526 $ 72,907 $ 338,584 $ 186,814 GAAP gross margin 78 % 76 % 79 % 75 %Non-GAAP gross margin 79 % 76 % 79 % 75 % Reconciliation of operating expensesGAAP research and $ 56,440 $ 28,684 $ 142,928 $ 75,531 developmentLess: Stock-based (10,173 ) (1,934 ) (24,723 ) (3,709 )compensation expensePlus: Non-cash benefit ? ? 2,729 2,344 related to tax adjustmentLess: Employer payrolltaxes on employee stock (418 ) ? (1,877 ) (262 )transactionsNon-GAAP research and $ 45,849 $ 26,750 $ 119,057 $ 73,904 development GAAP sales and marketing $ 57,142 $ 38,836 $ 153,626 $ 105,061 Less: Stock-based (6,068 ) (1,540 ) (13,683 ) (3,276 )compensation expensePlus: Non-cash benefit ? ? 449 397 related to tax adjustmentLess: Employer payrolltaxes on employee stock (1,354 ) (88 ) (3,014 ) (279 )transactionsNon-GAAP sales and $ 49,720 $ 37,208 $ 137,378 $ 101,903 marketing GAAP general and $ 16,376 $ 9,265 $ 44,876 $ 23,193 administrativeLess: Stock-based (3,946 ) (1,042 ) (10,037 ) (2,659 )compensation expensePlus: Non-cash benefit ? ? 2,383 2,266 related to tax adjustmentLess: Employer payrolltaxes on employee stock (282 ) ? (552 ) (19 )transactionsNon-GAAP general and $ 12,148 $ 8,223 $ 36,670 $ 22,781 administrative Reconciliation ofoperating income (loss) and operating marginGAAP operating loss $ (9,267 ) $ (4,218 ) $ (4,835 ) $ (17,874 )Plus: Stock-based 20,716 4,677 49,610 10,016 compensation expensePlus: Amortization of 274 179 668 531 acquired intangiblesLess: Non-cash benefit ? ? (5,561 ) (5,007 )related to tax adjustmentPlus: Employer payrolltaxes on employee stock 2,086 88 5,597 560 transactionsNon-GAAP operating income $ 13,809 $ 726 $ 45,479 $ (11,774 )(loss)GAAP operating margin -6 % -4 % -1 % -7 %Non-GAAP operating margin 9 % 1 % 11 % -5 % Reconciliation of net income (loss)GAAP net loss $ (15,150 ) $ (4,161 ) $ (8,387 ) $ (17,601 )Plus: Stock-based 20,716 4,677 49,610 10,016 compensation expensePlus: Amortization of 274 179 668 531 acquired intangiblesLess: Non-cash benefit ? ? (5,561 ) (5,007 )related to tax adjustmentPlus: Employer payrolltaxes on employee stock 2,086 88 5,597 560 transactionsPlus: Amortization ofdebt discount and 8,062 ? 10,546 ? issuance costsNon-GAAP net income $ 15,988 $ 783 $ 52,473 $ (11,501 )(loss)Net income (loss) per $ 0.05 $ 0.01 $ 0.18 $ (0.13 )share - basicNet income (loss) per $ 0.05 $ 0.00 $ 0.16 $ (0.13 )share - dilutedShares used in non-GAAP per share calculations:Basic 302,554 103,876 299,105 87,758 Diluted 333,011 285,397 330,831 87,758

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

(In thousands; unaudited)

Three Months Nine Months Ended September 30, Ended September 30, 2020 2019 2020 2019 Net cashprovided by $ 36,270 $ 3,824 $ 85,263 $ 6,804 operatingactivitiesLess: Purchasesof property and (1,412 ) (4,834 ) (4,336 ) (9,813 )equipmentLess:Capitalizedsoftware (6,217 ) (2,650 ) (14,371 ) (7,058 )developmentcostsFree cash flow $ 28,641 $ (3,660 ) $ 66,556 $ (10,067 )

Contact Information

AJ Ljubich, CFADatadog Investor Relations(866) 329-4466IR@datadog.com

Martin BergmanDatadog Communications(866) 329-4466Press@datadog.com

Datadog is a registered trademark of Datadog, Inc.

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