Company Quick10K Filing
Datadog
10-Q 2020-03-31 Filed 2020-05-12
10-K 2019-12-31 Filed 2020-02-25
10-Q 2019-09-30 Filed 2019-11-13
S-1 2019-08-23 Public Filing
8-K 2020-05-11 Earnings, Other Events, Exhibits
8-K 2020-02-13 Earnings, Exhibits
8-K 2019-12-06 Other Events
8-K 2019-11-12 Earnings, Exhibits
8-K 2019-09-23 Amend Bylaw, Exhibits

DDOG 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ddog-ex311_9.htm
EX-31.2 ddog-ex312_8.htm
EX-32.1 ddog-ex321_6.htm
EX-32.2 ddog-ex322_7.htm

Datadog Earnings 2020-03-31

Balance SheetIncome StatementCash Flow

10-Q 1 ddog-10q_20200331.htm 10-Q ddog-10q_20200331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2020 

OR

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

For the transition period from             to            

Commission File Number: 001-39051

 

Datadog, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

27-2825503

(State or other jurisdiction of
incorporation or organization)

 

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

 

 

620 8th Avenue, 45th Floor

New York, NY

 

10018

(Address of principal executive offices)

 

(Zip Code)

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

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, par value $0.00001 per share

DDOG

The Nasdaq Stock Market LLC

(Nasdaq Global Select Market)

 

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

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

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

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Small reporting company

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

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

As of May 4, 2020, there were 176,047,887 shares of the registrants Class A common stock and 123,330,727 shares of the registrants Class B common stock, each with a par value of $0.00001 per share, outstanding.

 

 


TABLE OF CONTENTS

 

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

3

Item 1.

 

Financial Statements

 

3

 

 

Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019 (unaudited)

 

3

 

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019 (unaudited)

 

4

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2020 and 2019 (unaudited)

 

5

 

 

Condensed Consolidated Statement of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2020 and 2019 (unaudited)

 

6

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 (unaudited)

 

7

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

8

 

 

 

 

 

Item 2.

 

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

 

20

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

29

Item 4.

 

Controls and Procedures

 

29

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

31

Item 1.

 

Legal Proceedings

 

31

Item 1A.

 

Risk Factors

 

31

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

54

Item 3.

 

Defaults Upon Senior Securities

 

54

Item 4.

 

Mine Safety Disclosures

 

54

Item 5.

 

Other Information

 

54

Item 6.

 

Exhibits

 

55

Signatures

 

56

 

1


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

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

 

 

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

 

 

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

 

 

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

 

 

our ability to achieve or sustain our profitability;

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

the growth rates of the markets in which we compete; and

 

 

the potential impact of the worldwide COVID-19 pandemic on our business, results of operations and financial condition.

 

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

 

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

 

 

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

 

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

 

2


PART I-FINANCIAL INFORMATION

Item 1. Financial Statements

DATADOG, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)

 

 

 

March 31,

2020

 

 

December 31,

2019

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

194,350

 

 

$

597,297

 

Marketable securities

 

 

600,384

 

 

 

176,674

 

Accounts receivable, net of allowance for credit losses of $1,649 and $817 as of

   March 31, 2020 and December 31, 2019, respectively

 

 

108,437

 

 

 

102,394

 

Deferred contract costs, current

 

 

9,314

 

 

 

8,346

 

Prepaid expenses and other current assets

 

 

20,580

 

 

 

19,231

 

Total current assets

 

 

933,065

 

 

 

903,942

 

Property and equipment, net

 

 

34,084

 

 

 

32,749

 

Operating lease assets

 

 

51,286

 

 

 

53,002

 

Goodwill

 

 

8,891

 

 

 

9,058

 

Intangible assets, net

 

 

1,176

 

 

 

1,435

 

Deferred contract costs, non-current

 

 

18,875

 

 

 

17,409

 

Restricted cash

 

 

3,382

 

 

 

3,456

 

Other assets

 

 

15,897

 

 

 

16,990

 

TOTAL ASSETS

 

$

1,066,656

 

 

$

1,038,041

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

14,205

 

 

$

15,429

 

Accrued expenses and other current liabilities

 

 

41,755

 

 

 

38,746

 

Operating lease liabilities, current

 

 

13,436

 

 

 

11,916

 

Deferred revenue, current

 

 

141,242

 

 

 

134,148

 

Total current liabilities

 

 

210,638

 

 

 

200,239

 

Operating lease liabilities, non-current

 

 

46,042

 

 

 

48,510

 

Deferred revenue, non-current

 

 

3,940

 

 

 

4,340

 

Other liabilities

 

 

3,141

 

 

 

2,611

 

Total liabilities

 

 

263,761

 

 

 

255,700

 

COMMITMENTS AND CONTINGENCIES (NOTE 7)

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

Class A common stock, $0.00001 par value per share; 2,000,000,000 shares

   authorized as of March 31, 2020 and December 31, 2019; 153,495,803 and

   64,308,498 shares issued and outstanding as of March 31, 2020, and

   December 31, 2019, respectively

 

 

2

 

 

 

1

 

Class B common stock, $0.00001 par value per share; 310,000,000 shares

   authorized as of March 31, 2020 and December 31, 2019; 145,238,917 and

   232,078,452 shares issued and outstanding as of March 31, 2020, and

   December 31, 2019, respectively

 

 

1

 

 

 

2

 

Additional paid-in capital

 

 

921,091

 

 

 

905,821

 

Accumulated other comprehensive (loss) income

 

 

(1,062

)

 

 

133

 

Accumulated deficit

 

 

(117,137

)

 

 

(123,616

)

Total stockholders’ equity

 

 

802,895

 

 

 

782,341

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

1,066,656

 

 

$

1,038,041

 

 

See accompanying notes to condensed consolidated financial statements.

3


DATADOG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Revenue

 

$

131,248

 

 

$

70,050

 

Cost of revenue

 

 

26,479

 

 

 

18,950

 

Gross profit

 

 

104,769

 

 

 

51,100

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

40,824

 

 

 

22,815

 

Sales and marketing

 

 

45,215

 

 

 

30,107

 

General and administrative

 

 

14,952

 

 

 

7,840

 

Total operating expenses

 

 

100,991

 

 

 

60,762

 

Operating income (loss)

 

 

3,778

 

 

 

(9,662

)

Other income, net

 

 

2,896

 

 

 

230

 

Income (loss) before provision for income taxes

 

 

6,674

 

 

 

(9,432

)

Provision for income taxes

 

 

(195

)

 

 

(59

)

Net income (loss)

 

$

6,479

 

 

$

(9,491

)

Net income (loss) attributable to common stockholders

 

$

6,479

 

 

$

(9,491

)

Basic net income (loss) per share

 

$

0.02

 

 

$

(0.12

)

Diluted net income (loss) per share

 

$

0.02

 

 

$

(0.12

)

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

 

 

295,455

 

 

 

77,061

 

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

 

 

327,801

 

 

 

77,061

 

 

See accompanying notes to condensed consolidated financial statements.

4


DATADOG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Net income (loss)

 

$

6,479

 

 

$

(9,491

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(287

)

 

 

(50

)

Unrealized loss on available-for-sale marketable securities

 

 

(908

)

 

 

 

Other comprehensive loss:

 

 

(1,195

)

 

 

(50

)

Comprehensive income (loss)

 

$

5,284

 

 

$

(9,541

)

 

See accompanying notes to condensed consolidated financial statements.

 

 

5


DATADOG, INC.

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

(in thousands, except share data)

(unaudited)

 

 

 

Class A and Class B

 

 

Additional

 

 

Accumulated

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

BALANCE—December 31, 2019

 

 

296,386,950

 

 

$

3

 

 

$

905,821

 

 

$

133

 

 

$

(123,616

)

 

$

782,341

 

Issuance of common stock upon exercise of stock

   options

 

 

2,347,770

 

 

 

 

 

 

2,813

 

 

 

 

 

 

 

 

 

2,813

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

294

 

 

 

 

 

 

 

 

 

294

 

Stock-based compensation

 

 

 

 

 

 

 

 

12,163

 

 

 

 

 

 

 

 

 

12,163

 

Change in accumulated other comprehensive

   income (loss)

 

 

 

 

 

 

 

 

 

 

 

(1,195

)

 

 

 

 

 

(1,195

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,479

 

 

 

6,479

 

BALANCE—March 31, 2020

 

 

298,734,720

 

 

$

3

 

 

$

921,091

 

 

$

(1,062

)

 

$

(117,137

)

 

$

802,895

 

 

 

 

Convertible

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated

Other

 

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

(Deficit)

 

BALANCE—December 31, 2018

 

 

179,814,912

 

 

$

140,805

 

 

 

 

78,180,606

 

 

$

 

 

$

30,834

 

 

$

31

 

 

$

(106,906

)

 

$

(76,041

)

Issuance of common stock upon exercise of stock

   options

 

 

 

 

 

 

 

 

 

2,773,200

 

 

 

 

 

 

1,308

 

 

 

 

 

 

 

 

 

1,308

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

214

 

 

 

 

 

 

 

 

 

214

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,497

 

 

 

 

 

 

 

 

 

2,497

 

Change in accumulated other comprehensive

   income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(51

)

 

 

 

 

 

(51

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,491

)

 

 

(9,491

)

BALANCE—March 31, 2019

 

 

179,814,912

 

 

$

140,805

 

 

 

 

80,953,806

 

 

$

 

 

$

34,853

 

 

$

(20

)

 

$

(116,397

)

 

$

(81,564

)

 

See accompanying notes to condensed consolidated financial statements.

 

6


DATADOG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

6,479

 

 

$

(9,491

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,688

 

 

 

2,111

 

Amortization of discounts or premiums on marketable securities

 

 

244

 

 

 

 

Amortization of deferred contract costs

 

 

2,185

 

 

 

1,028

 

Stock-based compensation, net of amounts capitalized

 

 

12,060

 

 

 

2,445

 

Non-cash lease expense

 

 

3,226

 

 

 

117

 

Provision for accounts receivable allowance

 

 

1,073

 

 

 

74

 

Loss on disposal of property and equipment

 

 

2

 

 

 

4

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(7,116

)

 

 

(7,585

)

Deferred contract costs

 

 

(4,619

)

 

 

(3,390

)

Prepaid expenses and other current assets

 

 

(1,404

)

 

 

(8,492

)

Other assets

 

 

919

 

 

 

(8,219

)

Accounts payable

 

 

(1,391

)

 

 

14,524

 

Accrued expenses and other liabilities

 

 

2,025

 

 

 

1,408

 

Deferred revenue

 

 

6,884

 

 

 

18,884

 

Net cash provided by operating activities

 

 

24,255

 

 

 

3,418

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

(427,482

)

 

 

 

Maturities of marketable securities

 

 

2,620

 

 

 

 

Purchases of property and equipment

 

 

(1,526

)

 

 

(2,197

)

Capitalized software development costs

 

 

(3,417

)

 

 

(2,096

)

Net cash used in investing activities

 

 

(429,805

)

 

 

(4,293

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

2,813

 

 

 

1,776

 

Initial public offering costs

 

 

(153

)

 

 

 

Net cash provided by financing activities

 

 

2,660

 

 

 

1,776

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(141

)

 

 

(87

)

 

 

 

 

 

 

 

 

 

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

(403,031

)

 

 

814

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period

 

 

601,189

 

 

 

64,980

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period

 

$

198,158

 

 

$

65,794

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$

34

 

 

$

3

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING

   ACTIVITIES:

 

 

 

 

 

 

 

 

Accrued property and equipment purchases

 

$

610

 

 

$

577

 

Stock-based compensation included in capitalized software development costs

 

$

103

 

 

$

52

 

Vesting of early exercised options

 

$

294

 

 

$

214

 

Costs related to initial public offering included in accounts payable and accrued liabilities

 

$

268

 

 

$

 

 

 

 

 

 

 

 

 

 

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH

   WITHIN THE CONDENSED CONSOLIDATED BALANCE SHEETS TO THE AMOUNTS

   SHOWN IN THE STATEMENTS OF CASH FLOWS ABOVE:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

194,350

 

 

$

54,554

 

Restricted cash – Including amounts in prepaid expense and other current assets and

   other assets

 

 

3,808

 

 

 

11,240

 

Total cash, cash equivalents and restricted cash

 

$

198,158

 

 

$

65,794

 

 

See accompanying notes to condensed consolidated financial statements.

 

7


DATADOG, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Description of Business

Description of Business

Datadog, Inc. (“Datadog” or the “Company”) was incorporated in the State of Delaware on June 4, 2010. The Company is the monitoring and analytics platform for developers, IT operations teams and business users in the cloud age. The Company’s SaaS platform integrates and automates infrastructure monitoring, application performance monitoring, log management, user experience and network performance monitoring to provide unified, real-time observability of its customers’ entire technology stack. The Company is headquartered in New York City and has various other global office locations.

2. Basis of Presentation and Summary of Significant Accounting Policies

Unaudited Interim Condensed Consolidated Financial Information

The unaudited condensed consolidated financial statements include the accounts of Datadog, Inc. and its wholly owned subsidiaries, and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and following the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. These financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2020 or for any other interim period or for any other future year. The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed with the SEC on February 25, 2020 (the “Annual Report”).

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with GAAP.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Datadog, Inc. and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Stock Split

On September 6, 2019, the Board and stockholders approved an amended and restated certificate of incorporation of the Company effecting a 3-for-1 stock split of the Company’s issued and outstanding shares of common stock and convertible preferred stock, and an increase to the authorized shares of the Company’s common stock and convertible preferred stock to 380,000,000 shares and 179,814,912 shares, respectively. The split was effected on September 6, 2019 and without any change in the par value per share.

All information related to the Company’s common stock, convertible preferred stock and stock awards has been retroactively adjusted to give effect to the 3-for-1 stock split on September 6, 2019.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Such estimates include the fair value of marketable securities, the allowance for credit losses, the fair value of acquired assets and assumed liabilities from business combinations, useful lives of property, equipment, software, and finite lived intangibles, stock-based compensation including the determination of the fair value of the Company’s stock prior to its initial public offering (“IPO”), fair value of common stock and redeemable convertible preferred stock prior to the IPO, valuation of long-lived assets and their recoverability, including goodwill, estimated expected period of benefit for deferred contract costs, the incremental borrowing rate for operating leases, realization of deferred tax assets and uncertain tax positions, revenue recognition and the allocation of overhead costs between cost of revenue and operating expenses. The Company bases its estimates on historical experience and also on assumptions that management considers reasonable. The Company assesses these estimates on a regular basis; however, actual results could materially differ from these estimates.

8


Accounting Pronouncements Recently Adopted

 

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments—Credit Losses (Topic 326)Measurement of Credit Losses on Financial Instruments, which requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in more timely recognition of credit losses. Additionally, ASU No. 2016-13 amends the current available-for-sale security impairment model for debt securities held for investment. The new model will require an estimate of expected credit losses when the fair value is below the amortized cost of the asset. The credit-related impairment (and subsequent recoveries) are recognized as an allowance on the balance sheet with a corresponding adjustment to the income statement. Non-credit related losses will continue to be recognized through OCI. This guidance also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company adopted this ASU on January 1, 2020 and determined that the ASU had no material impact on the Company’s condensed consolidated financial statements.

 

In August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software under ASC 350-40, in order to determine which costs to capitalize and recognize as an asset and which costs to expense. The Company adopted the ASU on January 1, 2020 and applied it prospectively to implementation costs incurred after the date of adoption. The Company’s adoption of this ASU had no material impact on the Company's condensed consolidated financial statements.

 

Accounting Pronouncements Not Yet Adopted

 

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which aims to reduce complexity in accounting standards by improving certain areas of GAAP without compromising information provided to users of financial statements. This guidance will be effective for the Company beginning January 1, 2021. The Company is currently evaluating the impact of the adoption of this standard on its condensed consolidated financial statements.

 

3. Marketable Securities

 

The following is a summary of available-for-sale marketable securities, excluding those securities classified within cash and cash equivalents, on the condensed consolidated balance sheets (in thousands):

 

 

 

March 31, 2020

 

 

 

Amortized

Cost

 

 

Unrealized

Gain

 

 

Unrealized

Losses

 

 

Fair

Value

 

Commercial debt securities

 

$

321,534

 

 

$

60

 

 

$

(2,096

)

 

$

319,498

 

Certificates of deposit

 

 

39,865

 

 

 

54

 

 

 

 

 

 

39,919

 

U.S. government agencies

 

 

14,914

 

 

 

58

 

 

 

 

 

 

14,972

 

U.S. government treasury securities

 

 

106,033

 

 

 

1,023

 

 

 

 

 

 

107,056

 

Commercial paper

 

 

118,908

 

 

 

31

 

 

 

 

 

 

118,939

 

Marketable securities

 

$

601,254

 

 

$

1,226

 

 

$

(2,096

)

 

$

600,384

 

 

 

 

December 31, 2019

 

 

 

Amortized

Cost

 

 

Unrealized

Gain

 

 

Unrealized

Losses

 

 

Fair

Value

 

Commercial debt securities

 

$

80,376

 

 

$

46

 

 

$

(5

)

 

$

80,417

 

U.S. government treasury securities

 

 

72,467

 

 

 

10

 

 

 

(4

)

 

 

72,473

 

Commercial paper

 

 

23,784

 

 

 

 

 

 

 

 

 

23,784

 

Marketable securities

 

$

176,627

 

 

$

56

 

 

$

(9

)

 

$

176,674

 

 

9


As of March 31, 2020, the fair values of available-for-sale marketable securities, by remaining contractual maturity, were as follows (in thousands):

 

Due within one year

 

$

478,459

 

Due in one year through five years

 

 

121,925

 

Total

 

$

600,384

 

 

The Company does not believe that any unrealized losses are attributable to credit-related factors based on its evaluation of available evidence. To determine whether a decline in value is related to credit loss, the Company evaluates, among other factors: the extent to which the fair value is less than the amortized cost basis, changes to the rating of the security by a rating agency and any adverse conditions specifically related to an issuer of a security or its industry. No tax benefits on unrealized losses have been reflected in the condensed consolidated statement of comprehensive income (loss) due to the Company’s full valuation allowance as of March 31, 2020 and December 31, 2019.

 

4. Fair Value Measurements

 

The following tables present information about the Company’s financial assets and liabilities that have been measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019, and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands):

 

 

 

Fair Value Measurement as of March 31, 2020

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

138,733

 

 

$

 

 

$

 

 

$

138,733

 

Commercial paper

 

 

 

 

 

27,478

 

 

 

 

 

 

27,478

 

U.S. government treasury securities

 

 

 

 

 

12,000

 

 

 

 

 

 

12,000

 

Certificates of deposit

 

 

 

 

 

3,202

 

 

 

 

 

 

3,202

 

Marketable Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

 

 

 

 

319,499

 

 

 

 

 

 

319,499

 

U.S. government agencies

 

 

 

 

 

14,972

 

 

 

 

 

 

14,972

 

Certificates of deposit

 

 

 

 

 

39,919

 

 

 

 

 

 

39,919

 

U.S. government treasury securities

 

 

 

 

 

107,054

 

 

 

 

 

 

107,054

 

Commercial paper

 

 

 

 

 

118,940

 

 

 

 

 

 

118,940

 

Total financial assets

 

$

138,733

 

 

$

643,064

 

 

$

 

 

$

781,797

 

 

 

 

Fair Value Measurement as of December 31, 2019

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

588,762

 

 

$

 

 

$

 

 

$

588,762

 

Marketable Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

 

 

 

 

80,417

 

 

 

 

 

 

80,417

 

U.S. government treasury securities

 

 

 

 

 

72,473