Datadog 10-Q 2023-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

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FORM 10-Q

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(Mark One)

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

For the quarterly period ended September 30, 2023

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)

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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

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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 November 1, 2023, there were 302,163,623 shares of the registrant’s Class A common stock and 26,390,053 shares of the registrant’s 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 September 30, 2023 and December 31, 2022			3
			Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022			4
			Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2023 and 2022			5
			Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2023 and 2022			6
			Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022			8
			Notes to Condensed Consolidated Financial Statements (unaudited)			9
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			34
Item 4.			Controls and Procedures			35
PART II.			OTHER INFORMATION			36
Item 1.			Legal Proceedings			36
Item 1A.			Risk Factors			36
Item 2.			Unregistered Sales of Equity Securities			62
Item 3.			Defaults Upon Senior Securities			62
Item 4.			Mine Safety Disclosures			62
Item 5.			Other Information			62
Item 6.			Exhibits			63
Signatures						64

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 general market, political, economic, and business conditions in our industry, or reductions in information technology spending, 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 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 (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.

PART I-FINANCIAL INFORMATION

DATADOG, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)

			September 30, 2023						December 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents			$	261,309					$	338,985
Marketable securities			2,080,380						1,545,341
Accounts receivable, net of allowance for credit losses of $11,091 and $5,626 as of September 30, 2023 and December 31, 2022, respectively			400,649						399,551
Deferred contract costs, current			39,805						33,054
Prepaid expenses and other current assets			37,341						27,303
Total current assets			2,819,484						2,344,234
Property and equipment, net			157,689						125,346
Operating lease assets			121,913						87,629
Goodwill			348,697						348,277
Intangible assets, net			10,145						16,365
Deferred contract costs, non-current			62,976						55,338
Restricted cash			—						3,303
Other assets			22,398						24,360
TOTAL ASSETS			$	3,543,302					$	3,004,852
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable			$	85,362					$	23,474
Accrued expenses and other current liabilities			101,837						171,158
Operating lease liabilities, current			18,777						22,092
Deferred revenue, current			636,500						543,024
Total current liabilities			842,476						759,748
Operating lease liabilities, non-current			127,800						76,582
Convertible senior notes, net			741,386						738,847
Deferred revenue, non-current			17,505						12,944
Other liabilities			7,659						6,226
Total liabilities			1,736,826						1,594,347
COMMITMENTS AND CONTINGENCIES (NOTE 8)
STOCKHOLDERS' EQUITY:
Class A common stock, $0.00001 par value per share; 2,000,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 301,974,045 and 293,573,825 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively			3						3
Class B common stock, $0.00001 par value per share; 310,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 26,271,614 and 25,616,018 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively			—						—
Additional paid-in capital			2,028,053						1,625,190
Accumulated other comprehensive loss			(13,889)						(12,422)
Accumulated deficit			(207,691)						(202,266)
Total stockholders’ equity			1,806,476						1,410,505
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY			$	3,543,302					$	3,004,852

See accompanying notes to condensed consolidated financial statements.

DATADOG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
Revenue			$	547,536					$	436,533					$	1,538,710					$	1,205,701
Cost of revenue			103,319						93,599						305,079						249,986
Gross profit			444,217						342,934						1,233,631						955,715
Operating expenses:
Research and development			240,225						205,388						709,197						533,695
Sales and marketing			156,870						129,493						449,296						345,929
General and administrative			51,352						39,395						136,344						100,158
Total operating expenses			448,447						374,276						1,294,837						979,782
Operating loss			(4,230)						(31,342)						(61,206)						(24,067)
Other income (loss):
Interest expense			(1,303)						(3,728)						(5,010)						(13,516)
Interest income and other income, net			29,833						12,011						69,184						25,367
Other income, net			28,530						8,283						64,174						11,851
Income (loss) before provision for income taxes			24,300						(23,059)						2,968						(12,216)
Provision for income taxes			(1,670)						(2,926)						(8,393)						(8,910)
Net income (loss)			$	22,630					$	(25,985)					$	(5,425)					$	(21,126)
Net income (loss) attributable to common stockholders			$	22,630					$	(25,985)					$	(5,425)					$	(21,126)
Basic net income (loss) per share			$	0.07					$	(0.08)					$	(0.02)					$	(0.07)
Diluted net income (loss) per share			$	0.06					$	(0.08)					$	(0.02)					$	(0.07)
Weighted average shares used in calculating basic net income (loss) per share:			325,557						315,990						322,395						314,753
Weighted average shares used in calculating diluted net income (loss) per share:			351,309						315,990						322,395						314,753

See accompanying notes to condensed consolidated financial statements.

DATADOG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

(unaudited)

			Three Months Ended September 30,												Nine Months Ended September 30,

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, or the Annual Report. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading “Risk Factors” in this Quarterly Report on Form 10-Q for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.

Overview

Datadog is the observability and security platform for cloud applications.

Our SaaS platform integrates and automates infrastructure monitoring, application performance monitoring, log management, real-user monitoring, 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.

We generate revenue from the sale of subscriptions to customers using our cloud-based platform. The terms of our subscription agreements are primarily monthly or annual. Customers also have the option to purchase additional products, such as additional containers to monitor, custom metrics packages, anomaly detection and app analytics. Professional services are generally not required for the implementation of our products and revenue from such services has been immaterial to date.

We employ a land-and-expand business model centered around offering products that are easy to adopt and have a very short time to value. Our customers can expand their footprint with us on a self-service basis. Our customers often significantly increase their usage of the products they initially buy from us and expand their usage to other products we offer on our platform. We grow with our customers as they expand their workloads in the public and private cloud.

As of September 30, 2023, we had $261.3 million in cash and cash equivalents and $2.1 billion in marketable securities. We generated revenue of $547.5 million and $436.5 million in the three months ended September 30, 2023 and 2022, respectively, representing year-over-year growth of 25%. For the nine months ended September 30, 2023 and 2022, our revenue was $1,538.7 million and $1,205.7 million, respectively, representing year-over-year growth of 28%. Substantially all of our revenue is from subscription software sales. We have continued to make significant expenditures and investments, including in personnel-related costs, sales and marketing, infrastructure and operations, and have incurred net income (loss) of $22.6 million and $(26.0) million for the three months ended September 30, 2023 and 2022, respectively, and $(5.4) million and $(21.1) million for the nine months ended September 30, 2023 and 2022, respectively. Our operating cash flow was $439.7 million and $304.0 million for the nine months ended September 30, 2023 and 2022, respectively. Our free cash flow was $396.3 million and $257.2 million for the nine months ended September 30, 2023 and 2022, respectively. See the section titled “—Liquidity and Capital Resources—Non-GAAP Free Cash Flow” below.

Unfavorable conditions in the economy both in the United States and abroad may negatively affect the growth of our business and our results of operations. For example, macroeconomic events including rising inflation, the U.S. Federal Reserve raising interest rates, the failure of Silicon Valley Bank and other financial institutions, the Russian invasion of Ukraine, the evolving conflict in Israel and Gaza and the COVID-19 pandemic have led to economic uncertainty. Historically, during periods of economic uncertainty and downturns, businesses may slow spending on information technology, which may impact our business and our customers’ businesses. In recent quarters, we have seen slower usage growth from existing customers, which may be related to the uncertain macroeconomic environment.

Due to our subscription model, the effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. However, if economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed. For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see “Risk Factors” included in Part II, Item 1A of this report.

Factors Affecting Our Performance

Acquiring New Customers

We believe there is substantial opportunity to continue to grow our customer base. We intend to drive new customer acquisition by continuing to invest significantly in sales and marketing to engage our prospective customers, increase brand awareness and drive adoption of our platform and products. We also plan to continue to invest in building brand awareness within the development and operations communities. As of September 30, 2023, we had approximately 26,800 customers spanning organizations of a broad range of sizes and industries, compared to approximately 22,200 as of September 30, 2022. Our ability to attract new customers will depend on a number of factors, including the effectiveness and pricing of our products, offerings of our competitors and the effectiveness of our marketing efforts.

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.

Expanding Within Our Existing Customer Base

Our base of customers represents a significant opportunity for further sales expansion. As of September 30, 2023, we had approximately 3,130 customers with annual run-rate revenue, or ARR, of $100,000 or more, representing 86% of our ARR, up from 2,600 customers as of September 30, 2022, representing 85% of our ARR. We monitor our number of customers with ARR of $100,000 or more, and believe it is useful to investors, as an indicator of our ability to grow the number of customers that are exceeding this ARR threshold. We define ARR as the annual run-rate revenue of subscription agreements from all customers at a point in time. We calculate ARR by taking the monthly run-rate 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.

A further indication of the propensity of our customer relationships to expand over time is our dollar-based net retention rate, which compares our ARR from the same set of customers in one period, relative to the year-ago period. As of September 30, 2023, our trailing 12-month dollar-based net retention rate was slightly below 120%. As of September 30, 2022, our trailing 12-month dollar-based net retention rate was above 130%. We calculate dollar-based net retention rate as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period-end, or the Prior Period ARR. We then calculate the ARR from these same customers as of the current period-end, or the Current Period ARR. Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months but excludes ARR from new customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the point-in-time dollar-based net retention rate. We then calculate the weighted average of the trailing 12-month point-in-time dollar-based net retention rates, to arrive at the trailing 12-month dollar-based net retention rate. As the growth of our business has decelerated in recent quarters, our trailing 12-month dollar-based net retention rate has declined.

We believe that our land-and-expand business model allows us to efficiently increase revenue from our existing customer base. Our customers often expand the deployment of our platform across large teams and more broadly within the enterprise as they migrate more workloads to the cloud, find new use cases for our platform, and generally realize the benefits of our platform. We intend to continue to invest in enhancing awareness of our brand and developing more products, features and functionality, which we believe are important factors to achieve widespread adoption of our platform. Our ability to increase sales to existing customers will depend on a number of factors, including our customers’ satisfaction with our solution, competition, pricing and overall changes in our customers’ spending levels.

Sustaining Innovation and Technology Leadership

Our success is dependent on our ability to sustain innovation and technology leadership in order to maintain our competitive advantage. We believe that we have built a highly differentiated platform that will position us to further extend the adoption of our platform and products. Datadog is frequently deployed across a customer’s entire infrastructure, making it ubiquitous. Datadog is a daily part of the lives of developers, operations engineers and business leaders. We employ a land-and-expand business model centered around offering products that are easy to adopt and have a very short time to value. Our efficient go-to-market model enables us to prioritize significant investment in innovation. We have demonstrated the success of our platform approach, through expansion beyond our initial infrastructure monitoring solution to include 19 products. Approximately 82% of our customers were using more than one product as September 30, 2023, up from approximately 80% a year earlier. Additionally, as of September 30, 2023, approximately 46% of our customers were using more than four products, up from approximately 40% a year earlier, and approximately 21% of our customers were using more than six products, up from approximately 16% a year earlier. We believe these metrics indicate strong expansion of product adoption across our platform.

We intend to continue to invest in building additional products, features and functionality that expand our capabilities and facilitate the extension of our platform to new use cases. We also intend to continue to evaluate strategic acquisitions and investments in businesses and technologies to drive product and market expansion. Our future success is dependent on our ability to successfully develop, market and sell existing and new products to both new and existing customers.

Expanding Internationally

We believe there is a significant opportunity to expand usage of our platform outside of North America. Revenue, as determined based on the billing address of our customers, from regions outside of North America was approximately 30% and 28% of total revenue for the nine months ended September 30, 2023 and 2022, respectively. In addition, we have made and plan to continue to make significant investments to expand geographically, particularly in EMEA and APAC. Although these investments may adversely affect our operating results in the near term, we believe that they will contribute to our long-term growth. Beyond North America, we now have sales presence internationally, including in Amsterdam, Dublin, London, Paris, Seoul, Singapore, Sydney, and Tokyo.

Components of Results of Operations

Revenue

We generate revenue from the sale of subscriptions to customers using our cloud-based platform. The terms of our subscription agreements are primarily monthly, annual or multi-year, with the majority of our revenue coming from annual subscriptions. Our customers can enter into a subscription for a committed contractual amount of usage that is apportioned ratably on a monthly basis over the term of the subscription period, a subscription for a committed contractual amount of usage that is delivered as used, or a monthly subscription based on usage. To the extent that our customers’ usage exceeds the committed contracted amounts under their subscriptions, either on a monthly basis in the case of a ratable subscription or once the entire commitment is used in the case of a delivered-as-used subscription, they are charged for their incremental usage.

Usage is measured primarily by the number of hosts or by the volume of data indexed. A host is generally defined as a server, either in the cloud or on-premise. Our infrastructure monitoring, APM and network performance monitoring products are priced per host, our logs product is priced primarily per log events indexed and secondarily by events ingested. Customers also have the option to purchase additional products, such as additional container or serverless monitoring, custom metrics packages, anomaly detection, synthetic monitoring and app analytics.

In the case of subscriptions for committed contractual amounts of usage, revenue is recognized ratably over the term of the subscription agreement, generally beginning on the date that our platform is made available to a customer. As a result, much of our revenue is generated from subscriptions entered into during previous periods. Consequently, any decreases in new subscriptions or renewals in any one period may not be immediately reflected as a decrease in revenue for that period but could negatively affect our revenue in future quarters. This also makes it difficult for us to rapidly increase our revenue through the sale of additional subscriptions in any period, as revenue is recognized over the term of the subscription agreement. In the case of a subscription for a committed contractual amount of usage that is delivered as used, a monthly subscription based on usage, or usage in excess of a ratable subscription, we recognize revenue as the product is used, which may lead to fluctuations in our revenue and results of operations. In addition, historically, we have experienced seasonality in new customer bookings, as we typically enter into a higher percentage of subscription agreements with new customers in the fourth quarter of the year.

Due to ease of implementation of our products, professional services generally are not required and revenue from such services has been immaterial to date.

Cost of Revenue

Cost of revenue primarily consists of expenses related to providing our products to customers, including payments to our third-party cloud infrastructure providers for hosting our software, personnel-related expenses for operations and global support, including salaries, benefits, bonuses and stock-based compensation, payment processing fees, information technology, depreciation and amortization related to the amortization of acquired intangibles and internal-use software and other overhead costs such as allocated facilities.

We intend to continue to invest additional resources in our platform infrastructure and our customer support and success organizations to expand the capability of our platform and ensure that our customers are realizing the full benefit of our platform and products. The level, timing and relative investment in our infrastructure could affect our cost of revenue in the future.

Gross Profit and Gross Margin

Gross profit represents revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross margin may fluctuate from period to period as our revenue fluctuates, and as a result of the timing and amount of investments to expand our products and geographical coverage.

Operating Expenses

Our operating expenses consist of research and development, sales and marketing and general and administrative expenses. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation expense and sales commissions. Operating expenses also include overhead costs for facilities and shared IT-related expenses, including depreciation expense.

Research and Development

Research and development expense consists primarily of personnel costs for our engineering, service and design teams. Additionally, research and development expense includes contractor fees, depreciation and amortization and allocated overhead costs. Research and development costs are expensed as incurred. We expect that our research and development expense will increase in absolute dollars as our business grows, particularly as we incur additional costs related to continued investments in our platform.

Sales and Marketing

Sales and marketing expense consists primarily of personnel costs for our sales and marketing organization, costs of general marketing and promotional activities, including the free tier and free introductory trials of our products, travel-related expenses, amortization of acquired customer relationships and allocated overhead costs. Sales commissions earned by our sales force are deferred and amortized on a straight-line basis over the expected period of benefit, which we have determined to be four years. We expect that our sales and marketing expense will increase in absolute dollars as we expand our sales and marketing efforts.

General and Administrative

General and administrative expense consists primarily of personnel costs and contractor fees for finance, legal, human resources, information technology and other administrative functions. In addition, general and administrative expense includes non-personnel costs, such as legal, accounting and other professional fees, hardware and software costs, certain tax, license and insurance-related expenses and allocated overhead costs.

We have incurred, and expect to continue to incur, additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations and increased expenses for insurance, investor relations and professional services. We expect that our general and administrative expense will increase in absolute dollars as our business grows.

Other Income, Net

Other income, net consists of interest income, primarily due to income earned on money market funds included in cash and cash equivalents and on marketable securities, partially offset by interest expense due on the 2025 Notes and amortization of premiums on our marketable securities.

Provision for Income Taxes

Provision for income taxes consists of U.S. federal and state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. We recorded a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized.

Results of Operations

The following table sets forth our consolidated statements of operations data for the periods indicated:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
			(in thousands)
Revenue			$	547,536					$	436,533					$	1,538,710					$	1,205,701
Cost of revenue (1)(2)(3)			103,319						93,599						305,079						249,986
Gross profit			444,217						342,934						1,233,631						955,715
Operating expenses
Research and development (1)(3)			240,225						205,388						709,197						533,695
Sales and marketing (1)(2)(3)			156,870						129,493						449,296						345,929
General and administrative (1)(3)			51,352						39,395						136,344						100,158
Total operating expenses			448,447						374,276						1,294,837						979,782
Operating loss			(4,230)						(31,342)						(61,206)						(24,067)
Other income (loss):
Interest expense (4)			(1,303)						(3,728)						(5,010)						(13,516)
Interest income and other income, net			29,833						12,011						69,184						25,367
Other income, net			28,530						8,283						64,174						11,851
Income (loss) before provision for income taxes			24,300						(23,059)						2,968						(12,216)
Provision for income taxes			(1,670)						(2,926)						(8,393)						(8,910)
Net income (loss)			$	22,630					$	(25,985)					$	(5,425)					$	(21,126)

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

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
			(in thousands)
Cost of revenue			$	4,570					$	3,165					$	12,452					$	7,173
Research and development			79,174						65,321						229,607						163,326
Sales and marketing			26,159						21,145						75,057						53,330
General and administrative			13,211						11,731						37,063						26,816
Total			$	123,114					$	101,362					$	354,179					$	250,645

---

(2)Includes amortization of acquired intangibles expense as follows:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
			(in thousands)
Cost of revenue			$	1,974					$	1,900					$	6,054					$	4,795
Sales and marketing			208						208						617						617
Total			$	2,182					$	2,108					$	6,671					$	5,412

---

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

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
			(in thousands)
Cost of revenue			$	107					$	47					$	276					$	219
Research and development			5,260						1,799						15,213						7,925
Sales and marketing			2,980						620						5,008						2,334
General and administrative			1,342						245						3,450						719
Total			$	9,689					$	2,711					$	23,947					$	11,197

---

(4) Includes amortization of issuance costs as follows:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
			(in thousands)
Interest expense			$	848					$	843					$	2,539					$	2,525

The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue for the periods indicated:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
			(as a percentage of total revenue**(1)****)**
Revenue			100		%				100		%				100		%				100		%
Cost of revenue			19						21						20						21
Gross profit			81						79						80						79
Operating expenses
Research and development			44						47						46						44
Sales and marketing			29						30						29						29
General and administrative			9						9						9						8
Total operating expenses			82						86						84						81
Operating loss			(1)						(7)						(4)						(2)
Other income (loss):
Interest expense			0						(1)						0						(1)
Interest income and other income, net			5						3						4						2
Other income, net			5						2						4						1
Income (loss) before provision for income taxes			4						(5)						0						(1)
Provision for income taxes			0						(1)						(1)						(1)
Net income (loss)			4		%				(6)		%				0		%				(2)		%

(1)Certain items may not total due to rounding.

Comparison of the Three Months Ended September 30, 2023 and 2022

Revenue

			Three Months Ended September 30,
			2023						2022						Change						% Change
			(dollars in thousands)
Revenue			$	547,536					$	436,533					$	111,003					25		%

Revenue increased by $111.0 million, or 25%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. Approximately 65% of the increase in revenue was attributable to growth from existing customers, and the remaining 35% was attributable to growth from new customers.

Cost of Revenue and Gross Margin

			Three Months Ended September 30,
			2023						2022						Change						% Change
			(dollars in thousands)
Cost of revenue			$	103,319					$	93,599					$	9,720					10		%
Gross margin			81		%				79		%

Cost of revenue increased by $9.7 million, or 10%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This increase was primarily due to an increase of $4.3 million in third-party cloud infrastructure hosting and software costs and an increase of $2.6 million in personnel and other related costs as a result of increased headcount.

Our gross margin increased by 2% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, primarily as the result of revenue growth exceeding the growth of third-party cloud infrastructure provider costs due to cost savings.

Research and Development

			Three Months Ended September 30,
			2023						2022						Change						% Change
			(dollars in thousands)
Research and development			$	240,225					$	205,388					$	34,837					17		%
Percentage of revenue			44		%				47		%

Research and development expense increased by $34.8 million, or 17%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This increase was primarily due to an increase of $36.1 million in personnel and other related costs for our engineering, product and design teams as a result of increased headcount and was offset by a decrease of $1.8 million in cloud infrastructure-related investments.

Sales and Marketing

			Three Months Ended September 30,
			2023						2022						Change						% Change
			(dollars in thousands)
Sales and marketing			$	156,870					$	129,493					$	27,377					21		%
Percentage of revenue			29		%				30		%

Sales and marketing expense increased by $27.4 million, or 21%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This increase was primarily due to an increase of $22.2 million in personnel and other related costs for our sales and marketing organization as a result of increased headcount and increased

variable compensation for our sales personnel and an increase of $4.8 million in advertising, sales, marketing and promotional activities.

General and Administrative

			Three Months Ended September 30,
			2023						2022						Change						% Change
			(dollars in thousands)
General and administrative			$	51,352					$	39,395					$	11,957					30		%
Percentage of revenue			9		%				9		%

General and administrative expense increased by $12.0 million, or 30%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This increase was primarily due to an increase in legal expenses, professional services, personnel and other related costs as a result of increased headcount.

Other Income, Net

			Three Months Ended September 30,
			2023						2022						Change						% Change
			(dollars in thousands)
Other income, net			$	28,530					$	8,283					$	20,247					244		%
Percentage of revenue			5		%				2		%

Other income, net increased by $20.2 million, or 244%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. This increase was primarily driven by an increase of $19.7 million in interest income, mainly due to income earned from investments in marketable securities.

Comparison of the Nine Months Ended September 30, 2023 and 2022

Revenue

			Nine Months Ended September 30,
			2023						2022						Change						% Change
			(dollars in thousands)
Revenue			$	1,538,710					$	1,205,701					$	333,009					28		%

Revenue increased by $333.0 million, or 28%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. Approximately 65% of the increase in revenue was attributable to growth from existing customers, and the remaining 35% was attributable to growth from new customers.

Cost of Revenue and Gross Margin

			Nine Months Ended September 30,
			2023						2022						Change						% Change
			(dollars in thousands)
Cost of revenue			$	305,079					$	249,986					$	55,093					22		%
Gross margin			80		%				79		%

Cost of revenue increased by $55.1 million, or 22%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This increase was primarily due to an increase of $32.9 million in third-party cloud infrastructure hosting and software costs, an increase of $14.2 million in personnel and other related costs as a result of increased headcount, and an increase of $4.5 million of depreciation and amortization.

Our gross margin increased by 1% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily as the result of revenue growth exceeding the growth of third-party cloud infrastructure provider costs due to cost savings.

Research and Development

			Nine Months Ended September 30,
			2023						2022						Change						% Change
			(dollars in thousands)
Research and development			$	709,197					$	533,695					$	175,502					33		%
Percentage of revenue			46		%				44		%

Research and development expense increased by $175.5 million, or 33%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This increase was primarily due to an increase of $158.5 million in personnel and other related costs for our engineering, product and design teams as a result of increased headcount and an increase of $15.2 million in cloud infrastructure-related investments.

Sales and Marketing

			Nine Months Ended September 30,
			2023						2022						Change						% Change
			(dollars in thousands)
Sales and marketing			$	449,296					$	345,929					$	103,367					30		%
Percentage of revenue			29		%				29		%

Sales and marketing expense increased by $103.4 million, or 30%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This increase was primarily due to an increase of $90.9 million in personnel and other related costs for our sales and marketing organization as a result of increased headcount and increased variable compensation for our sales personnel and an increase of $11.3 million in advertising, sales, marketing and promotional activities.

General and Administrative

			Nine Months Ended September 30,
			2023						2022						Change						% Change
			(dollars in thousands)
General and administrative			$	136,344					$	100,158					$	36,186					36		%
Percentage of revenue			9		%				8		%

General and administrative expense increased by $36.2 million, or 36%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This increase was primarily due to an increase in personnel and other related costs as a result of increased headcount, legal expenses, and other professional services.

Other Income, Net

			Nine Months Ended September 30,
			2023						2022						Change						% Change
			(dollars in thousands)
Other income, net			$	64,174					$	11,851					$	52,323					442		%
Percentage of revenue			4		%				1		%

Other income, net increased by $52.3 million, or 442%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This increase was primarily driven by an increase of $49.3 million in interest income, mainly due to income earned from investments in marketable securities.

Liquidity and Capital Resources

Our largest source of operating cash is cash collection from sales of subscriptions to our customers. Our primary uses of cash from operating activities are for personnel expenses, hosting expenses, facility expenses, and marketing expenses. We have generated positive cash flows from operations during the nine months ended September 30, 2023 and 2022. When assessing sources of liquidity, we also include cash and cash equivalents of $261.3 million and marketable securities of $2.1 billion as of September 30, 2023. We believe that our existing cash and cash equivalents, marketable securities and cash flow from operations will be sufficient to support our cash requirements for the next 12 months and beyond.

Our working capital requirements are principally comprised of workforce salaries, bonuses, commissions, and benefits and, to a lesser extent, cancellable and non-cancelable licenses and services arrangements that are integral to our business operations, and operating lease obligations. Our principal commitments consist of purchase commitments for business operations, operating lease obligations, and obligations to pay the 2025 Notes’ coupons and principal. Purchase commitments for business operations are primarily related to cloud hosting and other software-based services. In June 2020, we issued $747.5 million aggregate principal amount of the 2025 Notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

During the nine months ended September 30, 2023, there have been no material changes outside the ordinary course of business to our contractual obligations and commitments, as disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Annual Report.

Cash Flows

The following table shows a summary of our cash flows for the periods presented:

			Nine Months Ended September 30,
			2023						2022
			(in thousands)
Cash provided by operating activities			$	439,728					$	303,966
Cash used in investing activities			(557,328)						(295,550)
Cash provided by financing activities			37,390						21,821

Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2023 increased $135.8 million compared to the nine months ended September 30, 2022, primarily driven by an increase in non-cash charges of $94.5 million and a decrease in accounts receivable of $73.5 million. The increase in non-cash charges related primarily to an increase of $103.5 million in stock-based compensation as we continued to increase headcount to support the growth of the business. The decrease in accounts receivable was primarily due to timing of cash collections. The increase in cash provided by operating activities was offset by a decrease in accrued expenses and other liabilities of $95.6 million.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2023 increased $261.8 million compared to the nine months ended September 30, 2023, primarily driven by an increase of $944.1 million in the investment in marketable securities. The increase in cash used in investing activities was offset by an increase of $610.8 million in proceeds from maturities of marketable securities, a decrease of $33.9 million in cash paid for the acquisition of businesses net of cash acquired, and an increase of $34.3 million in proceeds from the sale of marketable securities.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2023 increased $15.6 million compared to the nine months ended September 30, 2022, primarily due to an increase in proceeds from the exercise of stock options of $9.1 million and an increase in proceeds from the issuance of Class A common stock under the ESPP of $6.4 million.

Non-GAAP Free Cash Flow

We report our financial results in accordance with GAAP. To supplement our condensed consolidated financial statements, we provide investors with the amount of free cash flow, which is a non-GAAP financial measure. Free cash flow represents net cash provided by operating activities, reduced by capital expenditures and capitalized software development costs, if any. Free cash flow is a measure used by management to understand and evaluate our liquidity and to generate future operating plans. The reduction of capital expenditures and amounts capitalized for software development facilitates comparisons of our liquidity on a period-to-period basis and excludes items that we do not consider to be indicative of our liquidity. We believe that free cash flow is a measure of liquidity that provides useful information to our management, board of directors, investors and others 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. Nevertheless, our use of free cash flow has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Further, our definition of free cash flow may differ from the definitions used by other companies and therefore comparability may be limited. You should consider free cash flow alongside our other GAAP-based financial performance measures, such as net cash used in operating activities, and our other GAAP financial results.

The following table presents a reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable financial measure calculated in accordance with GAAP, for each of the periods indicated:

			Nine Months Ended September 30,
			2023						2022
			(in thousands)
Net cash provided by operating activities			$	439,728					$	303,966
Less: Purchases of property and equipment			(17,191)						(25,207)
Less: Capitalized software development costs			(26,279)						(21,592)
Free cash flow			$	396,258					$	257,167

Critical Accounting Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

There have been no material changes to our critical accounting policies from those disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Annual Report.

Recently Adopted Accounting Pronouncements

See Note 2, Basis of Presentation and Summary of Significant Accounting Policies, in our Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates.

Interest Rate Risk

As of September 30, 2023, we had $233.9 million in cash equivalents and $2.1 billion in marketable securities, which consisted of commercial debt, commercial paper, U.S. government treasury securities, certificates of deposit, and U.S. government agency securities. Our cash and cash equivalents are held for working capital purposes. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to a fluctuation in interest rates, which may affect our interest income and the fair market value of our investments. As of September 30, 2023, a hypothetical 10% relative change in interest rates would not have a material impact on our condensed consolidated financial statements.

On June 2, 2020, we issued $747.5 million aggregate principal amount of the 2025 Notes. The fair value of the 2025 Notes is subject to interest rate risk, market risk and other factors due to the conversion feature. The fair value of the 2025 Notes will generally increase as our Class A common stock price increases and will generally decrease as our Class A common stock price declines. The interest and market value changes affect the fair value of the 2025 Notes but do not impact our financial position, cash flows, or results of operations due to the fixed nature of the debt obligation.

Foreign Currency Exchange Risk

Our reporting currency and the functional currency of our wholly-owned foreign subsidiaries is the U.S. dollar. All of our sales are denominated in U.S. dollars, and therefore our revenue is not currently subject to significant foreign currency risk. Our operating expenses are denominated in the currencies of the countries in which our operations are located, which are primarily in the United States, France, Ireland, and the United Kingdom. Our consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative financial instruments, although we may choose to do so in the future. A hypothetical 10% increase or decrease in the relative value of the U.S. dollar to other currencies would not have a material effect on our operating results.

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023. Based on the evaluation of our disclosure controls and procedures as of September 30, 2023, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II-OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows or financial condition. Defending such proceedings is costly and can impose a significant burden on management and employees. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Our operations and financial results are subject to various risks and uncertainties including those described below. You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks or others not specified below materialize, our business, financial condition and results of operations could be materially and adversely affected. In that case, the trading price of our Class A common stock could decline.

Risk Factors Summary

The following is a summary of the principal risks associated with an investment in our Class A common stock:

• Unfavorable conditions in our industry or the global economy, or reductions in information technology spending, could limit our ability to grow our business and negatively affect our results of operations.

• Our recent rapid growth may not be indicative of our future growth. Our rapid growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.

• We have a history of operating losses and may not achieve or sustain profitability in the future.

• We have a limited operating history, which makes it difficult to forecast our future results of operations.

• We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all.

• Our business depends on our existing customers purchasing additional subscriptions and products from us and renewing their subscriptions. If our customers do not renew or expand their subscriptions with us, our future operating results would be harmed.

• If we are unable to attract new customers, our business, financial condition and results of operations will be adversely affected.

• Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our products.

• If we or our third-party service providers experience, or are unable to protect against cyber-attacks, ransomware, security incidents, or security breaches, or if unauthorized parties otherwise obtain access to our customers’ data, our data, or our platform and information technology systems, then our solution may be perceived as not being secure, our reputation may be harmed, demand for our platform and products may be reduced, and we may incur significant liabilities or additional expenses.

• Interruptions or performance problems associated with our products and platform capabilities may adversely affect our business, financial condition and results of operations.

• We may not be able to successfully manage our growth, and if we are not able to grow efficiently, our business, financial condition and results of operations could be harmed.

• If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, or to changing customer needs, requirements or preferences, our platform and products may become less competitive.

• The markets in which we participate are competitive, and if we do not compete effectively, our business, financial condition and results of operations could be harmed.

• The dual class structure of our common stock has the effect of concentrating voting control with holders of our Class B common stock, including our executive officers, directors and their affiliates, which will limit the ability of holders of our Class A common stock to influence the outcome of important transactions.

Risks Associated with our Growth

Unfavorable conditions in our industry or the global economy, or reductions in information technology spending, could limit our ability to grow our business and negatively affect our results of operations.

Our results of operations may vary based on the impact of unfavorable changes in our industry or the global economy on us or our customers and potential customers. Unfavorable conditions in the economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth in the United States or abroad, financial and credit market fluctuations, inflation, rising interest rates, the failure of Silicon Valley Bank and other financial institutions, international trade relations, political turmoil, natural catastrophes, outbreaks of contagious diseases, such as the COVID-19 pandemic, warfare and terrorist attacks on the United States, Europe, the Asia Pacific region or elsewhere, such as the evolving conflict in Israel and Gaza, could cause a decrease in business investments, including spending on information technology, disrupt the timing and cadence of key industry events, and negatively affect the growth of our business and our results of operations. For example, the COVID-19 pandemic adversely affected workforces, economies and financial markets globally, leading to a reduction in the ability of, or the inability of, customers, partners, suppliers, vendors or other parties to meet their contractual obligations, and for a period of time, a reduction in customer spending on technology, and such conditions may reoccur in the future. The war in Ukraine and the related political and economic responses imposed on Russia such as sanctions, may also exacerbate these issues and trends especially in Europe. More recently, in response to persistently high inflation, the U.S. Federal Reserve has increased interest rates, which may reduce economic growth and cause companies to decrease spending on information technology. These types of unfavorable conditions could disrupt the timing of and attendance at key industry events, which we rely upon in part to generate sales of our products. If those events are disrupted, our marketing investments, sales pipeline and ability to generate new customers and sales of our products could be negatively and adversely affected. Our competitors, many of which are larger and have greater financial resources than we do, may respond to challenging market conditions by lowering prices in an attempt to attract our customers and may be less dependent on key industry events to generate sales for their products. The increased pace of consolidation in certain industries may result in reduced overall spending on our products and solutions. We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or how any such event may impact our business.

Our recent rapid growth may not be indicative of our future growth. Our rapid growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.

Our revenue was $1,538.7 million and $1,205.7 million for the nine months ended September 30, 2023 and 2022, respectively, and $1,675.1 million and $1,028.8 million for the years ended December 31, 2022 and 2021, respectively. You should not rely on the revenue growth of any prior quarterly or annual period as an indication of our future performance. Even if our revenue continues to increase, we expect that our revenue growth rate will decline in the future as a result of a variety of factors, including the maturation of our business. Overall growth of our revenue depends on a number of factors, including our ability to:

• price our products effectively so that we are able to attract new customers and expand sales to our existing customers;

• expand the functionality and use cases for the products we offer on our platform;

• maintain and expand the rates at which customers purchase and re

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Trading Arrangements

During the three months ended September 30, 2023, the Company’s directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted written plans intended to satisfy the affirmative defense conditions of Securities Exchange Act Rule 10b5-1(c) for the sale of the Company’s securities as set forth in the table below.

Name						Position						Adoption Date						Total Shares of Class A Common Stock to be Sold						Expiration Date
Kerry Acocella						General Counsel & Secretary						September 12, 2023						17,500						September 30, 2024
Alexis Lê-Quôc						Chief Technology Officer & Director						September 5, 2023						3,307,972 (1)						October 3, 2025
(1)Approximately 2.7 million shares will be sold in sell-to-cover transactions intended to satisfy tax withholding obligations and exercise costs realized upon the exercise of stock options.

												Incorporated by Reference
Exhibit Number						Description						Form						File No.						Exhibit						Filing Date						Filed Herewith
3.1						Amended and Restated Certificate of Incorporation of Datadog, Inc.						8-K						001-39051						3.1						September 23, 2019
3.2						Amended and Restated Bylaws of Datadog, Inc.						10-Q						001-39051						3.2						August 9, 2023
31.1						Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.																														X
31.2						Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.																														X
32.1*						Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.																														X
32.2*						Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.																														X
101.INS						XBRL Instance Document																														X
101.SCH						XBRL Taxonomy Extension Schema Document																														X
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document																														X
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document																														X
101.LAB						XBRL Taxonomy Extension Label Linkbase Document																														X
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document																														X
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)																														X

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*			This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			DATADOG, INC.
Date: November 7, 2023			By:						/s/ Olivier Pomel
			Name:						Olivier Pomel
			Title:						Chief Executive Officer and Director (Principal Executive Officer)
Date: November 7, 2023			By:						/s/ David Obstler
			Name:						David Obstler
			Title:						Chief Financial Officer (Principal Financial and Accounting Officer)