The ongoing COVID-19 pandemic and any related economic downturn could negatively impact our business, financial condition and results of operations.
•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 maywill 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,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.
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•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;
the impact of the COVID-19 pandemic and responses thereto on our business, financial condition and results of operations;
•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; and
•the growth rates of the markets in which we compete.
applications.
And while we continue to broaden our capabilities in observability, we have continued to expand our platform into use cases beyond observability. Starting in 2020, we began to develop products in cloud security, and in 2021, we expanded into developer-focused products.
cases across observability, security, and software delivery. In 2023, we launched Application Vulnerability Management to detect vulnerabilities in open-source libraries in production, Data Streams Monitoring to track and improve the performance of event-driven applications, and Workflow Automation to easily automate actions based on observability insights.
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•Simple but not simplistic. Our platform is easy-to-use with out-of-the-box integrations, customizable drag-and-drop dashboards, real-time visualization and prioritized alerting. The platform is deployed in a self-service installation process within minutes, allowing new users to quickly derive value without any specialized training or heavy implementation or customization. It is highly extensible across a wide array of use cases to a broad set of developers, operations engineers, security professionals, product managers, product designers, platform engineers, customer support staff, and business users. As a result, our platform is integral to business operations and used every day, and our users find increasing value in the solution over time.
•Integrated data platform. We were the first to combine the “three pillars of observability” - metrics, traces, and logs - with the introduction of our log management solution in 2018. Today, our platform combines infrastructure monitoring, application performance monitoring, log management, user experience monitoring, security monitoring, incident management, continuous integration and network performancecontinuous delivery, or CI/CD, pipeline and test monitoring in one integrated data platform.This approach increases efficiency by reducing both the expense and friction of attempting to glean insights from disparate systems. We are able to provide a unified view across the IT stack, including infrastructure and application performance, as well as the real-time events impacting performance. Each of our products is integrated and taken together, they provide the ability to view metrics, traces, logs, sessions, security signals, and logsother data side-by-side and to perform correlation analysis.
•Built for collaboration. Our platform was built to break down the silos between developers and operations teams in order to help organizations adopt DevOps practices and improve overall business performance. We provide development and operations teams with a common set of tools to develop a joint understanding of application performance and shared insights into the infrastructure supporting the applications. Additionally, our customizable and interactive dashboards can be shared with business teams to provide them with real-time actionable insights.
Over time, as the use cases for our platform have expanded, the types of users that we can serve and help to collaborate have expanded as well, to include security professionals, product managers, product designers, platform engineers, customer support staff, and business users.•Cloud agnostic. Our platform is designed to be deployable across all environments, including public cloud, private cloud, on-premise, multi-cloud, and multi-cloud hybrid environments, allowing organizations to diversify their infrastructure and reduce single vendor dependence.
•Ubiquitous. Datadog is frequently deployed across a customer’s entire infrastructure, making it ubiquitous. Compared to legacy systems that are often used only by a few users in an organization’s IT operations team, Datadog is a daily part of the lives of developers, operations engineers and business leaders.
•Integrates with our customers’ complex environments. We enable development and operations teams to harness the full spectrum of SaaS and open source tools. We have over 400700 out-of-the-box integrations with technologies to provide significant value to our customers without the need for professional services. Our integrations provide for comprehensive data point aggregation and consistent, up-to-date, high-quality customer experiences across heterogeneous IT environments as they are fully maintained by Datadog.
•Powered by robust analyticsmachine-learning and machine-learningartificial intelligence. Our platform ingests massive amounts of data into our unified data warehouse. We develop actionable insights using our advanced analytics capabilities. Our platform featuresplatform's Watchdog capabilities feature artificial intelligence and machine learning that can cross-correlate metrics, traces, logs, sessions, security signals, and logsother data to identify outliers and notify users of potential anomalies before theyanomalies; discover and help resolve issues quickly with automated root cause analysis; augment the troubleshooting workflow with contextual insights; and minimize impact the business.
•Scalable. Our SaaS platform is highly scalable and is delivered through the cloud. Our platform is massively scalable, currently monitoring more than tens of trillion events a day and millions of servers and containers at any point in time. We offer secure, easily accessible data retention at full granularity for extensive periods of time, which can provide customers with a complete view of their historical data.
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•Accelerate digital transformation. We enable customers to take full advantage of the cloud to develop and maintain mission-critical applications with agility and with confidence in the face of increasing business and time pressure and complexity of underlying infrastructure. As a result, our platform helps accelerate innovation cycles, deliver exceptional digital experiences and optimize business performance. •Reduce time to problem detection and resolution. Using infrastructure, APM, •Improve agility of development, operations, security and business teams. We eliminate the historical silos of development and operations teams and provide a platform that enables efficient and agile development through the adoption of DevOps and DevSecOps. Our platform enables development, operations and security teams to collaborate closely with a shared understanding of data and analytics. This helps them develop a joint understanding of application performance and shared insights into the infrastructure supporting the applications. •Enable operational efficiency. Our solution is easy to install, which eliminates the need for heavy implementation costs and professional services. We have hundreds of integrations with key technologies, from which our customers can derive significant value, avoiding internal development costs and professional services required to create those integrations. Our customer-centric pricing model is tailored to customers’ desired usage needs. Our platform empowers customers to better understand the operational needs of their applications and IT environments, enabling greater efficiency in resource allocation and spend on cloud infrastructure. •Expand our customer base by acquiring new customers. Our market penetration is low. We believe there is a substantial opportunity to continue to grow our customer base. We intend to drive new customer additions by expanding our sales and marketing efforts in the markets we serve. •Expand within our existing customer base through broader deployments, new use cases and new product adoption. Our base of approximately •Expand our technology leadership through continued investment and new products. We intend to invest in expanding the functionality of our current platform and adding capabilities that address new market opportunities. We have a history of continued innovation. For example, in 2017 we launched APM, in 2018 we launched Log Management, in 2019 we launched •Expand our customer base internationally. We believe there is a significant opportunity to continue to expand usage of our platform outside of the United States, as international markets have increased the shift of their IT spend to the cloud. •Single Pane of Glass. Our ability to provide a unified source of data enables users to access information from a single platform and easily explore multiple data sources. Through a single dashboard and with a common data framework, users are able to access and explore all of the relevant performance data. Users are able to more quickly assess and resolve their issues without having to toggle between multiple products. •Robust, Deep Data Set. Our client-side collection technology relies on installation of a single agent for metrics, traces, logs, and •SaaS Platform. Our cloud based multi-tenant SaaS platform allows for real-time ingestion, and analysis of massive amounts of data, without our customers needing to worry about the provisioning, sizing and capacity of their monitoring platform. •One Data Model. Every piece of data that is ingested by our platform is consistently tagged with metadata regardless of its type. This allows for different kinds of performance data, such as a log event and an application trace, to be queried together, correlated, alerted on, and visualized in a common user interface. •Cross-Correlation. All of our solutions are integrated and work cohesively to provide a deep level of context and insight into what is occurring in a customer’s IT environment and power faster troubleshooting. •Out-Of-The-Box, Actionable Insights. From the moment of installation, our platform provides actionable insights through customizable dashboards, predictive analytics, automated correlations, visualizations and alerting. •High Accuracy Machine-Learning Capabilities and Predictive Capabilities Powered by the Network Effect. Our multi-tenant cloud platform analyzes massive data sets ingested across our customers and their IT environments. It uses machine learning to predict and identify sources of performance or availability issues that customers share due to dependencies on common service providers or third-party services. •Automated Alerts. We offer sophisticated real time alerting capabilities in the platform that detects issues, alerts users, and integrates with their service management systems. •Infrastructure Monitoring. Our •Application Performance Monitoring (APM). APM provides full visibility into the health and functioning of applications regardless of the deployment environment. •Database Monitoring. Database Monitoring allows customers to view query metrics and explain plans from all of their databases in a single place. With Database Monitoring, they can quickly pinpoint costly and slow queries and drill into precise execution details to address bottlenecks. Additionally, query, host, and application metric correlation makes it easy to identify and understand the impact of resource constraints on database performance. •Incident Management. Incident •ability to provide unified, real-time observability of IT environments; •ability to operate in dynamic and elastic environments; •extensibility across the enterprise, including development, operations and business users; •propensity to enable collaboration between development, operations and business users; •ability to monitor any combination of public clouds, private clouds, on-premise and multi-cloud hybrids; •ability to provide advanced analytics and machine learning; •ease of deployment, implementation and use; •breadth of offering and key technology integrations; •performance, security, scalability and reliability; •quality of service and customer satisfaction; •total cost of ownership; and •brand recognition and reputation. alignment on how their work supports Datadog's goals and priorities. mentoring. celebration, support belonging, and help our employees feel welcome and respected. Growth operations. •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 renew subscriptions to our platform; •provide our customers with support that meets their needs; •continue to introduce our products to new markets outside of the United States; •successfully identify and acquire or invest in businesses, products or technologies that we believe could complement or expand our platform; and •increase awareness of our brand on a global basis and successfully compete with other companies. •our technology infrastructure, including systems architecture, scalability, availability, performance and security; •our sales and marketing organization to engage our existing and prospective customers, increase brand awareness and drive adoption of our products; •product development, including investments in our product development team and the development of new products and new functionality for our platform as well as investments in further optimizing our existing products and infrastructure; •acquisitions or strategic investments; •international expansion; and •general These investments may not result in increased revenue growth in our business. If we are unable to maintain or increase our revenue at a rate sufficient to offset the expected increase in our costs, our business, financial position, and results of operations will be harmed, and we may not be able to achieve or maintain profitability over the long term. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays, and other unknown factors that may result in losses in future periods. If our revenue growth does not meet our expectations in future periods, our business, financial position and results of operations may be harmed, and we may not achieve or maintain profitability in the future. important that our customers renew or expand their subscriptions with us. Whether our customers renew or expand their subscriptions with us may be impacted by a number of factors, including business strength or weakness of our customers, customer usage, customer satisfaction with our products and platform capabilities and customer support, our prices, the capabilities and prices of competing products, mergers and acquisitions affecting our customer base, consolidation of affiliates’ multiple paid business accounts into a single paid business account, The reliability and continuous availability of our platform is critical to our success. However, complex software such as ours can contain errors, defects, security vulnerabilities or software bugs that, despite testing by us, are difficult to detect and correct, particularly when such vulnerabilities are first introduced or when new versions or enhancements of our platform are released. Real or perceived errors, defects, security vulnerabilities or software bugs in our products could result in reputational harm, reduce the demand for our products and expose us to breach of contract claims, regulatory fines and related liabilities. correct. fundamentally change our business activities and practices in response to a security breach or related regulatory actions or litigation, which could have an adverse effect on our business. For example, in March 2023, our platform experienced widespread outages across multiple products and regions, which was substantially resolved in approximately a day. fire, flood, severe storm, earthquake, power loss, telecommunications failures, outbreaks of contagious diseases, terrorist or other attacks, and other similar events beyond our control could negatively affect our cloud-based products. A prolonged service disruption affecting our cloud-based solution for any of the foregoing reasons would negatively impact our ability to serve our customers and could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers or otherwise harm our business. We may also incur significant costs for using alternative equipment or taking other actions in preparation for, or in reaction to, events that damage the third-party hosting services we use. •fluctuations in demand for or pricing of our platform and products; •fluctuations in usage of our platform and products; •our ability to attract new customers; •our ability to retain our existing customers; •customer expansion rates and the pricing and quantity of subscriptions renewed; •the pricing of subscriptions from customers in our cloud-provider marketplaces; •timing and amount of our investments to expand the capacity of our third-party cloud infrastructure providers; •seasonality driven by industry conferences; •the investment in new products and features relative to investments in our existing infrastructure and products; •the timing of our customer purchases; •fluctuations or delays in purchasing decisions in anticipation of new products or enhancements by us or our competitors; •changes in customers’ budgets and in the timing of their budget cycles and purchasing decisions; •our ability to control costs, including our operating expenses; •the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including commissions; •the amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments and other non-cash charges; •the amount and timing of costs associated with recruiting, training and integrating new employees and retaining and motivating existing employees; •the effects of acquisitions and their integration; •general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers participate, including those •the impact of new accounting pronouncements; •changes in regulatory or legal environments that may cause us to incur, among other elements, expenses associated with compliance; •changes in the competitive dynamics of our market, including consolidation among competitors or customers; and •significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our products and platform capabilities. officers, or the failure by our executive team to effectively work with our employees and lead our company, could harm our business. We also are dependent on the continued service of our existing software engineers because of the complexity of our products and platform capabilities. •ability to provide unified, real-time observability of IT environments; •ability to operate in dynamic and elastic environments; •extensibility across the enterprise, including development, operations and business users; •propensity to enable collaboration between development, operations and business users; •ability to monitor any combination of public clouds, private clouds, on-premise and multi-cloud hybrids; •ability to provide advanced analytics and machine learning; •ease of deployment, implementation and use; •breadth of offering and key technology integrations; •performance, security, scalability and reliability; •quality of service and customer satisfaction; •total cost of ownership; and •brand recognition and reputation. future resulting in possible significant operational costs for compliance and risk to our business. In addition, new technologies we use in our products or in our business, like AI and machine learning, may also subject us to new or enhanced governmental or regulatory scrutiny, litigation, ethical concerns, or other complications that could adversely affect our business, reputation, or financial results. companies and data protection authorities. Under the EU GDPR, companies may face temporary or definitive bans on data processing and other corrective actions, significant monetary fines, and private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests. next several years. might result in substantial costs and may divert management’s attention and resources, which might seriously harm our business, financial condition and results of operations. Insurance might not cover such claims, might not provide sufficient payments to cover all the costs to resolve one or more such claims, and might not continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs, potentially harming our business, financial position and results of operations. •changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates; •changes in tax laws, tax treaties, and regulations or the interpretation of them, including changes to IRC Section 174 under the U.S. Tax Cuts and Jobs Act and the Inflation Reduction Act; •changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business; •the outcome of current and future tax audits, examinations, or administrative appeals; and •limitations or adverse findings regarding our ability to do business in some jurisdictions. or interpretations could have a significant effect on our reported results of operations and could affect the reporting of transactions already completed before the announcement of a change. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon, misappropriating or otherwise violating our intellectual property rights. •cease selling or using products or services that incorporate the intellectual property rights that we allegedly infringe, misappropriate or violate; •make substantial payments for legal fees, settlement payments or other costs or damages; •obtain a license, which may not be available on reasonable terms or at all, to sell or use the relevant technology; or •redesign the allegedly infringing products to avoid infringement, misappropriation or violation, which could be costly, time-consuming or impossible. that the occurrence of infringement claims is likely to grow as the market for our platform and products grows. Accordingly, our exposure to damages resulting from infringement claims could increase and this could further exhaust our financial and management resources. •slower than anticipated availability and adoption of cloud and hybrid IT infrastructures by international businesses; •changes in a specific country’s or region’s political or economic conditions; •the need to adapt and localize our products for specific countries; •greater difficulty collecting accounts receivable and longer payment cycles; •potential changes in trade relations, sanctions, regulations, or laws; •unexpected changes in laws, regulatory requirements, or tax laws; •more stringent regulations relating to privacy and data security and the unauthorized use of, or access to, commercial and personal information, particularly in •differing and potentially more onerous labor regulations, especially in Europe, where labor laws are generally more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations in these locations; •challenges inherent in efficiently managing, and the increased costs associated with, an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs that are specific to each jurisdiction; •potential changes in laws, regulations and costs affecting our U.K. operations and local employees due to Brexit; •difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems; •increased travel, real estate, infrastructure, and legal compliance costs associated with international operations; •currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we chose to do so in the future; •limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; •laws and business practices favoring local competitors or general market preferences for local vendors; •limited or insufficient intellectual property protection or difficulties obtaining, maintaining, protecting or enforcing our intellectual property rights, including our trademarks and patents; •political instability, •an outbreak of a contagious disease, which may cause us or our third-party providers and/or customers to temporarily suspend our or their respective operations in the affected city or country; •exposure to liabilities under anti-corruption and anti-money laundering laws, including the FCPA, U.S. bribery laws, the UK Bribery Act, and similar laws and regulations in other jurisdictions; and •adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash. interest, and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations. Our financial statements could fail to reflect adequate reserves to cover such a contingency. •actual or anticipated fluctuations in our financial condition or results of operations; •variance in our financial performance from expectations of securities analysts; •changes in the pricing of subscriptions to our products; •changes in our projected operating and financial results; •changes in laws or regulations applicable to our platform and products; •announcements by us or our competitors of significant business developments, acquisitions, or new offerings; •significant data breaches, disruptions to or other incidents involving our software; •our involvement in litigation; •future sales of our Class A common stock by us or our •changes in senior management or key personnel; •the trading volume of our Class A common stock; •changes in the anticipated future size and growth rate of our market; and •general economic and market conditions. conversion of shares of our Class B common stock into shares of our Class A common stock has had and will continue to have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their Class B shares. •authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our Class A common stock; •require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; •specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer; •establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; •establish that our board of directors is divided into three classes, with each class serving three-year staggered terms; •prohibit cumulative voting in the election of directors; •provide that our directors may be removed for cause only upon the vote of at least 66 2/3% of our outstanding shares of voting stock; •provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and •require the approval of our board of directors or the holders of at least 66 2/3% of our outstanding shares of voting stock to amend our bylaws and certain provisions of our certificate of incorporation. forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions. an issuer not involving a public offering. applications. 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 I, Item 1A of this report. As the growth of our business has decelerated in recent quarters, our trailing 12-month dollar-based net retention rate has declined. platform. Tokyo. Years Ended December 31, 2020 2019 2018 (in thousands) Revenue $ 603,466 $ 362,780 $ 198,077 Cost of revenue 130,197 88,949 46,529 Gross profit 473,269 273,831 151,548 Operating expenses Research and development Research and development Research and development 210,626 111,425 55,176 Sales and marketing 213,660 146,657 88,849 General and administrative 62,756 35,889 18,556 Total operating expenses 487,042 293,971 162,581 Operating loss (13,773 ) (20,140 ) (11,033 ) Other (expense) income, net: Interest expense Interest expense Interest expense (30,434 ) (32 ) — Interest income and other income, net 21,985 4,196 793 Other (expense) income, net (8,449 ) 4,164 793 Loss before provision for income taxes (22,222 ) (15,976 ) (10,240 ) Provision for income taxes (2,325 ) (734 ) (522 ) Net loss $ (24,547 ) $ (16,710 ) $ (10,762 ) Years Ended December 31, 2020 2019 2018 (in thousands) Cost of revenue $ 1,794 $ 582 $ 287 Research and development 38,008 7,972 1,641 Sales and marketing 20,467 5,538 1,910 General and administrative 14,105 4,942 1,406 Total $ 74,374 $ 19,034 $ 5,244 Years Ended December 31, 2020 2019 2018 (in thousands) Cost of revenue $ 943 $ 752 $ 511 Years Ended December 31, 2020 2019 2018 (in thousands) Research and development $ (2,729 ) $ (2,344 ) $ — Sales and marketing (449 ) (397 ) — General and administrative (2,383 ) (2,266 ) — Total $ (5,561 ) $ (5,007 ) $ — Years Ended December 31, 2020 2019 2018 (in thousands) Cost of revenue $ 187 $ — $ — Research and development 2,836 1,157 — Sales and marketing 3,756 284 — General and administrative 839 19 — Total $ 7,618 $ 1,460 $ — 2020,2023, we had approximately 14,20027,300 customers in over 100150 countries. Our platform provides the following key benefits to our customers:and log data, and data from integrations in our unified platform, our customers are able to quickly isolate the root cause of application issues in one place where they otherwise would be required to spend hours trying to investigate using multiple tools. The reduction in mean time to detection and mean time to resolution helps our customers avoid lost revenues and enhance customer experience.14,20027,300 customers as of December 31, 20202023 represents a significant opportunity for further sales expansion. We plan to continue to increase sales within our existing customer base through increased usage of our platform and the cross selling of additional products.UserDigital Experience Monitoring and Network Performance Monitoring, and in 2020 we launched Security Monitoring,Cloud SIEM, Continuous Profiler and Incident Management.also modular and includes infrastructure monitoring, application performance monitoring, log management, user experience monitoring, network performance monitoring, cloud and application security, monitoring,developer-focused observability, and incident management, as well as a range of shared features such as sophisticated dashboards, advanced analytics, collaboration tools, workflow automation, and alerting capabilities. EachMany of our products isare fully capable stand-alone so clients can choose to use different capabilities incrementally or deploy many at once. When deployed together, our products automatically enable cross-correlation, which in turn allows customers to gain greater levels of visibility across their infrastructure and applications to more rapidly troubleshoot problems.7hundreds ofmore than 700 integrations to seamlessly aggregate metrics and events across all of the systems and services that power digital businesses. Our easy-to-use platform is deployed through a self-service installation process. Users can derive value from our platform within minutes without any specialized training or heavy implementation or customization. Customers can easily expand their usage of our platform on a self-serve basis, adding hosts or volumes of data monitored. Our platform is massively scalable currently monitoring more than tens of trillion events a day and millions of servers and containers.logs,other data, allowing for a simple, seamless deployment experience for the customers. We ingest massive amounts of complex data and normalize it. The volume of data associated with combining infrastructure, APM and log management provides for a dramatically more robust data set than any of the individual data sources would provide on their own.400+•700+ Fully Supported Integrations. We offer more than 400700 out-of-the-box integrations including public cloud, private cloud, on-premise hardware, databases and third-party software. the following products that can be used individually or as a unified solution, and includes a Marketplace where customers can access products built by our partners on top of the Datadog platform. Our products include:infrastructure monitoringInfrastructure Monitoring platform provides real-time monitoring of IT infrastructure across public cloud, private cloud and hybrid environments, as well as in containers and serverless architectures, ensuring performance, and availability of applications. All infrastructure data is located in one repository with automatic correlation, regardless of environment size or rate of change, to provide a fulsome view of everything that is occurring across the IT ecosystem.DistributedCode-level distributed tracing across microservices, hosts, containers and serverless computing functions allows our customers to gain deep insights into application and code performance.
•Log Management. Log Management for applications, systems and cloud platforms ingests data, creates indexes and enables querying of logs with visualizations and alerting to provide immediate insight into any performance issues. Logging Without Limits® decouples the cost of log ingestion from processing, allowing customers to cost effectively collect a massive volume of logs and selectively process those they need to monitor.•Log Management. Log management for applications, systems and cloud platforms ingests data, creates indexes and enables querying of logs with visualizations and alerting to ensure immediate insight into any performance issues. Logging Without LimitsTM decouples the cost of log ingestion from processing, allowing customers to cost effectively collect a massive volume of logs and selectively process those they need to monitor.8User•Digital Experience Monitoring. User experience monitoring Digital Experience Monitoring brings visibility up the stack to monitor the digital experience of the customeruser and is comprisedconsists of two products – Synthetics, and Real User Monitoring (RUM), or RUM.and Session Replay. Synthetics provides user-experience monitoring of applications and API endpoints via simulated AI-powered user requests to proactively track application performance and ensure uptime. RUM provides analysis and visualization of the performance of front-endweb browser and mobile applications as experienced by all actual users. Performance Monitoring.Network Performance Monitoring or NPM, enables the analysis and visualization of the flow of network traffic in on-premise, cloud-based or hybrid environments. Itenvironments, helping customers determine when the network is very lightweight, allowing customers to monitor the flowroot cause of network traffic without sacrificing performance. Additionally, our NPM offersan issue. Network Device Monitoring seamlessly consolidates monitoring and troubleshooting of network hardware, such as routers, firewalls, switches, load balancers, and firewalls. NPM allows the mapping of full-stack dependencies, and is fully integrated with the Datadog platform.Security Monitoring. Security monitoring allows customers to detect threats in real time and investigate security signals across metrics, traces, and logs. It provides the full engineering organization, including Dev, Ops, and security teams, visibility into common data sources, in order to better operationalize IT security. Complementing our generally available Security Monitoring, Compliance Monitoring is currently available in beta to proactively notify misconfigurations and compliance drift, and runtime security is also available in beta to detect threats at the infrastructure and workload level.managementManagement allows users to declare incidents, investigate root cause and dependencies, collaborate around a shared view of the incident, follow to resolution, and auto-generate post-mortem documentations, all within the Datadog platform.Continuous Profiler. Continuous profiler measures code level performance•Application Security Management. Application Security Management (ASM) delivers continuous, real-time visibility into attacks that target customers' web applications, serverless applications, and APIs. ASM is automatically integrated with APM distributed traces and code-level context, empowering Dev, Ops, and security teams to build and run secure applications in any environment through an always-on,production. Application Vulnerability Management continuously monitors customers' production environments for both code-level and low overhead solution. Thisopen-source vulnerabilities.quickly identifydetect threats in real time and optimizeinvestigate security signals across metrics, traces, logs, and other data. It provides the most resource-consuming parts in application codeengineering organization, including Dev, Ops, and security teams, visibility into common data sources, in order to improve mean timebetter operationalize IT security.resolution, enhance user experiencesupport compliance with GDPR, HIPAA, CCPA, and reduce cloud provider cost.more.2020,2023, we had 1,085approximately 2,400 employees in our sales and marketing organization, including sales development, field sales, sales engineering, technical solutions, business development, sales operations, sales strategy, customer success and marketing personnel. We intend to continue to invest in our sales and marketing capabilities to capitalize on our market opportunity.2020,2023, we had 927approximately 2,400 employees in our research and development organization. We intend to continue to invest in our research and development capabilities to extend our platform and products.9With•with respect to on-premise infrastructure monitoring, we compete with diversified technology companies and systems management vendors including IBM, Microsoft Corporation, Micro Focus International plc, BMC Software, Inc. and Broadcom.With•with respect to APM, we compete with Cisco Systems, Inc., New Relic, Inc. and Dynatrace Software Inc.With•with respect to Log management,Management, we compete with Splunk Inc. and Elastic N.V.With•with respect to Cloud monitoring, we compete with native solutions from cloud providers such as Amazon Web Services, or AWS, Microsoft Azure, and Google Cloud Platform, or GCP, and Microsoft Azure.2020,2023, we had 2,185approximately 5,200 employees operating across 2833 countries. Approximately 37%39% of our full-time employees as of that date were located outside of the United States, 42%36% of whom were located in France. In countries in which we operate, such as France, we are subject to, and comply with, local labor law requirements, which may automatically make our employees subject to industry-wide collective bargaining agreements. We have not experienced any work stoppages and we consider our relations with our employees to be good. 10All of us at Datadog are driven by the desire to deliver a product that our customers love. In order to do that, we that our employees love; one that promotes a healthy work-life balance, career growth, low drama, and a friendly office culture with plentyenvironment. As part of fun (virtual) activitiesour commitment to ensure our teams remain close in these unprecedented times. To make sureemployees, we periodically assess our culture remains positive and strong, we conductby conducting global engagement surveys periodically to gain a better understanding of what is important to our employees. The areas in which we arehave been rated most successfulfavorable include the transparencyemployee pride and accessibility of our leadership, support for employees during COVID-19, the strength of our product offerings,belief in Datadog's mission and opportunities for employee growthpurpose and development. fosters a strong learning culturepromotes professional growth by offering individual- and team-specific training on an ongoing basis, as well as a wide range of learning programs delivered by our global Talent Development team. We also provide robust manager training that shares effective tools and frameworks around recruiting, managing, and developing team members.mentoring, coaching, and external development.Datadog strives for ancommunity, both inside and out of the office. Internally, we offer trainingwork spaces for employees around unconscious bias,with diverse backgrounds and otherexperiences. Our diversity and inclusion-related topics designed to createinclusion programming includes a culturefocus on training workshops and resources that increase education, promote moments of belonging. rights, including our proprietary technology, software, know-how and brand. We use open source software in our services. Our proprietary API libraries and the agent used by customers to uploadsend data to our proprietary platform are licensed by us on an open source basis.2020,2023, we own one issued patent and sixthirty-seven patents globally, five patent applications pending for examination in the United States, fivethree pending PCT applications, and nosix pending foreign patents or patent applications. The pending U.S. patent applications, if issued, would be scheduled to expire in 2038between 2039 and 2039.2043. Despite our pending U.S. patent applications, there can be no assurance that our patent applications will result in issued patents. As of December 31, 2020,2023, we own fourseven registered trademarks in the United States and twenty-nineone hundred sixteen registered trademarks in various non-U.S. jurisdictions. However, as we have expanded internationally, we have been unable to register or obtain the exclusive right to use the Datadog trademark in certain jurisdictions, and as we continue to expand may face similar issues in other jurisdictions.1112Related to the “COVID-19” PandemicThe ongoing COVID-19 pandemic and any related economic downturn could negatively impactAssociated with our business, financial condition and results of operations.The ongoing COVID-19 pandemic may prevent us or our employees, customers, partners, suppliers or vendors or other parties with whom we do business from conducting certain marketing and other business activities for an indefinite period of time, which could adversely impact our business, financial position and results of operations. Further, in response to the COVID-19 pandemic, many state, local and foreign governments have put in place, and others in the future may put in place, quarantines, executive orders, shelter-in-place orders and similar government orders and restrictions in order to control the spread of the disease. Such orders or restrictions, or the perception that such orders or restrictions could occur or reoccur, have resulted in business closures, work stoppages, slowdowns and delays, work-from-home policies, travel restrictions and cancellation of events, among other effects that could negatively impact productivity and disrupt our operations or those of our customers, partners, suppliers or vendors or other parties with whom we do business.In light of the uncertain and rapidly evolving situation relating to the spread of COVID-19 and in compliance with recent shelter-in-place orders and other government executive orders directing that all non-essential businesses close their physical operations, we have taken measures intended to help minimize the risk of the virus to our employees and the communities in which we participate. These measures include temporarily suspending all non-essential travel worldwide for our employees, canceling, postponing or holding virtually any Datadog events and discouraging employee attendance at any industry events or in-person work-related meetings. In addition, although we have recently and may continue to selectively reopen certain of our offices in compliance with applicable government orders and guidelines, the vast majority of our employees continue to work remotely. We have a distributed workforce and our employees are accustomed to working remotely and working with others who are working remotely. However, the temporary suspension of travel and in-person meetings could negatively impact our marketing efforts, the length or variability of our sales cycles, our international expansion efforts or the length of our average recruiting cycle for employees across the organization. Further, operational or other challenges could arise as we and our customers, partners, suppliers and vendors and other parties with whom we do business continue to operate via a remote workforce. In addition, our management team has, and will likely continue, to spend significant time, attention and resources monitoring the COVID-19 pandemic and seeking to manage its effects on our business and workforce.COVID-19 could also adversely affect workforces, economies and financial markets globally, potentially leading to an economic downturn and a reduction in customer spending on our solutions or an inability for our customers, partners, suppliers or vendors or other parties with whom we do business to meet their contractual obligations. While it is not possible at this time to predict the duration and extent of the impact that COVID-19 could have on worldwide economic activity and our business in particular, the continued spread of COVID-19 and the measures taken by governments, businesses and other organizations in response to COVID-19 could adversely impact our business, financial condition and results of operations. For example, during the second quarter of 2020, we experienced some impact to the rate of usage growth from our existing customers. In addition, we have provided and may continue to provide guidance about our business and future operating results, which is based on certain assumptions, estimates and expectations as of the date such guidance is given. Guidance is necessarily speculative in nature, and is inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control, such as the global economic uncertainty and financial market conditions caused by the COVID-19 pandemic. If we were to revise or fail to meet our announced guidance or expectations of analysts as a result of these factors, the price of our Class A common stock could be negatively affected. Moreover, to the extent the COVID-19 pandemic adversely affects our business, financial condition and results of operations, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, including but not limited to, those related to our ability expand within our existing customer base, acquire new customers, develop and expand our sales and marketing capabilities and expand internationally.13operations.(suchsuch as the ongoing COVID-19 pandemic), pandemic, warfare and terrorist attacks on the United States, Europe, the Asia Pacific region or elsewhere, such as the conflict in the Middle East, 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. In addition, ourOur competitors, many of whomwhich are larger and have greater financial resources than we do, may respond to challenging market conditions by lowering prices in an attempt to attract ourIn addition, theThe 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.Risks Associated with our Growth$603.5$2,128.4 million, $362.8$1,675.1 million and $198.1$1,028.8 million for the years ended December 31, 2020, 20192023, 2022 and 2018,2021, 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:administration, including increased legal and accounting expenses associated with being a public company.14generatedhave experienced net losses of $(24.5) million, $(16.7) millionin several recent fiscal years and $(10.8) million for the years ended December 31, 2020, 2019 and 2018, respectively. Asas of December 31, 2020,2023, we had an accumulated deficit of $148.2$153.7 million. While we have experienced significant revenue growth in recent periods and periods of or achieve or maintain profitability in the future. We also expect our costs and expenses to increase in future periods, which could negatively affect our future results of operations if our revenue does not increase. In particular, we intend to continue to expend significant funds to further develop our platform, including by introducing new products and functionality, and to expand our inside and field sales teams and customer success team to drive new customer adoption, expand use cases and integrations, and support international expansion. We will also face increased compliance costs associated with growth and the expansion of our customer base, and being a public company.base. Our efforts to grow our business may be costlier than we expect, or the rate of our growth in revenue may be slower than we expect, and we may not be able to increase our revenue enough to offset our increased operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described herein, and unforeseen expenses, difficulties, complications or delays, and other unknown events. If we are unable to achieve and sustain profitability, the value of our business and Class A common stock may significantly decrease.We were founded in June 2010. semi-annualsemiannual and multi-year. Our customers have no obligation to renew their subscriptions for our products after the expiration of their subscription period. In order for us to maintain or improve our results of operations, it is15the effects of global economic conditions, including due to the global economic uncertainty and financial market conditions caused by the COVID-19 pandemic, or reductions in our customers’ spending on IT solutions or their spending levels generally. In addition, theThese factors impacting our ability to sell additional subscriptions and products to our customers may be exacerbated by unfavorable conditions in the COVID-19 pandemic.economy, see “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” above. These factors may also be exacerbated if, consistent with our growth strategy, our customer base continueshighly customizablehighly-customizable application software. In addition, as our market matures, our products evolve, and competitors introduce lower cost or differentiated products that are perceived to compete with our platform and products, our ability to sell subscriptions for our products could be impaired. Similarly, our subscription sales could be adversely affected if customers or users within these organizations perceive that features incorporated into competitive products reduce the need for our products or if they prefer to purchase other products that are bundled with solutions offered by other companies that operate in adjacent markets and compete with our products. As a result of these and other factors, we may be unable to attract new customers, which may have an adverse effect on our business, financial condition and results of operations.cyber attacks,cyber-attacks, ransomware, security incidents, or security breaches, or if unauthorized parties otherwise obtain access to or otherwise compromise 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.service,services, to operate our business, for legal and marketing purposes, and for other business-related purposes. We may use third-party service providers and sub-processors to help us deliver services to our customers. These vendors may store or process personal information on our behalfor our customers’ data,customers' data. Consequently, we may be subject to significant litigation, indemnity obligations, fines, penalties, disputes, investigations and other liabilities. We have previously and may in the future become the target of cyber-attacks by third parties seeking to gain unauthorized access to and exfiltrate our or our customers’ data, including confidential and personal information, from certain of our infrastructure resources, or to disrupt our ability to provide our services. For example, in July 2016 an unidentified third party gained unauthorized access to, and exfiltrated data from, certain of our infrastructure resources, including a database that stored our customers’ credentials for our platform and for third-party integrations. Some of the customer credentials accessed and exfiltrated included confidential and personal information. As a precautionary measure following this event, we reset customer passwords and instructed customers to revoke credentials that had been shared with us. In addition, many of our employees are temporarily working remotely,16due to the COVID-19 pandemic, which may pose additional data security risks (including, for example, an increase in phishing and spammalicious emails experiencedwe began experiencing during 2020).phishing and ransomware attacks)phishing), malicious code, denial-of-service attacks, credential harvesting and general hacking have become more prevalent in our industry, particularly against cloud services. In addition,Ransomware attacks, including those from organized criminal threat actors, nation-states and nation-state supported actors, are becoming increasingly prevalent and can lead to significant interruptions, delays, or outages in our operations, loss of data (including customer data), loss of income, significant extra expenses to restore data or systems, reputational loss and the diversion of funds. To alleviate the financial, operational and reputational impact of a ransomware attack it may be preferable to make extortion payments, but we may be unwilling or unable to do so (including, for example, if applicable laws or regulations prohibit such payments). Similarly, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain have not been compromised or that they do not directly control contentcontain exploitable defects or bugs that could result in a breach of or disruption to our customers store in our products. If our customers use our products forplatform, systems and networks or the transmission or storagesystems and networks of personal informationthird parties that support us and our services. Despite the security measurescontrols we have in place, such attacks are or are believedvery difficult to have been breached as a result of third-party action, employee error, malfeasance or otherwise, our reputation could be damaged, our business may suffer, and we could incur significant liability. In addition, our remediation efforts may not be successful.We also process, store and transmit our own data as part of our business and operations. This data may include personal, confidential or proprietary information. avoid.Because many different security vulnerabilities exist and exploits of such vulnerabilities continue to evolve, we may be unable to anticipate attempted security breaches, react in a timely manner or implement adequate preventative measures. Among other things, our applications, systems, networks, software and physical facilities could be breached, or the personal or confidential information that we store could be otherwise compromised due to employee error or malfeasance, if, for example, third parties fraudulently induce our employees or our members to disclose information or user names and/or passwords, or otherwise compromise the security of our networks, systems and/or physical facilities. Additionally, employees or service providers may inadvertently misconfigure resources or misdirect certain communications that lead to security incidents for which we must then expend effort and incur expenses to correct.use third-partyalso process, store and transmit our own data as part of our business and operations. This data may include personal, confidential or proprietary information. We may expend significant resources, fundamentally change our business activities and practices, or modify our operations or information technology systemsin an effort to protect against security incidents and services in a variety of contexts, including, without limitation, encryptionto mitigate, detect, and authentication technology, employee email, content delivery to customers, back-office support, credit card processingremediate actual and other functions. Although we have developed systems and processes that arepotential vulnerabilities.protect customer datadetect, mitigate, and prevent data lossremediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties upon which we rely). We may not, however, detect and remediate all such vulnerabilities on a timely basis. Among other things, our applications, systems, networks, software, other computer assets and physical facilities could be breached or could otherwise malfunction or fail, or the personal or confidential information that we store could be otherwise compromised due to employee error or malfeasance, if, for example, third parties fraudulently induce our employees or our members to disclose information or user names and/or passwords, or otherwise compromise the security breaches, includingof our networks, systems and/or physical facilities. Additionally, from time to time employees or service providers may inadvertently misconfigure resources or misdirect certain communications, leading to security vulnerabilities or incidents that we must then expend effort and processes designedincur expenses to reduce the impact of a security breach at a third-party service provider, such measures cannot provide absolute security.(“HIPAA”),or HIPAA, requiring companies to notify individuals, regulatory authorities, and others of security breaches involving certain types of data. Such mandatory contractual and legal disclosures are costly, could lead to negative publicity, may cause ourOurApplicable laws, our contracts, our representations, or industry standards may require us to use industry-standard or reasonable measures to safeguard sensitive personal information or confidential information. A security breach could lead to claims by our customers, or other relevant stakeholders, that we have failed to comply with such legal or contractual obligations. As a result, we could be subject to legal action or our customers could end their relationships with us. Further, there can be no assurance that any limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages.1718products. Manyproducts, as users of our free tier may not lead to them or others within their organization purchasing and deploying our platform and products.platform. To the extent that users do not become, or we are unable to successfully attract paying customers, we will not realize the intended benefits of these marketing strategies and our ability to grow our revenue will be adversely affected.19related toimpacted by the ongoing COVID-19 pandemic;For example, the full impact of the COVID-19 pandemic is unknown at this time, but could result in adverse changes in our results of operations for an unknown period of time as the virus and its related social and economic impacts spread. If our quarterly results of operations fall below the expectations of investors and securities we enter into a higher percentage of subscription agreements with new customers and renewals with existing customers in the fourth quarter of the year. We believe that this results from the procurement, budgeting, and deployment cycles of many of our customers, particularly our enterprise customers. We expect that this seasonality will continue to affect our bookings and our results of operations in the future, and might become more pronounced as we continue to target larger enterprise customers.the majoritya large portion of our revenue ratably over the term of the subscription agreement, 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 addition, fluctuations in monthly subscriptions based on usage could affect our revenue on a period-over-period basis. If our quarterly results of operations fall below the expectations of investors and securities analysts who follow our stock, the price of our Class A common stock would decline substantially, and we could face costly lawsuits, including securities class actions. President and Chief Technology Officer, and David Obstler, our Chief Financial Officer, as well as our other key employees in the areas of research and development and sales and marketing functions. From time to time, there may be changes in our executive management team or other key employees resulting from the hiring or departure of these personnel. Our executive officers and other key employees are employed on an at-will basis, which means that these personnel could terminate their employment with us at any time. The loss of one or more of our executive20From time to time, weWe have experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources than we have. If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have breached their legal obligations, resulting in a diversion of our time and resources. In addition, prospective and existing employees often considerdevelop the infrastructure of a public company,expand globally, we may find it difficult to maintain these important aspects of our culture.culture particularly given remote or hybrid work arrangements, which increased as a result of the COVID-19 pandemic. If we fail to maintain our company culture, our business and competitive position may be harmed.21MacroeconomicIndustryCompetitive Risksthatto keep pace with rapid technological and regulatory change, or if new technologies emerge that are able to deliver competitive products at lower prices, more efficiently, more conveniently, or more securely than our products, our business, financial condition and results of operations could be adversely affected.400700 out-of-the-box integrations to assist customers in deploying Datadog, and we need to continuously modify and enhance our products to adapt to changes and innovation in existing and new technologies to maintain and grow our integrations. We expect that the number of integrations we will need to support will continue to expand as developers adopt new software platforms, and we will have to develop new versions of our products to work with those new platforms. This development effort may require significant engineering, sales and marketing resources, all of which would adversely affect our business. Any failure of our products to operate effectively with future infrastructure platforms and technologies could reduce the demand for our products. If we are unable to respond to these changes in a cost-effective manner, our products may become less marketable and less competitive or obsolete, and our business, financial condition and results of operations could be adversely affected.Micro Focus International plc, BMC Software, Inc. and Computer Associates International, Inc.SolarWinds Corporation. With respect to APM, we compete with companies including Cisco Systems, Inc., New Relic, Inc. and Dynatrace Software Inc. With respect to log management, we compete with companies including Splunk Inc. and Elastic N.V. With respect to cloud monitoring, we compete with native solutions from cloud providers such as AWS, GCP and Microsoft Azure. In addition, we may increasingly choose to allow these third-party hosting providers to offer our solutions directly through their customer marketplaces. An increasing number of sales through cloud provider marketplaces could reduce both the number of customers with whom we have direct commercial relationships as well as our profit margins on sales made through such marketplaces.2223 and standards, and contractual obligations related to data privacy and security. Actual or perceived failure by us or our third-party service providers to comply with such laws, regulations, standards, or contractual obligations could harm our business.contractualother applicable obligations regarding the protection of confidentiality and appropriate use of personal information, confidential information, and other proprietary information.information that we, our third-party service providers or other partners process. We are subject to a variety of federal, state, local and internationalforeign laws, directives, and regulations, and industry standards, relating to the collection, use, retention, security, disclosure, transfer and other processing of personal information. The regulatory framework for and users' expectations around privacy and security issues worldwide is rapidly evolving and as a result, implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future.The data protection landscape is currently unstable, resulting in possible significant operational costs for internal compliance and risk to our business. TheFor example, the European Economic Area, or EEA, Switzerland and the United Kingdom, collectively “Europe,” adopted theUnion's General Data Protection Regulation, or EU GDPR, which contains numerous requirements and changes from previously existing law, including more robust obligations on data processors and heavier documentation requirements for data protection compliance programs by companies.data protection laws includingEconomic Area (EEA) and the GDPR also generally prohibitUnited Kingdom have significantly restricted the transfer of personal information from Europedata to the United States and most other countries unlesswhose privacy laws it generally believes are inadequate. Although there are currently various mechanisms that may be used to transfer personal data from the partiesEEA and United Kingdom to the United States in compliance with law, such as the EEA standard contractual clauses, the United Kingdom’s International Data Transfer Agreement/Addendum, and the EU-U.S. Data Privacy Framework and the United Kingdom extension thereto (which allows for transfers for relevant U.S.-based organizations who self-certify compliance and participate in the Framework), these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States.establishedenacted or are considering enacting similar cross-border data transfer restrictions and laws requiring local data residency, and strict limitations to the processing of personal information, which could increase the cost and complexity of delivering our services and operating our business. For example, Brazil enacted the General Data Protection Law, New Zealand enacted the New Zealand Privacy Act, China enacted its Personal Information Protection Law, and Canada introduced the Digital Charter Implementation Act.legal basisvalid compliance mechanism for the transfercross-border personal information transfers, we may face increased exposure to regulatory actions, substantial fines and implemented specific safeguards to protect the transferred personal information. One of the primary mechanisms allowing U.S. companies to importinjunctions against processing or transferring personal information from Europe in compliance with the GDPR has been certification to the EU-U.S. Privacy Shield and Swiss-U.S. Privacy Shield frameworks administered by the U.S. Department of Commerce. However, the Court of Justice of the European Union, in its recent “Schrems II” ruling, invalidated the EU-U.S. Privacy Shield framework. The Swiss Federal Data Protection and Information Commissioner also recently opined that the Swiss-U.S. Privacy Shield is inadequate for transfers of data from Switzerland to the United States. Authorities in the United Kingdom may similarly invalidate use of the EU-U.S. Privacy Shield as mechanisms for lawful personal information transfers from the U.K. to the United States.or elsewhere. Inability to import personal information from Europeother jurisdictions to the United States may decrease demand forsignificantly and negatively impact our products and services as our customers that are subject to the GDPR may seek alternatives that do not involve personal information transfers out of Europe.24The Schrems II decision also raised questions about whether one of the primary alternatives to the EU-U.S. Privacy Shield, namely, the European Commission’s Standard Contractual Clauses, or “SCCs,” can lawfully be used for personal information transfers from Europe to the United States or most other countries. At present, there are few, if any, viable alternatives to the SCCs. The European Commission recently proposed updates to the SCCs, and additional regulatory guidance has been released that seeks to imposes additional obligations on companies seeking to rely on the SCCs. As such, any transfersbusiness operations, including by us or our third-party service providers of personal information from Europe pursuant to SCCs may not comply with European data protection law, may increase our exposure to the GDPR’s heightened sanctions for violations of its cross-border data transfer restrictions, and may result in lowerlowering sales on our platform because ofdue to the difficulty of establishing a lawful basismechanism for personal information transfers out of Europe. While weEurope or other jurisdictions, or requiring us to increase our data processing capabilities in Europe or elsewhere at significant expense. Some European regulators have taken stepsordered certain companies to mitigatesuspend or permanently cease certain transfers out of Europe for allegedly violating the impact on us with respectGDPR’s cross-border data transfer limitations.transfers of data, such as implementing SCCs, the efficacycookies and longevity of these transfer mechanisms remains uncertain. Moreover, as a result of the Schrems II decision, data exporters may now have an obligation to assess, analyzesimilar tracking technologies, electronic communications, and verify on a case-by-case basis that personal information will be adequately protected in the country to which it is being exported, which increases the difficult of selling to European customers and may lead to longer sales cycles.Further, the United Kingdom’s decision to leave the European Union, often referred to as Brexit, has created uncertainty with regard to data protection regulation in the United Kingdom.marketing. In particular, it is unclear whether the transfer of personal information from the EU toand the United Kingdom, regulators are increasingly focusing on compliance with requirements related to the online behavioral advertising ecosystem and requirements around consent. It is anticipated that the ePrivacy Regulation will inreplace the future remain lawful undercurrent national laws that implement the GDPR. The United Kingdom-EU post-Brexit trade deal providesePrivacy Directive that transfersgoverns electronic communications. Outside of Europe, other laws and regulations, including legislative proposals, individual behavior and industry practices are increasingly resistant to the use of personal information to deliver targeted advertising, making certain online advertising activities more difficult and subject to additional scrutiny. For example, the United Kingdom will not be treated as restricted transfersCalifornia Consumer Privacy Act, or CCPA, grants California residents the right to opt-out of a non-EU country for a period of up to six months from January 1, 2021. However, unless the EU Commission makes an “adequacy finding” with respect to the United Kingdom before the end of that transition period, from that date the United Kingdom will be a “third country” under the GDPR and transferscompany’s sharing of personal information fromfor cross-context behavioral advertising purposes. Other comprehensive U.S. state privacy laws extend similar rights to residents. As a result of these developments, we may be required to change the EUway we market our products, which would impair our ability to the United Kingdom will require an “adequacy mechanism,” such as the SCCs.In addition to the GDPR, the European Commission has another draft regulation in the approval process, known as the Regulation on Privacy and Electronic Communications,reach new or ePrivacy Regulation, that would replace the current ePrivacy Directive. Originally planned to be adopted and implemented at the same time as the GDPR, the ePrivacy Regulation continues to be delayed. While the new legislation contains protections for those using communications services (for example, protections against online tracking technologies), the timing of its proposed enactment following the GDPR means that additional time and effort may need to be spent addressing differences between the ePrivacy Regulation and the GDPR. New rules related to the ePrivacy Regulation may negatively impact our platform and products and our relationships with ourexisting customers. Following Brexit, it is unclear whether, and if so how, the United Kingdom will introduce any or all of the ePrivacy Regulation into law in the United Kingdom.the GDPRthese and the ePrivacy Regulation, when it becomes effective,other applicable laws may cause us to incur substantial operational costs or require us to change our business practices. Despite our efforts to bring practices into compliance before the effective date of the GDPR and ePrivacy Regulation,with all applicable laws, we may not be successful in our efforts to achieve compliance either due to internal or external factors such as resource allocation limitations or a lack of vendor cooperation. Non-compliance could result in proceedings against us by governmental entities, customers, data subjects or others. We may also experience difficulty retaining or obtaining new European or multi-national customers due to the legal requirements, compliance cost, potential risk exposure, and uncertainty for these entities, and we may experience significantly increased liability with respect to these customers pursuant to the terms set forth in our engagements with them. While we utilize a data center in the EEA to maintain certain customer data (which may include personal data)information) originating from the EEA, we may find it necessary to establish additional systems and processes to maintain such data in the EEA, which may involve substantial expense and distraction from other aspects of our business.Additionally, other countries outside of Europe have enacted or are considering enacting similar cross-border data transfer restrictions and laws requiring local data residency, and strict limitations to the processing of personal information, which could increase the cost and complexity of delivering our services and operating our business. In the past year, for example, Brazil enacted the General Data Protection Law, New Zealand enacted the New Zealand Privacy Act, China released its draft Personal Information Protection Law, and Canada introduced the Digital Charter Implementation Act.rapidly.rapidly, and we are, or may become, subject to numerous U.S. data privacy and security laws. In the United States, rules and regulationslaws governing data privacy and security include those promulgated under the authority of the Federal Trade Commission Act, the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the California Consumer Privacy Act, or CCPA, HIPAA, and numerous other state and federal laws relating to privacy and data security. Many state legislatures have adopted legislation that regulates how businesses operate online, including measuresregulatorylegal requirements.25which amends the CCPA, was approved by California voters on November 3, 2020 and is scheduled to gowent into effect on January 1, 2023. The CPRA would, among other things, amendamends the CCPA to give California residents the ability to limit the use of their sensitive information, provide additional penalties for CPRA violations concerning California residents under the age of 16, and establish a new California Privacy Protection Agency to implement and enforce the law. BothThese changes to the CCPA and CPRA could impact our business activities depending on how they are interpreted. These laws exemplify the vulnerability of our business not only to security incidents but also to the evolving regulatory environment related to the protection of personal informationinformation. Other states have enacted or proposed comprehensive privacy laws as well. For example, privacy laws in Colorado, Connecticut, Utah and protected health information. Some observersVirginia have noted thatrecently gone into effect and similar laws in other states, such as Delaware, Indiana, Iowa, Montana, Oregon, Tennessee, and Texas have been enacted and are expected to go into effect over the CCPA and CPRA could mark the beginning of a trend toward more stringent privacy legislation in the United States, which could increase our potential liability and adversely affect our business, the results of our operations, and our financial condition. and public censure, other claims and penalties, significant costs for remediation and damage to our reputation, we could be required to fundamentally change our business activities and practices or modify our products and platform capabilities, any of which could have an adverse effect on our business. In particular, plaintiffs have become increasingly more active in bringing privacy-related claims against companies, including class claims and mass arbitration demands. Some of these claims allow for the recovery of statutory damages on a per violation basis, and, if viable, carry the potential for monumental statutory damages, depending on the volume of data and the number of violations. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable privacy and data security laws, regulations, or contractual obligations, could result in additional cost and liability to us, damage our reputation, inhibit sales, and adversely affect our business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations, and contractual obligations that are applicable to the businesses of our customers may limit the use and adoption of, and reduce the overall demand for, our products. Privacy and data security concerns, whether valid or not valid, may inhibit market adoption of our products, particularly in certain industries and foreign countries. If we are not able to adjust to these changing laws, regulations, and contractual obligations, our business may be harmed.26and in doing sowhich may restrict our ability to sell into the government sector until we have attainedare able to comply with the revised certification.contracting requirements. Government demand and payment for our products are affected by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our products.27recently ruled in South Dakota v. Wayfair, Inc. et al, or Wayfair, that online sellers can be required to collect sales and use tax despite not having a physical presence in the buyer’s state. In response to Wayfair, or otherwise, states or local governments may adopt, or begin to enforce, laws requiring us to calculate, collect, and remit taxes on sales in their jurisdictions. A successful assertion by one or more states requiring us to collect taxes where we presently do not do so, or to collect more taxes in a jurisdiction in which we currently do collect some taxes, could result in substantial tax liabilities, including taxes on past sales, as well as penalties and interest. The imposition by state governments or local governments of sales tax collection obligations on out-of-state sellers could also create additional administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on our competitors, and decrease our future sales, which could have a material adverse effect on our business and results of operations.2020,2023, we had NOL carryforwards for federal and state income tax purposes of approximately $263.2$148.9 million and $177.5$206.4 million, respectively, which may be available to offset taxable income in the future, and which expire in various years beginning in 2031 for federal purposes and 20282026 for state purposes if not utilized. Unused U.S. federal NOLs for taxable years beginning before January 1, 2018, may be carried forward to offset future taxable income, if any, until such unused NOLs expire. Under current law, U.S. federal NOLs incurred in taxable years after December 31, 2017, can be carried forward indefinitely, but the deductibility of such U.S.futurepost-change taxable income. We may experience a future ownership change under Section 382 of the Code that could affect our ability to utilize the NOLs to offset our income. Furthermore, our ability to utilize NOLs of companies that we have acquired or may acquire in the future may be subject to limitations. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to reduce future income tax liabilities, including for state tax purposes. For these reasons, we may not be able to utilize a material portion of the NOLs reflected on our balance sheets, even if we attain profitability, which could potentially result in increased future tax liability to us and could adversely affect our operating results and financial condition.increasechange due to several factors, including:U.S. generally accepted accounting principles, or areis subject to interpretation by the Financial Accounting Standards Board, the SEC and various bodies formed to promulgate and interpret applicable accounting principles. A change in these principles28deferred contract costs,business combinations, and the valuation of our stock-based compensation awards, among others.internal-use software development costs. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock.secret laws,secrets, patents, copyrights, service marks, contractual restrictions, and other intellectual property laws and confidentiality procedures to establish and protect our proprietary rights. However, the steps we take to obtain, maintain, protect and enforce our intellectual property rights may be inadequate. We will not be able to protect our intellectual property rights if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property rights. If we fail to protect our intellectual property rights adequately, our competitors may gain access to our proprietary technology and develop and commercialize substantially identical products, services or technologies, our business, financial condition, results of operations or prospects may be harmed. In addition, defending our intellectual property rights might entail significant expense. Any patents, trademarks, or other intellectual property rights that we have or may obtain may be challenged or circumvented by others or invalidated or held unenforceable through administrative process,processes, including re-examination, inter partes review, interference and derivation proceedings and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings) or litigation. Despite our pending U.S. patent applications, there can be no assurance that our patent applications will result in issued patents. Even if we continue to seek patent protection in the future, we may be unable to obtain or maintain patent protection for our technology. In addition, any patents issued from pending or future patent applications or licensed to us in the future may not provide us with competitive advantages, or may be successfully challenged by third parties. There may be issued patents of which we are not aware, held by third parties that, if found to be valid and enforceable, could be alleged to be infringed by our current or future technologies or products. There also may be pending patent applications of which we are not aware that may result in issued patents, which could be alleged to be infringed by our current or future technologies or products. Furthermore, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be possible for unauthorized third parties to copy our products and platform capabilities and use information that we regard as proprietary to create products that compete with ours. Patent, trademark, copyright, and trade secret protectionprotections may not be available to us in every country in which our products are available. For example, as we have expanded internationally, we have been unable to register and obtain the exclusive right to use the Datadog trademark in certain jurisdictions, including incertain European countries outside of the EU, and as we continue to expand, we may face similar issues in other jurisdictions. The value of our intellectual property could diminish if others assert rights in or ownership of our trademarks and other intellectual property rights, or trademarks that are similar to our trademarks. We may be unable to successfully resolve these types of conflicts to our satisfaction. In some cases, litigation or other actions may be necessary to protect or enforce our trademarks and other intellectual property rights. Furthermore, third parties may assert intellectual property claims against us, and we may be subject to liability, required to enter into costly license agreements, or required to rebrand our products and/or prevented from selling some of our products if third parties successfully oppose or challenge our trademarks or successfully claim that we infringe, misappropriate or otherwise violate their trademarks or other intellectual property rights. In addition, the laws of some foreign countries may not be as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate. As we expand our international activities, our exposure to unauthorized copying and use of our products and platform capabilities and proprietary information will likely increase. Moreover, policing unauthorized use of our technologies, trade secrets, and intellectual property may be difficult, expensive, and time-consuming, particularly in foreign countries where the laws may not be as protective of intellectual property rights as those in the United States and where mechanisms for enforcement of intellectual property rights may be weak.29becomecontinue to be subject to intellectual property disputes. Our success depends, in part, on our ability to develop and commercialize our products and services without infringing, misappropriating or otherwise violating the intellectual property rights of third parties. However, we may not be aware that our products or services are infringing, misappropriating or otherwise violating third-party intellectual property rights and such third parties may bring claims alleging such infringement, misappropriation or violation. Lawsuits are time-consuming and expensive to resolve and they divert management’s time and attention. The software industry is characterized by the existence of a large number of patents, copyrights, trademarks, trade secrets, and other intellectual and proprietary rights. Companies in the software industry are often required to defend against litigation claims based on allegations of infringement, misappropriation or other violations of intellectual property rights. Our technologies may not be able to withstand any third-party claims against their use. In addition, many companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. We do not currently have a large patent portfolio, which could prevent us from deterring patent infringement claims through our own patent portfolio, and our competitors and others may now and in the future have significantly larger and more mature patent portfolios than we have. Any litigation may also involve patent holding companies or other adverse patent owners that have no relevant product revenue, and therefore, our patent applicationsportfolio may provide little or no deterrence as we would not be able to assert them against such entities or individuals. If a third party is able to obtain an injunction preventing us from accessing such third-party intellectual property rights, or if we cannot license or develop alternative technology for any infringing aspect of our business, we would be forced to limit or stop sales of our products and platform capabilities or cease business activities related to such intellectual property. Although we carry general liability insurance, our insurance may not cover potential claims of this type or may not be adequate to indemnify us for all liability that may be imposed. We cannot predict the outcome of lawsuits and cannot ensure that the results of any such actions will not have an adverse effect on our business, financial condition or results of operations. Any intellectual property litigation to which we might become a party, or for which we arehave been or may continue to be required to provide indemnification, may require us to do one or more of the following:3025%30% for the year ended December 31, 2020.2023. Beyond North America, we now have sales presence internationally, including in Amsterdam, Dublin, London, Paris, London,Seoul, Singapore, Tokyo, Seoul, Sydney, and Amsterdam.Tokyo. We are continuing to adapt to and develop strategies to address international markets, but there is no guarantee that such efforts will have the desired effect. For example, we anticipate that we will need to establish relationships with new partners in order to expand into certain countries, and if we fail to identify, establish and maintain such relationships, we may be unable to execute on our expansion plans. As of December 31, 2020,2023, approximately 37%39% of our full-time employees were located outside of the United States, 42%36% of whom were located in France. We expect that our international activities will continue to grow for the foreseeable future as we continue to pursue opportunities in existing and new international markets, which will require significant dedication of management attention and financial resources.31Europe;or terrorist activities;portionamount of our operating expenses are incurred outside the United States. These operating expenses are denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates. If we are not able to successfully hedge against the risks associated with currency fluctuations, our results of operations could be adversely affected.32The Tax Cuts and Jobs Act, or the Tax Act, makes broad and complex changes to the U.S. tax code including, among other things, changes to U.S. federal tax rates, imposes additional limitations on the deductibility of interest, has both positive and negative changes to the utilization of future net operating loss, or NOL, carryforwards, allows for the expensing of certain capital expenditures, and puts into effect the migration from a “worldwide” system of taxation to a territorial system.stockholders, as well as the anticipation of lock-up releases;including those related to the ongoing COVID-19 pandemic, may also negatively impact the market price of our Class A common stock. The full impact ofAdditional risks are described in “Risks Associated with our Growth—Unfavorable conditions in our industry or the COVID-19 pandemic is unknown at this time, butglobal economy, or reductions in information technology spending, could result in material adverse changes inlimit our ability to grow our business and negatively affect our results of operations for an unknown period of time as the virus and its related political, social and economic impacts spread.operations”. In addition, technology stocks have historically experienced high levels of volatility. In the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future, which could result in substantial expenses and divert our management’s attention.2020,2023, our outstanding shares of Class B common stock represented approximately 80%46% of the voting power of our outstanding capital stock. As a result, the holders of our Class B common stock, which includes certain of our directors, executive officers and their affiliates, will be able to exercise considerable influence over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or our assets, even if their stock holdings represent less than 50% of the outstanding shares of our capital stock. This concentration of ownership will limitlimits the ability of other stockholders to influence corporate matters and may cause us to make strategic decisions that could involve risks to holders of our Class A common stock or that may not be aligned with the interests of holders of our Class A common stock. This control may adversely affect the market price of our Class A common stock.33shares in the long term.announcedin the past imposed restrictions on including companies with multiple class share structures in certain of their indexes. For example, in July 2017, FTSE Russell and Standard & Poor’s announced that they would cease to allow most newly public companies utilizing dual or multi-class capital structures to be included in their indices. Under the announced policies, our dual class capital structure would make us ineligible for inclusion in any of these indices. Given the sustained flow of investment funds into passive strategies that seek to track certain indexes, exclusion from stock indexes would likely preclude investment by many of these funds and could make our Class A common stock less attractive to other investors. As a result, the market price of our Class A common stock could be adversely affected.An active public trading market for our Class A common stock may not develop or be sustained.Prior to the closing of our IPO in September 2019, no public market for our Class A common stock existed. An active public trading market for our Class A common stock may not continue to develop or, if further developed, it may not be sustained. The lack of an active market may impair the ability of holders of our Class A common stock to sell their shares at the time they wish to sell them or at a price that the holders of our Class A common stock consider reasonable. The lack of an active market may also reduce the fair value of shares of our Class A common stock. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.2020,2023, holders of a substantial number of shares hadof our capital stock have rights, subject to certain conditions, to require us to file registration statements covering the sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.34do not publishcease publishing research or publish unfavorable or inaccurate research about our business, or if we fail to meet or significantly exceed our publicly announced financial guidance or the expectations of analysts or public investors, the market price and trading volume of our Class A common stock could decline.few securities analysts commence coverage of us, or if industry analysts cease coverage of us, our stock price would be negatively affected. If securities or industry analysts do not publish research or reports about our business, downgrade our Class A common stock, or publish negative reports about our business, our stock price would likely decline. In addition, the stock prices of many companies in the technology industry have declined significantly after those companies have failed to meet, or significantly exceed, the financial guidance publicly announced by those companies or the expectations of analysts. If our financial results fail to meet, or significantly exceed, our announced guidance or the expectations or analysts or public investors, analysts could downgrade or Class A common stock or publish unfavorable research on us. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly,As a result, demand for our Class A common stock could decrease, which might cause our stock price to decline and could decrease the trading volume of our Class A common stock.will continue to incur increased costs and demands upon management as a result of operating ascomplying with the laws and regulations affecting public companies in the United States, which may harm our business.and our management will be required to continue to devote substantial time to compliance with our public company responsibilities and corporate governance practices.We have incurredin the Unites States, we incur significant legal, accounting, insurance, and other expenses as a public company, which we expect to further increase because we are no longer an “emerging growth company.”expenses. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq Global Select Market and other applicable securities rules and regulations impose various requirements on public companies.companies and these laws, requirements, rules and regulations are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. Our management and other personnel devote a substantial amount of time to compliance with these requirements. These rules and regulations contribute to increased legal and financial compliance costs and make some activities more time-consuming and costly.As a result of being a public company, wefor the fiscal year ending December 31, 2020.on an annual basis. This assessment will need tomust include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. In addition, our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting. Our compliance with Section 404 requires that we incur substantial expenses and expend significant management efforts. We have hired, , and need to continue to hire, additional accounting and financial staff with appropriate public company experience and technical accounting knowledge to comply with Section 404.3536 if triggered, may adversely affect our financial condition and operating results.will beare entitled to convert the notes at any time during specified periods at their option. If one or more holders elect to convert their 2025 Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their 2025 Notes when these conversion triggers are satisfied, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2025 Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.The accounting method for convertible debt securities that may be settled in cash, such as the notes, could have a material effect on our reported financial results.The accounting method for convertible debt securities that may be settled in cash, such as the 2025 Notes, could have a material effect on our reported financial results. Under ASC 470-20, Debt with Conversion and Other Options, or ASC 470-20, an entity must separately account for the liability and equity components of the convertible debt instruments (such as the 2025 Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The effect of ASC 470-20 on the accounting for the 2025 Notes is that the equity component is required to be included in the additional paid-in capital section of stockholders’ equity in our consolidated balance sheet at issuance, and the value of the equity component is treated as debt discount for purposes of accounting for the debt component of the 2025 Notes. As a result, we are required to record a greater amount of non-cash interest expense in current periods presented as a result of the amortization of the debt discount; such amortization results in the carrying value of the 2025 Notes accreting to their face amount over the term of the 2025 Notes. We have reported larger net losses or lower net income in our financial results because ASC 470-20 requires interest to include both the current period’s amortization of the debt discount and the instrument’s non-convertible coupon interest rate, which could adversely affect our reported or future financial results, the trading price of our common stock and the trading price of the 2025 Notes. However, in August 2020, the Financial Accounting Standards Board published an Accounting Standards Update 2020-06, or ASU 2020-06, eliminating the separate accounting for the debt and equity components as described above. ASU 2020-06 will be effective for SEC-reporting entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. However, early adoption is permitted in certain circumstances for fiscal years beginning after December 15, 2020, including interim periods within those fiscal37years. The Company chose to early adopt ASU 2020-06 on January 1, 2021. When effective, we expect the elimination of the separate accounting described above to reduce the interest expense that we expect to recognize for the 2025 Notes for accounting purposes.In addition, under certain circumstances, convertible debt instruments (such as the 2025 Notes) that may be settled entirely or partly in cash are currently accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of such 2025 Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of such 2025 Notes exceeds their principal amount. Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued. However, when adopted, ASU 2020-06 will require the potentially more dilutive if-converted method to be used for calculating earnings per share, and the treasury stock method will no longer be allowed for convertible debt instruments whose principal amount may be settled using shares. We also cannot be sure whether other changes may be made to the current accounting standards related to the 2025 Notes, or otherwise, that could have an adverse impact on our financial statements.headquarters arecurrent principal executive office is located in New York, City, where we leaseNew York and, as of December 31, 2023, it consists of approximately 129,000238,000 square feet pursuant to four separate subleases. One of these subleases, for approximately 33,000 square feet, willspace under leases that expire in December 2022. The other three subleases, totaling approximately 96,000 square feet, will expire in December 2023. June 2033.havelease other offices around the world for our employees, including in Boston, Denver, San Francisco, Paris, Dublin, Amsterdam, Sydney, Tokyo, and Paris. These offices are leased,Singapore. we do not own any real property. We intend to procure additional space in the future as we continue to add employees and expand geographically. We believe that our current facilities are adequate to meetand suitable for our current needs.382021,2024, there were 221,583,813305,929,910 holders of record of our Class A common stock and 84,907,96225,944,197 holders of record of our Class B common stock.UseProceedsIn September 2019,Unregistered Equity Securitiesclosed our IPO of 27,600,000issued 176,687 shares of our Class A common stock at an offering price of $27.00 per share, including 3,600,000 shares pursuant to the underwriters’ option to purchase additional shares of our Class A common stock, resultingas consideration in net proceeds to us of $705.9 million, after deducting underwriting discounts and commissions of $37.3 million and net offering expenses of $2.0 million. All of the shares issued and sold in our IPO were registeredacquisitions. The issuance was deemed exempt from registration under the Securities Act pursuant to the exemption provided by Section 4(a)(2) of the Securities Act as a registration statement on Form S-1 (File No. 333-233428), which was declared effectivetransaction by the SEC on September 18, 2019. There has been no material change in the planned use of proceeds from our IPO from those disclosed in the final prospectus for our IPO dated as of September 18, 2019 and filed with the SEC pursuant to Rule 424(b)(4) on September 19, 2019.2020,2023, of the cumulative total return to stockholders of our Class A common stock relative to the Nasdaq CompositeNasdaq-100 Index, or the Nasdaq Composite,100, and the Nasdaq Computer Index, or the Nasdaq Computer.40Composite100 and the Nasdaq Computer at their respective closing prices on September 19, 2019 and assumes reinvestment of gross dividends. The stock price performance shown in the graph represents past performance and should not be considered an indication of future stock price performance.
41Selected Financial DataAs permitted by final SEC rulemaking effective February 10, 2021, the information called for by this Item 6 is omitted..42
[Reserved]10- K.10-K. 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 Annual Report on Form 10-K. You should review the disclosure under the heading “Part I, Item 1A. Risk Factors” in this Annual Report on Form 10-K for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.monitoringobservability and analyticssecurity platform for developers, IT operations teams and business users in the cloud age.security monitoringmany other capabilities to provide unified, real-time observability ofand 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.2020,2023, we had $228.7$330.3 million in cash, cash equivalents and restricted cash and $1,292.5$2,252.6 million in marketable securities. We have grown rapidly in recent periods, with revenues for the fiscal years ended December 31, 2020, 20192023, 2022 and 20182021 of $603.5$2,128.4 million, $362.8$1,675.1 million, and $198.1$1,028.8 million, respectively, representing year-over-year growth of 66%27% from the fiscal year ended December 31, 20192022 to the fiscal year ended December 31, 20202023 and 83%63% from the fiscal year ended December 31, 20182021 to the fiscal year ended December 31, 2019.2022. Substantially all of our revenue is from subscription software sales. We expect that the rate of growth in our revenue will continue to decline as our business scales, even if our revenue continues to grow in absolute terms. We have continued to make significant expenditures and investments, including in personnel-related costs, sales and marketing, infrastructure and operations, and have incurred net lossesincome (losses) of $(24.5)$48.6 million, $(16.7)$(50.2) million and $(10.8)$(20.7) million for the fiscal years ended December 31, 2020, 20192023, 2022 and 2018,2021, respectively. Our operating cash flow was $109.1$660.0 million, $24.2$418.4 million and $10.8$286.5 million for the years ended December 31, 2020, 20192023, 2022 and 2018,2021, respectively. Our free cash flow was $83.2$597.5 million, $0.8$353.5 million and $(5.0)$250.5 million for the years ended December 31, 2020, 20192023, 2022 and 2018,2021, respectively. See the section titled “—Liquidity and Capital Resources—Non-GAAP Free Cash Flow” below.Since December 2019, COVID-19 has spread to multiple countries, includingother countries in which weabroad may negatively affect the growth of our business and our customers, partners, suppliers, vendorsresults of operations. For example, macroeconomic events including rising inflation, the U.S. Federal Reserve raising interest rates, the Russian invasion of Ukraine, the conflict in the Middle East and other parties with whom we do business operate. The extent of the impact of the COVID-19 pandemic have led to economic uncertainty. Historically, during periods of economic uncertainty and downturns, businesses may slow spending on our operational and financial performance depends on certain developments, including the duration and spread of the outbreak, its impact on industry events, and its effect on our customers, partners, suppliers and vendors and other parties with whom we do business, all ofinformation technology, which are uncertain and cannot be predicted at this time. To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel and employee work locations, and cancelling or holding virtually Datadog marketing events. We are continuing to actively monitor the rapidly evolving situation related to COVID-19 and may take further actions that alter our business operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees, customers, partners, suppliers, vendors and stockholders. The extent to which the COVID-19 pandemic may impact our results of operationsbusiness and financial condition remains uncertain.our customers’ businesses. In addition, duerecent quarters, we have seen slower usage growth from existing customers, which may be related to the uncertain macroeconomic environment.the COVID-19 pandemic, if any,macroeconomic conditions may not be fully reflected in our results of operations until future periods.432020,2023, we had approximately 14,17027,300 customers spanning organizations of a broad range of sizes and industries, compared to approximately 10,50023,200 as of December 31, 2019.2022. Customers as of December 31, 2022 exclude customers from a then-recent acquisition, which did not contribute meaningful revenue during the fiscal year. 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.2020,2023, we had 1,253approximately 3,190 customers with annual run-rate revenue, or ARR, of $100,000 or more, representing 78%86% of our ARR, up from 8582,780 as of December 31, 2019,2022, representing 75%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 U.S. 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.each of December 31, 2020 and 2019,2023, our trailing 12-month dollar-based net retention rate was above 130%.mid-110%'s. As of December 31, 2022, our trailing 12-month dollar-based net retention rate was mid-140%'s. The decline in our trailing 12-month dollar-based net retention rate was primarily attributable to slower usage growth from existing customers, which may be related to the uncertain macroeconomic environment. 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.proven initialdemonstrated the success of our platform approach, through expansion beyond our initial infrastructure monitoring solution to include APM in 2017, logs in 2018, user experience and network performance monitoring in 2019 and security monitoring in 2020.over 19 products. As of December 31, 2020,2023, approximately 72%83% of our customers were using more than one product, up from approximately 60%81% a year earlier. Additionally, as of December 31, 2023, approximately 47% of our customers were using more than four products, up from approximately 42% a year earlier, and approximately 22% of our customers were using more than six products, up from approximately 18% a year earlier. We believe these metrics indicate strong momentum in the uptakeexpansion of product adoption across our newer platform products.4425%30% and 28% of our total revenue for each of the years ended December 31, 20202023 and 2019.2022, 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, includingprimarily in Amsterdam, Dublin, London, Paris, London,Seoul, Singapore, Tokyo, Seoul, Sydney, and Amsterdam.annual,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.45 However, we expect that our general and administrative expense will decrease as a percentage of our revenue as our revenue grows over the longer term.(Expense) Income (Loss), Net(expense) income (loss), net consists primarily of interest expense due on the 2025 Notes, and amortization of premiums on our marketable securities, partially offset by 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.46Year Ended December 31, Year Ended December 31, 2023 2023 2022 2021 (in thousands) (in thousands) (4)(3)Operating expenses: (4)(3)(4)(3)(4)(3)(4)(3)(4)(3)Other income: (5)(4)(5)(4)(5)(4)Other income, net Income (loss) before provision for income taxes Net income (loss) __________________
____________________(1)Includes stock-based compensation expense as follows:__________________(2)Includes amortization of acquired intangibles expense as follows:Year Ended December 31, 2023 2022 2021 (in thousands) Cost of revenue $ 17,578 $ 10,827 $ 4,565 Research and development 313,096 237,120 101,942 Sales and marketing 101,937 76,735 35,035 General and administrative 49,689 38,472 22,195 Total $ 482,300 $ 363,154 $ 163,737
(2)Includes amortization of acquired intangibles expense as follows:(3)Includes non-cash benefit related to tax adjustment as follows:Year Ended December 31, Year Ended December 31, 2023 2023 2022 2021 (in thousands) (in thousands) Cost of revenue __________________
_____________________(4)Includes employer payroll taxes on employee stock transactions as follows:47Year Ended December 31, Year Ended December 31, 2023 2023 2022 2021 (in thousands) (in thousands)
__________________
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|
|
| Years Ended December 31, |
| |||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
|
| (in thousands) |
| |||||||||
Interest expense |
| $ | 18,727 |
|
| $ | — |
|
| $ | — |
|
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Interest expense | $ | 3,388 | $ | 3,369 | $ | 3,349 | |||||||||||
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| Years Ended December 31, |
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| 2020 |
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| 2019 |
|
| 2018 |
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| (as a percentage of total revenue(1)) |
| |||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2023 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||||||
(as a percentage of total revenue(1)) | (as a percentage of total revenue(1)) | |||||||||||||||||||||||||||||||||||||||||||||
Revenue |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % | Revenue | 100 | % | 100 | % | 100 | % | |||||||||||||||||||||||||||
Cost of revenue |
|
| 22 |
|
|
| 25 |
|
|
| 23 |
| ||||||||||||||||||||||||||||||||||
Gross profit |
|
| 78 |
|
|
| 75 |
|
|
| 77 |
| ||||||||||||||||||||||||||||||||||
Operating expenses |
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| ||||||||||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||||||||||||||||||||||||
Research and development |
|
| 35 |
|
|
| 31 |
|
|
| 28 |
| ||||||||||||||||||||||||||||||||||
Sales and marketing |
|
| 35 |
|
|
| 40 |
|
|
| 45 |
| ||||||||||||||||||||||||||||||||||
General and administrative |
|
| 10 |
|
|
| 10 |
|
|
| 9 |
| ||||||||||||||||||||||||||||||||||
Total operating expenses |
|
| 81 |
|
|
| 81 |
|
|
| 82 |
| ||||||||||||||||||||||||||||||||||
Operating loss |
|
| (2 | ) |
|
| (6 | ) |
|
| (5 | ) | ||||||||||||||||||||||||||||||||||
Other (expense) income, net: |
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| Other income: | ||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||||||||||||||||||||||
Interest expense |
|
| (5 | ) |
|
| 0 |
|
|
| 0 |
| ||||||||||||||||||||||||||||||||||
Interest income and other income, net |
|
| 4 |
|
|
| 1 |
|
|
| 1 |
| ||||||||||||||||||||||||||||||||||
Other (expense) income, net |
|
| (1 | ) |
|
| 1 |
|
|
| 1 |
| ||||||||||||||||||||||||||||||||||
Loss before provision for income taxes |
|
| (4 | ) |
|
| (5 | ) |
|
| (4 | ) | ||||||||||||||||||||||||||||||||||
| Other income, net | ||||||||||||||||||||||||||||||||||||||||||||||
| Income (loss) before provision for income taxes | ||||||||||||||||||||||||||||||||||||||||||||||
Provision for income taxes |
|
| (0 | ) |
|
| (0 | ) |
|
| (1 | ) | ||||||||||||||||||||||||||||||||||
Net loss |
|
| (4 | )% |
|
| (5 | )% |
|
| (5 | )% | ||||||||||||||||||||||||||||||||||
| Net income (loss) | Net income (loss) | 2 | % | (3) | % | (2) | % | |||||||||||||||||||||||||||||||||||||||
__________________
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|
2022
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| Years Ended December 31, |
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|
| 2020 |
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| 2019 |
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| Change |
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| % Change |
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|
| (dollars in thousands) |
|
|
|
|
| |||||||||
Revenue |
| $ | 603,466 |
|
| $ | 362,780 |
|
| $ | 240,686 |
|
|
| 66 | % |
| Year Ended December 31, | |||||||||||||||||||||||
| 2023 | 2022 | Change | % Change | ||||||||||||||||||||
| Revenue | $ | 2,128,359 | $ | 1,675,100 | $ | 453,259 | 27 | % | |||||||||||||||
48
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| Years Ended December 31, |
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| 2020 |
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| 2019 |
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| (dollars in thousands) |
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| Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | % Change | ||||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of revenue |
| $ | 130,197 |
|
| $ | 88,949 |
|
| $ | 41,248 |
|
|
| 46 | % | $ | 409,908 | $ | $ | 346,743 | $ | $ | 63,165 | 18 | 18 | % | ||||||||||||||||||||||||
Gross margin |
|
| 78 | % |
|
| 75 | % |
|
| 3 | % |
|
|
|
| Gross margin | 81 | % | 79 | % | 2 | % | ||||||||||||||||||||||||||||