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| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
March 31, 2022
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
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Delaware | 27-2825503 | ||||||||||
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620 8th Avenue, | 45th Floor
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New York, | NY | 10018 | |||||||||
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| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Class A common stock, par value $0.00001 per share | DDOG | The Nasdaq Stock Market LLC | ||||||
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Emerging growth company |
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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; •future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements; •the costs and success of our sales and marketing efforts, and our ability to promote our brand; •our reliance on key personnel and our ability to identify, recruit and retain skilled personnel; •our ability to effectively manage our growth, including any international expansion; •our ability to protect our intellectual property rights and any costs associated therewith; •our ability to compete effectively with existing competitors and new market entrants; •the growth rates of the markets in which we FINANCIAL STATEMENTS September 30, 2019 December 31, 2018 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 760,945 $ 53,639 Accounts receivable, net of allowance for doubtful accounts of $516 and $477 as of September 30, 2019 and December 31, 2018, respectively 87,208 55,822 Deferred contract costs, current 6,151 3,717 Prepaid expenses and other current assets 18,172 8,773 Total current assets 872,476 121,951 Property and equipment, net 31,266 21,649 Operating lease assets 55,695 — Goodwill 7,626 7,626 Intangible assets, net 759 1,288 Deferred contract costs, non-current 12,064 7,292 Restricted cash 9,507 11,341 Other assets 17,360 8,603 TOTAL ASSETS $ 1,006,753 $ 179,750 LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable $ 18,992 $ 12,638 Accrued expenses and other current liabilities 30,481 30,290 Operating lease liabilities, current 10,222 — Deferred revenue, current 116,966 69,306 Total current liabilities 176,661 112,234 Operating lease liabilities, non-current 51,684 — Deferred revenue, non-current 4,827 1,393 Other liabilities 2,346 1,359 Total liabilities 235,518 114,986 COMMITMENTS AND CONTINGENCIES (NOTE 7) CONVERTIBLE PREFERRED STOCK: Convertible preferred stock; $0.00001 par value per share; 0 and 179,814,912 shares authorized as of September 30, 2019 and December 31, 2018, respectively; 0 and 179,814,912 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively — 140,805 STOCKHOLDERS' EQUITY (DEFICIT): Preferred stock; $0.00001 par value per share; 20,000,000 and 0 shares authorized as of September 30, 2019 and December 31, 2018, respectively; 0 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively — — Common stock, $0.00001 par value per share; 0 and 380,000,000 shares authorized as of September 30, 2019 and December 31, 2018, respectively; 0 and 78,180,606 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively — — Class A common stock, $0.00001 par value per share; 2,000,000,000 and 0 shares authorized as of September 30, 2019 and December 31, 2018, respectively; 27,600,000 and 0 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively — — Class B common stock, $0.00001 par value per share; 310,000,000 and 0 shares authorized as of September 30, 2019 and December 31, 2018, respectively; 268,113,075 and 0 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively 3 — Additional paid-in capital 895,793 30,834 Accumulated other comprehensive (loss) income (54 ) 31 Accumulated deficit (124,507 ) (106,906 ) Total stockholders’ equity (deficit) 771,235 (76,041 ) TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) $ 1,006,753 $ 179,750 Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Revenue $ 95,864 $ 51,074 $ 249,136 $ 136,467 Cost of revenue 23,297 12,098 63,225 30,690 Gross profit 72,567 38,976 185,911 105,777 Operating expenses: Research and development 28,684 14,159 75,531 37,456 Sales and marketing 38,836 25,130 105,061 59,747 General and administrative 9,265 4,322 23,193 12,933 Total operating expenses 76,785 43,611 203,785 110,136 Operating loss (4,218 ) (4,635 ) (17,874 ) (4,359 ) Other income, net 90 311 646 612 Loss before provision for income taxes (4,128 ) (4,324 ) (17,228 ) (3,747 ) Provision for income taxes (33 ) (349 ) (373 ) (428 ) Net loss $ (4,161 ) $ (4,673 ) $ (17,601 ) $ (4,175 ) Other comprehensive (loss) income—foreign currency translation adjustments (45 ) (10 ) (85 ) 32 Comprehensive loss $ (4,206 ) $ (4,683 ) $ (17,686 ) $ (4,143 ) Net loss attributable to common stockholders $ (4,161 ) $ (4,673 ) $ (17,601 ) $ (4,175 ) Basic and diluted net loss per share $ (0.04 ) $ (0.06 ) $ (0.20 ) $ (0.06 ) Weighted average shares used in calculating basic and diluted net loss per share: 103,876 73,353 87,758 69,708 COMPREHENSIVE INCOME (LOSS) thousands) Convertible Class A and Class B Additional Accumulated Other Total Preferred Stock Common Stock Common Stock Paid-in Comprehensive Accumulated Stockholders' Shares Amount Shares Amount Shares Amount Capital (Loss) Income Deficit Equity (Deficit) BALANCE—June 30, 2019 179,011,431 $ 140,752 — $ — 86,823,234 $ — $ 41,132 $ (9 ) $ (120,346 ) $ (79,223 ) Issuance of common stock upon exercise of stock options — — — — 2,278,410 — 2,106 — — 2,106 Vesting of early exercised stock options — — — — — — 1,177 — — 1,177 Stock-based compensation — — — — — — 4,691 — — 4,691 Issuance of class A common stock in connection with initial public offering, net of underwriting discounts and issuance costs — — 27,600,000 1 — — 705,937 — — 705,938 Conversion of convertible preferred stock to common stock in connection with initial public offering (179,011,431 ) (140,752 ) 179,011,431 2 — — 140,750 — — 140,752 Change in accumulated other comprehensive (loss) income — — — — — — — (45 ) — (45 ) Reclassification of common stock to class A and class B common stock — — 89,101,644 — (89,101,644 ) — — — — — Net loss — — — — — — — — (4,161 ) (4,161 ) BALANCE—September 30, 2019 — $ — 295,713,075 $ 3 — $ — $ 895,793 $ (54 ) $ (124,507 ) $ 771,235 Convertible Non-Voting Additional Accumulated Other Total Preferred Stock Common Stock Common Stock Paid-in Comprehensive Accumulated Stockholders' Shares Amount Shares Amount Shares Amount Capital (Loss) Income Deficit Deficit BALANCE—June 30, 2018 179,814,912 $ 140,805 73,587,747 $ — — $ — $ 25,652 $ (6 ) $ (95,646 ) $ (70,000 ) Issuance of common stock upon exercise of stock options — — 2,572,725 — — — 433 — — 433 Vesting of early exercised stock options — — — — — — 109 — — 109 Stock-based compensation — — — — — — 1,369 — — 1,369 Conversion of non-voting common stock — — — — — — — — — — Change in accumulated other comprehensive (loss) income — — — — — — — (10 ) — (10 ) Net loss — — — — — — — — (4,673 ) (4,673 ) BALANCE—September 30, 2018 179,814,912 $ 140,805 76,160,472 $ — — $ — $ 27,563 $ (16 ) $ (100,319 ) $ (72,772 ) Convertible Class A and Class B Additional Accumulated Other Total Preferred Stock Common Stock Common Stock Paid-in Comprehensive Accumulated Stockholders' Shares Amount Shares Amount Shares Amount Capital (Loss) Income Deficit Equity (Deficit) BALANCE—December 31, 2018 179,814,912 $ 140,805 — $ — 78,180,606 $ — $ 30,834 $ 31 $ (106,906 ) $ (76,041 ) Issuance of common stock upon exercise of stock options — — — — 10,117,557 — 6,576 — — 6,576 Vesting of early exercised stock options — — — — — — 1,490 — — 1,490 Stock-based compensation — — — — — — 10,153 — — 10,153 Issuance of class A common stock in connection with initial public offering, net of underwriting discounts and issuance costs — — 27,600,000 1 — — 705,937 — — 705,938 Conversion of convertible preferred stock to common stock in connection with third-party tender offer (803,481 ) (53 ) — — 803,481 — 53 — — 53 Conversion of convertible preferred stock to common stock in connection with initial public offering (179,011,431 ) (140,752 ) 179,011,431 2 — — 140,750 — — 140,752 Change in accumulated other comprehensive (loss) income — — — — — — — (85 ) — (85 ) Reclassification of common stock to class A and class B common stock — — 89,101,644 — (89,101,644 ) — — — — — Net loss — — — — — — — — (17,601 ) (17,601 ) BALANCE—September 30, 2019 — $ — 295,713,075 $ 3 — $ — $ 895,793 $ (54 ) $ (124,507 ) $ 771,235 Convertible Non-Voting Additional Accumulated Other Total Preferred Stock Common Stock Common Stock Paid-in Comprehensive Accumulated Stockholders' Shares Amount Shares Amount Shares Amount Capital (Loss) Income Deficit Deficit BALANCE—December 31, 2017 179,814,912 $ 140,805 62,160,984 $ — 1,137,000 $ — $ 20,491 $ (48 ) $ (96,144 ) $ (75,701 ) Issuance of common stock upon exercise of stock options — — 12,862,488 — — — 3,608 — — 3,608 Vesting of early exercised stock options — — — — — — 277 — — 277 Stock-based compensation — — — — — — 3,187 — — 3,187 Conversion of non-voting common stock — — 1,137,000 — (1,137,000 ) — — — — — Change in accumulated other comprehensive (loss) income — — — — — — — 32 — 32 Net loss — — — — — — — — (4,175 ) (4,175 ) BALANCE—September 30, 2018 179,814,912 $ 140,805 76,160,472 $ — — $ — $ 27,563 $ (16 ) $ (100,319 ) $ (72,772 ) See accompanying notes to condensed consolidated financial statements. STOCKHOLDERS’ EQUITY in thousands, except share data) Nine Months Ended September 30, 2019 2018 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (17,601 ) $ (4,175 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 8,776 4,239 Amortization of deferred contract costs 3,688 1,806 Stock-based compensation, net of amounts capitalized 10,016 3,051 Noncash lease expense 8,403 — Provision for accounts receivable allowance 835 285 Loss (gain) on disposal of property and equipment 442 (1 ) Changes in operating assets and liabilities: Accounts receivable, net (32,224 ) (8,577 ) Deferred contract costs (10,894 ) (6,045 ) Prepaid expenses and other current assets (9,476 ) (746 ) Other assets (8,480 ) (4,939 ) Accounts payable 4,213 4,814 Accrued expenses and other liabilities (1,990 ) 6,320 Deferred revenue 51,096 19,352 Net cash provided by operating activities 6,804 15,384 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (9,813 ) (8,205 ) Capitalized software development costs (7,058 ) (4,540 ) Cash paid for acquisition of businesses; net of cash acquired — (1,618 ) Net cash used in investing activities (16,871 ) (14,363 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options 7,306 6,833 Proceeds from initial public offering, net of underwriting discounts and commissions and other offering costs 708,659 — Net cash provided by financing activities 715,965 6,833 Effect of exchange rate changes on cash and cash equivalents 49 13 NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 705,947 7,867 CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period 64,980 63,778 CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period $ 770,927 $ 71,645 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for income taxes $ 97 $ 4 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Accrued property and equipment purchases $ 1,574 $ 70 Stock-based compensation included in capitalized software development costs $ 137 $ 136 Vesting of early exercised options $ 1,490 $ 277 Costs related to initial public offering included in accounts payable and accrued liabilities $ 2,721 $ — RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH WITHIN THE CONSOLIDATED BALANCE SHEETS TO THE AMOUNTS SHOWN IN THE STATEMENTS OF CASH FLOWS ABOVE: Cash and cash equivalents $ 760,945 $ 64,003 Restricted cash – Including amounts in prepaid expense and other current assets and other assets 9,982 7,642 Total cash, cash equivalents and restricted cash $ 770,927 $ 71,645 its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 North America $ 70,904 $ 38,791 $ 186,340 $ 101,976 International 24,960 12,283 62,796 34,491 Total $ 95,864 $ 51,074 $ 249,136 $ 136,467 assumptions that management considers reasonable. The Amount Balance as of December 31, 2018 $ 11,009 Additions to deferred contract costs 10,894 Amortization of deferred contract costs (3,688 ) Balance as of September 30, 2019 $ 18,215 estimates. September 30, 2019 December 31, 2018 Hosting $ 8,554 $ 3,356 General prepaid expenses 3,475 3,607 Other receivables 3,745 526 Marketing 1,114 218 Rent 809 1,066 Restricted cash 475 — Total prepaid expenses and other current assets $ 18,172 $ 8,773 September 30, 2019 December 31, 2018 Computers and equipment $ 6,757 $ 4,540 Furniture and fixtures 4,330 2,621 Leasehold improvements 15,671 8,554 Capitalized software development costs 21,762 15,000 Total property and equipment $ 48,520 $ 30,715 Less: accumulated depreciation and amortization (17,254 ) (9,066 ) Total property and equipment, net $ 31,266 $ 21,649 Fair Value Fair value of net assets acquired: Net tangible assets (liabilities) $ (536 ) Developed technology 825 Goodwill 1,334 Total fair value of net assets acquired $ 1,623 As of September 30, 2019 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Amortization Period Developed technology $ 2,125 $ (1,366 ) $ 759 2-3 years December 31, 2018 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Amortization Period Developed technology $ 2,125 $ (837 ) $ 1,288 2-3 years Customer relationships 20 (20 ) — 1 year Total $ 2,145 $ (857 ) $ 1,288 Amount Remainder of 2019 $ 179 2020 378 2021 202 Total $ 759 September 30, 2019 December 31, 2018 Accrued compensation and commissions $ 12,903 $ 15,229 Early exercise liability-stock options 2,168 2,931 Income tax liability 731 516 Payroll and sales taxes 1,432 1,147 Deferred rent — 3,527 Accrued expenses 13,247 6,940 Total accrued expenses and other current liabilities $ 30,481 $ 30,290 March 31, 2022, other than certain non-cancelable operating leases described in Note 9, March 31, 2021. Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Operating lease cost(1) $ 3,885 $ 9,715 Variable lease cost(2) 126 136 Short-term lease cost 564 2,148 Nine Months Ended September 30, Cash paid for amounts included in measurement of lease liabilities $ 6,077 Operating lease assets obtained in exchange for new lease liabilities 14,618 Amount Remainder of 2019 $ 2,830 2020 14,488 2021 16,795 2022 16,589 2023 14,403 2024 and beyond 4,017 Total lease payments $ 69,122 Less: imputed interest (8,393 ) Present value of lease liabilities $ 60,729 Number Of Options Outstanding Weighted- Average Exercise Price Weighted- Average Remaining Contractual Life (in Years) Balance—December 31, 2018 38,865,057 $ 0.83 7.9 Options granted 9,481,530 $ 9.06 Options exercised (10,114,941 ) $ 0.72 Options forfeited (1,078,452 ) $ 2.29 Balance—September 30, 2019 37,153,194 $ 2.92 7.9 Exercisable—September 30, 2019 21,090,498 $ 2.24 7.3 Total compensation cost related to unvested awards not yet recognized was approximately 2021, respectively. The weighted-average period over which this compensation cost related to unvested RSUs and restricted shares will be recognized is 3.0 years and 3.1 years as of March 31, 2022 and December 31, 2021, respectively. Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Cost of revenue $ 161 $ 74 $ 372 $ 182 Research and development 1,934 387 3,709 931 Sales and marketing 1,540 522 3,276 1,241 General and administrative 1,042 325 2,659 697 Stock-based compensation, net of amounts capitalized 4,677 1,308 10,016 3,051 Capitalized stock-based compensation expense 14 61 137 136 Total stock-based compensation expense $ 4,691 $ 1,369 $ 10,153 $ 3,187 Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Basic net loss per share: Class A Class B Class A Class B Numerator: Net loss $ (93 ) $ (4,068 ) $ (4,673 ) $ (157 ) $ (17,444 ) $ (4,175 ) Denominator: Weighted average shares used in calculating net loss per share, basic 2,322 101,554 73,353 782 86,976 69,708 Basic net loss per share $ (0.04 ) $ (0.04 ) $ (0.06 ) $ (0.20 ) $ (0.20 ) $ (0.06 ) Diluted net loss per share: Numerator: Allocation of distributed loss for basic computation $ (93 ) $ (4,068 ) $ (4,673 ) $ (157 ) $ (17,444 ) $ (4,175 ) Reallocation of undistributed loss as a result of conversion of Class B to Class A shares (4,068 ) — — (17,444 ) — — Allocation of undistributed loss $ (4,161 ) $ (4,068 ) $ (4,673 ) $ (17,601 ) $ (17,444 ) $ (4,175 ) Denominator: Number of shares used in basic calculation 2,322 101,554 73,353 782 86,976 69,708 Weighted average effect of diluted securities: Conversion of Class B to Class A common shares outstanding 101,554 — — 86,976 — — Number of shares used in diluted calculation 103,876 101,554 73,353 87,758 86,976 69,708 Diluted net loss per share $ (0.04 ) $ (0.04 ) $ (0.06 ) $ (0.20 ) $ (0.20 ) $ (0.06 ) As of September 30, 2019 2018 Convertible Preferred Stock — 179,815 Shares subject to outstanding stock options 37,153 39,981 Unvested early exercised stock options 1,548 2,204 Total 38,701 222,000 applications. We employ a land-and-expand business model centered around offering products that are easy to adopt and have a very short time to value. Our customers can expand their footprint with us on a self-service basis. Our customers often significantly increase their usage of the products they initially buy from us and expand their usage to other products we offer on our platform. We grow with our customers as they expand their workloads in the public and private cloud. on marketable securities, partially offset by interest expense due on the 2025 Notes (as defined below) and amortization of premiums on our marketable securities. Three Months Ended Nine Months Ended September 30, September 30, 2019 2018 2019 2018 (in thousands) Revenue $ 95,864 $ 51,074 $ 249,136 $ 136,467 Cost of revenue (1)(2) 23,297 12,098 63,225 30,690 Gross profit 72,567 38,976 185,911 105,777 Operating expenses Research and development (1) 28,684 14,159 75,531 37,456 Sales and marketing (1) 38,836 25,130 105,061 59,747 General and administrative (1) 9,265 4,322 23,193 12,933 Total operating expenses 76,785 43,611 203,785 110,136 Operating loss (4,218 ) (4,635 ) (17,874 ) (4,359 ) Other income, net 90 311 646 612 Loss before provision for income taxes (4,128 ) (4,324 ) (17,228 ) (3,747 ) Provision for income taxes (33 ) (349 ) (373 ) (428 ) Net loss $ (4,161 ) $ (4,673 ) $ (17,601 ) $ (4,175 ) Three Months Ended Nine Months Ended September 30, September 30, 2019 2018 2019 2018 (in thousands) Cost of revenue $ 161 $ 74 $ 372 $ 182 Research and development 1,934 387 3,709 931 Sales and marketing 1,540 522 3,276 1,241 General and administrative 1,042 325 2,659 697 Total $ 4,677 $ 1,308 $ 10,016 $ 3,051 Three Months Ended Nine Months Ended September 30, September 30, 2019 2018 2019 2018 (in thousands) Cost of revenue $ 179 $ 112 $ 531 $ 332 Three Months Ended Nine Months Ended September 30, September 30, 2019 2018 2019 2018 (as a percentage of total revenue) Revenue 100 % 100 % 100 % 100 % Cost of revenue 24 24 25 22 Gross profit 76 76 75 78 Operating expenses Research and development 30 28 31 28 Sales and marketing 41 49 42 44 General and administrative 10 8 9 9 Total operating expenses 81 85 82 81 Operating loss (4 ) (9 ) (7 ) (3 ) Other income, net 0 1 0 0 Loss before provision for income taxes (4 ) (8 ) (7 ) (3 ) Provision for income taxes (1 ) (1 ) (1 ) (1 ) Net loss (5 )% (9 )% (8 )% (4 )% 2021 Three Months Ended September 30, 2019 2018 Change % Change (dollars in thousands) Revenue $ 95,864 $ 51,074 $ 44,790 88 % Three Months Ended September 30, 2019 2018 Change % Change (dollars in thousands) Cost of revenue $ 23,297 $ 12,098 $ 11,199 93 % Gross margin 76 % 76 % — Three Months Ended September 30, 2019 2018 Change % Change (dollars in thousands) Research and development $ 28,684 $ 14,159 $ 14,525 103 % Percentage of revenue 30 % 28 % Three Months Ended September 30, 2019 2018 Change % Change (dollars in thousands) Sales and marketing $ 38,836 $ 25,130 $ 13,706 55 % Percentage of revenue 41 % 49 % Three Months Ended September 30, 2019 2018 Change % Change (dollars in thousands) General and administrative $ 9,265 $ 4,322 $ 4,943 114 % Percentage of revenue 10 % 8 % Nine Months Ended September 30, 2019 2018 Change % Change (dollars in thousands) Revenue $ 249,136 $ 136,467 $ 112,669 83 % Nine Months Ended September 30, 2019 2018 Change % Change (dollars in thousands) Cost of revenue $ 63,225 $ 30,690 $ 32,535 106 % Gross margin 75 % 78 % 3 % Nine Months Ended September 30, 2019 2018 Change % Change (dollars in thousands) Research and development $ 75,531 $ 37,456 $ 38,075 102 % Percentage of revenue 31 % 28 % Nine Months Ended September 30, 2019 2018 Change % Change (dollars in thousands) Sales and marketing $ 105,061 $ 59,747 $ 45,314 76 % Percentage of revenue 42 % 44 % Nine Months Ended September 30, 2019 2018 Change % Change (dollars in thousands) General and administrative $ 23,193 $ 12,933 $ 10,260 79 % Percentage of revenue 9 % 9 % marketable securities. Nine Months Ended September 30, 2019 2018 (in thousands) Cash provided by operating activities $ 6,804 $ 15,384 Cash used in investing activities (16,871 ) (14,363 ) Cash provided by financing activities $ 715,965 $ 6,833 When assessing sources of liquidity, we also include cash and cash equivalents of $271.7 million and marketable securities of $1.4 billion as of March 31, 2022. We believe that our existing cash and cash equivalents, marketable securities and cash flow from operations will be sufficient to support our cash requirements for the next 12 months and beyond. sales. marketable securities of $6.6 million. understanding and evaluating the strength of our liquidity and future ability to generate cash that can be used for strategic opportunities or investing in our Nine Months Ended September 30, 2019 2018 (in thousands) Net cash provided by operating activities $ 6,804 $ 15,384 Less: Purchases of property and equipment (9,813 ) (8,205 ) Less: Capitalized software development costs (7,058 ) (4,540 ) Free cash flow $ (10,067 ) $ 2,639 Estimates Annual Report. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK CONTROLS AND PROCEDURES LEGAL PROCEEDINGS RISK FACTORS negatively affect our results of 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; •general administration, including increased legal and accounting expenses associated with being a public company. liabilities or additional expenses. Our risks are likely to increase as we continue to expand, grow our customer base, and process, store, and transmit increasingly large amounts of proprietary and sensitive data. 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. •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 •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. services and adversely affect our business, financial conditions and results of operations. In addition, although we carry general liability insurance, our insurance may not be adequate to indemnify us for all liability that may be imposed or otherwise protect us from liabilities or damages with respect to claims alleging compromises of customer data, and any such coverage may not continue to be available to us on acceptable terms or at all. additional scrutiny. business, the results of our operations, and our financial condition. For example, each of Colorado, Utah and Virginia have recently passed similar consumer privacy legislation, all of which differ from the CPRA and become effective in 2023. 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 •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. •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 •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, •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. Risks Related to Ownership of Our Class A Common Stock •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. Furthermore, if we issue additional equity or convertible debt securities, the new equity securities could have rights senior to those of our common stock. For example, if we elect to settle our conversion obligation under our 0.125% Convertible Senior Notes due 2025, or our 2025 Notes, in shares of our Class A common stock or a combination of cash and shares of our Class A common stock, the issuance of such Class A common stock may dilute the ownership interests of our stockholders and sales in the public market could adversely affect prevailing market prices. •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. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS (b) Use of Proceeds MINE SAFETY DISCLOSURES OTHER INFORMATION Incorporated by Reference Filed Herewith Exhibit Number Description Form File No. Exhibit Filing Date 3.1 Amended and Restated Certificate of Incorporation of Datadog, Inc. 8-K 001-39051 3.1 September 23, 2019 3.2 S-1/A 333-233428 3.4 August 23, 2019 10.1 Datadog, Inc. 2012 Equity Incentive Plan, and terms of agreements thereunder. S-1/A 333-233428 10.2 August 23, 2019 10.2 Datadog, Inc. 2019 Equity Incentive Plan and terms of agreements thereunder. S-1/A 333-233428 10.3 September 9, 2019 10.3 S-1/A 333-233428 10.4 September 9, 2019 31.1 X 31.2 X 32.1* X 32.2* X 101.INS XBRL Instance Document X 101.SCH XBRL Taxonomy Extension Schema Document X 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X 101.DEF XBRL Taxonomy Extension Definition Linkbase Document X 101.LAB XBRL Taxonomy Extension Label Linkbase Document X 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X /s/ Olivier Pomel Olivier Pomel Date: /s/ David Obstler David ObstlerPagePage 52434343636366060606162 andcompete. in under the header “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained herein. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.(www.investors.datadoghq.com)(investors.datadoghq.com). We therefore encourage investors and others interested in Datadog to review the information that we make available on our website, in addition to following our filings with the Securities and Exchange Commission, webcasts, press releases and conference calls.I-FINANCIALI-FINANCIAL INFORMATIONFinancial StatementsMarch 31,
2022December 31,
2021ASSETS CURRENT ASSETS: Cash and cash equivalents $ 271,686 $ 270,973 Marketable securities Marketable securities 1,399,323 1,283,473 275,342 268,824 Deferred contract costs, current 24,688 23,235 Prepaid expenses and other current assets 32,632 24,443 Total current assets 2,003,671 1,870,948 Property and equipment, net 90,713 75,152 Operating lease assets 61,921 61,355 Goodwill 292,032 292,176 Intangible assets, net 14,088 15,704 Deferred contract costs, non-current 42,753 42,062 Restricted cash 3,424 3,490 Other assets 20,413 19,907 TOTAL ASSETS $ 2,529,015 $ 2,380,794 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 18,629 $ 25,270 Accrued expenses and other current liabilities 108,211 111,284 Operating lease liabilities, current 20,320 20,157 Deferred revenue, current 454,812 371,985 Total current liabilities 601,972 528,696 Operating lease liabilities, non-current 51,817 52,106 Convertible senior notes, net Convertible senior notes, net 736,318 735,482 Deferred revenue, non-current 12,798 13,896 Other liabilities 9,253 9,411 Total liabilities 1,412,158 1,339,591 COMMITMENTS AND CONTINGENCIES (NOTE 8) COMMITMENTS AND CONTINGENCIES (NOTE 8) 0 0 STOCKHOLDERS' EQUITY: STOCKHOLDERS' EQUITY: Class A common stock, $0.00001 par value per share; 2,000,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 283,004,354 and 263,339,585 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively Class A common stock, $0.00001 par value per share; 2,000,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 283,004,354 and 263,339,585 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively 3 2 Class B common stock, $0.00001 par value per share; 310,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 31,916,651 and 50,025,852 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively Class B common stock, $0.00001 par value per share; 310,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 31,916,651 and 50,025,852 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively — 1 Additional paid-in capital 1,271,777 1,197,136 Accumulated other comprehensive loss Accumulated other comprehensive loss (12,555) (3,830) Accumulated deficit (142,368) (152,106) Total stockholders’ equity Total stockholders’ equity 1,116,857 1,041,203 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,529,015 $ 2,380,794 AND COMPREHENSIVE LOSSThree Months Ended
March 31,2022 2021 Revenue $ 363,030 $ 198,549 Cost of revenue 74,462 46,666 Gross profit 288,568 151,883 Operating expenses: Research and development 150,608 79,266 Sales and marketing 101,166 64,353 General and administrative 26,380 21,094 Total operating expenses 278,154 164,713 Operating income (loss) Operating income (loss) 10,414 (12,830) Other income: Other income: Interest expense Interest expense (5,247) (5,472) Interest income and other income, net Interest income and other income, net 5,687 5,773 Other income, net 440 301 Income (loss) before provision for income taxes Income (loss) before provision for income taxes 10,854 (12,529) Provision for income taxes (1,116) (539) Net income (loss) Net income (loss) $ 9,738 $ (13,068) Net income (loss) attributable to common stockholders Net income (loss) attributable to common stockholders $ 9,738 $ (13,068) Basic net income (loss) per share Basic net income (loss) per share $ 0.03 $ (0.04) Diluted net income (loss) per share Diluted net income (loss) per share $ 0.03 $ (0.04) Weighted average shares used in calculating basic net income (loss) per share Weighted average shares used in calculating basic net income (loss) per share 313,456 306,034 Weighted average shares used in calculating diluted net income (loss) per share Weighted average shares used in calculating diluted net income (loss) per share 345,668 306,034 CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)thousands, except share data)Three Months Ended
March 31,2022 2021 Net income (loss) $ 9,738 $ (13,068) Other comprehensive loss: Foreign currency translation adjustments (539) (853) Unrealized loss on available-for-sale marketable securities (8,186) (682) Other comprehensive loss (8,725) (1,535) Comprehensive income (loss) $ 1,013 $ (14,603) 5CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)(in thousands, except share data)(unaudited)6CASH FLOWSIn thousands) Class A and Class B
Common StockAdditional
Paid-in
CapitalAccumulated
Other
Comprehensive LossAccumulated
DeficitTotal
Stockholders' EquityShares Amount BALANCE—December 31, 2021 313,365,437 $ 3 $ 1,197,136 $ (3,830) $ (152,106) $ 1,041,203 Issuance of common stock upon exercise of stock options 1,167,000 — 4,218 — — 4,218 Vesting of early exercised stock options — — 33 — — 33 Vesting of restricted stock units 388,568 — — — — — Stock-based compensation — — 70,390 — — 70,390 Change in accumulated other comprehensive loss — — — (8,725) — (8,725) Net income — — — — 9,738 9,738 BALANCE—March 31, 2022 314,921,005 $ 3 $ 1,271,777 $ (12,555) $ (142,368) $ 1,116,857 Class A and Class B
Common StockAdditional
Paid-in
CapitalAccumulated
Other
Comprehensive Income (Loss)Accumulated
DeficitTotal
Stockholders'
EquityShares Amount BALANCE—December 31, 2020 305,880,063 $ 3 $ 1,103,305 $ 2,287 $ (148,163) $ 957,432 Effect of adoption of ASU 2020-06 — (173,070) — 16,802 (156,268) BALANCE—January 1, 2021 305,880,063 3 930,235 2,287 (131,361) 801,164 Issuance of common stock upon exercise of stock options 1,320,113 — 3,290 — — 3,290 Vesting of early exercised stock options — — 293 — — 293 Vesting of restricted stock units 348,352 — — — — — Issuance of restricted shares of common stock from acquisitions 255,822 — 20,172 — — 20,172 Stock-based compensation — — 31,014 — — 31,014 Change in accumulated other comprehensive loss — — — (1,535) — (1,535) Net loss — — — — (13,068) (13,068) BALANCE—March 31, 2021 307,804,350 $ 3 $ 985,004 $ 752 $ (144,429) $ 841,330 7Three Months Ended March 31, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 9,738 $ (13,068) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 7,394 4,402 Amortization of discounts or premiums on marketable securities 3,959 4,259 Amortization of issuance costs 840 835 Amortization of deferred contract costs 6,022 3,779 Stock-based compensation, net of amounts capitalized 66,884 28,861 Non-cash lease expense 4,411 4,012 Allowance for credit losses on accounts receivable 798 25 Loss on disposal of property and equipment 823 3 Changes in operating assets and liabilities: Accounts receivable, net (7,319) 9,223 Deferred contract costs (8,166) (6,711) Prepaid expenses and other current assets (8,391) (5,998) Other assets (805) 572 Accounts payable (7,624) (9,226) Accrued expenses and other liabilities (2,911) 9,682 Deferred revenue 81,735 21,000 Net cash provided by operating activities 147,388 51,650 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of marketable securities (329,706) (150,331) Maturities of marketable securities 199,703 253,234 Proceeds from sale of marketable securities 2,007 6,497 Purchases of property and equipment (9,514) (998) Capitalized software development costs (7,973) (6,183) Cash paid for acquisition of businesses; net of cash acquired (4,871) (11,509) Net cash (used in) provided by investing activities (150,354) 90,710 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options 4,245 3,275 Employee payroll taxes paid related to net share settlement under the employee stock purchase plan — (245) Repayments of convertible senior notes (3) — Net cash provided by financing activities 4,242 3,030 Effect of exchange rate changes on cash, cash equivalents and restricted cash (629) (782) NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 647 144,608 CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period 274,463 228,711 CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period $ 275,110 $ 373,319 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for income taxes $ 339 $ 327 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Accrued property and equipment purchases $ 2,994 $ 213 Stock-based compensation included in capitalized software development costs $ 3,506 $ 2,153 Vesting of early exercised options $ 33 $ 293 Issuance of restricted shares of common stock for the acquisition of businesses $ — $ 20,172 Acquisition holdback $ — $ 1,195 RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH WITHIN THE CONDENSED CONSOLIDATED BALANCE SHEETS TO THE AMOUNTS SHOWN IN THE STATEMENTS OF CASH FLOWS ABOVE: Cash and cash equivalents $ 271,686 $ 369,706 Restricted cash 3,424 3,613 Total cash, cash equivalents and restricted cash $ 275,110 $ 373,319 analyticssecurity platform for developers, IT operations teams and business users in the cloud age.applications. The Company’s SaaS platform integrates and automates infrastructure monitoring, application performance monitoring, and log management and security monitoring to provide unified, real-time observability of its customers’ entire technology stack. The Company is headquartered in New York City and has various other global office locations.Initial Public OfferingOn September 23, 2019, the Company completed its initial public offering (“IPO”), in which the Company issued and sold 24,000,000 shares of its Class A common stock at a public offering price of $27.00 per share, which resulted in net proceeds of $615.6 million after deducting underwriting discounts and commissions. On September 25, 2019, the underwriters exercised their option to purchase an additional 3,600,000 shares of Class A common stock at $27.00 per share, resulting in additional proceeds of $92.3 million, net of underwriters’ discounts and commissions. Immediately prior to the closing of the IPO, all shares of common stock then outstanding were reclassified as Class B common stock and all shares of the convertible preferred stock then outstanding automatically converted into 179,011,431 shares of Class B common stock. Prior to the IPO, deferred offering costs, which consist of direct incremental legal, accounting, and consulting fees relating to the IPO, were capitalized in prepaid expenses and other current assets in the condensed consolidated balance sheets. Upon the consummation of the IPO, $2.0 million of net deferred offering costs were reclassified into stockholders’ equity as an offset against IPO proceeds.Basis of PresentationThe accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).Principles of ConsolidationThe condensed consolidated financial statements include the accounts of Datadog, Inc. and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.Stock Split and Authorized SharesOn January 2, 2018, the Company’s Board of Directors (the “Board”) and stockholders approved a 4-for-1 stock split of the Company’s then-outstanding common stock and convertible preferred stock was effected without any change in the par value per share.On September 6, 2019, the Board and stockholders approved an amended and restated certificate of incorporation of the Company effecting a 3-for-1 stock split of the Company’s issued and outstanding shares of common stock and convertible preferred stock, and an increase to the authorized shares of the Company’s common stock and convertible preferred stock to 380,000,000 shares and 179,814,912 shares, respectively. The split was effected on September 6, 2019 and without any change in the par value per share. All information related to the Company’s common stock, convertible preferred stock and stock awards has been retroactively adjusted to give effect to the 3-for-1 stock split, without any change in the par value per share.All information related to the Company’s common stock, convertible preferred stock and stock awards has been retroactively adjusted to give effect to the 4-for-1 stock split on January 2, 2018 and 3-for-1 stock split on September 6, 2019.8On September 23, 2019, an amended and restated certificate of incorporation of the Company was filed immediately prior to the closing of the IPO authorizing an aggregate of 2,330,000,000 shares of capital stock of the Company, including 2,000,000,000 shares of Class A common stock, 310,000,000 shares of Class B common stock and 20,000,000 shares of preferred stock.Segment InformationThe Company has a single operating and reportable segment as well as one business activity, monitoring and providing analytics on companies’ information technology (“IT”) infrastructure. The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources. There are no segment managers who are held accountable for operations or results below the consolidated level.Use of EstimatesThe preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Such estimates include allowance for doubtful accounts, the fair value of acquired assets and assumed liabilities from business combinations, useful lives of property, equipment, software, and finite lived intangibles, stock-based compensation including the determination of the fair value of the Company’s stock, valuation of long-lived assets and their recoverability, including goodwill, estimated expected period of benefit for deferred contract costs, the incremental borrowing rate for operating leases, realization of deferred tax assets and uncertain tax positions, revenue recognition and the allocation of overhead costs between cost of revenue and operating expenses. The Company bases its estimates on historical experience and also on assumptions that management considers reasonable. The Company assesses these estimates on a regular basis; however, actual results could materially differ from these estimates.wholly ownedwholly-owned subsidiaries, and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and following the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. These financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 20192022 or for any other interim period or for any other future year. The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes theretocontained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 contained in the Company’s final prospectus for its IPO dated2021, as of September 18, 2019 and filed with the SEC pursuant to Rule 424(b)(4) on September 19, 2019February 25, 2022 (the “Final Prospectus”“Annual Report”).Foreign Currency TranslationThe reporting currencythe Company is the United States dollar (“USD”). Presentation functional currency of the Company is USD, and the functional currency of the Company’s subsidiaries is generally the local currency of the jurisdiction in which the foreign subsidiary is located. The assets and liabilities of the Company’s subsidiaries are translated to USD at exchange rates in effect at the balance sheet date. All income statement accounts are translated at monthly average exchange rates. Resulting foreign currency translation adjustments are recorded directly in accumulated other comprehensive loss as a separate component of stockholders’ equity (deficit).Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in other income, net in the accompanying condensed consolidated financial statements have been prepared in accordance with GAAP.operationsConsolidationcomprehensive loss when realized.9Company generates revenue frompreparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the sale of subscriptions to customers using its cloud-based platform. The terms of the Company’s subscription agreements are primarily monthly or annual. The Company’s customers can enter into (1) a subscription agreement for a committed contractual amount of usage that is apportioned ratably on a monthly basis over the term of the subscription period, (2) a subscription agreement for a committed contractual amount of usage that is delivered as used, or (3) a monthly subscription based on usage. The Company typically bills customers on an annual subscriptionamounts reported in full up-front, with any usage in excess of the committed contracted amount billed monthly in arrears. The Company typically bills customers on a monthly plan in arrears. Customers also have the option to purchase additional services priced at rates at or above the stand-alone selling price.The Company elected to early adopt Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“Topic 606”), effective January 1, 2017, using the full retrospective method of adoption. As such, the condensed consolidated financial statements present revenue in accordance with Topic 606and accompanying notes. Such estimates include the fair value of marketable securities, the allowance for allcredit losses, the fair value of acquired assets and assumed liabilities from business combinations, useful lives of property, equipment, software and finite lived intangibles, stock-based compensation, valuation of long-lived assets and their recoverability, including goodwill, the periods presented.The Company accountsincremental borrowing rate for revenue contracts with customers through the following steps:(1)identify the contract with a customer;(2)identify the performance obligations in the contract;(3)determine the transaction price;(4)allocate the transaction price; and(5)recognize revenue when or as the Company satisfies a performance obligation.The Company’s revenue arrangements may include infrastructure monitoring, application performance monitoring, log management, and synthetics, as well as secondary services including custom metrics in dashboard monitoring, docker container monitoring, and app analytics. The Company has identified each service as a separate performance obligation.The transaction price is based on the fixed priceoperating leases, estimated expected period of benefit for the contracted level of service plus variable consideration for additional optional purchases. Billing periods correspond to the periods over which services are performed and there are no discounts given on the purchase of future services.The Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on a range of actual prices charged to customers.Revenue is recognized when control of these services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those services. The Company determined an output method to be the most appropriate measure of progress because it most faithfully represents when thedeferred contract costs, fair value of the services are simultaneously received and consumed by the customer, and control is transferred.For committed contractual amounts of usage, revenue is recognized ratably over the termliability component of the subscription agreement generally beginning on the date that the platform is made available to a customer. For committed contractual amountconvertible debt, realization of usage that is delivered as used, a monthly subscription based on usage, or usage in excess of a ratable subscription, the Company recognizes revenue as the product is used. Subscription revenue excludes sales and other indirect taxes.The Company applied the practical expedient in Topic 606 and did not evaluate contracts of one year or less for the existence of a significant financing component.Cost of RevenueCost of revenue consists primarily of costs related to providing subscription services to paying customers, including data center and networking expenses, employee compensation (including stock-based compensation) and other employee-related expenses for customer experience and technical operations staff, payments to outside service providers, payment processing fees, amortization of capitalized internally developed software costs and acquired developed technology, and allocated overhead costs.Research and Development CostsResearch and development costs are expensed as incurred. Research and development costs consist of employee compensation (including stock-based compensation) and other employee-related expenses, materials and supplies, and allocated overhead costs such as rent and facilities costs.10Advertising costs are expensed as incurred and were approximately $2.7 million and $7.3 million for the three and nine months ended September 30, 2019, respectively, and $2.3 million and $6.0 million for the three and nine months ended September 30, 2018, respectively, and are included in sales and marketing expense in the accompanying condensed consolidated statement of operations and comprehensive loss.Income TaxesThe Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts for financial reporting and the tax bases of assets and liabilities. The deferred assets and liabilities are recorded at the statutorily enacted tax rates anticipated to be in effect when such temporary differences reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. A valuation allowance is established, when based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.The Company engages in transactions in which the tax consequences may be subject to uncertainty. The Company accounts for uncertain tax positions, based on an evaluation as to whether it is more likely than not that a tax position will be sustained on audit, including resolution of any related appeals or litigation processes. This evaluation is based on all available evidence and assumes that the appropriate tax authorities have full knowledge of all relevant information concerning the tax position. The Company accounts for uncertain tax positions as non-current tax liabilities or through a reduction of a corresponding deferred tax asset. The tax benefit recognized is based on the largest amount that is greater than 50% likely of being realized upon ultimate settlement. The Company includes potential interest expense and penalties related to its uncertain tax positions in income tax expense.Stock-Based CompensationThe Company measures compensation expense for all stock-based payment awards, including stock options granted to employees, directors, and nonemployees, based on the estimated fair value of the awards on the date of grant. The fair value of each stock option granted is estimated using the Black Scholes option pricing model. The determination of the grant date fair value using an option-pricing model is affected by the estimated fair value of the Company’s common stock as well as assumptions regarding a number of other complex and subjective variables. These variables include expected stock price volatility over the expected term of the award, actual and projected employee stock option exercise behaviors, the risk-free interest rate for the expected term of the award and expected dividends. Stock-based compensation is recognized on a straight-line basis over the requisite service period. The Company also has certain options that have performance-based vesting conditions; stock-based compensation expense for such awards is recognized on a straight-line basis from the time the vesting condition is likely to be met through the time the vesting condition has been achieved.Prior to the IPO, the fair value of common stock underlying the stock options had historically been determined by the Board of Directors, with input from the Company’s management. The Board of Directors previously determined the fair value of the common stock at the time of grant of the options by considering a number of objective and subjective factors, including valuations of comparable companies, sales of common stock to unrelated third parties, operating and financial performance, the lack of liquidity of the Company’s capital stock, and general and industry-specific economic outlook. Subsequent to the IPO, the fair value of the underlying common stock is determined by the closing price, on the date of grant, of the Company’s Class A common stock, which is traded publicly on the Nasdaq Global Select Market.Cash and Cash EquivalentsThe Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents consist of funds deposited into money market funds.Restricted CashRestricted cash primarily consists of collateralized letters of credit established in connection with lease agreements for the Company’s facilities. Restricted cash is included in current assets for leases that expire within one year and is included in non-current assets for leases that expire in more than one year from the balance sheet date.11Financial instruments that potentially subject the Company to credit risk primarily consist of cash and cash equivalents and accounts receivable. For cash and cash equivalents, the Company is exposed to credit risk in the event of default by the financial institutions to the extent of the amounts recorded on the accompanying condensed consolidated balance sheets exceed federally insured limits. The Company places its cash and cash equivalents with financial institutions with high-quality credit ratings and has not experienced any losses in such accounts. For accounts receivable, the Company is exposed to credit risk in the event of nonpayment by customers to the extent of the amounts recorded on the accompanying condensed consolidated balance sheets.There were no customers representing greater than 10% of total revenue for the three and nine months ended September 30, 2019 or 2018. No customers represented greater than 10% of accounts receivable as of September 30, 2019 or December 31, 2018.Geographical InformationRevenue by location is determined by the billing address for the customer. The following table sets forth revenue by geographic area (in thousands):As of September 30, 2019, 72% of the Company’s long-lived assets were located in North America and 28% were located outside of North America. As of December 31, 2018, 85% of the Company’s long-lived assets were located in North America and 15% were located outside of North America, respectively.Fair Value of Financial InstrumentsThe accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.Included in the Company’s cash and cash equivalents are money market funds, which are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. As of September 30, 2019, and December 31, 2018, the Company had $760.9 million and $53.6 million, respectively, of cash and cash equivalents primarily invested in money market funds. In addition, the Company had $10.0 million and $11.3 million, respectively, of restricted cash in connection with collateral for various lease agreements for the Company’s facilities. Accounts receivable, accounts payable, and accrued expenses are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date.A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.12Accounts receivable includes billed and unbilled receivables. Trade accounts receivable are recorded at invoiced amounts and do not bear interest. The Company generally does not require collateral and provides for expected losses. The expectation of collectability is based on a review of credit profiles of customers, contractual terms and conditions, current economic trends, and historical payment experience. The Company regularly reviews the adequacy of the allowance for doubtful accounts by considering the age of each outstanding invoicerecognition and the collection historyallocation of each customer to determine the appropriate amount of allowance for doubtful accounts. Accounts receivable deemed uncollectible are charged against the allowance for doubtful accounts when identified.Unbilled accounts receivable represents revenue recognized on contracts for which billings have not yet been presented to customers because the amounts were earned but not contractually billable as of the balance sheet date. The unbilled accounts receivable balance is due within one year. As of September 30, 2019, and December 31, 2018, unbilled accounts receivable of approximately $13.1 million and $13.1 million, respectively, was included in accounts receivable on the Company’s condensed consolidated balance sheets.Internal Use Software Development CostsThe Company capitalizes qualifying internal use software developmentoverhead costs related to its cloud platform. The costs consist of personnel costs (including related benefits and stock-based compensation) that are incurred during the application development stage. Capitalization of costs begins when two criteria are met: (1) the preliminary project stage is completed, and (2) it is probable that the software will be completed and used for its intended function. Capitalization ceases when the software is substantially complete and ready for its intended use, including the completion of all significant testing. Costs related to preliminary project activities and post implementation operating activities are expensed as incurred.Capitalized costs are included in property and equipment. These costs are amortized over the estimated useful life of the software, which is two years, on a straight-line basis, which represents the manner in which the expected benefit will be derived. The amortization of costs related to the platform applications is included inbetween cost of revenue and sales and marketing expense based on an allocation between paid customer accounts and free customer accounts not generating revenue.Property and Equipment, NetProperty and equipment, net is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful life of the related asset. Expenses that improve an asset or extend its remaining useful life are capitalized. Costs of maintenance or repairs that do not extend the lives of the respective assets are charged to expenses as incurred.Deferred Contract CostsSales commissions earned by the Company’s sales force are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized over a period of benefit which is determined to be four years.operating expenses. The Company determined the period of benefit by taking into consideration the length of terms inbases its customer contracts, life of the technologyestimates on historical experience and other factors. Amounts expected to be recognized within one year of the balance sheet date are recorded as deferred contract costs, current; the remaining portion is recorded as deferred contract costs, non-current, in the condensed consolidated balance sheets. Deferred contract costs are periodically analyzed for impairment. Amortization expense is included in sales and marketing expenses in the accompanying condensed consolidated statements of operations.Deferred contract costsalso on the Company’s condensed consolidated balance sheets were $18.2 million and $11.0 million as of September 30, 2019 and December 31, 2018, respectively. Amortization expense was $1.4 million and $0.7 million for the three months ended September 30, 2019 and 2018, respectively, and was $3.7 million and $1.8 million for the nine months ended September 30, 2019 and 2018, respectively. 13following table representsCompany assesses these estimates on a rollforward of the Company’s deferred contract costs (in thousands):Business CombinationsWhen the Company acquires a business, the purchase consideration is allocated to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated respective fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require the Company to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired technology, and trade names from a market participant perspective, useful lives and discount rates. The Company’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result,regular basis; however, actual results maycould materially differ from estimates. During the measurement period, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to other income, net in the condensed consolidated statement of operations.Accounting for Impairment of Long-Lived Assets (Including Goodwill and Intangibles)Long-lived assets with finite lives include property and equipment, capitalized development software costs and acquired intangible assets. Long-lived assets are amortized over their estimated useful lives which are as follows:Computers and equipment3 yearsFurnitures and fixtures5 yearsLeasehold improvementsShorter of lease term or useful life of assetCapitalized software development costs2 yearsIntangible assets1-3 yearsThe Company evaluates long lived assets, including acquired intangible assets and capitalized software development costs, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable or the estimated useful life becomes shorter than originally estimated. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset or an asset group to estimated undiscounted future net cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset exceeds these estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the assets exceeds the fair value of the asset or asset group, based on discounted cash flows.Goodwill is not amortized but rather tested for impairment at least annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that goodwill may be impaired. Goodwill impairment is recognized when the quantitative assessment results in the carrying value exceeding the fair value, in which case an impairment charge is recorded to the extent the carrying value exceeds the fair value. The Company did not recognize any impairment of goodwill during the three or nine months ended September 30, 2019 or during the year ended December 31, 2018.Operating LeasesThe Company leases real estate facilities under operating leases. For leases that contain rent escalation or rent concession provisions, the Company records the total rent expense during the lease term on a straight-line basis over the term of the lease. Prior to the adoption of ASC 842, Leases on January 1, 2019, the Company records the difference between the rent paid and the straight-line rent expense as a deferred rent liability within accrued expenses and other current liabilities and other liabilities.The Company’s operating lease costs were $3.9 million and $9.7 million during the three and nine months ended September 30, 2019, respectively. The Company recognized sublease income (including reimbursed expenses) of $0.2 million and $0.8 million during the three and nine months ended September 30, 2019, respectively. The Company’s variable lease costs amounted to $0.1 million and $0.1 million for the three and nine months ended September 30, 2019, respectively. The Company’s short-term lease costs were $0.6 million and $2.1 million for the three and nine months ended September 30, 2019, respectively.14The Company’s gross lease expense was $2.7 million and $6.5 million during the three and nine months ended September 30, 2018, respectively, which was offset by sublease income of $0.3 million and $0.5 million for the three and nine months ended September 30, 2018, respectively.Deferred RevenueThe Company records contract liabilities to deferred revenue when the Company receives customer payments in advance of the performance obligations being satisfied on the Company’s contracts. Certain of the Company’s customers pay in advance of satisfaction of performance obligations and other customers with monthly contract terms are billed in arrears on a monthly basis.The Company recognized into revenue $43.5 million and $21.7 million during the three months ended September 30, 2019 and 2018, respectively, and $62.9 million and $29.8 million during the nine months ended September 30, 2019 and September 30, 2018, respectively, that was included in the deferred revenue balances as of December 31, 2018 and 2017, respectively.Remaining performance obligations represent the aggregate amount of the transaction price in contracts allocated to performance obligations not delivered, or partially undelivered, as of the end of the reporting period. Remaining performance obligations include unearned revenue, multi-year contracts with future installment payments and certain unfulfilled orders against accepted customer contracts at the end of any given period. As of September 30, 2019, and December 31, 2018, the aggregate transaction price allocated to remaining performance obligations was $206.4 million and $127.1 million, respectively. There is uncertainty in the timing of revenues associated with the Company’s drawdown contracts, as future revenue can often vary significantly from past revenue. However, the Company expects to recognize substantially all of the remaining performance obligations over the next 24 months.Net Loss Per Share Attributable to Common ShareholdersBasic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period giving effect to all potentially dilutive securities to the extent they are dilutive. The dilutive effect of potentially dilutive securities is reflected in diluted net loss per share by application of the two-class method. During the periods when the Company is in a net loss position, the net loss attributable to common stockholders was not allocated to the convertible preferred stock and unvested common stock under the two-class method as these securities do not have a contractual obligation to share in the Company’s losses.RecentlyNot Yet AdoptedNovember 2015,October 2021, the FASB issued ASU No. 2015-17, Income Taxes2021-08, Business Combinations (Topic 740), Balance Sheet Classification of Deferred Tax. 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU No. 2015-17 was issued by the FASB as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). Current GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. To simplify the presentation of deferred income taxes, the amendments in ASU 2015-17 require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments of ASU 2015-17. ASU 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2017 and interim periods within those annual periods. Early adoption is permitted for financial statements that have not been previously issued. The ASU was adopted January 1, 2019 and applied retrospectively to all deferred tax assets and liabilities for all periods presented. The Company adoption of this ASU had no material impact on the Company’s condensed consolidated financial statements.In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows. The ASU provides guidance on how certain cash receipts and outflows should be classified on entities’ statement of cash flows. The Company adopted the ASU on January 1, 2019 on a retrospective basis to all periods presented. Adoption of this ASU did not have a material impact on the Company’s condensed consolidated statements of cash flows for the periods presented.15In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows. The standard requires that the statements of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The Company adopted the ASU on January 1, 2019 on a retrospective basis for all periods presented. Prior to the adoption of the ASU, changes within restricted cash were presented within investing activities as changes related to payments and refunds of security deposits in connection with leases for the Company’s facilities. As a result of adopting the ASU, the Company includes restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts presented on the statement of condensed consolidated cash flows. Accordingly, the statement of cash flows has been revised to include restricted cash as a component of cash, cash equivalents, and restricted cash.In February 2016, the FASB issued ASU 2016-02, Leases (ASC 842)2021-08"), which requires, among other items, lesseesintends to recognize most leases as assets and liabilities on the balance sheet. Qualitative and quantitative disclosures are also enhanced to better understand the amount, timing and uncertainty of cash flows arising from leases. The Company adopted this ASU on January 1, 2019 and has elected the transition option prescribed by ASU 2018-11, and accordingly will not restate prior periods under ASC 842. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification and determination of the lease term. Upon adoption, the Company recognized a right of use asset of $47.9 million and a lease liability of $51.4 million with no impact to accumulated deficit or condensed consolidated statement of cash flows. The Company’s condensed consolidated financial statements as of September 30, 2019 reflect the adoption of ASC 842.In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The updated guidance simplifiesimprove the accounting for nonemployee share-based payment transactions. The amendments in the new guidance specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumedacquired revenue contracts with customers in a grantor’s own operationsbusiness combination by issuing share-basedaddressing diversity in practice and inconsistency related to recognition of an acquired contract liability and payment awards. The Company adopted this ASUterms and their effect on January 1, 2019 and had no impact on subsequent revenue recognized byCompany’s financial statements.Accounting Pronouncements Not Yet AdoptedIn August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software, which align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this ASU.acquirer. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2019,2022, and interim periods within those fiscal years.years, and should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption is permitted. The Company does not expect the adoption of this ASU to have a material effect on the Company’s consolidated financial statements.In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL modelamendments is expected to resultpermitted, including adoption in more timely recognition of credit losses. This guidance also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. Entities willan interim period. An entity that early adopts in an interim period should apply the standard’s provisions as a cumulative-effect adjustmentamendments (1) retrospectively to retained earnings as ofall business combinations for which the acquisition date occurs on or after the beginning of the first reportingfiscal year that includes the interim period in whichof early application and (2) prospectively to all business combinations that occur on or after the guidance is adopted. This guidance will be effective for the Company beginning January 1, 2020.date of initial application. The Company is currently evaluating the impact of the adoption of this standard on its condensed consolidated financial statements.Prepaid ExpensesMarketable SecuritiesOther Current AssetsPrepaid expensescash equivalents on the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021 (in thousands):March 31, 2022 Amortized
CostUnrealized
GainUnrealized
LossesFair
ValueCommercial debt securities $ 1,039,451 $ 12 $ (9,325) $ 1,030,138 Certificates of deposit 37,908 10 (103) 37,815 U.S. government treasury securities 98,501 — (895) 97,606 Commercial paper 226,354 1 (581) 225,774 Non-U.S. government securities 8,049 — (59) 7,990 Marketable securities $ 1,410,263 $ 23 $ (10,963) $ 1,399,323 December 31, 2021 Amortized
CostUnrealized
GainUnrealized
LossesFair
ValueCommercial debt securities $ 1,034,573 $ 43 $ (2,564) $ 1,032,052 Certificates of deposit 14,574 5 (10) 14,569 U.S. government treasury securities 77,628 18 (204) 77,442 Commercial paper 151,379 14 (37) 151,356 Non-U.S. government securities 8,071 — (17) 8,054 Marketable securities $ 1,286,225 $ 80 $ (2,832) $ 1,283,473 Due within one year $ 1,034,278 Due in one year through five years 365,045 Total $ 1,399,323 current assets consistedfactors: the extent to which the fair value is less than the amortized cost basis, changes to the rating of the security by a rating agency and any adverse conditions specifically related to an issuer of a security or its industry. Unrealized gains and losses on marketable securities are presented net of tax.164.Fair Value Measurement as of March 31, 2022 Level 1 Level 2 Level 3 Total Financial Assets: Cash equivalents: Money market funds $ 241,080 $ — $ — $ 241,080 Commercial paper — — — — Corporate debt securities — — — — Marketable Securities: Corporate debt securities — 1,030,138 — 1,030,138 Certificates of deposit — 37,815 — 37,815 U.S. government treasury securities — 97,606 — 97,606 Commercial paper — 225,774 — 225,774 Non-U.S. government treasury securities — 7,990 — 7,990 Total financial assets $ 241,080 $ 1,399,323 $ — $ 1,640,403 Fair Value Measurement as of December 31, 2021 Level 1 Level 2 Level 3 Total Financial Assets: Cash equivalents: Money market funds $ 241,571 $ — $ — $ 241,571 Marketable Securities: Corporate debt securities — 1,032,052 — 1,032,052 Certificates of deposit — 14,569 — 14,569 U.S. government treasury securities — 77,442 — 77,442 Commercial paper — 151,356 — 151,356 Non-U.S. government treasury securities — 8,054 — 8,054 Total financial assets $ 241,571 $ 1,283,473 $ — $ 1,525,044 March 31,
2022December 31,
2021Computers and equipment $ 19,214 $ 16,885 Furniture and fixtures 7,534 6,595 Leasehold improvements 27,074 20,669 Capitalized software development costs 98,421 86,189 Total property and equipment $ 152,243 $ 130,338 Less: accumulated depreciation and amortization (61,530) (55,186) Total property and equipment, net $ 90,713 $ 75,152 As discussed in Note 2, Basis of Presentation and Summary of Significant Accounting Policies—Internal Use Software, the$3.8$5.8 million and $8.3$4.0 million for the three and nine months ended September 30, 2019,March 31, 2022 and 2021, respectively. Depreciation and amortization expense was approximately $1.6 million and $3.9 million for the three and nine months ended September 30, 2018, respectively.5. Acquisition,Madumbo AcquisitionOn September 28, 2018, with Madumbo whereby the Company acquired all of the issued and outstanding shares of Madumbo for $1.6a SaaS based security platform company. The consideration was approximately $219.4 million, incomprising cash consideration. Madumbo created an artificial intelligence platform that the Company plans to use to strengthen the Company’s current product offering. Goodwill was not deductible for tax purposes. Goodwill resulted primarily from the expected integration of Madumbo’s platform with the Company’s existing product offerings.and Class A common stock. The acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations., and accordingly, the total fair value of the purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date. The resultstotal preliminary purchase price allocated to intangible assets and goodwill was $12.0 million and $204.3 million, respectively. The resulting goodwill is not deductible for income tax purposes. Intangible assets consisted of Madumbo’s operations have been includeddeveloped technology in the Company’s condensed consolidated statementsamount of operations$8.7 million and comprehensive loss sincecustomer relationships in the amount of $3.3 million. The useful life for developed technology and customer relationships are three and four years, respectively. Additionally, there was a one-time severance charge of $1.3 million recorded on the acquisition datedate.were not material.assumptions, including potential liabilities and contingencies. The Company will record adjustments to the fair value of the assets acquired, liabilities assumed and goodwill within the 12 month measurement period, if necessary. Goodwill resulted primarily from the expectation of enhancing the Company's current application security tools. Pro forma results of operations for this acquisition have not been presented because it was alsothey were not material to the condensed consolidated results of operations. Transaction costs amountedapproximately $0.1intangible assets in the amount of $1.7 million and were expensed as incurred.The aggregate purchase consideration andgoodwill in the amount of $34.3 million based on the respective estimated fair valuesvalues. Goodwill resulted primarily from the expectation of enhancing the assets acquired and liabilities assumed atCompany's current observability tools. The resulting goodwill is not deductible for income tax purposes. Pro forma results of operations for this acquisition have not been presented because they were not material to the datecondensed consolidated results of acquisition were as follows (in thousands):Intangibles,March 31, 2022 Gross
Carrying
AmountAccumulated
AmortizationNet
Carrying
AmountAmortization
PeriodDeveloped technology $ 17,186 $ (5,595) $ 11,591 3 years Customer relationships 3,300 (803) 2,497 4 years Total $ 20,486 $ (6,398) $ 14,088 0 December 31, 2021 Gross
Carrying
AmountAccumulated
AmortizationNet
Carrying
AmountAmortization
PeriodDeveloped technology $ 17,186 $ (4,182) $ 13,004 3 years Customer relationships 3,300 (600) 2,700 4 years Total $ 20,486 $ (4,782) $ 15,704 $0.2$1.6 million and $0.5$0.4 million for the three and nine months ended September 30, 2019, respectivelyMarch 31, 2022 and was approximately $0.1 million and $0.3 million for the three and nine months ended September 30, 2018,2021, respectively. Amortization of developed technology and customer relationships are included in cost of revenue on the Company’s condensed consolidated statement of operations and comprehensive loss.September 30, 2019,March 31, 2022, future amortization expense by year is expected to be as follows (in thousands): Amount Remainder of 2022 $ 4,892 2023 5,986 2024 2,985 2025 225 Total $ 14,088 6. Accrued Expenses and Other Current LiabilitiesAccrued expenses and other current liabilities consistedAmount Balance as of December 31, 2021 $ 292,176 Foreign currency translation adjustments (144) Balance as of March 31, 2022 $ 292,032 (in thousands):circumstances:7. Commitments(1)during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and ContingenciesLease Commitments—including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;has entered into various noncancelable operating leases for its facilities expiring between fiscal 2019may not redeem the 2025 Notes prior to June 20, 2023. On or after June 20, 2023, and 2025. Certain operating leases contain provisions under which monthly rent escalates over time. When lease agreements contain escalating rent clauses or free rent periods,prior to the 31st scheduled trading day immediately preceding the maturity date, the Company recognizes rentmay redeem for cash all or any portion of the 2025 Notes, at its option, if the last reported sale price of its Class A common stock was at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100% of the principal amount of the 2025 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.on a straight-line basis over the contractual terms of the 2025 Notes using the effective interest rate method. The carrying amount of the equity component representing the conversion option was $177.2 million. The equity component was recorded in additional paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification.lease.Non-Income Tax Matters—In2025 Notes at an effective interest rate of 5.97%. Issuance costs attributable to the equity component were $4.1 million and are netted against the equity component in additional paid-in capital.2015,1, 2021 the Company recorded a $5.0 million contingent Federal payroll tax liabilityadopted ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in conjunction with common stock repurchase transactions, as part of a capital raise, with certain of its employees. The potential payroll tax treatment of these transactions was subject to uncertainty, and the contingent payroll tax liability was deemed probable and reasonably estimable. On April 15, 2019, the period of limitations for assessing the contingent Federal payroll tax liability expired and the Company was legally released from being the primary obligor. an Entity’s Own Equity (“ASU No. 2020-06”). As a result of the Company recognizedadoption, the debt conversion option of $177.2 million and debt issuance costs of $4.1 million previously attributable to the equity component are no longer presented in equity. Similarly, the debt discount, that is equal to the carrying value of the embedded conversion feature upon issuance, is no longer amortized into income as interest expense over the life of the instrument. This resulted in a $5.0$16.8 million benefit indecrease to the opening balance of accumulated deficit, a $173.1 million decrease to the opening balance of additional paid-in capital and a $156.3 million increase to the opening balance of convertible senior notes, net on the condensed consolidated statementbalance sheet.operations during the nineliability component of the 2025 Notes was as follows (in thousands):March 31,
2022December 31,
2021Convertible senior notes, net: Principal $ 747,496 $ 747,500 Unamortized debt issuance costs (11,178) (12,018) Net carrying amount $ 736,318 $ 735,482 Three Months Ended
March 31,2022 2021 Contractual interest expense $ 234 $ 234 Amortization of issuance costs 840 835 Total $ 1,074 $ 1,069 September 30, 2019.USU.S. employees. ContributionsThe Company is responsible for administrative costs of the 401(k) plan and beginning on January 1, 2022, the Company began making matching contributions to the 401(k) plan are discretionary.plan. For the three months ended March 31, 2022, the Company incurred expense of $1.2 million for matching contributions. The Company did notmake any matching contributions to the 401(k) plan for the year ended December 31, 2018 and the ninethree months ended September 30, 2019.18Cloud Hosting Commitments—In April 2019 and September 2019, the Company entered into cloud hosting agreements, effective May 2019 and September 2019, respectively, for a total purchase commitment of $225.0 million and $37.5 million, respectively, payable over the three years following the date of the applicable agreement.and comprehensive loss in connection with the indemnification provisions have not been material.8.noncancelablenon-cancelable operating leases for its facilities expiring between fiscal 20192022 and 2025.2030. Certain lease agreements contain an option for the Company to renew a lease for a term of up to fivefour years or an option to terminate a lease early within threetwo years. The Company considers these options, which may be elected at the Company’s sole discretion, in determining the lease term on a lease-by-lease basis. The Company has elected the practical expedient not to record leases with an initial term of 12 months or less on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company accounts for lease components and non-lease components as a single lease component. Operating lease assets and liabilities are reflected within operating lease assets; operating lease liabilities, current and operating lease liabilities, non-current, on the condensed consolidated balance sheet.and comprehensive loss were as follows (in thousands):Three Months Ended
March 31,2022 2021 $ 5,237 $ 4,755 Short-term lease cost 1,169 792 1)Includes right of use amortization of $3.1 million and $7.6 million for the three and nine months ended September 30, 2019, respectively
1)Includes non-cash lease expense of $4.4 million and $4.0 million for the three months ended March 31, 2022 and 2021, respectively.2)Primarily related to Consumer Price Index adjustments, common area maintenance and property tax.Three Months Ended
March 31,2022 2021 Cash paid for amounts included in measurement of lease liabilities $ 5,837 $ 4,483 Operating lease assets obtained in exchange for new lease liabilities 5,181 — 19 Amount Remainder of 2022 $ 17,712 2023 20,217 2024 10,567 2025 8,163 2026 6,698 2027 and beyond 17,598 Total lease payments $ 80,955 Less: imputed interest (8,818) Present value of lease liabilities $ 72,137 September 30,2019Weighted averageMarch 31,
2022Weighted-average remaining lease term (years) 4.9 4.20Weighted averageWeighted-average discount rate4.58 % 5.03%9. Three Months Ended
March 31,2022 2021 North America $ 259,862 $ 142,890 International 103,168 55,659 Total $ 363,030 $ 198,549 (Deficit)two2 classes of common stock, Class A and Class B. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one1 vote per share and each share of Class B common stock is entitled to ten10 votes per share. Shares of Class B common stock may be converted into Class A common stock at any time at the option of the stockholder, and are automatically converted upon the sale or transfer to Class A common stock upon sale or transfer, subject to certain limited exceptions.September 30, 2019,March 31, 2022, the Company had authorized 2,000,000,000 shares of Class A common stock and 310,000,000 shares of Class B common stock, each at a par value per share of $0.00001, of which 27,600,000283,004,354 shares of Class A common stock and 268,113,07531,916,651 shares of Class B common stock were issued and outstanding.Preferred StockAs of September 30, 2019, the Company had authorized 20,000,000 shares of preferred stock, at a par value per share of $0.00001, with rights and preferences, including voting rights, designated from time to time by the Board. No shares of preferred stock were issued and outstanding as of September 30, 2019.Convertible Preferred StockImmediately prior to the completion of the IPO in September 2019, all shares of convertible preferred stock then outstanding were converted into 179,011,431 shares of Class B common stock.two2 equity incentive plans, the 2012 equity incentive planEquity Incentive Plan (the “2012 Plan”) and the 2019 equity incentive planEquity Incentive Plan (the “2019 Plan”). OnIn connection with the dateCompany's initial public offering of the Final Prospectus,Class A common stock (the "IPO"), the Company ceased granting awards under the 2012 Plan, and all shares that remained available for issuance under the 2012 Plan at that time were transferred to the 2019 Plan. Additionally, as of September 30, 2019,March 31, 2022, there were 37,153,19420,139,912 shares of Class A common stock issuable upon conversion of Class B common stock underlying options outstanding under the 2012 Plan. Under the 2019 Plan, the Board and any other committee or subcommittee of the Board may grant stock options, stock appreciation rights, (“SARs”), restricted stock awards, (“RSAs”), restricted stock units (“RSUs”), and performance-based and other awards, each equity award valued or based on the Company’s Class A common stock, to employees, directors, consultants and advisors of the Company. Through September 30, 2019, the Company has only issued stock options in connection with the 2012 and 2019 Plans. As of September 30, 2019, the Company was authorized toMarch 31, 2022, there were 68,675,859 shares available for grant awards representing up to 70,296,733 shares under the 2019 PlanPlan.had awards representing 32,397,031weighted-average exercise prices:Number Of
Options
OutstandingWeighted-
Average
Exercise PriceWeighted-
Average
Remaining
Contractual
Life (in Years)Aggregate
Intrinsic Value
(in thousands)Balance outstanding—December 31, 2021 21,372,561 $ 3.31 5.5 $ 3,735,819 Options granted — — Options exercised (1,167,000) 3.61 Options forfeited or expired (35,368) 5.58 Balance outstanding—March 31, 2022 20,170,193 $ 3.29 5.2 $ 2,988,747 Ending Exercisable—March 31, 2022 16,552,340 $ 2.21 4.8 $ 2,470,661 available to grant underand 20,139,912 shares of Class B common stock issuable upon the 2019 Plan.20Stock option activity is as follows:$98.4$25.8 million and $28.4$31.6 million as of September 30, 2019March 31, 2022 and December 31, 2018,2021, respectively. The weighted averageweighted-average period over which this compensation cost related to unvested employee awards will be recognized is 3.61.1 years and 3.41.3 years as of September 30, 2019March 31, 2022 and December 31, 2018,2021, respectively.The weighted average grant-date fair value ofninethree months ended September 30, 2019March 31, 2022 and September 30, 2018 was $8.68 and $2.39, respectively.2021. The Company received approximately $7.3$4.2 million and $6.8$3.3 million in cash proceeds from options exercised during the ninethree months ended September 30, 2019March 31, 2022 and September 30, 2018,2021, respectively. The intrinsic value of options exercised during the ninethree months ended September 30, 2019March 31, 2022 and September 30, 20182021 was approximately $106.0$165.5 million and $26.8$123.6 million, respectively. The aggregate fair value of options vested during the ninethree months ended September 30, 2019March 31, 2022 and 20182021 was $8.5$6.5 million and $2.8$7.4 million, respectively.1,548,000options for 31,500 shares of Class B common stock.Shares Weighted-
Average
Fair ValueBalance—December 31, 2021 8,081,269 $ 101.21 Awarded 1,496,539 139.96 Vested (388,568) 69.88 Forfeited/canceled (189,438) 97.23 Unvested and outstanding—March 31, 2022 8,999,802 $ 109.09 2,095,656 shares of common stock$773.6 million as of September 30, 2019March 31, 2022 and December 31, 2018, respectivelyFinal Prospectus. final prospectus for the IPO.initially reserved and authorizedis implemented through a series of offerings under which eligible employees are granted purchase rights to purchase shares of the issuance of up to a total of 6,725,000 shares ofCompany’s Class A common stock to participating employees. Ason specified dates during such offerings. Under the ESPP, the Company may specify offerings with durations of September 30, 2019, 6,725,000 shares of Class A common stock remain available for grant under the ESPP. The initial offering period began on the date of the Final Prospectusnot more than 27 months, and will end on May 15, 2020.may specify shorter purchase periods within each offering. On each purchase date, eligible employees will purchase the shares at a price per share equal to 85% of the lesser of (1) the $27.00 initial public offering pricefair market value of the Company’s Class A common stock on the first trading day of the offering period, or (2) the fair market value of the Company’s Class A common stock on the purchase date, as defined in the ESPP.$0.1$2.2 million of stock-based compensation expense related to the ESPP during the three months ended September 30, 2019, beginning upon the IPO in September 2019.March 31, 2022. As of September 30, 2019, no amounts haveMarch 31, 2022, $11.4 million has been withheld on behalf of employees for a future purchase under the ESPP due to the timing of payroll deductions. There were no purchases forrelated to the ESPP in the three months ended September 30, 2019 related toMarch 31, 2022. As of March 31, 2022, 15,123,466 shares of Class A common stock remain available for grant under the ESPP.21accountsrecognizes and measures compensation expense for all stock-based payment awards granted to employees, directors and nonemployees based on the fair value of the awards on the date of grant. The determination of the grant date fair value using an option-pricing model is affected by the estimated fair value of the Company’s common stock as well as assumptions regarding a number of other complex and subjective variables. These variables include expected stock price volatility over the expected term of the award, actual and projected employee stock option exercise behaviors, the risk-free interest rate for the expected term of the award and expected dividends. The fair value of RSUs is determined by the closing price on the date of grant of the Company’s Class A common stock, as reported on the Nasdaq Global Select Market. The Company estimates the fair value of the rights to acquire stock under the ESPP using the Black-Scholes option-pricing model. Stock-based compensation is recognized on a straight-line basis over the requisite service period and account for forfeitures as they occur.and comprehensive loss as follows (in thousands):Three Months Ended
March 31,2022 2021 Cost of revenue $ 1,653 $ 701 Research and development 44,696 16,069 Sales and marketing 14,595 7,010 General and administrative 5,940 5,081 Stock-based compensation, net of amounts capitalized 66,884 28,861 Capitalized stock-based compensation expense 3,506 2,153 Total stock-based compensation expense $ 70,390 $ 31,014 10. Three Months Ended
March 31, 2022 2021 Interest income $ 5,496 $ 5,898 Other income (loss), net 191 (125) Interest income and other income, net $ 5,687 $ 5,773 (0.8)%10.3% and (8.1)(4.3)% for the three months ended September 30, 2019March 31, 2022 and 2018,2021, respectively and (2.2)% and (11.4)% for the nine months ended September 30, 2019 and 2018, respectively.. The Company has incurred U.S. operating losses and hasgenerated minimal profits in the US and its foreign jurisdictions.U.S.United States. Due to uncertainties surrounding the realization of the deferred tax assets, the Company maintainsrecorded a full valuation allowance against substantially all of its net deferred tax assets. When the Company determines that it will be able to realize some portion or all of its deferred tax assets, an adjustment to its valuation allowance on its deferred tax assets would have the effect of increasing net income in the period such determination is made.The Company has applied ASC 740, Income Taxes,has determined that it has uncertain positions that would resultJobs Act of 2017 eliminates the option to deduct research and development expenditures, as defined under IRC Section 174, in the year incurred. Instead, taxpayers are required to amortize such expenditures over five years if incurred in the U.S. and over fifteen years if incurred in a tax reserve deemed immaterial forforeign jurisdiction. For the ninethree months ended September 30, 2019 and $0.2 million forMarch 31, 2022, the nine months ended September 30, 2018. The Company’s policy isCompany conformed to recognize interest and penalties related to uncertainthis change in tax positions in income tax expense. The Company is subject to U.S. federal tax authority, U.S. state tax authority and foreign tax authority examinations.11. law.LossIncome (Loss) Per Sharelossincome (loss) per common share is presented in conformity with the two-class method required for participating securities. Immediately prior to the consummation of the Company’s IPO in September 2019, all outstanding shares of convertible preferred stock and common stock were converted tointo shares of Class B common stock. As a result, Class A and Class B common stock are the only outstanding equity inshares of capital stock of the Company.lossincome (loss) per share is computed using the weighted-average number of shares of common sharesstock outstanding during the period. The undistributed earnings are allocated based on the contractual participation rights of the Class A and Class B common sharesstock as if the earnings for the year have been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. Further, as the conversion of Class B common stock is assumed in the computation of the diluted net lossincome (loss) per share of Class A common stock, the undistributed earnings are equal to net lossincome (loss) for that computation.22lossincome (loss) per share (in thousands, except per share data):Three Months Ended
March 31,2022 2021 Basic net income (loss) per share: Class A Class B Class A Class B Numerator: Net income (loss) $ 8,332 $ 1,406 $ (9,547) $ (3,521) Denominator: Weighted-average shares used in calculating net income (loss) per share, basic 268,197 45,259 223,566 82,468 Basic net income (loss) per share $ 0.03 $ 0.03 $ (0.04) $ (0.04) Diluted net income (loss) per share: Numerator: Allocation of distributed net income (loss) for basic computation $ 8,332 $ 1,406 $ (9,547) $ (3,521) Reallocation of undistributed net income (loss) as a result of conversion of Class B to Class A shares 1,406 — (3,521) — Allocation of undistributed income (loss) $ 9,738 $ 1,406 $ (13,068) $ (3,521) Denominator: Number of shares used in basic calculation 268,197 45,259 223,566 82,468 Weighted-average effect of diluted securities: Conversion of Class B to Class A common shares outstanding 45,259 — 82,468 — Employee stock options 20,075 — — — Unvested early exercises 11 — — — Restricted stock units 3,373 — — — Unvested restricted stock in connection with acquisition 655 — — — Shares issuable upon conversion of the convertible senior notes 8,098 — — — Number of shares used in diluted calculation 345,668 45,259 306,034 82,468 Diluted net income (loss) per share $ 0.03 $ 0.03 $ (0.04) $ (0.04) Since the Company was in a loss position for the periods presented, basic net loss per share is the same as diluted net loss per share as the inclusion of all potential common shares outstanding would have been anti-dilutive. As of March 31, 2022 2021 Shares subject to outstanding stock options and RSUs 1,540 30,794 Unvested early exercised stock options and restricted shares of common stock — 620 Shares subject to the employee stock purchase plan 48 138 Shares issuable upon conversion of the convertible senior notes — 8,098 Total 1,588 39,650 2310- Q10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 included in the Final Prospectus for our initial public offering, or our IPO, dated as of September 18, 2019 and filed with the Securities and Exchange Commission,2021, or the SEC, pursuant to Rule 424(b)(4) on September 19, 2019.Annual Report. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy, and plans and objectives of management for future operations and the potential impact that the ongoing COVID-19 pandemic may have on our business, includes forward-looking statements that involve risks and uncertainties as described under the heading “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading “Risk Factors” in this Quarterly Report on Form 10-Q for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.analyticssecurity platform for developers, IT operations teams and business users in the cloud age.and log management and security monitoring to provide unified, real-time observability of our customers’ entire technology stack. Datadog is used by organizations of all sizes and across a wide range of industries to enable digital transformation and cloud migration, drive collaboration among development, operations, security, and business teams, accelerate time to market for applications, reduce time to problem resolution, secure applications and infrastructure, understand user behavior and track key business metrics. Our paid subscriptions are available in Pro and Enterprise tiers. The terms of our subscription agreements are primarily monthly or annual. Customers also have the option to purchase additional products, such as additional containers to monitor, custom metrics packages, anomaly detection and trace search andapp analytics. Professional services are generally not required for the implementation of our products and revenue from such services has been immaterial to date.September 30, 2019,March 31, 2022, we had $770.9$275.1 million in cash, cash equivalents and restricted cash.cash and $1.4 billion in marketable securities. We generated revenue of $95.9$363.0 million and $51.1$198.5 million in the three months ended September 30, 2019March 31, 2022 and 2018, respectively, representing year-over-year growth of 88%. For the nine months ended September 30, 2019 and 2018, our revenue was $249.1 million and $136.5 million,2021, respectively, representing year-over-year growth of 83%. Substantially all of our revenue is subscription software sales. Our net lossincome (loss) was $(4.2)$9.7 million and $(4.7)$(13.1) million for the three months ended September 30, 2019March 31, 2022 and 2018, respectively, and $(17.6) million and $(4.2) million for the nine months ended September 30, 2019 and 2018,2021, respectively. We generated operating cash flow of $6.8$147.4 million and $15.4$51.7 million in the ninethree months ended September 30, 2019March 31, 2022 and 2018,2021, respectively. Our free cash flow was ($10.1)$129.9 million and $2.6$44.5 million in the ninethree months ended September 30, 2019March 31, 2022 and 2018,2021, respectively. See the section titled “—Liquidity and Capital Resources—Non-GAAP Free Cash Flow” for additional information.September 30, 2019,March 31, 2022, we had approximately 9,50019,800 customers spanning organizations of a broad range of sizes and industries.industries, compared to approximately 15,200 as of March 31, 2021. 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.24September 30, 2019,March 31, 2022, we had approximately 7272,250 customers with annual run-rate revenue, or ARR, of $100,000 or more, representing 85% of our ARR, up from 3771,406 customers as of September 30, 2018.March 31, 2021, representing 79% 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. We updated the definition of MRR as of the quarter ended September 30, 2021 to capture usage from subscriptions with committed contractual amounts and applied this change retrospectively.ARR and MRR should be viewed independently of revenue, and do not represent our revenue under U.S. generally accepted accounting principles, or 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.and both user experience and network performance monitoring in 2019.2019 and security monitoring in 2020. As of September 30, 2019,March 31, 2022, approximately 50%81% of our customers were using more than one product, up from approximately 15%75% a year earlier. We believe these metrics indicate strong momentum in the uptake of our newer platform products.25%approximately 28% of total revenue for the ninethree months ended September 30, 2019.March 31, 2022 and 2021. In addition, we have made and plan to continue to make significant investments to expand geographically, particularly in Europe, the Middle East, AfricaEMEA and in the Asia Pacific region.APAC. Although these investments may adversely affect our operating results in the near term, we believe that they will contribute to our long-term growth. Beyond North America, we now have sales presence internationally, including in Amsterdam, Dublin, London, Paris, Seoul, Singapore, Sydney, and Tokyo.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.25APMnetwork performance monitoring products are priced per host, while theour logs product is priced primarily per log events indexed and secondarily by events ingested. Customers also have the option to purchase additional products, such as additional container or serverless monitoring, custom metrics packages, anomaly detection, synthetic monitoring and trace search andapp analytics.26and continue to be our largest operating expense for the foreseeable future as we expand our sales and marketing efforts. However, we expect that our sales and marketing expense will decrease as a percentage of our revenue over the long term. newly public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations and increased expenses for insurance, investor relations and professional services. We expect that our general and administrative expense will increase in absolute dollars as our business grows. 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. our money market funds included in cash and cash equivalents and restricted cash.maintainrecorded a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized.(1)Includes stock-based compensation expense as follows:Three Months Ended
March 31,2022 2021 (in thousands) Revenue $ 363,030 $ 198,549 74,462 46,666 Gross profit 288,568 151,883 Operating expenses 150,608 79,266 101,166 64,353 26,380 21,094 Total operating expenses 278,154 164,713 Operating income (loss) 10,414 (12,830) Other income: (5,247) (5,472) Interest income and other income, net 5,687 5,773 Other income, net 440 301 Income (loss) before provision for income taxes 10,854 (12,529) Provision for income taxes (1,116) (539) Net income (loss) $ 9,738 $ (13,068)
(1)Includes stock-based compensation expense as follows:(2)Includes amortization of acquired intangibles expense as follows:Three Months Ended
March 31,2022 2021 (in thousands) Cost of revenue $ 1,653 $ 701 Research and development 44,696 16,069 Sales and marketing 14,595 7,010 General and administrative 5,940 5,081 Total $ 66,884 $ 28,861 Three Months Ended
March 31, 2022 2021 (in thousands) Cost of revenue $ 1,413 $ 355 Sales and marketing 203 — Total $ 1,616 $ 355 Three Months Ended
March 31,2022 2021 (in thousands) Cost of revenue $ 102 $ 95 Research and development 3,297 1,771 Sales and marketing 1,109 1,179 General and administrative 257 124 Total $ 4,765 $ 3,169 Three Months Ended
March 31,2022 2021 (in thousands) Interest expense $ 840 $ 835 Three Months Ended
March 31, 2022 2021 Revenue 100 % 100 % Cost of revenue 21 24 Gross profit 79 76 Operating expenses Research and development 41 40 Sales and marketing 28 32 General and administrative 7 11 Total operating expenses 77 83 Operating income (loss) Operating income (loss) 3 (6) Other income (loss): Other income (loss): Interest expense Interest expense (1) (3) Interest income and other income, net Interest income and other income, net 2 3 Other income (loss), net Other income (loss), net 0 0 Loss before provision for income taxes 3 (6) Provision for income taxes 0 (1) Net income (loss) Net income (loss) 3 % (7) % September 30, 2019March 31, 2022 and 2018Three Months Ended
March 31, 2022 2021 Change % Change (dollars in thousands) Revenue $ 363,030 $ 198,549 $ 164,481 83 % $44.8$164.5 million, or 88%83%, for the three months ended September 30, 2019March 31, 2022 compared to the three months ended September 30, 2018. TheMarch 31, 2021. Approximately 80% of the increase in revenue was primarily dueattributable to growth from existing customers, withand the remaining increase20% was attributable to growth from new customers.28Three Months Ended
March 31,2022 2021 Change % Change (dollars in thousands) Cost of revenue $ 74,462 $ 46,666 $ 27,796 60 % Gross margin 79 % 76 % $11.2$27.8 million, or 93%60%, for the three months ended September 30, 2019March 31, 2022 compared to the three months ended September 30, 2018.March 31, 2021. This increase was primarily due to an increase of $9.1$22.4 million in third-party cloud infrastructure hosting and software costs, $1.1 millionan increase of depreciation and amortization, $0.8$2.0 million in personnel expenses as a result of increased headcount, $0.1and an increase of $1.8 million in depreciation and amortization expense.credit card processing feesincreased revenue and other fees,cost savings from our third-party cloud infrastructure providers.$0.1DevelopmentThree Months Ended
March 31,2022 2021 Change % Change (dollars in thousands) Research and development $ 150,608 $ 79,266 $ 71,342 90 % Percentage of revenue 41 % 40 % Our gross margin remained relatively constant inThree Months Ended
March 31, 2022 2021 Change % Change (dollars in thousands) Sales and marketing $ 101,166 $ 64,353 $ 36,813 57 % Percentage of revenue 28 % 32 % September 30, 2019March 31, 2022 compared to the three months ended September 30, 2018.Research and DevelopmentResearch and development expense increased by $14.5 million, or 103%, for the three months ended September 30, 2019 compared to the three months ended September 30, 2018.March 31, 2021. This increase was primarily due to an increase of $10.4 million in personnel costs for our engineering, product and design teams as a result of increased headcount and an increase of $4.1 million in cloud infrastructure related investments and in allocated overhead costs necessary for supporting the growth of the business.Sales and MarketingSales and marketing expense increased by $13.7 million, or 55%, for the three months ended September 30, 2019 compared to the three months ended September 30, 2018. This increase was primarily due to an increase of $10.3 million in personnel costs for our sales and marketing organization as a result of increased headcount and increased amortization of deferred contract costs related to increased variable compensation for sales personnel due to increased sales, an increase of $1.2 million in marketing and promotional activities, and an increase of $2.2 million in allocated overhead costs as a result of increased overall costs necessary to support the growth of the business and related infrastructure.General and Administrative29General and administrative expense increased by $4.9 million, or 114%, for the three months ended September 30, 2019 compared to the three months ended September 30, 2018. This increase was primarily due to an increase of $2.9 million in personnel costs as a result of increased headcount, an increase of $1.4 million related to outside professional fees primarily related to legal and accounting services, and an increase of $0.6 million in allocated overhead costs as a result of an increase in overall costs necessary to support the growth of the business and related infrastructure.Comparison of the Nine Months Ended September 30, 2019 and 2018RevenueRevenue increased by $112.7 million, or 83%, in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. The increase in revenue was primarily due to growth from existing customers, with the remaining increase attributable to new customers.Cost of Revenue and Gross MarginCost of revenue increased by $32.5 million, or 106%, in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. This increase was primarily due to an increase of $26.9 million in third-party cloud infrastructure hosting and software costs, an increase of $2.4 million in personnel expenses as a result of increased headcount, an increase of $2.1 million of depreciation and amortization expense, an increase of $0.6 million in credit card processing fees and other fees, and an increase of $0.6 million in allocated overhead costs as a result of an increase in overall costs necessary to support the growth of the business and related infrastructure.Our gross margin declined by 3% for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, primarily as the result of the timing and amount of our investments to expand the capacity of our third-party cloud infrastructure providers.Research and DevelopmentResearch and development expense increased by $38.1 million, or 102%, in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. This increase was primarily due to an increase of $23.8 million in personnel costs for our engineering, product and design teams as a result of increased headcount, and an increase of $14.3 million in cloud infrastructure related investments and in allocated overhead costs necessary for supporting the growth of the business.30Sales and marketing expense increased by $45.3 million, or 76%, in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. This increase was primarily due to an increase of $30.0$32.2 million in personnel costs for our sales and marketing organization as a result of increased headcount and increased variable compensation for our sales personnel, an increase of $8.1$2.2 million in allocated overhead costs as a result of an increase in overall costs necessary to support the growth of the business and related infrastructure, and an increase of $7.2$1.9 million in advertising, marketing, and promotional activities.Three Months Ended
March 31, 2022 2021 Change % Change (dollars in thousands) General and administrative $ 26,380 $ 21,094 $ 5,286 25 % Percentage of revenue 7 % 11 % $10.3$5.3 million, or 79%25%, infor the ninethree months ended September 30, 2019March 31, 2022 compared to the ninethree months ended September 30, 2018.March 31, 2021. This increase was primarily due to an increase of $4.9$5.6 million in personnel expensescosts as a result of increased headcount and an increase of $4.1$0.8 million related to outside professional fees primarilybad debt expense. These amounts were partially offset by a decrease in $1.2 million related to legal and accounting services, anfees.Three Months Ended
March 31,2022 2021 Change % Change (dollars in thousands) Other income, net $ 440 $ 301 $ 139 46 % Percentage of revenue 0 % 0 % $1.3$0.2 million in allocated overhead expenses relatedamortization of premiums on our marketable securities. The increase was partially offset by a decrease of $0.1 million in interest income, mainly due to an increaseincome earned from investments in overall costs necessary to support the growth of the business and related infrastructure.Since inception, we have financed operations primarily through sales of subscriptions and the net proceeds we have received from sales of equity securities as further detailed below. As of September 30, 2019, we had cash and cash equivalents totaling $760.9 million.Our cash and cash equivalents primarily consist of bank deposits and money market funds. In September 2019, we closed our IPO of 27,600,000 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 shares of our Class A common stock, resulting in aggregate 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.We believe that our existing cash and cash equivalents and cash flow from operations will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including our subscription growth rate, subscription renewal activity, including the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support development efforts, the introduction of new and enhanced products, and the continuing market adoption of our platform. We may, in the future, enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We may be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, operations and financial condition.A substantial source of our cash from operations is from our deferred revenue, which is included in the liabilities section of our consolidated balance sheet. Deferred revenue consists of the unearned portion of customer billings, which is recognized as revenue in accordance with our revenue recognition policy. As of September 30, 2019, we had deferred revenue of $121.8 million, of which $117.0 million was recorded as a current liability and expected to be recognized as revenue in the next 12 months, provided all other revenue recognition criteria have been met.31The following table shows a summary of our cash flows for the periods presented:Operating Activitiesmarketing expenses, hosting expenses, facility expenses, and overheadmarketing expenses. We have generated positive cash flows from operations during the three months ended March 31, 2022 and 2021, and have historically supplemented working capital requirements through net proceeds from the sale of debt and equity securities.Three Months Ended
March 31,2022 2021 (in thousands) Cash provided by operating activities $ 147,388 $ 51,650 Cash (used in) provided by investing activities (150,354) 90,710 Cash provided by financing activities 4,242 3,030 ninethree months ended September 30, 2019 of $6.8March 31, 2022 increased $95.7 million wascompared to the three months ended March 31, 2021, primarily related to our net loss of $(17.6) million, adjusted fordriven by an increase in non-cash charges of $32.2$45.0 million and net cash outflows of $7.8 million provided by changes in our operating assets and liabilities. Non-cash charges primarily consisted of stock-based compensation, depreciation and amortization of property and equipment, amortization of capitalized software, and amortization of acquired intangibles. The main drivers of the changes in operating assets and liabilities were related to a $51.1 millionan increase in deferred revenue resultingof $60.7 million. The increase in non-cash charges related primarily to an increase of $38.0 million in stock-based compensation as we continued to increase headcount to support the growth of the business. The increase in deferred revenue resulted primarily from increased billings for subscriptions and a $4.2 millionsubscriptions. The increase in accounts payable. These amounts were partiallycash provided by operating activities was offset by a $2.0 million decrease in accrued expenses and other liabilities, a $32.2 millionan increase in accounts receivable net,of $16.5 million due to increases in sales, a $9.5 million increase in prepaid expenses and other current assets, primarily driven by prepaid hosting services, a $10.9 million increase in deferred contract costs related to commissions paid on new bookings, and a $8.5 million increase in other assets.Cash provided by operating activities for the nine months ended September 30, 2018 of $15.4 million was primarily related to our net loss of $(4.2) million, adjusted for non-cash charges of $9.4 million and net cash inflows of $10.2 million provided by changes in our operating assets and liabilities. Non-cash charges primarily consisted of stock-based compensation, depreciation and amortization of property and equipment, amortization of capitalized software, and amortization of acquired intangibles. The main drivers of the changes in operating assets and liabilities were related to a $19.4 million increase in deferred revenue, resulting primarily from increased billings for subscriptions, a $4.8 million increase in accounts payable, and a $6.3 million increase in accrued expenses and other liabilities, due to an increase in headcount. These amounts were partially offset by an $8.6 million increase in accounts receivable, net, due to increases in sales, a $0.7 million increase in prepaid expenses and other current assets, primarily driven by prepaid hosting services, a $6.0 million increase in deferred contract costs related to commissions paid on new bookings, and a $4.9 million increase in other assets.Cashninethree months ended September 30, 2019 and 2018 was $16.9March 31, 2022 increased $241.1 million compared to the three months ended March 31, 2021, primarily driven by an increase in the investment of marketable securities of $179.4 million, a decrease in proceeds from maturities of marketable securities of $53.5 million, and $14.4 million, respectively, and was primarily the resultan increase in purchases of increases in capital expenditures to purchase property and equipment to support additional office space and site operations, increasesof $8.5 million. The increase in capitalizationcash used in investing activities was offset by a decrease in proceeds from sales of software development costs and increases in acquired intangibles.Cashninethree months ended September 30, 2019 was $716.0March 31, 2022 increased $1.2 million and wascompared to the three months ended March 31, 2021, primarily the result of aggregate net proceeds from our IPOdue to an increase in the amount of $708.7 million, and proceeds from the exercise of stock options in the amount of $7.3 million. Cash provided by financing activities for the nine months ended September 30, 2018 was $6.8 million and was the result of proceeds from the exercise of stock options.generally accepted accounting principles in the United States, or GAAP. To supplement our condensed consolidated financial statements, we provide investors with the amount of free cash flow, which is a non-GAAP financial measure. Free cash flow represents net cash used inprovided by operating activities, reduced by capital expenditures and capitalized software development costs, if any. Free cash flow is a measure used by management to understand and evaluate our liquidity and to generate future operating plans. The reduction of capital expenditures and amounts capitalized for software development facilitates comparisons of our liquidity on a period-to-period basis and excludes items that we do not consider to be indicative of our liquidity. We believe that free cash flow is a measure of liquidity that provides useful information to our management, board of directors, investors and others in32business in the same manner as our management and board of directors.business. Nevertheless, our use of free cash flow has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Further, our definition of free cash flow may differ from the definitions used by other companies and therefore comparability may be limited. You should consider free cash flow alongside our other GAAP-based financial performance measures, such as net cash used in operating activities, and our other GAAP financial results. a reconciliation of free cash flow to net cash used in operating activities, the most directly comparable GAAP measure, for each of the periods indicated.The following table presents our cash flows for the periods presented and a reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable financial measure calculated in accordance with GAAP:Three Months Ended
March 31,2022 2021 (in thousands) Net cash provided by operating activities $ 147,388 $ 51,650 Less: Purchases of property and equipment (9,514) (998) Less: Capitalized software development costs (7,973) (6,183) Free cash flow $ 129,901 $ 44,469 Contractual Obligations and CommitmentsOur principal commitments consist of obligations under our operating leases, which are primarily for office space, and purchase commitments to our cloud hosting providers and other vendors. We entered into an agreement with Google Cloud Platform, or GCP, in September 2019, which we refer to as the GCP Agreement. Under the GCP Agreement, we are required to purchase an aggregate of at least $37.5 million of cloud services from GCP through September 2022. The aggregate amount of $37.5 million is to be paid over the course of three periods, or Commitment Periods, with each period being 12 months. The amount to be paid for each of the three Commitment Periods is $8.0 million, $12.0 million and $17.5 million, respectively. Except in limited circumstances, such as our termination of the GCP Agreement for cause, if we fail to meet the minimum purchase commitment during any Commitment Period, we are required to pay the difference. Neither party may terminate the GCP Agreement for convenience during this three-year term. Other than as described above, there have been no material changes to our obligations under our operating leases and purchase commitments as compared to 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.Off-Balance Sheet ArrangementsAs of September 30, 2019 we did not have any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.Policiesas compared tofrom those disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of 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, 2019.33We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period under the JOBS Act until the earlier of the date we (1) are no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.quantitative and qualitative disclosures about market riskSeptember 30, 2019,March 31, 2022, we had $755.0$241.1 million ofin cash equivalents investedand $1.4 billion in money market funds.marketable securities, which consisted of commercial debt, certificates of deposit, U.S. and non-U.S. government treasury securities, and commercial paper. In addition, we had $10.0 $3.4 million of restricted cash due to the outstanding letters of credit established in connection with lease agreements for our facilities. Our cash and cash equivalents are held for working capital purposes. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to a fluctuation in interest rates, which may affect our interest income and the fair market value of our investments.As of September 30, 2019,March 31, 2022, a hypothetical 10% relative change in interest rates would not have a material impact on our condensed consolidated financial statements.wholly ownedwholly-owned foreign subsidiaries is the U.S. dollar. All of our sales are denominated in U.S. dollars, and therefore our revenue is not currently subject to significant foreign currency risk. Our operating expenses are denominated in the currencies of the countries in which our operations are located, which are primarily in the United States, Canada, France, Ireland, the United Kingdom, Japan, Australia, Germany, the Netherlands and Australia.Spain. Our consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreignControls and Procedures“disclosure“disclosure controls and procedures,” as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’sSEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.September 30, 2019.March 31, 2022. Based on the evaluation of our disclosure controls and procedures as of September 30, 2019,March 31, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.3435Legal ProceedingsRisk FactorsRisks RelatedOur Businessgrow our business and Industry$249.1$363.0 million, $136.5$198.5 million, $198.1$1,028.8 million and $100.8$603.5 million for the ninethree months ended September 30, 2019March 31, 2022 and 20182021 and the years ended December 31, 20182021 and 2017,2020, 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:36have experiencedgenerated net losses in each periodyear since inception. We generatedour inception, including net losses of $(17.6) million, $(4.2) million, $(10.8)$20.7 million and $(2.6)$24.5 million for the nine months ended September 30, 2019 and 2018 and the years ended December 31, 20182021 and 2017,2020, respectively. As of September 30, 2019,March 31, 2022, we had an accumulated deficit of $124.5$142.4 million. While we have experienced significant revenue growth in recent periods, we are not certain whether or when we will obtain a high enough volume of sales to sustain or increase our growth 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, the expansion of our customer base, and being a public company. 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.37aor are unable to protect against cyber attacks, ransomware, security breachincidents, 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.personally identifiablepersonal information, and security breaches or unauthorized access to our platform and products, or those of our third-party service providers, could result in the unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to sensitive information including our or 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 unauthorized access to our or our customers’ data 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 working remotely due to the COVID-19 pandemic, which may pose additional data security risks (including, for example, an increase in phishing and spam emails we began experiencing during 2020).personally identifiablepersonal information and our security measures are or are believed 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.personally identifiable,personal, confidential or proprietary information. We may expend significant resources, fundamentally change our business activities and practices, or modify our operations or information technology in an effort to protect against security incidents and to mitigate, detect, and remediate actual and potential vulnerabilities. There can be no assurance that any security measures that we or our third-party service providers have implemented will be effective against current or future security threats. While we have developed systems and processes designed to protect the integrity, confidentiality, and security of our and our customers’ data, our security measures or those of our third-party service providers could fail and result in unauthorized access to or disclosure, modification, misuse, loss or destruction of such data.38 there are many different security breach techniquesvulnerabilities exist and exploits of such techniquesvulnerabilities 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, 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 of 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 incur expenses to correct.systemsservices in a variety of contexts, including, without limitation, encryption and authentication technology, employee email, content delivery to customers, back-office support, credit card processing and other functions. Although we have developed systems and processes that are designed to protect customer data and prevent data loss and other security breaches, including systems and processes designed to reduce the impact of a security breach at a third-party service provider, such measures cannot provide absolute security.datafines, judgments, settlements, penalties, costs, attorney fees and other impacts that arise out of privacy or security liabilities actually incurred, will cover any indemnificationincidents or breaches. If the impacts of a privacy or security incident or breach, or the successful assertion of one or more large claims against us relatingthat exceeds our available insurance coverage, or results in changes to any incident,our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), it could have an adverse effect on our business. In addition, we cannot be sure that our existing insurance coverage, cyber coverage and coverage for errors and omissions will continue to be available to us on economically reasonableacceptable terms or at all, or that any insurerour insurers will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect our reputation, business, financial condition and results of operations.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.Our ability to attract new users and customers and increase revenue from existing customers depends in large part on our ability to enhance and improve our existing products, increase adoption and usage of our products, and introduce new products and capabilities. The market in which we compete is relatively new and subject to rapid technological change, evolving industry standards, and changing regulations, as well as changing customer needs, requirements and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis. If we were unable to enhance our products and platform capabilities that 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.The success of our platform depends, in part, on its ability to be deployed in a self-service installation process. We currently offer more than 350 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.39The 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.Our unified platform combines functionality from numerous traditional product categories, and hence we compete in each of these categories with home-grown and open-source technologies, as well as a number of different vendors. 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 Computer Associates International, Inc. With respect to APM, we compete with Cisco Systems, Inc., New Relic, Inc. and Dynatrace Software Inc. With respect to log management, we compete with Splunk Inc. and Elastic N.V. With respect to cloud monitoring, we compete with native solutions from cloud providers such as Amazon.com, Inc. (Amazon Web Services, or AWS), Alphabet Inc. (Google Cloud Platform, or GCP) and Microsoft Corporation (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.With the introduction of new technologies and market entrants, we expect that the competitive environment will remain intense going forward. Some of our actual and potential competitors have been acquired by other larger enterprises and have made or may make acquisitions or may enter into partnerships or other strategic relationships that may provide more comprehensive offerings than they individually had offered or achieve greater economies of scale than us. In addition, new entrants not currently considered to be competitors may enter the market through acquisitions, partnerships or strategic relationships. As we look to market and sell our products and platform capabilities to potential customers with existing internal solutions, we must convince their internal stakeholders that our products and platform capabilities are superior to their current solutions.We compete on the basis of a number of factors, including: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; andbrand recognition and reputation.Our competitors vary in size and in the breadth and scope of the products offered. Many of our competitors and potential competitors have greater name recognition, longer operating histories, more established customer relationships and installed customer bases, larger marketing budgets and greater resources than we do. Further, other potential competitors not currently offering competitive solutions may expand their product or service offerings to compete with our products and platform capabilities, or our current and potential competitors may establish cooperative relationships among themselves or with third parties that may further enhance their resources and product offerings in our addressable market. Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, and customer requirements. An existing competitor or new entrant could introduce new technology that reduces demand for our products and platform capabilities. In addition to product and technology competition, we face pricing competition. Some of our competitors offer their solutions at a lower price, which has resulted in, and may continue to result in, pricing pressures.For all of these reasons, we may not be able to compete successfully against our current or future competitors, and this competition could result in the failure of our platform to continue to achieve or maintain market acceptance, any of which would harm our business, results of operations, and financial condition.4041participate;42the 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. As of September 30, 2019, we had approximately 727 customers with an ARR of $100,000 or more. Sales to large customers involve risks that may not be present or that are present to a lesser extent with sales to smaller entities, such as longer sales cycles, more complex customer requirements, substantial upfront sales costs, and less predictability in completing some of our sales. For example, enterprise customers may require considerable time to evaluate and test our solutions and those of our competitors prior to making a purchase decision and placing an order. A number of factors influence the length and variability of our sales cycle, including the need to educate potential customers about the uses and benefits of our solutions, the discretionary nature of purchasing and budget cycles, and the competitive nature of evaluation and purchasing approval processes. As a result, the length of our sales cycle, from identification of the opportunity to deal closure, may vary significantly from customer to customer, with sales to large enterprises typically taking longer to complete. Moreover, large enterprise customers often begin to deploy our products on a limited basis, but nevertheless demand configuration, integration services and pricing negotiations, which increase our upfront investment in the sales effort with no guarantee that these customers will deploy our products widely enough across their organization to justify our substantial upfront investment.From 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 consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, experiences significant volatility, or increases such that prospective employees believe there is limited upside to the value of our equity awards, it may adversely affect our ability to recruit and retain key employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects would be harmed.43develop the infrastructure of a public company,expand globally, we may find it difficult to maintain these important aspects of our culture.culture particularly given the ongoing COVID-19 pandemic and remote work arrangements. If we fail to maintain our company culture, our business and competitive position may be harmed.44If we fail to offer high-quality support, our reputation could suffer.Our customers rely on our customer support personnel to resolve issues and realize the full benefits that our platform provides. High-quality support is also important for the renewal and expansion of our subscriptions with existing customers. The importance of our support function will increase as we expand our business and pursue new customers. If we do not help our customers quickly resolve issues and provide effective ongoing support, our ability to maintain and expand our subscriptions to existing and new customers could suffer,reputation with existing or potential customers could suffer.Acquisitions, strategic investments, partnerships, or alliances could be difficult to identify, pose integration challenges, divert the attention of management, disrupt our business, dilute stockholder value, and adversely affect our business, financial condition and results of operations.We have in the past and may in the future seek to acquire or invest in businesses, joint ventures, products and platform capabilities, or technologies that we believe could complement or expand our services and platform capabilities, enhance our technical capabilities, or otherwise offer growth opportunities. Further, following the receipt of proceeds from our IPO, there is an increased likelihood that we will devote resources to exploring larger and more complex acquisitions and investments than we have previously attempted. Any such acquisition or investment may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable opportunities, whether or not the transactions are completed, and may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating or integrating the businesses, technologies, products and platform capabilities, personnel or operations of any acquired companies, particularly if the key personnel of an acquired company choose not to work for us, their software is not easily adapted to work with our platform, or we have difficulty retaining the customers of any acquired business due to changes in ownership, management or otherwise. These transactions may also disrupt our business, divert our resources, and require significant management attention that would otherwise be available for development of our existing business. Any such transactions that we are able to complete may not result in any synergies or other benefits we had expected to achieve, which could result in impairment charges that could be substantial. In addition, we may not be able to find and identify desirable acquisition targets or business opportunities or be successful in entering into an agreement with any particular strategic partner. These transactions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our results of operations. In addition, if the resulting business from such a transaction fails to meet our expectations, our business, financial condition and results of operations may be adversely affected or we may be exposed to unknown risks or liabilities.Wethird-party service providers are subject to stringent and changing privacy laws, regulations and standards, information security policies and contractual obligations related to data privacy and security. Our actualActual 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 personally identifiable information.personal information, confidential information, and other proprietary information that we, our third-party service providers or other partners process. We are subject to a variety of federal, state, local and international laws, directives and regulations, and industry standards, relating to the collection, use, retention, security, disclosure, transfer and other processing of personally identifiablepersonal information. The regulatory framework for 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. We publicly post documentation regarding our practices concerning the collection, processing, use and disclosure of data. Although we endeavor to comply with our published policies and documentation, we may at times fail to do so or be alleged to have failed to do so. The publication of our privacy policy and other documentation that provide promises and assurances about privacy and security can subject us to potential state and federal action if they are found to be deceptive, unfair, or misrepresentative of our actual practices. Any failure by us, our suppliers or other parties with whom we do business to comply with this documentation or with federal, state, local or international regulations could result in proceedings against us by governmental entities or others. In many jurisdictions, enforcement actions and consequences for noncompliance are rising. In the United States, these include enforcement actions in response to rules and regulations promulgated under the authority of federal agencies and state attorneys general and legislatures and consumer protection agencies. In addition, privacy advocates and industry groups have regularly proposed, and may propose in the future, self-regulatory standards with which we must legally comply or that contractually apply to us. If we fail to follow these security standards even if no customer information is compromised, we may incur significant fines or experience a significant increase in costs.45virtuallynearly every jurisdiction in which we operate has established its own data security and privacy legal framework with which we, our third-party service providers, or our customers must comply, including but not limited to the European Union, or EU.comply. The EU’s data protection landscape is currently unstable, resulting in possible significant operational costs for internal compliance and risk to our business. The EU has adoptedFor example, the European Union's General Data Protection Regulation, or EU GDPR, which went into effect in May 2018 and contains numerous requirements and changes from previously existing EU law, including more robust obligations on data processors and heavier documentation requirements for data protection compliance programs by companies. Amongrequirements,circumstances, the EU GDPR regulates transfersgenerally prohibits the transfer of personal data subjectinformation outside the European Economic Area, or the EEA. In June 2021, the European Commission released a set of Standard Contractual Clauses, or “SCCs,” that can lawfully be used for personal information transfers from Europe to the GDPRUnited States or most other countries. The SCCs require parties that rely upon that legal mechanism to third countries that have not been foundcomply with additional obligations, such as conducting transfer impact assessments and implementing additional security and privacy measures, which increases the difficulty of selling to provide adequate protectionEuropean customers and may lead to such personal data, including the United States.longer sales cycles. While we have taken steps to mitigate the impact on us with respect to transfers of data, such as implementing standard contractual clauses and self-certifying under the EU-US Privacy Shield,SCCs, the efficacy and longevity of these transfer mechanisms remains uncertain. The GDPR alsoMoreover, due to potential legal challenges, there exists some uncertainty as to whether the SCCs will remain a valid transfer mechanism of personal data out of the EEA. In addition, laws in Switzerland and the United Kingdom similarly restrict transfers of personal data outside of those jurisdictions to countries such as the United States that do not provide an adequate level of personal data protection.numerous privacy-related changesthe Digital Charter Implementation Act.companies operatingcross-border personal information transfers, we may face increased exposure to regulatory actions, substantial fines and injunctions against processing or transferring personal information from Europe or elsewhere. Inability to import personal information from other jurisdictions to the United States may significantly and negatively impact our business operations, including by lowering sales on our platform due to the difficultly of establishing a lawful basis for personal information transfers out of Europe or other jurisdictions, or requiring us to increase our data processing capabilities in Europe or elsewhere at significant expense.including greater control for data subjects (including, for example,and the “right to be forgotten”), increased data portability for EU consumers, data breach notificationUnited Kingdom, regulators are increasingly focusing on compliance with requirements and increased fines. In particular, under the GDPR, fines of up to 20 million euros or up to 4% of the annual global revenue of the noncompliant company, whichever is greater, could be imposed for violations of certain of the GDPR’s requirements. Such penalties are in addition to any civil litigation claims by customers and data subjects. The GDPR requirements apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, including employee information.In additionrelated to the GDPR, the European Commission has another draft regulation in the approval processonline behavioral advertising ecosystem. It is anticipated that focuses on a person’s right to conduct a private life (in contrast to the GDPR, which focuses on protection of personal data). The proposed legislation, known as the Regulation on Privacy and Electronic Communications, or ePrivacy Regulation, would replace the current ePrivacy Directive. Originally planned to be adopted and implemented at the same time as the GDPR, the ePrivacy Regulation will likely be enacted sometime in 2019. Whilereplace 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 meanscurrent national laws that additional time and effort may need to be spent addressing differences betweenimplement the ePrivacy RegulationDirective that governs electronic communications. Outside of Europe, other laws are further regulating targeted advertising, making certain online advertising activities more difficult and the GDPR. New rules relatedsubject to the ePrivacy Regulation are likely to include enhanced consent requirements in order to use communications content and communications metadata, which may negatively impact our platform and products and our relationships with our customers.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 beEuropean Economic AreaEEA to maintain certain customer data (which may include personal data) originating from the EU in the European Economic Area,EEA, we may find it necessary to establish additional systems and processes to maintain such data in the European Economic Area,EEA, which may involve substantial expense and distraction from other aspects of our business.rapidly.rapidly, and we are, or may become, subject to numerous U.S. data privacy and security laws. In the United States, laws 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, and other state and federal laws relating to privacy and data security. Many state legislatures have adopted legislation that regulates how businesses operate online, including measures relating to privacy, data security and data breaches. Laws in all 50 states require businesses to provide notice to customers whose personally identifiablepersonal information has been disclosed as a result of a data breach. The laws are not consistent, and compliance in the event of a widespread data breach is costly. States are also constantly amending existing laws, requiring attention to frequently changing regulatorylegal requirements. Further, California recently enacted the California Consumer Privacy Act, oris expected to take effectbecame effective on January 1, 2020. The CCPA2020, gives California residents expanded rights to access and delete their personal information, opt out of certainthe sale of personal information, sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action and statutory damages for data breaches that is expected to increase data breach litigation. The CCPAand may increase our compliance costs and potential liability.liability with respect to other personal information we collect about California residents. In addition, the California Privacy Rights Act, or the CPRA, which amends the CCPA, was approved by California voters on November 3, 2020 and is scheduled to go into effect on January 1, 2023. The CPRA would, among other things, amend 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. Both 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 personal information and protected health information. Some observers have noted that 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.these lawsthey may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our products and platform capabilities. If so, in addition to the possibility of fines, lawsuits, regulatory investigations and imprisonment of company officials, 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. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable privacy and data security laws, regulations, and policies,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 policiescontractual obligations that are applicable to the46standards related to the internet,contractual obligations, our business may be harmed.47 Additionally, the Trump administration has been critical of existing trade agreements and may impose more stringent export controls. Obtaining the necessary export license or other authorization for a particular sale may be time-consuming and may result in the delay or loss of sales opportunities. Violations of U.S. sanctions or export control regulations can result in significant fines or penalties and possible incarceration for responsible employees and managers.4849Any future litigation against us could be costly and time-consuming to defend.We may become subject to legal proceedings and claims that arise in the ordinary course of business, such as claims brought by our customers in connection with commercial disputes or employment claims made by our current or former employees. Litigation 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. “as-is”Unfavorable conditions inindustry or the global economy, or reductions in information technology spending, could limit our ability to grow our business and negatively affect our results of operations.Our results of operations may vary based on the impact of changes in our industry or the global economy on us or our customers and potential customers. Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, international trade relations, political turmoil, natural catastrophes, warfare and terrorist attacks on the United States, Europe, the Asia Pacific region, Japan or elsewhere, could cause a decrease in business investments, including spending on information technology, and negatively affect the growth of our business. Competitors, many of whom are larger and have greater financial resources than we do, may respond to challenging market conditions by lowering prices in an attempt to attract our customers. In addition, the increased pace of consolidation in certain industries may result in reduced overall spending on our products and solutions. We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or within any particular industry.5025%28% and 28% for the ninethree months ended September 30, 2019.March 31, 2022 and 2021, respectively. Beyond North America, we now have sales presence internationally, including in Amsterdam, Dublin, London, Paris, London,Seoul, Singapore, Tokyo, SeoulSydney, and Sydney.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 September 30, 2019,March 31, 2022, approximately 33%39% of our full-time employees were located outside of the United States, 48%37% 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.conditions, including in the United Kingdom as a result of the United Kingdom exiting the EU, or Brexit;Europe;or terrorist activities;51Legal, political and economic uncertainty surrounding the planned exit of the United Kingdom from the EU may be a source of instability in international markets, create significant currency fluctuations, adversely affect our operations in the United Kingdom and pose additional risks to our business, financial condition and results of operations.On March 29, 2017, the United Kingdom formally notified the European Council of its intention to leave the EU pursuant to Article 50 of the Treaty on European Union. The United Kingdom will cease to be an EU Member State either on the effective date of a withdrawal agreement (entry into such a withdrawal agreement will require the approval of the United Kingdom Parliament, or Parliament) or, failing that, two years following such notification of its intention to leave the EU, or the Brexit Date, unless the European Council (together with the United Kingdom) unanimously decides to extend the two year period. It is unclear how long it will take to negotiate a withdrawal agreement, but it appears likely that Brexit will continue to involve a process of lengthy negotiations between the United Kingdom and EU member states to determine the future terms of the United Kingdom’s relationship with the EU. To date, no formal withdrawal arrangements have been agreed, and there have been several extensions to the Brexit Date. On October 28, 2019, the EU granted the United Kingdom a further extension to the Brexit Date until January 31, 2020. Under the terms of the extension, the Brexit Date may be earlier than January 31, 2020 if a formal withdrawal agreement is ratified by Parliament. In addition, the United Kingdom will hold a general election on December 12, 2019. Until the post-election government is formed, there can be no guarantee or certainty as to which form Brexit will take and on which terms a withdrawal agreement with the EU will be agreed, if at all.Lack of clarity about future U.K. laws and regulations as the United Kingdom determines which EU rules and regulations to replace or replicate in the event of a withdrawal, including financial laws and regulations, tax and free trade agreements, intellectual property rights, supply chain logistics, environmental, health and safety laws and regulations, immigration laws and employment laws, could decrease foreign direct investment in the United Kingdom, increase costs, depress economic activity, and restrict access to capital. In addition, depending on the terms of the United Kingdom’s withdrawal from the EU, the United Kingdom could lose the benefits of global trade agreements negotiated by the EU on behalf of its members. The long-term effects of Brexit will depend on any agreements (or lack thereof) between the United Kingdom and the EU and, in particular, any arrangements for the United Kingdom to retain access to EU markets either during a transitional period or more permanently.Such a withdrawal from the EU is unprecedented, and it is unclear how the United Kingdom’s access to the European single market for goods, capital, services and labor within the EU, or the European single market, and the wider commercial, legal and regulatory environment, will impact our U.K. operations, including our customers in the United Kingdom. We may also face new regulatory costs and challenges that could have an adverse effect on our operations. The announcement of Brexit has already created economic uncertainty, and its consequences could adversely impact our business, financial condition and results of operations.The 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. We completed our accounting with respect to the Tax Act in 2018, and did not make any measurement-period adjustments.52We could be required to collect additional sales taxes or be subject to other tax liabilities that may increase the costs our clients would have to pay for our products and adversely affect our results of operations.An increasing number of states have considered or adopted laws that attempt to impose tax collection obligations on out-of-state companies. Additionally, the Supreme Court of the United States recently 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.Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.As of December 31, 2018, we had NOL carryforwards for federal and state income tax purposes of approximately $28.0 million and $24.2 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 2029 for state purposes if not utilized. A lack of future taxable income would adversely affect our ability to utilize these NOLs before they expire. In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change” (as defined under Section 382 of the Code and applicable Treasury Regulations) is subject to limitations on its ability to utilize its pre-change NOLs to offset future 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.Changes in our effective tax rate or tax liability may have an adverse effect on our results of operations.Our effective tax rate could increase due to several factors, including: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 the Tax 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; andlimitations or adverse findings regarding our ability to do business in some jurisdictions.Any of these developments could adversely affect our results of operations.Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.U.S. GAAP are subject to interpretation by the Financial Accounting Standards Board, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles 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.53If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our unaudited condensed consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as described in Note 2. “Basis of Presentation and Summary of Significant Accounting Policies” in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant estimates and judgments involve revenue recognition, deferred contract costs, and the valuation of our stock-based compensation awards, including the determination of fair value of our common stock (prior to the closing of the IPO), among others. 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.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.We have funded our operations since inception primarily through equity financings and sales of our products. We cannot be certain when or if our operations will generate sufficient cash to fully fund our ongoing operations or the growth of our business. We intend to continue to make investments to support our business, which may require us to engage in equity or debt financings to secure additional funds. Additional financing may not be available on terms favorable to us, if at all. If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could harm our business, operating results, and financial condition. If we incur additional debt, the debt holders would have rights senior to holders of common stock to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock. Furthermore, if we issue additional equity securities, stockholders will experience dilution, and the new equity securities could have rights senior to those of our common stock. Because our decision to issue securities in the future will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuances of debt or equity securities. As a result, our stockholders bear the risk of future issuances of debt or equity securities reducing the value of our common stock and diluting their interests.stockholders, as well as the anticipation of lock-up releases;54a result, as of September 30, 2019, holdersMarch 31, 2022, our outstanding shares of our Class B common stock collectively beneficially owned shares representingrepresented approximately 99% of the voting power of our outstanding capital stock and our directors and executive officers and their affiliates collectively beneficially owned, in the aggregate, shares representing approximately 85%53% 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 limit 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. For example, as of September 30, 2019, Olivier Pomel and Alexis Lê-Quôc represented approximately 24% of the voting power of our outstanding capital stock, and if they retain a significant portion of their holdings of our Class B common stock for an extended period of time, they could control a significant portion of the voting power of our capital stock for the foreseeable future. As board members, Messrs. Pomel and Lê-Quôc each owe a fiduciary duty to our stockholders and must act in good faith and in a manner they each reasonably believe to be in the best interests of our stockholders. As stockholders, Messrs. Pomel and Lê-Quôc are entitled to vote their shares in their own interests, which may not always be in the interests of our stockholders generally.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.55All of our directors and officers and the holders of a substantial majority all of our capital stock and securities convertible into our capital stock are subject to lock-up agreements that restrict their ability to transfer shares of our capital stock through end of day on March 16, 2020, subject to certain exceptions; provided that such restricted period will end with respect to 20% of the shares subject to each lock-up agreement if at any time beginning December 17, 2019, (1) we have filed at least one quarterly report on Form 10-Q or annual report on Form 10-K and (2) the last reported closing price of our Class A common stock is at least $35.91 for 10 out of any 15 consecutive trading days, including the last day, ending on or after December 17, 2019; and provided further that, if December 17, 2019 occurs within five trading days of a trading black-out period, the above referenced early expiration period will be the sixth trading day immediately preceding the commencement of the trading black-out period. In addition, with respect to shares not released as a result of such early release, if end of day on March 16, 2020 occurs within five trading days of a trading black-out period, the lock-up period will expire on the sixth trading day immediately preceding the commencement of the trading black-out period. Morgan Stanley & Co. LLC and either of Goldman Sachs & Co. LLC or J.P. Morgan Securities LLC may, in their sole discretion, permit our stockholders who are subject to these lock-up agreements to sell shares prior to the expiration of the lock-up agreements, subject to applicable notice requirements. If not earlier released, all of the shares of Class A common stock sold in our IPO will become eligible for sale upon expiration of the 180-day lock-up period, except for any shares held by our affiliates as defined in Rule 144 under the Securities Act.In addition, there were zero shares of Class A common stock and 37,153,194 shares of Class B common stock issuable upon the exercise of options outstanding as of September 30, 2019. the lock-up agreements described above and compliance with applicable securities laws. based on shares outstanding as of September 30, 2019,March 31, 2022, holders of approximately 196,312,314a substantial number of shares of our Class B common stock, or 66% of our capital stock outstanding as of such date, had rights, subject to somecertain 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.do 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 one or more of these analysts cease coverage of us orour 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 reportsunfavorable research on us regularly,us. 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.56We are an “emerging growth company,” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies will make our Class A common stock less attractive to investors.We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, or Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Pursuant to Section 107 of the JOBS Act, as an emerging growth company, we have elected to use the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our consolidated financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make our Class A common stock less attractive to investors. In addition, if we cease to be an emerging growth company, we will no longer be able to use the extended transition period for complying with new or revised accounting standards.remain an emerging growth company until the earliest of: (1) December 31, 2024; (2) the last day of the first fiscal year in which our annual gross revenue is $1.07 billion or more; (3) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities; and (4) the last day of the fiscal year in which the market value of our Class A common stock held by non-affiliates exceeded $700 million as of June 30 of such fiscal year.We cannot predict if investors will find our Class A common stock less attractive if we choosecontinue to rely on these exemptions. For example, if we do not adopt a new or revised accounting standard, our future results of operations may not be as comparable to the results of operations of certain other companies in our industry that adopted such standards. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock, and our stock price may be more volatile.We will incur increased costs as a result of operating as a public company, and our management will be required to continue to devote substantial time to compliance with our public company responsibilities and corporate governance practices.As a public company, we will incurthat we did not incur as a privatepublic company, which we expect to further increase after we are no longer an “emerging growth company.”increase. 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. Our management and other personnel devote a substantial amount of time to compliance with these requirements. Moreover, theseThese rules and regulations will increase ourcontribute to increased legal and financial compliance costs and will make some activities more time-consuming and costly. cannot predict or estimate the amount of additional costs we will incur as a public company or the specific timing of such costs.As a result of being a public company, we are obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our Class A common stock.for the fiscal year ending December 31, 2020.on an annual basis. This assessment will need to 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 will beis required to attest to the effectiveness of our internal control overreporting in our first annual report required to be filed with the SEC following the date we are no longer an “emerging growth company.” We have recently commenced the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404, but we may not be able to complete our evaluation, testing and any required remediation in a timely fashion once initiated.reporting. Our compliance with Section 404 will requirerequires that we incur substantial expenses and expend significant management efforts. We currently do not have an internal audit group,hired, and we will need to continue to hire, additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404. or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our Class A common stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.57 to the extent enforceable, the federal district courts of the United States of America as the exclusive forums for substantially all disputes between us andAct, subject to and contingent upon a final adjudication in the State of Delaware of the enforceability of such exclusive forum provision.58If a court were to find eitherWhile the Delaware courts have determined that such choice of forum provision containedprovisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, weincorporation. This may incurrequire significant additional costs associated with resolving such action in other jurisdictions. For example,jurisdictions and there can be no assurance that the Courtprovisions will be enforced by a court in those other jurisdictions.Chanceryour cash flows from operations to pay interest and principal on our indebtedness. Our ability to make scheduled payments of the Stateprincipal of, Delaware recently determinedto pay interest on or to refinance our indebtedness, including the 2025 Notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the exclusive forum provisioncapital markets and our financial condition at such time. We may not be able to engage in any of federal district courtsthese activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.United Statesindenture governing the 2025 Notes, from incurring additional debt, securing existing or future debt, recapitalizing our debt, repurchasing our stock, pledging our assets, making investments, paying dividends, guaranteeing debt or taking a number of Americaother actions that are not limited by the terms of the indenture governing the 2025 Notes that could have the effect of diminishing our ability to make payments on the 2025 Notes when due.resolvingthe capped call transactions, which are expected to occur during each 30 trading day period beginning on the 31st scheduled trading day prior to the maturity date of the 2025 Notes, or following any complaint asserting atermination of any portion of the capped call transactions in connection with any repurchase, redemption or early conversion of the 2025 Notes. This activity could also cause or prevent an increase or decrease in the price of action arisingour Class A common stock or the 2025 Notes. The potential effect, if any, of these transactions on the price of our Class A common stock or the 2025 Notes will depend in part on market conditions and cannot be ascertained at this time. Any of these activities could adversely affect the value of our Class A common stock.Securities Act is not enforceable. The Court of Chancery’s decision has been appealedcapped call transactions. Our exposure to the Delaware Supreme Court.credit risk of the option counterparties will not be secured by any collateral. If a counterparty to the Delaware Supreme Court reverses the Court of Chancery’s decision and holds that such a provision is cognizable under Delaware law,capped call transactions becomes subject to insolvency proceedings, we will enforcebecome an unsecured creditor in those proceedings with a claim equal to our exposure at the federal district court exclusive forum provision. Untiltime under such time astransaction. Our exposure will depend on many factors but, generally, our exposure will increase if the Delaware courts declaremarket price or the federal district court exclusive forum provision legally cognizable, we do not intend to enforce that provisionvolatility of our amended and restated certificatecommon stock increases. In addition, upon a default, failure to perform or a termination of incorporation.the capped call transactions by a counterparty, we may suffer more dilution than we currently anticipate with respect to our common stock.Unregistered sales of equity Securities and Use of ProceedsThe following sets forth information regarding all unregistered securities sold since June 30, 2019:From June 30, 2019 to September 23, 2019 (the date of the filing of our registration statement on Form S-8, File No. 333-233903), we granted stock options to purchase an aggregate of 5,219,550 shares of our Class B common stock at exercise prices ranging from $10.74 to $27.00 per share to a total of 153 employees under our 2012 Equity Incentive Plan.From June 30, 2019 to September 23, 2019 (the date of the filing of our registration statement on Form S-8, File No. 333-233903), we issued an aggregate of 2,261,730 shares of our Class B common stock upon the exercise of options under our 2012 Equity Incentive Plan at exercise prices ranging from $0.08 to $6.37 per share, for an aggregate purchase price of $2.1 million.The offers, sales, and issuances of the securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act or Regulation D promulgated thereunder or Rule 701 promulgated under the Securities Act as transactions by an issuer not involving a public offering or under benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited or sophisticated person and had adequate access, through employment, business, or other relationships, to information about us.In September 2019, we closed our IPO of 27,600,000 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, resulting in gross proceeds to us of $745.2 million. All of the shares issued and sold in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-233428), which was declared effective by the SEC on September 18, 2019. Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, Barclays Capital Inc., Jefferies LLC, RBC Capital Markets, LLC, JMP Securities LLC, Raymond James & Associates, Inc., Stifel, Nicolaus & Company, Incorporated, William Blair & Company, L.L.C. and Needham & Company, LLC acted as underwriters for the offering. The offering commenced on September 18, 2019 and, following the sale of all the shares upon the closing of the IPO, the offer terminated.The net proceeds to us after deducting underwriting discounts and commissions of $37.3 million and net offering expenses of $2.0 million were $705.9 million. No offering expenses were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning ten percent or more of any class of our equity securities or to any other affiliates. 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.At September 30, 2019, $2.7 million of expenses incurred in connection with our IPO had not yet been paid.Mine Safety DisclosuresOther Information60Item Incorporated by Reference Exhibit
NumberDescription Form File No. Exhibit Filing Date Filed
Herewith3.1 8-K 001-39051 3.1 September 23, 2019 3.2 S-1/A 333-233428 3.4 August 23, 2019 10.1 X 31.1 X 31.2 X 32.1* X 32.2* X 101.INS XBRL Instance Document X 101.SCH XBRL Taxonomy Extension Schema Document X 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X 101.DEF XBRL Taxonomy Extension Definition Linkbase Document X 101.LAB XBRL Taxonomy Extension Label Linkbase Document X 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X
_________________*This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof, regardless of any general incorporation language in such filing.61DATADOG, INC.DATADOG, INC. Date: November 13, 2019May 6, 2022By: By:Name: Name:Title: Title:November 13, 2019By: By:Name: Name:Title: Title:62