Q4 2019 Earnings Call
Finally, I would like to let them have you won the because all do you foresee 99 <unk> earnings call all that stuff in place on mute to prevent any background noise.
The speakers remarks, there will be question answer session. If you would like to watch restaurant. During this time seem to press Star then the number one telephone keypad.
Definitely might there be on the allow one question and a follow up their party Spencer. Thank you Mr. AG. The Beach you May begin your conference.
Thank you drew good afternoon, and thank you for joining us today to review data dogs fourth quarter 2019 financial results, which we announced in our press release issued after the close of market today. Joining me on the call today are Libbey April mill paradox, co founder and CEO, David Oakes LER, Peter <unk> CFO. During this whole we will make statements related to our business. There are forward looking under federal Securities laws.
And are made pursuant to safe Harbor provisions of the private Securities Litigation Reform Act like 95, including payments related to our future financial performance, including our outlook for the first quarter and for the full year 2020 or strategy benefit for products central contribution of customers with the air our 100000 or greater R&D and go to market investments expected capital expenditures and decide where market opportunity.
The word anticipate believe continue estimate expect intend wheel and similar expressions are intended to identify forward looking statements were similar indication to future expectations. These statements reflect our views only as of today not as of any subsequent date. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations.
Discussion of the mature material risks and other important factors that could affect our actual results. Please refer to our quarterly report on form 10-Q for the quarterly period ended September Thirtyth 2019 filed with the FCC on November 13th 2020, which is available on the Investor Relations section we're website.
Replay of this call will also be available there for a limited time additional information will be made available in our annual report on form 10-K for the year ended December 30, Onest 2019, and other filings and reports that we may file from time to time with the agency.
Additional non-GAAP financial matters will be discussed on this conference call. Please refer to the table than our earnings release, which can find on the Investor relations portion of our website for reconciliations of these measures for the most directly comparable GAAP financial measure with that I'd like to turn the call over to really be I [noise].
Thank you again and thank you all for joining us today to review, our Q4 and full year 2019 result.
Q4 was a good finish what has been a milestone year for us.
'cause, that's what driven by broad best friends across customer segments, and geographies and supported by the continued traction of our integrated platform.
To summarize Q4 revenue was $114 million, a close to 85% increase year over year and above the high end of all guidance.
We ended the year with 8800 and.
58 customers with annual run rate or <unk> or Oh, one of the talking a little more which is an increase of 89% year over year.
The majority or about 60% of what customers are now using two or more of a product at the Vienna figure.
In both quarters or database, but definitely was over 130% as customers increased usage and that update on your product.
We also continued to be kept only fisher with a free cash flow of $11 million an objective that that is still around that you all us.
For the full year, we generated revenue of $363 million, an 83% increase year over year, which was above the high level guidance.
And free cash flow was approximately breakeven or around 800000 dollar figure.
Just stepped back a little bit our results clearly indicate that the market wants a unified observe ability platform for Devon off team, which is becoming more important never but also more difficult to accomplish in a world that is your platform into cloud and they funnel architectures.
Our performance. It doesn't 19 shows that it was a winner is converging worlds and I'll success is driven by our origins as an intelligent classroom that collects many disparate sources of data across Stephen titles.
Ubiquity seeing as you put everywhere and used by everyone.
By the efficient adoption, we get from 19 was only <unk> monitoring product.
As a result, and today more than ever that and I'll get the monitoring and the matrix platform for Dev ops and business users into cottage.
We provide clarity and actionable insights into applications and that infrastructure all in real time, and we do so to enable customers to deliver greater innovation and consistently provide an exceptional user experience.
With that my goal in mind, Let's review, our Q4 performance.
First of all we're very pleased with our result.
Strength was broad based driven by both robust you look legislation, that's what I've continued growth of existing customers.
We added approximately 1000 net new customers in Q4, which is a record for the company and almost twice the number we added in the same quarter a year ago.
For the your approximately 40% of all growth came from new customers. We don't you local aren't demonstrating very strong growth when that retention of existing customers, but from just as well.
And our platform strategy is clearly clearly resonating, including strong uptake of on your products.
From an R&D perspective, we accelerated our pace of innovation with multiple exciting developments in Q4.
After the launch of Synthetics audio into your we extended our suite of user experience monitoring products was alone felt really is a monitoring or Ron domanico. The journey of actual users within an application.
And continuing on our vision for full stuck up that ability, we launched network performance monitoring or NPM to monitor network traffic flows across public and private cloud as well as on pennies environment.
We more recently implemented on it what monitoring offering was the better over SNL integration, which connects to physical network devices.
And extends VTB to customers with meaningful on premise network.
We are pleased with the initial uptake of NPL, Enron, which demonstrates our opportunity to drive additional value for customers and create future revenue drivers for our business.
In Q4, we also announced security monitoring as a first step to apply the power of a platform beyond the visibility to use cases.
We envision a future where seidl excuse me to break down beyond them enough and extend to security team.
As it becomes clear that security applications in the cloud world needs to involve all three.
We also believe that by harnessing the massive amounts of data already collected across metric strictly than log we can help customers better off rationalize IP security.
In 2018 data not became the first to unify the three pillars of UBS, if ability with the launch of a locks product.
In 2019, we believe that probably ourselves to be at most comprehensive have devoted he platform.
And this is evidenced by our customer adoption.
As of yet of the your dimenaci or about 60% of or customers are using two or more product, which is an increase of about from about 25 for somebody or though.
This means that today over 6000 of customers are using multiple products, which is more than some point solution vendors have today.
We also note that penetration is relatively even across enterprise midmarket and SMB segment.
Additionally, as.
As of the end of the year approximately 25% of our customers are using all three pillars of UBS MBT, combining infrastructure IPM, along which is up from 5% a year ago.
This is especially impressive considering that our third pillar log has been in a market for less than two years.
And just make it clear that customers are finding value by adopting a platform useful and benefit from coalitions and workflows that can cross boundaries between teams and system.
Finally, one of the greatest surprises to US. These here has been the success of newer products and initial end deal.
In 2019, approximately 65% of when you look or do you have to a more product up from only about 25% in 2018.
These demonstrates the pent up demand for integrated platform and our ability to add value from the very strong of a customer relationship.
To summarize we believe we'll have a very significant opportunity to further extend our product portfolio and increase or what it shows customers.
We are a product driven company and investing in innovation is a core part of what business how did you.
Now, let's move onto the go to market.
Starting with a little bit of approach.
I have been expanding coverage in both commercial and enterprise channels to get should the opportunity across companies I do.
While continuing rapid growth in North America, we are also expanding in new and existing territories internationally.
Additionally, we have been expanding in new markets, such as blending of government focus team.
And finally, we're investing in the partner channel as announced in January.
For now.
In January was the launch of the data apartment network.
We are excited about the opportunity with channel partners and plan for continued investment.
Turning to our Q4 sales.
We saw strong new local additions as well as extension from existing customers.
As of the end of the fourth quarter, we had approximately 10500 customers up from 7007 under the Euro.
As mentioned earlier, we added approximately 1000 customers in Q4, which is a record for the company.
We ended Q4 with 804 and 58 customers within our a 100000 that all more up 89% from a year ago and an increase of more than 113 Q4.
Given that more than 70% of or are you generated from customers have a 100000 dollar. We expect these cohort of customers to be a lost driver all future growth.
We also entered the your with 50 customers. We are a $1 million homeowner, which is up from 29, a year ago and only 12 two years ago.
Now, let's review some of our key wins in the quarter.
First we had a multimillion dollar upsells global financial information services company.
These customers study was that a dog in 2017 and has since increased spend by a factor of 20.
Nothing all three pillars.
We then a dog these customer has unified piece, but teams on a single view and reduced tools pool caused by point solutions.
Second.
We had another seven figure up sell to launch ecommerce we tend to.
These customer first came to that a dog in 2017 after experiencing large amounts of fulfill that eve.
Firstly, the battered sorry.
Right right before Black Friday.
Today, they have increased their spend by up to 15 and add up to infrastructure, a b M synthetics and more recently network performance monitoring.
Third we had an exciting land this quarter from a largely with better global airline.
As a company embarked on a cut first initiative, which relies on its lack of clots kept monitoring what's causing a significant risk.
Canada has enabled and improve time to market and move towards the GDP.
And at the six figure initial deal, we see ample room for growth overtime.
Fourth.
One of Europe's largest written national Railways had a seven figure up sale.
After using over 20 different monitoring tools. This organization has some doesn't that a dog as a single source of truth across metrics treaties and log in its cloud environment.
These deal was also want to a public procurement process, which demonstrates our potential into public sector.
We don't go over every deal we made but there were many other exciting deals in the six or seven figure ranch such as.
The traditional U.S. bank.
I Wonder if she has all global beverage company.
In Asia Baseball, except organization.
Manufacturer of industrial interest politician equipment.
A fortune 500 insurance company.
And a professional services firm, we over 50000 employees.
We believe these examples demonstrate that the massive actually replatforming given back on my question is happening globally and two organization that span all industries.
Fair enough today is a strategic partner to a diverse set of customers across both cloud native and traditional enterprises.
As a conclusion, we aren't you only strategies, what we think is a tremendous market opportunity, which we believe we are well positioned to capture.
We have been performing at a very high level and our focus is on doubling down on would have met a successful to date.
Slide 2020.
We plan to continue to invest in having good engineers and delivering innovation to our existing and new customers.
We also remain committed to investing in all go to market extending our excess capacity globally across all geographies as well as investing in new opportunities such as the peninsula in public sector.
With that I would elect to turn the call over to our Chief Financial Officer feed all right David.
Thanks, Olivier as mentioned, we're very pleased with our fourth quarter results, which capped off an exceptional year for data dog.
I will now review Q4 results in detail.
Revenue was $113.6 million up 85% year over year.
As Olivier mentioned the quarter strength was broad based driven by new and existing customers success across segments and Joe's as well is driven by strong platform adoption to provide some cost more context in Q4, four we saw strong new logo additions with contributions across.
I was in regions. This was a record quarter for new logo, a our are demonstrating very strong growth year over year.
Additionally, we saw strong continued expansion of existing customers in the fourth quarter. Our dollar based net retention was above 130% for the 10th consecutive quarter.
Robust retention rate is primarily driven by the increased usage of existing products as well as cross selling to newer products.
We continue to see robust and frictionless expansion as customers continue their cloud migration.
The cross selling of newer products is a more recent driver of our net retention rate.
Next we would know strength across segments with robust growth across enterprise mid market and SMB segments. This demonstrates the power of our simple, but not simplistic platform, which is powerful enough for the largest of organizations and also easy to deploy and use for the smallest.
I'm happy to report that the average JRR our enterprise customers at the end of 2019 was about $230000 an increase from $160000 at the end of 2018.
And average air our of our Midmarket customers at the end of 2019 was about $170000 and increased from 110000 at the end of 2018.
Well, we believe that remains ample room for continued penetration of each of these segments.
Lastly, we had a very strong quarter internationally in Q4, with both EMEA and APAC performing well Q4 saw record international Air our ads and strong embed them with international growth outpacing that of the aggregate business I'd note that many of these teams in the region. These regions are still.
Wrapping.
Turning to calculated billings defined as revenue plus the sequential change in deferred revenue, which was $130.3 million up 77% year over year.
Adjusting for the timing of a large invoice.
That change it's timing that we discussed last quarter calculated billings growth would have been 85% in Q4 in line with revenue growth.
As discussed previously we strongly discourage the use of billings as a gauge ever momentum as it does not accurately portray the growth of our business revenue is a better indicator of growth given the mix of monthly an annual billing terms amongst our customers and the tight relationship between revenue and they are.
Now, let's review the income statement in more detail.
As a reminder, unless otherwise noted all metrics are non gap.
We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release.
Gross profit in the quarter was $88.4 million, representing a gross margin of 78%.
This compares to gross margin of 76% last quarter and 75% in the year ago period improvement in gross margin was driven by efficient use of our cloud hosting span.
As we've discussed previously we are focused primarily on product development and innovation as well as the build out of cloud data centers in newer geography.
Therefore, our gross margins may fluctuate within certain ranges as we prioritize product innovation over resource resource optimization.
R&D expense was 31.6 million or 28% of revenue consistent with the year ago period.
We continue to benefit from product, let adoption and have made extensive investments in our platform.
This is evidenced by the launch of network and ROM products in Q4, as well as the announcement of security monitoring.
We continue to see a meaningful opportunity to innovate and expand our platform and therefore plans to continue to make investments in R&D.
Sales and marketing expense was 39.3 million or 35% of revenue down from 46% in the year ago period.
The change in Q4 was pronounced was pronounced partly due to the outperformance on the revenue line.
Furthermore, we note the greatest leverage came from marketing expenses, which grew at a lower rate year over year versus sales expenses, which group grew closer to the rate of revenue.
We plan to continue to invest aggressively to expand our go to market globally.
Gee Nx expense was 10.4 million or 9% of revenues slightly higher than 8% a year ago, given some public company related expenses.
Operating income was $7 million or.
6% operating margin compared to an operating loss of $4.3 million and a negative 7% margin in the year ago period.
Net income in the quarter was.
10.1 million or three cents per share on 327 million weighted average diluted shares outstanding.
Profitability outperformance was driven primarily by the revenue outperformance.
We have a highly efficient business model and have experienced a high return our investment on our investments in sales and marketing and an R&D.
While we have operated around breakeven to slightly profitable and outperformed on profitability in Q4, we see ample opportunities to continue to invest in the large market opportunity ahead of us.
Turning to the balance sheet and cash flow, we ended the quarter with $778 million in cash cash equivalents restricted cash and marketable securities.
Cash flow from operations was a positive $17.4 million in the quarter and a positive 24.2 million for the full year.
After taking into consideration capital expenditures and capitalized software free cash flow was positive 10.9 million in the quarter and approximately breakeven or around $800000 for the full year.
I would now like to turn to our outlook for the first quarter and the full year 2020.
Beginning with the first quarter, we expect revenue should be in the range of $117 million to $119 million, which represents a year over year growth of 68.5% at the midpoint.
Non-GAAP loss from operations is expected to be in the range of negative 5 million to negative 7 million.
Non-GAAP net loss per share is expected to be negative one cents to negative two cents per share based on approximately 296 million weighted average shares outstanding.
For the full year 2020 revenue is expected to be in the range of 535 million to $545 million, which represents 49% year over year growth at its midpoint.
Non-GAAP loss from operations expense is expected to be in the range of negative 20 million to negative 30 million.
Non-GAAP net loss per share is expected to be in the range of negative three cents per share to negative seven cents per share based on approximately 302 million weighted average shares outstanding.
A few things to take into consideration in this guidance.
First while we saw strong efficiencies in our gross margin in the fourth quarter, we continue to focus on product development and diversification of our cloud hosting vendors and regions. Therefore, our gross margins may fluctuate within a certain range as we prioritize innovation over resource optimization.
Second we had some important what we have some important corporate events in Q1, including ourselves to kick off.
Next our intention remains to invest much of our recent outperformance aggressive including aggressive hiring targets in R&D and sales and marketing.
Then some notes below the operating loss line.
We expect approximately $10 million to $13 million of an interest income for the full year based on our cash and marketable security investments.
Second we do not expect to be a federal taxpayer, but have a tax provision related to our international entities.
For the full year, we expect the tax provision of $1 million to $2 million.
Note that our share count forecast for Q1, and 2020 reflects our basic share count since we are forecasting a law in each period.
To summarize we're very pleased with the business performance in the fourth quarter as well as the full year.
We have growth at scale that you can match and have demonstrated efficiency in our model.
We are making continuing investments for growth for the foreseeable future.
We believe we are at the very early stages of a multibillion dollar market opportunity and we feel very good about our ability to build a large and successful company overtime.
That we will now open the call for questions operator, let's begin the QNX.
Sure just fine I would like to remind everyone in order to ask questions. Please press Star then the number one I know telephone keypad.
Again that start one on your telephone keypad. Your first question touched on the line of Sanjit Singh of Morgan Stanley Your line open.
Hi, and thank you for taking the club question. Congrats on a really exceptional 2019 Im really strong performance across the board I wanted to follow up on a point holiday that she made on in your script about.
25% of customers adopting all three pillars.
Better sense of sort of the market momentum in terms of.
Going towards these unified platforms like data dog, where are you in that journey in terms of other different customer segments, whether it's mid market, which it seems like they're moving pretty aggressively but also sort of the enterprise and who are you sort of.
Displacing as as customers consolidate and standardize more on on the data dot platform.
So the.
The momentum is the same actually in each and every one of the segments and whether you talk about SMB midmarket till enterprise that we see the same momentum.
And.
The.
In all cases.
By and large we're going to enter through net new deployments in cloud the environment.
So we typically don't be split anything from day, one what we're going to displace is going to be majority really homegrown open source system.
That's when we land use multiple customers over time.
We will be split for some of the customers that have spent more time in the income environment, an already had one of that Peter is weve.
A separate vendor will be split that but thats not the majority of the deployments we have.
Understood and that's my follow up a it's sort of related to some of the met them you're seeing across product. So if I look at the product portfolio in lets say three buckets.
Core infrastructure monitoring.
To the products do you released in 2017, 2018 that would be a pin logging and then sort of the 2019 cohort, where we're talking about network performance Rotring Brom, though really user monitoring and synthetics could you sort of give us a sense about you know the customer traction across across those three buckets.
Obviously going to vary, but just want to get a sense of what is picking up sort of softer than expected and are well aware of momentum is still sustaining thank you.
So I can tell you we singled out if others are monitoring which was oh usual product in the east one might you would be.
Super High gross South company.
If we can pretty soon.
The ATM unlocks products, both in hyper growth and have significant scale when the disclosing the exact scale, but I can tell you the debt going faster.
Then data that it was at this email scale.
The industrial product can you actually.
And then for the other products the only one that will be on the market for some time E synthetics.
Others, we either just started charging for them.
I haven't even yes, hi, charging for them to for example haven't started charging for rum yet.
But we started charging for NPM in December.
So these are very you I will have some exciting stories about them I mean, we mentioned one customer in the script that add up to you and when nasca someone attitude NPM and we have more stories like that.
But we see so far less go from the newer product of usually because they're more recent but we see very broad adoption synthetic has been on the market.
This spend charging for in.
During the summer.
He has a large user base and keeps growing and so we're very hopeful newly contracted which of these products is going to go faster, India and the have has the biggest footprint in the this Tim still very early for many of them.
But in general we're very satisfied with the adoption we see.
And we believe that there's going to be a lot of long term growth. Thanks to all of these products.
Appreciate the color Olivia thank you.
Your next question comes from the line of Greece Marine.
Goldman Sachs. Your line is now open.
Great. Thanks, very much for taking the question.
I just wanted to ask about the traction you're seeing in particular with enterprise accounts.
Can you talk about which of your non infrastructure products in particular are resonating with that that segment and what are some of the reasons that you're hearing from those customers about about why are winning relative to some of the competition. Thanks.
So in enterprise look we're going to land in the majority of cases with two or more of the product right. The do break down is the same as we having the other.
Take a reason is going to be typically infrastructure and long ago infrastructure and EM.
There's no not to very notable difference in the the attach rates there.
We'll see that the there's a bit more fiction in adopting a pms scale. So typically the dollars, even though they're going to use multiple products daughter from day, one and I'm going to be higher for customers that at a blog than the off with customers that add up EM.
But both are going to grow over time, so there might be a longer fuse on the growth in M. for example.
Great and then just a quick follow up on pricing you, obviously came up with a new pricing mechanism for logs that that seems to be resonating in the market now I guess a lot of competitors are trying to replicate the broader product suite that youve put together. So when you talk to customers is there a lot of sensitivity to price or they just very much we're focused on the functionality and therefore.
Sensitivity around around how you're charging for the products.
Well there we're sensitive customers is not so much on the depression itself, but as you know the two things when is the value and two is a controls they have over it.
So the way, we make little about product, although pricing work is that we want to give older controls the customers.
So they can and they can.
Line would dip it was invited to get for it. So that's what we've done with what you mentioned unlock side and we're we've also have versions of that for ATM and industrial monitoring products, we want to make sure customers.
How the controls and don't end up being prisoners of area of a pricing agreement that didn't win Lockups Catskill.
Great. Thank you.
Your next question comes from the line the frame OLED cell.
Your line is now open.
Hey, Thanks for taking my question Congrats from me as well.
Just a quick one on security like you had obviously Briggs you into yields there to you haven't please and before and there are some decent vendors out there what's the investment needed in terms of field support there is that kind of a whole specialist sales force that you need because you talked starts talking to see sort cetra well, how do you have to think about that.
Yes so.
Right now the book of the investment, we're making isn't the R&D and product side, So thats, where we starting with steel Veolia security.
We were not charging for anything yet there.
So we're going to its going to take some time before we see a full ramifications on or go to market Tokenization.
But I would say into short term the signals we get from customers.
And from the only products we have.
Matt.
One does a great deal a good amount of.
Open space when it comes to cloud environment, new cloud environments, the need to be secured.
So customers how the need to have a gap there anything that you.
Yes.
In the realities also amenable to being adopted bottom up which is the rest of what we've done which is exactly the rest of what we've done.
So initially the go to market is very well aligned with what we've done in the fast and we see signs of that being a fit into longer term there might be more changes required and focusing musician to the sales team, but in general anyway, when making changes and customization to the sales team as we have more and more channels to go to market and we get or to customers that are.
In different geographies, you can sizes and.
That might need different different ways to address them.
Okay, perfect and then one on the networking sites, so historically the networking.
Good morning, guys were always a little bit the Christie.
You have to be on the difference switch its et cetera is that changing with kind of some.
The open scores.
Our next et cetera, or how is it possible steward no because they used to be like a separate game.
Well I mean dairies suffer so we're not going to.
Monitoring with you objective and ripping and replacing everything that people already use on prime today.
Our starting point east customers and has a significant footprint in public and private clouds and didn't want to extend that visibility to on Prem network devices.
So these are the limits the I would say the subset of devices with starting with just by selecting these types of customers.
And then you know when it comes to integrating this will have decent is sort of what we do already right I mean was 100 or monitoring product.
Integrating with lots of different devices.
Battle to things intuitions in the real world with a lot of no small customers testing them.
That's a core competency of the company so that.
Not going to happen overnight, if you leave but you know where does if it's something we keep investing.
Okay perfect. Thanks very helpful.
Your next question comes from the line up.
Of credit Suisse. Your line open.
Excellent. Thanks, so much and congratulations on the very impressive results, especially the metrics you've shared around multi product adoption.
My first question for you Olivier I wanted to touch on the competitive dynamic for locking specifically and who you are mainly competing against perhaps if you could touch on what sort of success, you're seeing in the enterprise market and how you compete for business that spans both public and on premise environment, specifically in logging that would be very helpful.
So we see so today, we see a good adoption from the looking product in non enterprises, which.
It's.
I would still nyquil footing.
Give or take with the ATM product as the second product is being adopted in these environments.
And it's a higher dollar amount typically because there's less friction to sum it up a bit off on day one.
It's also going very fast you know again, because it does environments are going very fast themselves.
In terms of the competitive dynamics in most cases customers will have anything to cloud environments, we thought we'd even though they all have some other lugging vendor on prime.
So most large enterprises are going to have a splunk usually will be knows that.
And decided to have a splunk on prime is not in the looks cycle to them adopting a different platform altogether in cloud environments.
So thats, what we typically see we don't try to go and replace the the on premise environments. Before we are well established in next generation public and private clouds.
That's all strategy.
Thanks, Olivia and maybe just a follow up to that.
In reference to the competitive that you mentioned have you seen any changes in the market now that that they've had pricing changes in effect for a number of months does that in any way.
Change the pricing dynamic for you and the competitive win rates that you're seeing.
There's no changes that we could feel online.
The situation is exactly the same as it was in the last quarter. We yeah. We would we commented on.
Very helpful. Alright, Thank you so much.
Your next question comes from the line up.
Berg of RBC capital markets Your line open.
Thanks is actually mats once on for Matt.
Olivia you put out a really interesting report a couple weeks ago on the state of Serverless. It really makes kind of a strong case for the growth in the technology could you talk a little bit more about how this trend impacts data dog, specifically and then maybe things you can do to invest to be positioned for.
Yes, so to answer the last part of your question first would definitely investing heavily in supporting so let me to us.
This is the next stage in a continuum of evolution for the way infrastructure is being package and Ron.
Two back to.
Back a little bit when when you look at wouldn't publisher was like 15 years ago, We had people hardware than we moved onto a Vmware type. The engine into were very static you can go anywhere can you I thought instance, either where some of the ends that could go up and down.
Every a second then you had a containers there were small of yen.
Just wanted to cut intensive that could go up and down.
Every second and many second sorry.
And then you a you had these.
December last an up basically sort of functions that up as it gets more containers.
That grew up and done every microsecond until you know.
So.
Well if that is basically one be continuum that goes from started a few things that are moving very steadily.
Two lots and lots and lots and lots and lots of tiny components that keep being getting up and down and being we're combining different ways.
So the way we cede there's really a shift it's actually happening in terms of to value to provide that goes from.
The runtime.
Towards Gibbs disability, and the understanding of that one time.
So we think in the end this creates more value for us for us in local well job Indians too. So the front of complexity from our customers make sure that the people I understand what the machines are doing and can keep changing with the machines are doing and manage it and energy experience on it.
And do more complexity.
Due to better already for us So we think it.
Yes definitely.
[music].
A development that kills the marketing a favor.
Thanks, That's really helpful. And then David kind of feels like this is another quarter that we describe its accidentally profitable or thinking about investments into 2020 can you just talk about some of those levers you have during quarters during the year to ramp up investments. If you continue to see outperformance on the topline.
Yes, I think Thats, what we said last time, which is a lot of the outperformance has been going at the bottom line. It has to do with hiring plans. We're planning based on a little more of a conservative case and then we've been outperforming.
The levers to pull our at the higher more quickly most of the hiring is in R&D and sales and then the second would be too.
Two.
Change the marketing dollars to the extent, we can do some more marketing or trade shows those are the levers we can essentially pulling a court in a quarter.
Hi, Thanks for the time.
Yes.
Your next question comes from July Stanley.
JP Morgan your line is helping.
Yes, Thanks, Hi, guys. So wanted to dig in on the thousand net ads in the quarter Big uptick and what I'm wondering is are you seeing an inflection in terms of the gross new customers that are coming in and improvement in the overall renewal rate of customer.
Ours or both that's driving that metric.
It's a bit of both you know so the.
Renewal rates are are generally stable.
No I would say trending up softly overtime, you already pretty high is that there's not a lot of.
Room for them to go.
And the a and we see we suggesting more customers go through the door as we scale the organization in general we're seeing more customers wouldn't do it.
I would say the new logo performance in the second half of the year was stronger in the first half. It's it's related to our development of the sales team and the ramping.
And as we said its broad base for instance, EMEA, which we were developing performed very well in the second half of the year and new logos and that's because of the ramping and and the sort of the build out that we had been doing last year in the year before.
Got it and then would follow up when you look at a new enterprise logo that comes in and by all three pillars.
Where are you finding that primary point of contact is in the organization for that type of customer are you all the way to the CIO level enterprise account or are you finding that you're still finding success either in a division or geography, and then expanding upwards from there.
Well typically it's going to be Eclat initiative, and it's going to be no small because he's cloud and these new so there's going to be relatively small team that is driving that and that team is going to a.
To put these new him because he is the future that team is going to be connected to the.
Leadership team in general so sometimes the CIO sometimes from other.
People there.
And that team is going to have purview of the whole environment to start with we achieved.
Right, it's a it's relatively.
Straightforward for us to to enter with multiple products that one.
Perfect. Thank you.
Your next question comes from the line of Brent <unk> of Jefferies. Your line is now open.
Hey, guys. Thanks. This is part of on for Brent.
You talked about strong net new or ads on the international front.
Just any commentary on weather on how either you know purchasing pattern on sales cycles competition sort of compare from what you're seeing here in North America in Europe.
Demand quantities that we really see to the cloud migration happening in the rest of the world.
It's something that.
You are starting to happen at to happen at scale.
This is combined with the fact that we.
So sales teams and stuff inside one thing Dan if I suppose as welding in EMEA, two or two years ago any back last year.
The commission of that is what drives the success, we seeing there.
Let's say, it's still early those teams are still ramping this deal obviously things that you know I will take more time to up well reliably.
No.
But we've seen some great signs and then Q4, we had very strong performance in EMEA and APAC.
Logos and get a success is there both on the Midmarket side on the other Fry sites were very very.
Optimistic into future, but but it's still early.
Got it okay and.
On the lending area or side are you seeing anything.
Meaningful with the cohort.
In the fourth quarter relative to prior quarters.
Either you know greater infrastructure usage on lending or.
Joe multiple products when the when the initial deal assigned.
We see if you'd be glad that are more products, which is which is causing a a larger larger land slowly but surely but.
You know and it's just been progressive throughout the year as as the attach rate of additional products has gotten larger.
Okay makes sense. Thank you guys congrats.
Thanks, Thank you.
Your next question comes from the line abroad.
I've Stifel Your line open.
Great. Thanks, very much two quick ones for me I think during the fourth quarter, you better than the fed ramp process any update on where you are there and how should we think about potential upside from that.
So not it yet.
We'll go.
Dutifully fight a press release once we have the.
The outcome of it.
There's going to be.
Upside at some point I would say nothing to very short term, we seem to have to.
To be if we build out the teams there and is number one number more things we need to do but we're investing.
Got it Okay and David on your last comment there a moment ago about lot larger lab.
Is there any risk in that short term debt with bigger land you start to see less net dollar expansion because of the bigger starting point.
We said that we said that's one of the reasons, we said that we want it to be prudent in our guidance long term, but we haven't seen that today, we seen as Ali mentioned that net retention b b very stable and strong in the second half of the year.
Perfect. Thanks, very much thank you.
Your next question comes from buying Michael It's tough Raymond James Your line open.
Thanks. This is actually Robert Magic I believe you mentioned that you haven't started charging it for some of the new product should we expect the high level of pent up demand next quarter and has that been fully built into your Q1 guy. Thanks.
So.
So.
In general we.
We had to.
You Summer, we had a lot of pent up demand from synthetics, because we we actually had customers using it for five months before we started charging for it I think indicates will start charging quicker.
So there probably would be a bit less until then on the products might have also been more friction you know then synthetics, which we found to be very low friction.
Products with very easy for tons and tons of customers because suddenly with it.
At this point our expectations for.
These products are baked into guidance.
But as a multi branded products and obviously some of them are going to be a bigger piece and others to.
The long run where.
We are optimistic that we got a lot of upside, but I in the short in the short term if they didnt have an activity someone in that.
Appreciate it.
Your next question comes from July Jack Anders Anytime Youre line is now open.
Well good afternoon. Thanks for taking my question I was just wondering I mean, just given the proliferation of new products that you're introducing how would you describe sheer salesforce the maturity in the in their ability to understand and appropriately sell these products.
Yes, that's a quick question.
So that's also because of investment for us in enabling to Salesforce and making sure that nobody knows everything we can somehow.
In most situations, though when we when we land.
Customer, which is where the the bulk of the I was at a hard parts of the.
This has obviously is taking place we land with the marquee functional monitoring which is very very very great. So he quit feed for the pain, because theres a feeling from day, one when Dave Dupont crowd.
And then.
Logs and ATM that customers also understand very well and fully expect not to be part of this and platform.
So there's not a lot of.
Challenge there in terms of Trinity's, henceforth and making sure. We can present everything you know when it makes sense of the customer.
Now as we grow its customers over time and as we put more products in front of them and make sure that they know they can also use.
We use a monitoring on it will performance monitoring or synthetics and others I think there's definitely more investment we need to do that to make sure that.
We can we can fully capitalize on that so that's one of the levers for full growth we have.
One other things we're investing in yeah, as we mentioned I mean, we're pretty much selling a platform. So on and you can tell that from the attach rates and so.
In that case, the salesperson is able to sell that platform. That's with the client wants we also augment the salesperson with sales engineers.
Who are expert across the platform and in products. So they're not out there alone there being helped by some technical presales, but agenda today to the adoption for all of this product is mostly friction less you know so we see for example.
We see.
Option dynamics that a fairly similar between love to fly he's yeah that.
Higher touch with enterprise sales in 17 years, and SMB market that are going to be lower touch and handled by customer success teams. So you. So thats customers can find a way.
And it up to new products, they still probably.
Some upside.
If we can figure out the best way to enable.
The customer success teams into sales teams to go and proactively present, new products to customers.
Great appreciate the color and just as a follow up to that could you expand a little bit more on the the new partner network I mean, which channel are you I'm. Most excited about it who should we be keeping an eye on in terms of partnership could really moves the needle for you.
Well I know the.
Do you see this is very broad coverage and doing it really depends on different parts of the world in the U.S. is going to be mostly size you either.
Local lifecycle global they size.
In other parts of the world you're going to find you because we knew more importance to.
Two.
Two bars are doing in Europe in Asia.
You'd have a lot more channel for example, so it really depends on the part of the world.
Program as it is design have broad appeal.
And then we have teams on the ground that ugly deliveries.
These program to go and.
Recruit very specific types of of channels and resellers.
Great well, congratulations and thanks for taking my questions.
Thank you.
Your next question comes from the line up that's.
William Blair Your line open.
Hey, guys, let me Echo my congratulations and thanks for taking my question I.
I guess just started something much more strategic here.
When you think about platform as a whole theres, an underlying sort of data elements right. So were captured all the data and then as the next step which is hey, what we're going to do and we think about Dev ops I want to challenged with Dev ops integrating Dab an officer spy CD together and as you think about the data element capturing all the data.
What would equate to a relational databases always but this feels is there's all that Nash with I guess I'd love to understand how do you guys think about approaching the data opportunity to really delve into more of the upside, but deb side right. So as I developed software I tried to could you just aggression just appointment I didn't I think about sort of how that plays out and how your product roadmap.
Is it to that over say the next three to five years.
So oh product actually so we know that's like a me too we do business I was hoping to put on the complexity for customers and that put them up complex Peter sure Doesnt start up at the infrastructure or I'd logs over what's happening when you tracing that beginning production.
It actually covers everything will to between the two source code to the.
Engineers are writing.
The output of the application for the business.
And all device remediation task when you take place to keep it going in production.
So as time goes by we extend to footprint of the platform to recover as much as possible.
Space. So for example, we added the.
We announced.
Hey, providing product.
That.
It's very interesting because it it's another step towards bridging the gap between decode the developers rights and what's actually running and production and we had a fairly differentiated approach to each with actually very excited about it even do it's also another product, which I think for that.
So we do see the value of having as broad coverage as possible.
Into Andy the between the ultimate team to developers and and would emissions are doing.
I think it's helpful. In upstate I wanted to just forgot what what bridges the gap.
You guys, obviously a player the other players in the market, but at some point that the gap still exists between Matt.
Idea of development integration implementation and lots of people don't Realtimes CD, but it feels like given the data in a value has that the gaps should be easier for you to bridge anyone else I will just happy to respond to that are not yes. That's the idea I mean, that's why that's why we think.
So it was optimistic about the future. That's why we keep investing is where we think there's a great opportunity because.
When you think of the.
What makes us valuable is that because we started from the infrastructure we deployed everywhere not just in the.
Well thats supposed subset of machines or environment, we the political where we need to see to tell you. If it's working therefore.
For everywhere and then because of the way we do we just under product to a bridge the gap between different teams and be very easy to adopt we use by every single engineered every day and that can be edition of the put everywhere are used by everyone.
He is what gives you the surface of contact with the customer so that we can actually keep.
Filling the gaps in the and at stuff in the middle and cover more and more of the province space. So if you think just as you mentioned this tons and tons to do I mean, it's a very last program space.
We should be there's a lot of how do we can provide.
Got it.
Paul up there just more tactical now on the vertical side, obviously verticalization matters. It matters, probably lessen your space, but love to listen I, just think about Verticalization and how your purchase vertical markets. Thank you.
Yes, I think where we're not there yet in terms of acquisitions right no. Good bookings you as far as we can certainly very always until.
I think maybe when we're further along into cloud migration, that's something that might make more sense. Maybe also when we expand into different product categories, but maybe a little bit more specific to with the the.
Okay. Summers are doing was a data that's also something might make sense, but today was that go into the product.
We were not really verticalizing.
Got it thanks for taking my questions guys. Congrats again appreciate it.
Thank you.
Your next question comes from the line up but Walravens JMP Securities Your line.
Oh, great. Thank you and congratulations.
So let me and David I'd Love to hear your perspective each of you on the same question, which is.
I mean, 85% growth and working on so many things, which has come up and and all the questions on this call Olivier what is what's sort of your number one focus right now and David same question for you in terms of where you're spending you're focusing your time.
All right so as cheetah have to focus is.
Yes so.
Focused another one.
Hiring enough of to the Reits have people in enabling them everywhere in the world.
And that's the best predictor of success, when you're from now and focus number to having enough of engineers and.
Turning to and retaining them.
Which is the best predict off success two years from now and that's.
If we if we can get all that done we'll we'll be fine.
Yes, and my focus is on providing scalability and the infrastructure and the transparency of information to support that whether that be.
In the hiring process, the information around sales or products et cetera, and support that so we can see what's going on and make good business decisions.
Hello, various the thanks, Thank you very much.
Your next question comes on the line of fuel Kim Oh, Oh, Let's Securities. Your line is open.
Thank you so.
Congrats on a very strong impressive results.
Going on Brad's earlier remarks, and others one of the most impressive trend.
Hello.
But to lend initial deals with more Daniel core infrastructure product.
That's what you guys are known for and then obviously, there's also a fairly high percentage of customers.
Already adopting multiple products, which is obviously again very impressive.
Just trying to better understand is there a concerted sales effort.
Additionally, incentives or self process.
To push for these more type product adoption, especially on the initial land deals.
They just simply customers asking for down from does start again, just trying to better understand.
Driving this very impressive multi product adoption trends. Thanks.
No there's no there's no incentives for it the incentives that.
Customers wanting more if we if we have more of the product.
So it's easier to sell.
Yeah. The platform single pane of glass observed the platform is is being led by the clients as we talked about we're looking at clients first in where we are product strategy and we're following that and it's very much pulling us for the compensation is going pretty unusual to it.
Okay great.
Yep.
That's great.
Good luck engine, which is.
These and other products and technology out there they will quick.
For contract costs was up.
A lot, which is obviously a good side just curious if there was a if there's any kind of especial Commission payout.
You know for certain products or on higher pay also initial land deals just because places like.
Got a performed well in the quarter.
Fundamental to Stan.
Strong uptick in deferred contract costs beyond.
Sales execution, and perhaps some accelerators kicking it thanks, yes, theres no theres no special deals or anything different in the commission plan. It is purely the sales performance and those getting into accelerator. So it's all related to the sales performance.
You know if anybody listening to the school and you can sell.
We have high expenses because of accelerators, we've been lost commissions to feel free to apply.
Alright, thank you so much congrats.
Thanks.
There are no further questions at this time discussing.
All right.
Thank you.
So.
In closing I'd like to repeat that we're very pleased with results for Q4 and for 2019 as a whole.
We are achieving growth at scale securities can match, we have proven the efficiency of a model and we have demonstrated a platform traction.
That being said, we still feel that we're just getting started we had a tremendous opportunity ahead of us and have many ambitious goal to execute on 2020 and beyond.
With that I'd like to thank all that up customers for their trust and of course, all that out of employees for their hard work dedication and success would have been a fantastic year.
Together, we have a company's vetsync, but I believe the best to get to come. Thank you. Thank you.
This concludes todays conference call you may now disconnect. Thank you.
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