Q1 2021 Datadog Inc Earnings Call
Thank you for holding your conference will begin shortly once again. Thank you for holding your conference will begin shortly.
With me on the call today are Olivier per ml beta dogs, co founder and CEO and David Oops for day to dog CFO.
During this call we will make statements related to our business that are forward looking under federal Securities laws and are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995, including statements related to our future financial performance, including our outlook for the second quarter and for the full year of 2021 our strategy for.
Benefits from our products partnerships and investments in R&D and go to market.
Our ability to capitalize on our market opportunity and the impact of the COVID-19 pandemic on digital transformation and cloud migration trends as well as our ability to benefit from these trends. The words anticipate believe continue estimate expect intend will and similar expressions are intended to identify forward looking statements or similar.
Patients of future expectations. These statements reflect our views only as of today and 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 for a discussion of the material risks and other important factors that could affect our actual results. Please refer to our annual report on.
Form 10-K for the year ended December 31, 2020 filed with the SEC on March for 2020. One additional information will be made available in our quarterly report on form 10-Q for the quarterly period ended March 31st 2021, and other filings and reports that we may file from time to time with the SEC filings.
Filings with the SEC are available on the Investor Relations section of our website. A replay of this call will also be available there for a limited time non-GAAP financial measures will be discussed on this conference call. Please refer to the tables in our earnings release, which you can find on the Investor Relations portion of our website for reconciliation of these measures to their most directly directly comparable.
GAAP financial measures with that I'd like to turn the call over to Olivier.
Thanks, you Ken welcome for the team of debt a dog.
You all for joining us today.
We had a strength start to do you're on a very pleased with our performance in Q1, which was strong across all parts of the business and again showed high growth at scale and demonstrated deficiencies.
It has been a busy start of the year, we had two products become generally available.
As for Filer and incident management.
We closed the acquisition of the screen and timber.
And we continue to release, new features and innovations across all platforms.
In addition, we continue to hire and build on team at a very rapid pace.
Now onto a review on the quarter.
To summarize Q1 at a high level revenue was $199 million, an increase of 51% year over year and above the high end of our guidance range.
We ended the quarter with 1437 customers.
Sure.
$100000 on more up from 960 last year.
These customers generate over 75 per cent of R. R.
We have about 15200 customers up from about 11500 in the year ago quarter.
This means we added about 1000 customers in the quarter, making it another strong quarter of ads and consistent with the last few quarters.
We also continue to be capital efficient with free cash flow was $44 million.
And finally, our dollar based net retention rate continues to be over 130% as customers increase their usage and attitude on your product.
In addition to that the positive business trends from recent quarters have continued in Q1.
First usage growth from existing customers with stronger than expected and above historical levels I'm on.
Other factors, we are seeing the benefit from new logos signed in the back half of last year as they grow into their commitment.
Second Uruguay on our was strong in what is normally a seasonally slower quarter showing a go to market investments are paying off.
And third churn continues to remain very low and in line with historical rates.
Taking all these factors into account we had a very strong quarter of Ey are added.
In fact, we hit an important milestone as we added over 100 million of are in a single quarter for the first time.
Next our platform strategy continues to resonate and win in our markets.
As of the end of Q1, 75% of customers are using two or more products, which is up from 63% last year.
Additionally, 25% of customers are using four or more products, which is up from only 12% a year ago.
And we also have hundreds of customers using six or more of our nine generally available products.
But it is still early we think this is an interesting proof point that shows the continued upsell opportunity customer base.
And we had another quarter in which approximately 75 per cent of new logos landed with two or more products.
I'd like to provide an update on some of our more recent products.
From a performance monitoring real user monitoring and synthetics.
Both network performance monitoring and ridges on monitoring became generally available a bit more than a year ago and.
And we are excited to share that both are at approximately eight figures or they are not showing high growth.
And synthetics also continues to grow rapidly and is an increasingly important contributor to revenue.
As a reminder, on newer product are also on adopted first by self directing customers at a small scale before on land and expand model enables greater adoption over time.
And frictionless adoption from a single integrated platform is a key value proposition for our customers.
While we are very pleased with the performance of on your product I also want to spend some time on the core of our rubs mobility platform infrastructure APM and logs.
All three added record amounts of E on are in the quarter showing the strength of our platform.
APM and logs have both regional scale and remaining hyper growth for infrastructure continues to go on to healthy base.
To give you a sense of scale APM and logs together added more AAR or this quarter that the business as a whole need one year ago.
So it is clear to us that these products on each strong enough to be best of breed solutions on their own.
And to that point relative was recognized as a leader in Gartner is 2021 magic quadrant for ATM for the first time.
And in fact, we were the only vendor in the leaders quadrant that improve its position as the last reported.
Gartner statistically a highlighted our strong history of product development, and our ability to bring products to market rapidly.
As a reminder, we entered the APM market just four years ago.
APM product has a robust feature set including end to end distributor tracing was no sampling and seamless correlation of Tracy's was end to end up deliverability.
The ability to triage problem was also highlighted is a strength with a unified platform 16, and root cause analysis and reducing restoration time.
And lastly, our transparent pricing, which is available on our website was also recognized as helping to build customer trust.
We also continue to make investments in the watchdog, which is the brain behind AI based features across the debt at a platform.
In Q1, we announced a few enhancements, including watchdog insights, which is a recommendation engine that is always on and augment mainly on investigations by automatically detecting anomalies on outliers and allowing for faster time to resolution.
We also announced the beta of west of root cause analysis, which automatically identifies closer relationships between different issues across applications infrastructure and pinpoints the root cause.
In addition, we continued innovating across our platform releasing 30th features in Q1 and crossing 450 out of the box integrations.
A few features to highlight include network performance monitoring for Microsoft Windows, which is a very differentiating feature for <unk> P. M.
New marketplace integrations, including Oracle cloud.
As well as the official launch of our golf club expense.
US to onboard early customers in the government space.
Lastly on the product side I want to briefly discuss our acquisition of screen, which closed in early April.
We funded debt of dog to break down silos between Debbie Osteen.
And as we've discussed previously we are working to extend that to security teams as well.
Screen is an application security solution that actively detects attacks and can trip drivetrains them down to the impacted function cool.
It prevents application security exploits and enables response across development security and upstream.
We are very excited at the combination of screen with our ethics, APM and security offerings as.
As we expect it to allow our customers to protect AP I mean submitted applications with very little additional friction.
And we will share updates as we progress on integrating it into our platform.
Now, let's switch gears and move on to sales and marketing.
I am very proud of the continued productivity from a go to market team.
As we mentioned last quarter, we have been hiring at a rapid pace across our sales org and are seeing more teams and reps becoming productive.
Now, let's discuss some of our wins this quarter.
First we had a seven figure land was one of the world's largest consulting firms undergoing a multibillion dollar cloud migration.
We've done a dog they have reduced their monitoring cost by more than 35 per cent with greater visibility into every later on their stack, including several of its functions.
For products that N P M and synthetics.
Moving I'm not to a longer term outlook.
While depending on it continues to impact on Metro environment.
Businesses are starting to turn to priorities in the post COVID-19 world.
Is this is must be digital first which we expect will move forward digital transformation project.
Massive Ikea request for me he still in his early stages. When we believe we are in a great position with a unified opposite the ability platform.
Well there is the possibility for more near term volatility caused by the macro environment. We are increasingly confident in our ability to execute and in a long term opportunity.
[laughter] before you think the call to David there ought to change it to the management team I would like to bring to attention.
First or chief of any officer, then to share with transition out of the company this quarter to take some well deserved time off after a few decades of hard work.
We're very grateful to them for many quarters of growth and for developing a world class of innovation.
We are confident that the team his built will continue carrying the torch and will exceed expectations did that'd of way.
We also running a search for a new C. R O now evaluating both internal and external candidates.
Second I'm pleased to announce that we will soon be joined by our first ever Chief operating officer, Adam Blitzer, who joins us after a successful tenure as an EVP on G and I'd sales force.
And I would help us scale as a suspect from company and will oversee a number of a front office function.
Well that I would like to turn the call over to our Chief Financial Officer Day.
<unk>.
Thanks Olivier.
We had a very strong start to the year revenues was $198.5 million up 51% your per year against the challenging year ago comp.
Usage trends were strong.
<unk> broad base growth.
New logo generation continues to be strong and customers continue to adopt more products across the platform.
To provide some more context first.
Growth of existing customers was robot again, and our dollar based on that retention rate remained above 130 per cent where.
For the 15th consecutive quarter.
Per cent of our customers using two or more products.
And 25% of our customers now using for more products up from only 12% a year ago.
Next churn was consistent with historical levels.
This demonstrates the importance of our solution to our customers.
Our dollar based gross retention rate has remained largely unchanged in the mid nineties and this was true across customer segments.
And in each of our infrastructure APM and log products.
Taken together.
This resulted in a record quarter of <unk>.
Over $100 million and up significantly versus Q1 last year.
Now turning to billings.
Billings were $220 million up 59% year over year.
There were no major pro forma impacts to call out in the quarter.
Remaining performance obligations or RPE OS was $464 million up 81% year over year.
Contract duration continued to be at an increased level from New York co period.
<unk> strength is driven by strong annual billings and commitments as well as a few large multi year commits.
It is important to note that those multi year commits are billed annually and we do not incentivize our sales force for multiyear deals given our high net retention.
Current RPI growth was also strong in the high 60%.
As a reminder, billings and RP O can fluctuate versus revenue based on the timing of invoicing and the signing of customer contracts, while revenue incorporates customer usage.
Now, let's review the income statement in more detail.
As a reminder, unless otherwise noted all metrics are non-GAAP.
We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release.
Gross profit in the quarter was $153 million, representing a gross margin of 77%.
This compares to a gross margin of 78% last quarter and 80% in the year ago period.
The slight decrease in gross margin as we've discussed before is due to our investments in product.
And platform innovation.
We expect gross margin to continue to be slightly down from last year and the remainder of the year as we build out new cloud data centers and prioritize product development.
R&D expense was $61 million or 31% of revenue compared to 27% in the year ago quarter.
We continue to invest significantly in R&D, including our high growth in our engineering head count.
Engineering head count continues to grow slightly ahead of the pace of revenue growth and.
And we have been able to attract talent.
And are successfully executing on our hiring and Onboarding plans despite COVID-19.
Sales and marketing expense was $53 million or 28% of revenues compared to 32% in the year ago period.
Similar to R&D, we continue to make substantial investments in sales and marketing, but the pace of the revenue growth as our past pace investment growth.
This was another quarter of no in person trade shows and marketing events and while we have successfully redeployed much of the events budget to advertising and other lead generating activities. It is not on a one for one ratio.
G&A expense was $16 million or 8% of revenue slightly lower than the 9% in the year ago quarter.
And operating income was $20 million or a 10% operating margin compared to an operating income of $16 million or 12% in the year ago period.
Non-GAAP net income for the quarter was $20 million for $6.06 a share based on 344 million weighted average diluted shares outstanding.
Now turning to the balance sheet and cash flow.
We ended the quarter with $1 $6 billion in cash cash equivalents restricted cash and marketable securities.
Cash from operation was a strong $52 million in the quarter.
After taking into consideration capital expenditures and capitalized software free cash flow was $44 million for a margin of 22% free.
Free cash flow was driven by strong collections stemming from our strong billings in Q4 and Q1.
Now turning to our outlook.
For the second quarter and the full year 2021.
We believe we can deliver high growth for the foreseeable future.
As we are addressing a very large greenfield market and are executing well against that opportunity.
We are optimistic about the long term opportunity and have seen an uptick in metrics driving our business growth.
Taking this into accounts with our usual conservativism implied.
We are updating our guidance as follows.
For the second quarter, we expect.
Revenue to be in the range of $211 million to $213 million.
Which represents a year over year growth.
51% at the midpoint.
Non-GAAP operating income is expected to be in the range of $9 million to $11 million.
And non-GAAP net income per share is expected to be in the three <unk> debt.
<unk> per range based on an approximate 344 million weighted average diluted shares outstanding.
For the full year 2021.
Revenues are expected to be in the range of $880 million to $890 million, which represents a 47% year over year growth at the midpoint.
Non-GAAP operating income is expected to be in the range of 45 million to $55 million.
And non-GAAP net income per share is expected to be in the range of 13 to 16 <unk> per share based on 345 million weighted average diluted shares.
Now some notes on our guidance.
While usage growth was strong in Q1, when providing guidance as usual we use more conservative assumptions.
Next our strategic focus remains investing to optimize for the long term.
Therefore, we are planning to continue aggressive investments in R&D and go to market throughout 2021.
We believe the efficiencies of our business are evident and we are confident in our ability to be a sizable and materially profitable company over the long term.
Additionally, our model assumes a return to office the office and a resumption of travel and in person events in the second half of the year.
We have limited visibility on these topics, but believe it's prudent to incorporate this in our outlook.
Finally in early April we closed our acquisition of screen.
We are pleased to welcome more than 50 members of the screen team to day to dock.
The acquisition has an immaterial impact on our income statement.
And on our cash flow statement in Q2 will reflect the $190 million of cash that we paid for the acquisition.
Now below the operating income line.
We expect approximately $1 million of Q2, non-GAAP other income, which is net including the interest income on our cash and marketable securities less the interest expense on our convertible debt.
We do not expect to be a federal taxpayer in 2021, but have a tax provision related to our international entity.
We expect the tax provision to be approximately $700000 in Q2 and $3 million for the full year.
Now to summarize we are very pleased with the results of the quarter.
Customers continue to consume more day to dog, both in terms of usage and cross selling to newer products and.
And the execution remains strong.
We believe the importance of our solutions will only be strength in long term by the continued trends of cloud migration and digital transformation.
And now with that we'll open the call for questions operator, let's begin the Q&A.
Thank you we will now begin the question and answer session. If you have a question. Please press Star then one I'm Gonna Touchtone phone, if you wish to be removed from the queue. Please press the pound sign are the hash key there will be I believe it for the first question is an ounce if you're using a speakerphone you may need to pick up the handset first before pressing the numbers.
Once again, if you have a question. Please press Star then one I can touch chunk zone.
And we do have our first question from Raimo <unk> from Barclays.
Hey, Thanks, and congrats on an amazing quarter.
Olivia can you.
Talked about the.
Growing momentum you have are on an APM into recognition you get from the industry experts.
Can you talk a little bit about where we are in terms of.
Adoption in your client base in terms of number of applications that are getting properly monitored and what are you seeing in terms of where you are getting us where maybe some of the traditional legacy guys are getting used for APM. Thank you.
Yes. So great question I think we are seeing relative adoption from EPA and I think anything we becker.
Net Tennessee ago, when we took the company public we were saying that the APM probably had to be for the longer fuse too, but had a very long runway of as more and more on congestion has moved to the cloud and Mark will then become critical and that's what we see how going to the.
In terms of a.
Penetration among customer application.
The ratio of the of the.
On this call it the instances on containers are covered with APM from the total expenses in containers that we see for an ASIC for monitoring.
So quite a bit of runway there for that ratio is already higher than the <unk>.
Famous you know Gartner quote from 5% of applications being monitored.
So we think we are clearly targeting because they've built applications into mid Gen. Cloud environments. We are starting to see from some of our larger enterprise customers.
Some of their.
On per applications that are being instrumented was already P M as well, but I would say, it's more of a phase two of adoption.
As opposed to what we need we have and always talks with customers.
Thank you and we do have our next question from Sanjiv.
Sandeep Singh from Morgan Stanley.
Thank you for taking the questions and congrats for the team on a on a really exceptional quarter really good start for the year.
Follow on.
We're on those question on I think let's sort of impressed me is the multi product adoption and frankly in some of the newer categories. So you mentioned APM and logs, but you also called out on networking as well and some of the other new products. When you think about the networking opportunity what's driving.
That that strong growth is it just the maturity of the product sort of being a year or two product or did you see some benefits from some of the competitors like solar winds post.
The sunburst attack, how do we see it on networking opportunity on for day to dog relative to APM and some of the other products.
Well I think it's a combination of does it look on a market need.
Because net worth doing especially in mixing emission credit environment, and especially for companies and have one footnote on the ones put on Prem.
That's something that is well covered in terms of monitoring and understanding so there's a big need there.
And the second part of that is as you mentioned the product maturity I mean that product is getting better and better as covers more on water use cases, you know, which means it goes from being great for a small number of customers to being great for them.
Larger and larger fraction or market and give some of it.
One of the dispersion of that is what we announced or mentioned in the call today, which is the network performance monitoring today also works for Microsoft Windows.
And as it turns out.
It started differentiate it to have a cloud based network performance monitoring product that also works for Microsoft Windows and it helps a lot of those customers was very hybrid deployments.
I mean, it makes a ton of sensible day, and then as my follow up question.
As we think about the new announcements for them with a great hire for the CEO position can you sort of walk us through.
The thinking around why now is the right time to bring the CEO on board.
About where the business is in terms of scale or is there a certain new market segments that you want to target more sort of the thinking on bringing on a chief operating officer and in today's Doug.
The thinking is for you to scale the team.
We we.
If you fast forward a few years will be a lot bigger than we are building a platform.
There's a number of things that we'll need to do right and Theres a number of there's going to be a number of problems to solve along the way.
And it was always a gigawatt that we would need to grow the bandwidth of the senior management team.
And as we embarked on that we also sought to bring into the company some.
Experience with with later stages of scaling growth look like for SaaS companies, and especially fast platform companies.
Which explains for UDR.
Did the higher we're making here.
Makes total sense congrats again, thank you.
And we do have our next question from Brian Hill from Jefferies.
Thanks, I just wanted to follow up on on the question around Adam obviously, a huge endorsement for you guys, but Adam on the founder of a company and you know effectively was running a lot.
You know the outbound activity and I'm curious you know most Ceos at least the definition of.
Taking care of the inside of the company versus the outside can you just talk to his role on the outside in with customers and the interaction vs. The focused on the inside I think theres just some.
Just trying to understand where he is going to be spending most of his time.
Yeah, It's a great question and the focus is actually on a lot of the front office function and these are going to have to do with servicing.
Servicing on customers and growing our customers.
I won't go into too much detail if any music on our teams are like we have a fairly idiosyncratic setup for who we go to market and who we serve customers that is aligned with our learn and expand low friction and low.
But adam he's going to lead a number of those teams.
Okay, great and in for Chris <unk>.
For as you said any award.
Okay, that's great and a quick quick one for David just you mentioned duration is up can you remind us of what the duration is now versus what you saw a year ago.
Yeah on the billings duration, we said it in the seven around seven.
Months, and the contract duration spread out towards more towards a year in the nine plus months and its maintained that so what we saw was over the last couple of quarters, given the multi year contracts and the increase of annual billing the contract duration.
Increased.
Okay. Thanks for the color.
Yep.
And we do have our next question from Matt Hedberg from RBC.
Yeah.
Yeah. Thank you this is actually Matt Swanson on for Matt.
Thinking about the capabilities of screen on the potential cross sell opportunities could you give us a low color on what type of solution for your customers currently have to address these needs and if you think of this as you know a competitive environment within your customers or more of another greenfield opportunity.
Yeah, So it's really more of a greenfield opportunity to day customers.
Typically you don't have anything on if you have something it's not really deployed and the reason for that is that to inject application security inside the application that was actually quite a bit of friction.
Where the combination with their dog and we know a P M.
Makes sense is that we've already incurred that friction to instrument the application with EBITDA and at the point of inflection is the same.
And that's where we think the debt.
For overview of one plus one equals three new happens by adding screens for year to date on it.
And I should say, it's only going to be to start with anyway.
There's a lot more we want to do in application security and the rest of the security.
But the first step is really to collect the AR.
These protection detection and protection directly at the ATM level, we screen.
Well in that kind of leads directly into what I wanted to go to you for my second question, which is literally on you guys are really have a front row seat for digital transformation and you. Obviously then get to also see from the security challenges that arise from that.
So what are some of those other areas in security that maybe you're seeing his pain points for your customers.
Whether there's any it looks like they are.
It seems like every other amongst isn't there's a large scam attack that brings on you're right out of a security to for them to focus.
But the way, we should do well on the way it relates to US we are focusing on applications in the cloud.
And for that we think there are important aspects of it that happened in the day application level, which is what we're addressing with screen there are important aspects of it.
Happening at the infrastructure low.
We have a few different products that we started last year.
And thats it.
We're still developing and shipping around that.
Then there's one big part of it that has to do with bringing.
Putting all this information together into an actionable system of record.
And the on Prem World would be a theme we will.
Also have a product on security monitoring product that is a precursor to assume that we're building into a seamless not there yet so we really intend to cover that whole spectrum, specifically for applications that guidance specifically for use cases that are going to bring together, a dev ops and <unk>.
In security in general when you think of the problems.
Companies, having this kind of environment.
The first one is that the tooling is is very barebones. Most of it doesn't exist or are you still high friction that you didn't get them develop it doesn't get deployed.
But the other thing that happens in most of these companies that is really really hard to operationalize security because it's hard to get that up and security to be on the same page and can work together.
And that's where I think we can we can make a big difference if we.
If we use our platform on the right way on if we build on those products right.
Thank you.
And we do have for next question from live on Suri from William Blair.
Hey, Thanks for taking my question and congrats on.
Another well executed.
<unk>.
Wanted to touch on the partner network, you know you announced the launch of the formal part in their work on January kind of expand go to market self serviced for implementation of things like that can you just talk about the early interest you're seeing there the traction because youre not a heavy services companies on a lot of implementation.
Or lift here. So how is that playing out and kind of how does the plants are sort of more of a medium term long term channel strategy is is this really a growth driver is this sort of efficiency drive or how should we think about that.
So for US, it's really a growth driver right I think.
When you look at our debt.
We have plenty of efficiency.
And the way, we think about everything is how do we.
How do we get the biggest part of that market, which we think is going to be gigantic.
How do we deal with products, we need to get to a tool that could we reach all the customers across all regions and all segments to get there. So that's what we think about it.
So when you look at our partner program, we see it for that length, and we're very happy with the additions we've had there.
There's a number of things need to do for you I mean, it's still I would say very early on.
We have validating wins like we've talked about some of those in previous calls.
But there's a lot more we want to build.
Over the next day.
So next year I would say so.
Most strategic update in this quarter, but I do expect that we'll talk about it again.
Gotcha Gotcha Gotcha.
I wanted to touch a little bit on sort of pricing and competition kind of combined you know if I was to look at pricing in general you know you're viewed as kind of having a really attractive.
Price point in terms of the modern vendors.
But then as you get into enterprises, you know given the scale youre being deployed at whether pricing is cheaper expenses different but it becomes a big number on.
And guys like new relic Sue most block of all made adjusted the pricing models for the law.
Last 12 months in your last quarter. You said you were happening on pricing model I'm. Just wondering are you seeing any pushback at the enterprise level are you seeing customers ask for price concessions.
Anecdotally just some sense of the confidence you have the debt there is sort of a a non issue around pricing, but on enterprise level given the scaling on the corner on Lumpiness on how you think about that on what you're seeing competitively those guys sort of use pricing as a fraud or maybe even as a as a way to get into some accounts.
Yeah. So.
Yeah for first of all on on the pricing and price pushback, Luke we have customers that pay us more than $10 million a year.
You that somebody stays at $10 million, a year and he's not asking for a lower price.
So but look at the end of the day the way we think about it is this is this is very high leverage spend for our customers and that he sees a tiny compared to what they spend on their infrastructure on on their engineering teams.
And the way, we think about pricing for all the data on everything defenders is that day.
And that is they are going to grow exponentially over time.
They're going to grow faster than discuss numbers topline for for all practical purposes, and so price it will have to adapt.
The whole smart, we are about getting and interpreting that data for whole, we price and how we structure. The the model as I discussed on risk out more and more with us.
I will say that we while we do have price and conversion with customers, especially on onshore on we.
We don't see the kind of competitive cutthroat pressure you might imagine if you if you read the competition for marketing with guidance.
The best illustration of that would be I mean.
David mentioned.
On the call that we had the gross retention in the mid nineties.
This is stable across our advice.
Segments of our customers and also stable across products like if you take each of our infrastructure APM and logs products going to be do you see this on numbers.
With these sales do if that Theres very little.
On that goes away, there's not a lot of room there for good growth price driven competition.
Okay.
Gotcha Gotcha Super helpful. Thank you and thanks for my questions on the great job again.
Thank you.
And we do have our next question from Michael <unk> from Keybanc.
Hey, guys.
For a solid quarter. Congratulations let me continue on the competitive front relative to a couple of.
On a couple of directions one.
From Splunk recently secondly, the impact of open source open telemetry third whether or not present, a change from the cloud vendors present announcement RGA AWS.
So and how do the usual boring answer which is that we don't really see any changes on the competitive landscape.
It's a bit early for me to comment on the on the slick announcements because if you adjusted that yesterday.
But from what we could see.
It seems to be from one announcements from the repackaging of the products that had been doing for it for the past few quarters and that we had seen on the market. So there's no moving change of subprime.
And on the other side of it we don't see.
From anybody else, we don't see any big change that is impacting as much the biggest impact of competitive announcements I see is Ah is typically the day on the announcement with somebody had to have to figure out what's going on in and explain it and that's about it we don't we.
We don't we're not completion driven you know on our product development and we're also looking for you shouldn't read on you know go to market.
So let me I'll just follow up on that maybe just drill down further I brought up for open open telemetry is there.
Any sense that for those open telemetry is that the agent is essentially commoditize.
So is that forcing you in any way to focus even more so let's call. It up the stack in terms of analytics or other value add.
Also we are so first of all we fully.
All in on a per day, dmitry as well and to US it's not a change right. Our agent was open source already.
On it.
So it was we it was free for everybody, including our competition to reuse.
We.
Liens on into open source formats and.
Libraries to instruments of obligations for a very long time, and we support for a large number of them.
The way we see the problem is not like what matters is not what technology, we use to get debt up from here to there.
What matters is two fold for end to end problem for our customers and to make it as easy as possible.
For them to just plug it in and everything just woke everything to assure that we turned their mess for genetic match with all these different technologies and applications in cloud and everything else, we turned that into something that would be understanding as well ordered without any effort. That's what we entered the market Indian and that's where we see all of this.
<unk> be some Pcs that appearing in the middle like the formats and the libraries and everything out for now.
This will change the tax changes will change and it doesn't matter.
Let me thanks, very much nice quarter.
Our next question from Jack Andrews from Needham.
Well good afternoon, and thanks for taking my question.
Apologize I've been jumping around calls, but I just had a broader question.
When we think about just the proliferation of new products that you can just continue to introduce how would you characterize where your sales force is in terms of just their knowledge and ability too to really understand and then appropriately sell all this functionality that you have to offer.
Well, so far it's working I think.
Look we do have a fairly differentiated go to market and the way we organize internally you know which to use no who we learned we learned with and whole customers adopt our product and who they learn about those product.
So we are.
This doesn't rely on you know having every single sales rep understanding every single little feature we have in every part of the product that wouldn't be practice.
Practical.
So it is working we're very confident in that I would say.
There's a point at which we might we might have to consider tweaking. The way we go to market and I think that will have to do more with when do we start actively selling to what might be just from buyers and I think we've discussed this before but because I'm thinking more strategically of the security market.
Not there yet.
We're not actively pushing for the security buyers today with our product.
But when that happens we might have to make some tweaks within a day.
Okay. Thanks for just as a quick follow up could you maybe just talk about how much of your new business today is perhaps generated from partnerships with the.
The public cloud vendors I believe you have strategic relationships with all three of the big clouds entering the year here. So how should we be thinking about there are relative contributions moving forward.
So we don't have any any numbers to share on that.
I will say that a lot of the you know historically a lot of that has been.
Informal low in that we work alongside the credit providers, but there's no formal agreement on Rev share and everything else. We started to put some of those in place more recently around.
Around the committed resources for going to market jointly and things like that.
But we don't have anything to share on that.
Okay. Thanks, congratulations on the result.
Yeah.
And we do have our next question from Andrew Nowinski from Davidson.
Our customers I think you had 97 in Q4 on that spent over a millionaire or can you just give us any more color on what you are called a strong uptick on those customers. This quarter and then did you have any outsized deals on the quarter.
Let me just take that as a metric. We said we were going to announce that once a year and give some comment on flavors. So we're not going to give a number but you know it was a strong uptake on this we talked about it has a lot to do with the expansion of customers into that million dollar range.
As far as our concentration in the quarter nothing out of the ordinary we continue to have you know some very meaty lands, but given the land and expand model on a number of customers bring on we don't have a concentration that produces a quarter.
Okay, Great and then maybe just a follow up question on the gross margin side, I mean, it ticked down a little bit lower than I expected was there anything abnormal on on the gross margin side or do you expect that to to come back up going forward.
It's the way we see on I'll go ahead David.
Yeah.
Yeah, sorry go on you on it.
Alright.
So on the on the gross margin. So the way we think about it is this is this is due to us.
Having the product teams work on product development instead of working on optimizing.
And we're still happy with gross margins, where they are they might feel fluctuated, probably would fluctuate a bit lower than they were last year, because we're very busy building product.
But there's nothing fundamentally changed around or margin.
There's many other things we can do in the future to a few months if we so wish.
All right and on the call. We're making is we focus on product development will focus on making sure that we grow the top line in the short and midterm.
And then we are.
If things get out of a handle on the gross margin I will spend some more time on optimization.
Got it thank you.
And we do have a next question from Chris Merwin from Goldman Sachs.
Alright, Thanks for taking my question I wanted to ask about the.
Crow position on it I think you mentioned in the prepared remarks looking for.
For a new one I mean should.
Should we take that to me that perhaps there's more even more of an enterprise focus.
As it relates to your go to market organization, just just curious.
What type of person you are looking for.
What if anything we should read into as we think about any sort of evolution with the go to market motion of the company. Thank you.
Yeah. It does.
Really nothing to read into it I think it's a continuation of where we have a we said right now where we have a.
The deep bench on the on the sales leadership side, we're very happy with the leadership we have in place.
And it will still below we are going to be looking for a new CFO and would be great to be.
Looking at candidates, both internally and externally for that but Theres no.
There's no we didn't desire to change or change course or.
Do anything fundamentally different from where we were.
Got it thank you and apologies if this has been asked but.
In terms of duration I know that you know in prior quarters. It seems like that was coming in customers. We're looking at to do shorter deals anything changing on on.
On that front I mean, it seems like all that yeah. There's more tail was buying the business certainly as we get into a recovery here you should just go on hire just just curious if you could comment on.
Duration.
Yeah, It pulled in and we talked about in Q3.
As risk management happened and then we said in Q4, both billings and and contract duration pull back out basically in billings and you know in the $7 seven to eight and contract duration.
Nine turns around that and it has to do with you know clients.
Net client preferences, and we continue to have that same sort of duration in Q1 that we had in Q4. So so it's very similar to the trend we talked about last time, which is more duration on contracts year over year, but between Q4 and Q1, there really wasn't much change in the way quiet.
Our approach to contracting.
Got it thank you very much.
For me to have our next question from a young Kim from loop capital.
Great first congrats on a strong quarter all Ian David.
You mentioned that a strong usage usage trend.
<unk> strong results in the quarter is there any way to qualify whether it got strength and usage came from.
Existing deployments or relatively new deployments that just happened to ramp in the quarter and then also.
On usage I know, it's only Q1.
But how much of that strength and usage was already captured in the contract vs.
The low usage that came in well above contract provision so that caused customers to kind of renew at a higher contract volume. Thank you.
You won't take us I'll start with that so.
We had it was very broad based across industries.
We had a combination.
Our customers that we brought on with the strong new logos in the second half of the year and in Q1.
On begin to ramp because we our land and expand and customers that were already using us and had been using us for a year or more increased their activities. We think it has a lot to do with the increase of activity on digital transformation for fast transformation on workloads on Azure.
As in previous quarters.
About.
Two thirds of the increase.
Increase of usage was from customers using more of the products. They had purchased in the in the previous period in the previous period and about one third was a cross sell or new and that continued in the quarter. So it was a combination of new logos increased usage of existing products and.
Very robust cross selling and adoption on the platform.
Okay, great. So there wasn't any necessarily different trend debt.
Towards the upside and the usage trend in the quarter per se from previous quarters.
It was very it was brought all of those all three of those were positive in terms of both the scaling of new customers. The cross sell and the increased usage of existing products. Okay. Great and then just last question for me.
Just us.
Talk about any geographical trend that youre seeing out there that you actually expect to see.
For this year, especially in Europe. Thanks.
Our Europe, let me, let me take that Europe has been strong for US we have not seen a.
The slower vaccination.
Attract and we have seen.
Pretty good resumption of growth across all the geographies.
We'll have to continue to watch it because there's variation and back to work and back to the office, but as it relates to Q1 and Q4, we saw a fairly uniform strength across the regions.
Okay, great. Thank you so much.
Okay.
And we do have our next question from Greg.
<unk> from Mizuho.
Okay. Thank you very much on a really nice quarter guys. First question is on a day to dog continuous profiler and now that it's G. A what sort of trial and paid activity have you seen so far you know it would seem like there would be a lot of interest in getting ongoing visibility into code performance, but any early anecdotal day would be helpful. There.
Oh, yeah, so very happy with the product has been very strong out of the gate.
We don't have any numbers to share and just to keep flow early in its cycle that there's still a number of things that we need to do to the product for that.
It works well for everyone, who wants to use it.
But if they are.
Product studies that he's beloved debates user on it put it this way so it's a it's got it's got very very strong time, let's say on a group that can give you.
Okay. That's great and then you mentioned earlier that you saw an uptick in metrics would you say that your internal metrics are back to pre pandemic levels or not quite yet.
Well I think it's at this point I'm, losing track of what we're comparing to a back to pre pandemic level.
So far back.
But we look we're very happy with what happened over there.
Q3, Q for Q1.
We had a very very strong Q1.
We we still think we don't know what the macro is going to it's going to impact us we still think.
Because every one of our customers are aren't having that affected the same way at the same time you know, we just do a little bit more on spending there used to be but look we feel good about the business right I think we just increase the.
The guidance for the full year I think it went from 38 personnel so growth to 47 per cent.
That should tell you that we feel great about where we are in about the business.
Okay. That's helpful. Thanks Olivier.
This concludes the question and answer portion I'll now turn the call over to Olivia per mill for closing remarks.
Thank you and in closing I would just want to reiterate that we're very very pleased with our performance to start the year.
And then I am personally very proud of our execution on that I want to thank all of our employees all debt of dogs for their continued hard work.
You will.
Okay.
Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.
Okay.
Yes.
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