Q2 2021 Datadog Inc Earnings Call
Yeah.
Good morning, and thank you for joining us today to review day to dogs second quarter 2021 financial results, which we announced in our press release issued this morning.
Joining me on the call today are Olivia panel and adults co founder and CEO and David <unk> <unk> 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 and trade.
Our outlook for the third quarter and for the full year of 2021 and our strategy the potential benefits and more products partnerships and investments in R&D and go to market and our ability to capitalize on our market opportunity and words anticipate believe continue estimate expect intend will and similar expressions are intended to identify forward looking statements or similar indications and future.
Our expectations.
These statements reflect our views only as of today and not as of any subsequent day. 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 the quarterly report on form 10-Q for the quarter ended March 31, 2021 filed with the SEC on May 7 and 'twenty 'twenty..1 additional information will be made available and our quarterly report on form 10-Q for the period ended June 32021 and.
Other filings and reports that we may file from time to time with the as you see our 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.
Refer to the tables on our earnings release, which you can find on the Investor Relations portion of our website for a reconciliation of these measures to their most directly comparable GAAP financial measures.
That I'd like to turn the call over to Olivier.
Thank you Kyle and thank you all for joining us for our mortgage pulled together.
We are very pleased with our performance in Q2, which was stronger than expected on modest growth with existing customers as well as strong mucus and myself.
And we feel real strength, both across product lines and of course gifts and my statements.
For a quick review of the quarter.
Revenue was $234 million and increase of 67% year over year, and 18% quarter over quarter and.
And above the high end of our guidance range.
We ended the quarter with 1006 out of 10 customers who's in here on a $100000 on more up from 1000, and <unk> team and the year ago quarter.
Those customers generate about 80% of okay on.
We have about 16004 hundred customers, which is up from about 12100 last year.
We also continue to be capital efficient with free cash flow of $42 million.
And our dollar based net retention rates continued to be over 130%.
Customers increase their usage and attitude on newer products.
We're pleased that positive business trends from recent quarters continued in Q2.
First you get growth from existing customers remained very robust.
Among other factors, we continue to see the impact of a strong new logo growth and the basketball quarters as those new customers grow into their commitment.
Second Utica and R&R was again strong and we continue to execute against our go to market strategy.
And third churn continues to remain low and in line with historical rates.
Taking all these factors into account.
We had a very strong quarter of you on R&D.
About $100 billion on they are at least for the second consecutive quarter.
Next our platform strategy continues to resonate and the market.
As of the end of Q2, 75% of customers are using 2 or more products.
And from 68% a year ago.
Additionally, 28% of customers and are using 4 or more products, which is up from 15% last year.
And this quarter, approximately 70% of new logos and ended with 2 or more products.
On platform saw strong growth and the second quarter.
Which included another record of day are added and prospects from monitoring every single quarter.
This product is still early cash cycle.
Meanwhile, we can.
Do you need to see very strong performance with other products and platform.
Our APM suite, including Rum, and synthetics and log management together reached.
Over $400 million you're on.
On.
The APM suite and wealth management also remained and hyper growth mode.
While our newer on the products are growing even faster.
As a result, we are very pleased with the customer uptake and to end up disability platform as well as the beginning of a cloud security platform.
Now, let's move on to product and R&D.
Our teams continue to innovate and solve customer pain points.
We announced 73, new features and Q2 and have continued to ship in Q3.
So can you discuss just a few of them.
You announced the general availability of 2 new security products, and cloud security posture, and management and government securities, which targets security issues and lines Cross section.
Cash security posture and management grants continuous contribution already.
Customers from truck conformance to industry benchmarks and regulatory standards.
And cloud workload security performance real real time threat detection and <unk>.
Secondly, within the workloads and sales, we can host and containers.
These are second and third GE products and security alongside security monitoring, which pro forms of threat detection on everything and moving that extreme.
With this offering the free.
First building blocks of our plastic free platform are coming together and we can start delivering on our vision to build on silos between debt ups and security teams.
And with the addition of these 2 products, we now have 11 Gi products onto that platform.
We are also at the beginning of the opportunity to bring on BTT GBC Icd's free and.
And we announced the beta of our CIBC beauty products in late July.
She ICD is a combined practice of continuous integration and continuous to a degree.
And at least software to consistently return cash and released to production.
The problem is that developers also don't have visibility to the FDIC bank lines they have.
And youre going off with Tessa filling and why and where on the FDIC pipeline via our experience and bottlenecks and issues.
Our Ci visibility product based on our acquisition of undefined lots and that's okay.
Customer gain visibility into their test and pipeline with the goal of lowering costs and increasing efficiency project developer teams.
So we're excited about those announcements, but we're not spending steel on on existing products and we continue to expect features to make each and everyone and best of breed.
And since and we have been able to cross productivity and our customers cannot fast and Microsoft agents, Firefox and medicine to come.
And nobody wrong, we know support Android iOS and cross touch on frameworks that can be that much.
On a run product now covers a whole user space, including what applications on desktop mobile and tablet as well as mobile apps.
And finally, we continue to improve the AI and ml capabilities and the whole platform with our most recent additions, including automated protection of 40 deployments and APM and anomaly detection and security monitoring.
These are complemented by the continued extension of which some insight there.
And I mentioned engine, we are embedding directly into our users' workflows across our platform.
As you can see our end to end up and really keep platform continues to broaden and deepen.
We are beginning to see to move forward flow.
Security.
And we are in the early days and we'll see ICD use cases.
As always I want to thank our engineering and product teams for their creativity and productivity and the continued ability to deliver direct solution to our customers problems.
Now moving on to sales and marketing.
And the hinted by August and our growth this quarter. Our go to market teams continue to be very productive.
So let's discuss from our Q2 weeks.
First we had an 8 figure upsell with Nextgen financial services company, which is experiencing a surge of traffic in their core applications.
They rely on Bandog log management and pet.
Flow across the organization to find a good growth of issue.
They saw a significant increase and use it at our existing products and recently added our continuous provider to better understand that group of comments and production.
Next we had a 7 figure upsell with our European E Commerce company.
And what are you seeing multiple commercial and ability tools and 1 of the and 2021 strategic initiative was to consolidate and reduce costs.
By standardizing on their dog dissatisfied debt goal, while including debt teams collaboration and communication.
Next we had a 7 figure upsell and there's a lot of global accounting firm.
These companies are experiencing rapid growth with the online product and.
And these teams were forced to jump from 2% to try and repeat your problem.
And the dog and cat driven solutions growing customer monitoring APM and see very very.
Variable to decrease meantime to resolution and free up and general resources.
Next we had a 6 figure upsell with a 30 years old and analytic software company.
And moving more workloads to Azure and would you see.
You have sales they send it hasn't been enough for their loved management.
With a loving without limit functionality.
And you will lower close by and order of magnitude for low management.
Sacrificing any of the update on <unk>.
And finally, we had a 7 figure land is a large back on feedstocks differently.
And the company is growing rapidly and is planning to move to hybrid cloud.
Monitoring adoption rates and very low which made it difficult for the teams to collaborate.
We set a dog that entire team now has a single platform for all day.
And they recognized standard of impact on improving adoption and alignment across teams.
So as you can tell we're incredibly proud of the performance and well go to market teams this quarter.
And I want to thank them for their hard work and for.
Partnering with our customers delivering another quarter of strong results.
Now moving on to our longer term outlook.
We see business, you've now moving forward with our longer term digital strategy.
Businesses must increasingly digital first.
<unk> remains in its early stages.
And we believe we are and a great position to help our customers with a unified <unk> platform.
Meanwhile, we are making progress on our long term vision to break down silos between debt and security teams.
As a result, we are extremely excited about the opportunities we see to democratize data and have customers increased visibility and manage complexity.
And we're confident long term plan and continue to work hard towards you choose and our strategy.
Before turning the call over to Damian and why.
You mentioned and our teams are busy preparing for that 2021, our user conference, which will be held in late October this year.
Every year at Dash, we showcased our latest put on innovation and we're excited to show everyone and have been up to this year.
We also expect to hold an investor session at Ash. So please look at announcement and before.
With that and would like to turn the call over to our Chief Financial Officer.
David.
Thanks Olivier.
In summary, we had a very strong Q2.
Revenue was $233.5 million up 67% year over year and up 18%.
And over quarter.
Usage trends were strong and showed broad based growth.
New logo generation was also strong and customers continue to adopt more products across the platform.
To provide some more context.
First growth of existing customers was again robust and Q2 and our dollar based net retention rate remained above the 130%.
On the 16th consecutive quarter.
Usage growth was strong driven by customers expanded usage of existing products and the adoption of new products.
Our customers are continuing to pursue their cloud migration.
And as we expand with our customers, we see opportunities for them to standardize on us and consolidate their observer ability tool vendors.
Next we saw a rack and we saw the second consecutive quarter of our adds over $100 million.
With broad strength across product lines, including our newer products.
And strength across our regions.
New logos were also very strong we had a record number of both growth and net new logo additions in the quarter.
Both our enterprise and commercial sales teams executed strongly and the quarter and we continue to see broad opportunities across industries and customer size.
Remember that our given our usage based revenue model new logo wins generally do not immediately translate into meaningful revenue, but do so over time.
Next our platform strategy continues to resonate with customers.
And 70% of our customers are now using 2 or more products and 28% of our customers are now using 4 or more of our products.
Lastly, churn remained low and and inline with historical levels. Our dollar base gross retention rates remained unchanged in the mid nineties and they are similar across our customer segments and products.
Billings were $270 million up 69% year over year.
And there were no pro forma impacts and the quarter.
Remaining performance obligations or ARPA was $583 million up 103% year over year.
Driven by strong sales activity and increased contract duration.
The increase and contract duration was driven by a higher mix.
Of annual and multiyear commitments relative to the year ago quarter.
As a reminder, multiyear commitments are billed annually and we do not incentivize our sales force towards multi year deals.
Current RPI growth was also strong at over 80% year over year.
I should note that we continue to believe revenue is a better indicator of our business trends and billing and RP O. As those can fluctuate relative to revenue based on the timing of invoicing and the duration of customer contracts.
Now, let's review the income statement and more detail.
As a reminder, unless otherwise noted all metrics on non-GAAP.
We have provided a reconciliation of GAAP to non-GAAP financials, and our earnings release.
Gross profit in the quarter was $178 million, representing a gross margin of 76%.
This compares to a gross margin of 77% last quarter and 80% in the year ago quarter.
The year over year decrease and gross margin was due to investments and.
And our product and platform innovation.
We expect gross margin in the mid to long term to be consistent with our historical performance.
R&D expense was $71 million or 30% of revenue.
27% in the year ago quarter.
We continue to invest significantly in R&D and.
Including high growth of our engineering head count.
We're pleased that we are successfully executing on our hiring and on boarding plans and R&D.
Sales and marketing expense was $61 million or 26% of revenue compared to 33% and the year ago quarter.
We continue to make substantial investments and sales and marketing, but revenue growth has outpaced our investment growth.
We had only a few in person events in Q2, but.
But we continue to plan for increased travel and event costs later in this year.
Of course, depending on local health and travel guidelines.
G&A expense was $16 million or 7% of revenue down from 9% and the year ago quarter.
Operating income was $31 million or a 13% operating margin compared to the operating income of $15 million or at an 11% operating margin and a year ago quarter.
Although strong and the quarter, we are not optimizing for near term margins as we see a large and dynamic market opportunity in front of us and we are striving to invest heavily against that opportunity.
But Q2 of course demonstrate the efficiencies of our business model.
Non-GAAP net income in the quarter was $32 million or 9 pence per share on 342 million weighted average diluted shares outstanding.
Turning to the balance sheet and cash flow, we ended the quarter with $1.4 billion and cash cash equivalents restricted cash and marketable securities.
Cash flow from operations was 50.
$2 million and the quarter.
After taking into consideration and capital expenditures and capitalized software free cash flow was $42 million with a free cash flow margin of 18%.
Now for our outlook for the third quarter and the full year 2021.
We are optimistic about our long term opportunities and believe we will deliver high growth for the foreseeable future.
We are addressing a very large market and are executing well against that opportunity.
Taking this into account with the usual conservativism apply we are updating our guidance as follows.
For the third quarter, we expect.
Revenues to be and a range of $246 million to $248 million.
Which represents 60% year over year growth at the midpoint.
Non-GAAP operating income is expected to be and the range of $18 million to $20 million.
And non-GAAP net income per share is expected to be in the range of 5 to 6 per share.
Just on approximately 344 million weighted average diluted shares outstanding.
And then for the full year 2021.
Revenue is expected to be in the range of 938.
To $944 million, which represents a 56% year over year growth at the midpoint.
Non-GAAP operating income is expected to be and a range of $87 million to $93 million.
Non-GAAP net income per share is expected to be and a range of 26 to 28 per share based on an approximate 344 million weighted average diluted shares outstanding.
Now some notes on our guidance.
First while usage growth growth was strong and Q2, when providing guidance as usual we used more conservative assumptions.
Second our strategic focus remains on investing to optimize for long term growth.
We are planning for continued aggressive investments in R&D and go to market through the remainder of 2021.
And next our model assumes a return to the office and the resumption of travel and in person events.
During Q3.
That said, we will remain flexible depending upon local regulations and our highest priority is protecting the health of our employees.
Regarding items below the operating income line.
First we expect approximately <unk> 9 million of Q3, non-GAAP net interest and other income which includes the interest income on our cash and marketable securities and the interest expense on our convertible debt.
We do not expect to be a federal taxpayer Inc.
Q3, but have a tax provision related to our international entity.
And as a result, we expect a tax provision of approximately $600000 in Q3 and $2 million for the full year.
To summarize.
We are very pleased with our results this quarter.
Customers continue to consume more day to Doug.
And using more of their existing products and choosing to begin using new products.
We added 2 new products this quarter and now have 11 products to offer to our customers.
Our execution against our R&D and go to market goals remains strong.
And our ability to help customers.
To manage through their cloud migration and digital transformation effect continues to grow.
And with that we will open the call for questions operator, let's begin the Q&A.
Thank you well now begin the question and answer session.
If you do have a question press Star then 1 on your Touchtone phone.
If you wish to be removed from the queue. Please press the pound sign or there has to be weighted.
Camping and Speakerphone, you may need to pick up the handset first before pressing the numbers.
Once again, if you have a question for Karl and then 1 on your Touchtone phone.
Okay.
And our first question from Brent Thill from Jefferies.
Good morning.
And maybe provide a little more color on the large customer growth the last day.
Quarters, you've had.
Exceptional.
Results and that that segment, maybe if you can just give us a little more color on what youre seeing it.
As these larger enterprises are standardizing on your platform.
Yes, so we were still seeing some of those I mean, I think some of the what you mentioned and Nicole.
The feed and desk in the category, where customers were using something else before a collection of things and there's some that even on platform and which creates a larger land for us, but it's still not the vast majority of our consumer acquisition and.
<unk>, we're still starting small with customers and growing with debt and fitbit standardized with us they're on.
And as it further non devoted their migration to cloud environment. So we feel we see some of that proportion biggest convertible senior and between different quarters.
We don't we.
We don't see any particular trend there yet.
And David just in terms of the.
Sales hiring plan that you have and second half versus the first half.
Color on Covid.
Carrying capacity and what.
Correcting that back half of the year.
Yes, as we as we said previously.
Trying to.
To grow our ramp quota.
Approximately in line with revenues and.
And we had as we said throughout Covid last year and this year, we have aggressive hiring plans, which we are executing on.
And and we Havent changed our sort of goals for hiring and quota expansion.
Throughout the last couple of years.
Sure.
Yeah, Thanks, and just to rebound on would be what David.
Just said.
And like many companies that have stops and starts we kept hiring and Lee which put us in good position today.
I think right now you've been interest and time for hiring because the market is very hot and there's also many people taking some time off.
2 weeks here and looked at referred to grow deliver which we won't but we were happy with the place we're in and we're very happy with.
Make the choice to keep.
Total your recruiting throughout the pandemic.
Thank you.
Our next question is from Sandeep Singh from Morgan Stanley.
Thank you for taking the questions and congrats on the impressive Q2 results Olivia and wanted to.
See if I can get a little more understanding of the comment you made in your script around and.
Infrastructure monitoring still being and its early days from your perspective.
What drives that sort of sentiment around infrastructure monitoring and spend your core product on that.
Sort of the foundation of the company and Youre, saying that there is still a long long runway ahead, and just expound upon that that light and I'm thinking a little bit.
Yes, I think there's 2 aspects to it 1 is on in terms of penetration and I think the day.
The intersection of where we have and would seem to cloud.
And the next year and still a small fraction of Woodbury.
And the market total so there is a lot more we can get from that.
The second aspect is that the.
On the World is transforming these released to the market.
And size of the infrastructure that we.
We will have to be monitored probably gets sometimes look bigger than it has to be monitored from years ago.
So when you both taxes does 2 things.
More ground to cover in terms of growth market penetration.
And how much stuff, we can cover with infrastructure monitoring and further to that.
That is still evolving right there too and the name of the game into cloud is debt.
Waves of innovation and you end up running workloads and we've been through a few of those documents.
<unk> expenses, and then containers and I'll share the list.
We don't expect that to stop there and we think there could be new modalities for running and infrastructure and so we are investing heavily and our products.
<unk>.
To be at the forefront of on that.
It makes total sense and as a follow up I think 1 of the words that I heard multiple times.
And your script was standardization and what we've been hearing from customers is that APM is really come into its own how much of a driver has that been and where would you put sort of law.
Log analytics solution in terms of the maturity of it came out.
And you are 2 later after ATM, where does that capability and product stand from your perspective, if we use APM and thats an analogy.
And look what <unk> achieved from the same day.
APM and logs on Nick and Mike in terms of the day.
<unk>.
The adoption across our customer base and I would say the level of maturity.
Both products, we and situations, where we are starting with the with those products and that based on kind of.
Set up by customers and.
And they both can serve as the second leg of this tool and you seem to infrastructure.
The baby's force to and integration focus and Mers.
So what we see today.
The program and.
Meaningful scale is that consumer constant and hygiene on our operating they buy into the platform.
And the 3 main legs and thats to put on to that are going to be.
P and logs and your prospects from monitoring.
Alright, great to hear and thank you so thats all day.
Our next question is from Sterling Auty from Jpmorgan.
Yeah, Thanks, Hi, guys.
Given the number of comments that you talked about usage and the prepared remarks is helping drive strength and maybe you spend a quick minute talking through and remember we had the overages item and kind of the first half of last year. How is this different and how is the kind of usage and consumption.
<unk> growing now.
I'll take that I think what we said was we had a flattening and optimization and Q2 of last year and since that time, which is now Q3 of last year through now we've had and returned to more normal or.
Consistent with the long term trends and we continue to see that in Q2 a very.
Strong and similar quarter to what we've seen and the last 3.4 quarters and very consistent with the companies.
Long term positioning.
Position within that and that is reflective we feel of a return to normal and the rolling out of cloud migrations and digital.
Sure of above where we were planning so were so essentially we had a positive surprise and the revenues and that sort of drops down on the bottom line and secondly, and lastly, as Ali mentioned, we have very aggressive hiring plans.
We are essentially you know trying to get that done this year. It takes a while to get that done in this market and and so we we expect that growth to accelerate that sort of people side of things to accelerate and the second half of the year and we're already seeing that and are hiring numbers.
But we have over the last couple of years sort of wrapped up into our hiring during the course of the year.
Understood. Thank you.
[laughter].
Our next question is from cash Rangin from Goldman Sachs.
And Ah congratulations on extraordinary those those are really awesome to see this all the and David My Christmas as you really started to experience the benefits of standardization what are the sales cycles looking like and how do we expect the kind of hiring that you do too do.
<unk> to prosecute this option because it showed up and try and go with the pipeline and if you could as it resolved talk about how this gets better dog into the upper and there'll be enterprise market as as things evolve over the next couple of years that'd be great and also if you do have the time to answer this as the economy, if if the economy <unk>.
And so your results are fantastic as they are what could be the incremental benefit of the opening up of the economy, and we get to travel and get out there and thank you so much and congrats.
Thank you so.
Starts with the the sent a musician.
I just want it doesn't change or sales cycles too much because of the way we do it E and mostly start small and we grow with customers and then by the time, we standardize we have a total of the the foothold and that's customer and <unk> engineers are using up all the time and.
And it gets you cream and easier to make the case for Sanitization uhm from usually there's going to be some changes and overtime and as we can cover more and more of the of the globe and <unk> with those.
Sales force and maybe we have customers and have and more and more years with.
And I do expect to make some changes all the time to them and real quick but at this point, there's no and.
Maybe your tweets T cause and assess profit 20th.
And he takes it.
Does that day standardization does informal roadmap from a product perspective, because we are investing more and more and get him to do that and let me fairly cross country and we're doing that in order to help customers who standard die.
<unk> some of their legacy I T on from my T back and do that under the same most of their club technology. So do you see something weird informs that that part of our of our development and we also know likelihood and <unk>.
Form some of our efforts and all around professional services and and and spending more time bring discuss them and there's a cost.
On the the question on the opening of the economy.
And he look weak.
What's interesting to us is that it looks like the we're back to the the way the world was moving to the cloud more or less and the before the pandemic and.
And.
And.
Don't know if those things can go any faster.
And it seems to be some.
And then there will be very steady historical transfer out there and we're back to that city and so I will transfer we're happy with that.
The main thing that we're working on right now to maintain a long term growth and make sure that we keep building on the platform and so we can add more product covered the food. So this will probably go on increasing do not federal calling for customers, but at the same time scaling to go to market teams. So we can be and all of it from.
Rotation February and it was for customer segments and then.
And we still have quite a bit total up to do in order to achieve that.
Thanks, a lot all day and David.
Our next question.
Question is from <unk> from city.
Thanks for taking my question wanted to ask you just about the the pricing environment broadly, obviously, <unk> a year ago kind of it and the depth of Covid [noise] you saw from you know customers rationalize spend obviously didn't seem like that was that was an issue this quarter, but just how do you feel kind of longer term about you know.
And the your your pricing strategy and as you continue to innovate and and build out new features do you feel like you could potentially how about pricing power to to to charge even more overtime. Thanks.
Yeah, So I think that the 3 part of the answer the first 1 <unk> what was the last year with no price pressure will be so last year with cause I remember you seen your transferred print with Amazon and and either and and and the others and enjoy the customers and your last bill because I told this great and could you to save money when they were safe and you're looking for uncertainty of on cash.
And that people to us.
Because that's 1 to you know when you think long term.
The.
It's almost a given that they will need to be get from web charging for some of the ketchup and some other value provided customers that come to D attached to the district and Williams update on and it'll be and exchange because there was what are your day exploding exponentially well cause somebody's revenues on Hunter green to exploit exponentially and so that's 1 thing that will work.
And on with all of our products we.
We have this gonna be nation for 1 of them put on getting without limits and she said.
And you can see a way to align the <unk> does that and you get somebody to get with a price that day and you can let me spell that and make sure that we keep unbundling things on our end. So please and we will get into power to do that.
Uhm the the third answer to that question is that all the time, we made the choice to add new functionality largely in the form of miscues. When day. So you can I. Please have gone and spell our customers, which either way basically to to maintain and price and increased price and we as we grow.
And as we should've function Nike, we liked the fact that you'll forget the very good signal in terms of the value of these products provide and and hip stripes and hear the roadmap total spot.
[noise], Thanks, and just a follow up on the the competitive environment. All day I think you've talked about just how.
How customers are consolidating and observability tools or maybe you know you kind of see that opportunity. Just as is you you've seen more of that and and obviously the deal sizes have been really really healthy. This this quarter specially around you know the R. P. O growth are are you see and kind of more kind of.
The legacy Observability solution, a replacement and just just help us understand as those deal sizes grow you know what that means competitively for you guys. Thank you.
It's similar to what we've seen before and and the and and motion is really.
On Prime on agency that he'd be consolidated and 2 D to the cloud and that's what we see.
So we see that <unk> samter and we've seen in the past you know there's nothing there's no other very interesting come and to make about that today, Let me see let me see what we feel free.
Our next question from Matt Hedberg from RBC kept on there.
Alright, guys congrats on the corner and thanks for taking my questions. You know I'll eat you know obviously, you know you talked a little bit and your script about secure of what really a building security portfolio solutions, obviously, a little different buyer and sort of core <unk>. Your you know your core infrastructure or or or even logging products for that and.
<unk> can you talk about sort of <unk>, you know, how you're building up the sales motion there you know and and and really how you how you see additional leverage there.
Yeah. So the the sales motion there is very much built on for.
For now and what we had with that'll be a T.
And as a linguist products leaning on those customers that are already bought into debt and a platform and that and you can set so like just add up to you smell like security products and.
That's that 1.
Step 2 will be to add more and more of those products and these G and which me some neutral critical mass to actually start pushing them more directly from the task force I think for that will actually learning quite a bit from them. The screen equation was done recently and.
And we expect that that will have some interesting things to do in the in the future. We don't have anything specific to share the day, though.
Got it okay, and and and then <unk> David 1 for you you you you noted and the call that you had a higher level of multiyear commitments and obviously you know and we realize you don't necessarily push for that just wondering you know what what were some of the <unk> customer conversations that drove that behavior.
Yeah, I think it it is.
It has correlation to a larger customers who are investing more in day to dog as their standardized observe ability and want to commit longterm and generally is pull from the client rather than we go out remember when land and expand.
And we off and see the motion of of growing over time and and many contracts with more commitment. So this is really I'm more of a factor of enterprise customers and larger cloud natives committing today to dog as a core platform and wanting that come and it could be long.
And your term.
Got it Super helpful. Thank you.
Yep. Thanks.
Okay.
Our next question and from the meal no Starzyk from William Blair.
Hi, Thank you for taking my question and congrats on the incredible quarter. So it's great to hear about the platform expansion you vetted 2 offerings, David dog cash coming up and a few months and yet research and development expense I believe is up 84% year to date can you give us more detail around the decision sex sells.
Great the level of R&D spent and how should we think about the pace of new product introductions and given the increasing diversity of your offerings. What changes do you need to make to the sales organization to support the sale These new solutions.
Yes, we were investing as as it received yet we came home from you know so we went and how 'bout with G. T..2 X 8 alright, and visiting 90, which we we've done and.
2 of you absolutely should also and he's actually normally show up you know R&D expensive and.
And be on on and I'm going basis. So we were doing it you know we still think we're very early and which is very very very logical G. T.
<unk> D T security and we mentioned today also the submit give it up or your savings and on T. I C. D. But also you later on and there's a lot of free we can do a little can be I, idina, Nicky and send and lots of different things. We can touch on so we're very early and we intend to keep investing easily 94 right on time.
In terms of the impact on on and go to market really where it will see the first need for some changes and on the go to market studies, and we stopped pushing the south side of the security code on Monday simply and it hasn't happened yet and it's not something that we're doing today I those products just barely reached G.
Yeah, 4.2 of them.
And it's something that will send me do in the future. So nothing to share it with you on that but definitely something and we're working on.
Oh, that's a great day here and it quickly and can you just give me an update on the competitive backdrop is there any any change and and who you're suing on deals and have when rates improved and how might that vary by product. Thank you.
So it's very boring receipt Simpson that before.
From where we send the complaint and let's get hasn't changed.
And I'll focus.
Is to mostly with you and your environment environment team that are going to start small with us and I'm going to go with us until the standardized on us. So just about everything they do that's best emotion hasn't changed and.
And then to keep her on this hasn't changed that much either.
Okay, alright, thanks, and congrats again.
Our next question and from Brad Redfin Reback from.
Great. Thanks, very much as we think about new customer growth on the platform or is the recent cohort of new ads growing into their commitments faster so they ramping faster than customers a couple of years ago.
So.
So it's.
And that's a little bit because we also have some lava commitments on day, 1 and we used to you know we mentioned that and the previous on this on the <unk>.
So overall the courts on our journey and stop Roger the 18th Ugly and up a a time generally.
And and that the growth, we see very commensurate with what we've seen in the past and.
In terms of gross and net and use it on the first month day widows T M..6 month, and 12 months and everything so it's and 2 poplar and.
My brother and making when you look at the the consistency of the net retention and the longevity of it and it still is very very similar in Atlanta, and with cohorts and expanding similar to previous periods and very importantly, expanding for a long time. So they last the total.
And expansion and can use on for quite a long time, which is very consistent with what we've seen and previous periods.
That's great. Thanks, very much guys.
Yeah.
Our next question is from back and heard from need them.
And good morning, and and congratulations on the results only I was wondering if you continue to push more interest security Uhm what are the lessons learned from the previous convergence of the Dev and ops personas that could be applied to gaining traction and Deb sick ops and how is this convergence of security code.
Perhaps different than when Devon ops merge that you need to account for.
Yeah. So quick question and doesn't let this go on any tea and no and that's a lot and he says but would you <unk> would you think and friction and.
And and making things that otherwise I'm glad it will go on and left of it and lots of different people and bold another day and departments and go to be very easy and that can do on your on.
And so that's that's we know what to do that cause what we've done to share the company and.
So.
That's the first part.
The second part, though is that the buyers and will be decent and in some cases I might need to get dressed and I'll get differently and that's something a few other of the question stuffed up on earlier, so I won't repeat myself too much there but.
Something that we're working on and turns up.
And we add that to the the motion and habits for setting the bathroom.
And thanks for that and then just as a quick follow up Uhm again, when we think about those abroad and portfolio of your solutions.
Could you just update us in terms of just how you're keeping your sales force and your partner ecosystem, just up to speed with their ability to understand the the value propositions and and the nuances of everything that you are are offering these days.
Yeah, So it's a major effort and.
M D. It's actually 1 of the area, Adam who join us as a chief operating officer.
And I recently, it's gonna be major and be able to focus today to make sure that we we scale. The the team that those enablement and that teach you to rely on on this house email and it'll go to market teams, what would a productive or and even though it works and and and who to who to bring him into every single deals that we understand exactly onto my and.
And I put up to direct customer.
So that's gonna vs major everything and focus to investing and that.
Thanks very much.
Our next question and from a T Kidron from open and <unk> Oppenheimer.
Yeah, Hey, guys are great corner Ali and want to follow up on the security questions and.
And really talk about the 2 new announcements you've made a posture matters much and workload protection <unk> there isn't a security vendor at this point that doesn't have those solutions available as well so even though the market is early it seems like everybody's chasing this [laughter]. Maybe you can help me think about what differentiation you can bring into the security space.
From your perspective, and also I know, it's still early but perhaps maybe you could talk about D. A R. R distribution of your cloud security apart from at this point.
Yeah, So I'll go and see what on them and we we don't have anything to share you with yet we're actually you know the only thing I can say goodbye and happy with the weight training and and the way it and drawing and we will.
Probably share some more at some point, but we don't have anything to say today.
On the <unk>.
Differentiation, what we're bringing to <unk>.
We ordered the Orange remaining on the workload. We are present on those machines origin and 70, there. The laws are being collected by US already we already connect to it and started configuration uhm. So there's nothing to be done really obnoxious and there's 222 Kern on security.
And that's and major a major differentiator uhm.
And we also have all the developers and all the all the people that on what you want we do all day and day <unk>.
And they can get and they can consume to security and you know that's where they can be part of the solution as opposed to leaving and a separate title on the security team and task rehab and take her and just walk road. So when you combine those 2 things I think we have something and very full of food very different and and say.
Almost impossible for the competition that come solely from eastern and the workload and of course.
For security <unk> from city perspective.
<unk>.
Very good <unk>.
And.
Our next question on from Michael Curtis from Keybanc.
Hi, Yes first on February quarter on the price and discussion. So you touched on a little bit about the need to change price it at some point.
There has been and the market already some changes from some patterns and their pricing, which does seem aimed at commoditizing usage of debt in particular and has that had any kind of impact in terms of competition and how does that relate to some of your thoughts about what you would do with price and long term.
Alright can.
And we will see we've seen some of that and the market, but hasn't had any impact on us directly but I should say that we.
And we are investing and we have been investing a lot in your modal for charging customers and putting any control a guest and making sure that went on with the volume addresses and all that for you and ZIP code using.
And that's a lot of with or you know.
Without limit offering <unk>, we started with that for long. So also to be more and more for a P N and in times past lecture.
And that's something that I'll, I'll get some and I subscribe to Wednesday and.
1 day standardize on US and you have mentioned that on the cool some of our customers are able to just slash of spending on log in particular, because they can I can spend on what matters today and they can.
We can get over there and they can cable and and retaining but can only and.
<unk> some of it for some of the <unk> the superbowl cause they need they can make the recordable on the menu. They wanted that they can do anything they won't forgive them on the neighbors and leather furniture do people that could I pay a bill was and go you nearly every day to have Oregon. So that's.
And that's something we're already been and that to you. So it's not a big change for us just a continuation and what would be doing.
And then I'll you made and interesting.
And you made an interesting point about about legacy and <unk> investment and already for for legacy replacement I mean, I've done some of that and the past. So so so what do you need to do from and are into your product perspective, too to enable that and and we at the point where that could unlock it and upgrade cycle that would be very very very important to him.
Let me write that we were still early and that too I mean, we.
And <unk> with connecting to all sorts of non cloud equipment. You know so we're gonna, we'll keep with man people and it looks equipment and.
4 and distribution unique and that sort of stuff.
And and we will do more and more of it and.
Until we reached a point where do as.
See music and part of the market he's mature and nothing about that day at this time and put it into standardized today I will say that the customers I standardized and.
And <unk> C a T and to the account and.
Uhm are still the ones that are at the force.
Aware of the forefront of looks and migration to start with the leading edge from.
And they are a sign of things to come.
Not that we're at the Ah debt.
And I shall just yet.
Okay. Thanks on like I said.
Our next question and from Greg Moskovitz from Mizzou.
Alright, Thank you and all like on my congratulations on a very strong quarter I guess the first question just regarding the cloud security platform. In addition to all the card is a plan to offer C. S. T. M T W. As security monitoring and add security as a sweet as well.
Oh, they were like a <unk> a few pricing options there and we we we haven't come and you could get on the on any of that yet.
And we we.
We're we're thinking hard about device way it can be can be packaged.
Okay, and then all the 1 of your competitors recently spoke with that a large uplift and the number of deals close with their Hyperscaler partners, such as AWS and Azure can you update us on your cloud partnerships and they go to market activity that you're sitting there.
So we see continued <unk> I've been doing before to be getting more and more from both of those.
And those kind of partnerships and all of the content of sheets on developing more and more.
We really see it on the on the did you see the marketplace recently, and where to you and make it easier for customers and deploy.
Or a partnership with Azure I take another step forward recently also and we'd be integrated ever can you just cancel it until a few parts of the partnership that need to be implemented to receive a completely done yet, but they're still linguistic and making progress on that and we're also working on a on deeper partnerships with it for you and so it's it's happening across the board.
And the thing about training and and in my direction and both at this point and and he seemed not and the major part of our success and I would say, it's more of a potential upside for the future.
Alright, that's great. Thank you.
And our next question is from Romeo and Chow on shop from <unk>.
Please.
Thank you can you hear me okay.
Yeah Yeah.
Yeah, Okay hate perfect day, Thanks for squeezing me and and and congrats from me as well and and all of you can you talk <unk> going into towards C. I C. D. Now, it's obviously like it's a whole and U M market <unk> not many people who have already come there before like <unk> can you talk a little bit about like how this will play out for you.
And how big the opportunity is like how important and it is <unk> and theory is like that's where everything starts but like you know and I never thought about it from the monitor them from our ultimate ability perspective. Thank you.
Yeah. So it's interesting it very on it we know the current space is very day, because engineer spend a lot of time wrestling with.
15, and deploying and so we know what to take any amount of time and and and spending and vote there.
It's interesting to us because it pushes the boundary of where we operate also and and get go there and will cause we invaded and to the good luck on what blows and what happens on their laptop when you're writing code and either the bread and test luke's either on their own and environments before the retriever and developmental.
Developed mental state and even balance so it's it's very interesting to us for that reason.
It's a it's more of an S and can take away and turned the observing and hopes and might be those environment. So we'll have to see exactly what the market opportunities there, but we know the covenants pages on it.
Yeah, Okay, perfect and then 1 question of David and you know you're 130 and on our number and do you remember last year when the number and kind of came down a little bit you mentioned, it just and and in order to not going to give me a number but like trend wise. It's it's been number trending higher and now is there a lack of fact or.
Like how did we should think about it and I know you know and give me a number of it just just so I've actually and within that 130 about what are you, saying yeah.
Yeah, we won't give you a number but help you a little bit and friends. Yeah. I think that we said the combination of the strong sales and they continued uptake from both.
I use a more products on the use of side and adoption of products combined with the with the compare from the flattening and the second quarter has resulted in the point in time metrics, there increasing and the quarter.
Perfect Congrats quaintance yep.
And on and I'll turn the call back over to Olivia Foreclosing comments.
Alright, Thank you and and Jessica this call and I just need to write that we are very pleased with Oklahoma and his quarter.
And I also want to think again, oh that and those worldwide for their very hard work and for a job really you really welcome.
Thank you well.
Thank you, ladies and gentlemen, and that concludes today's call. Thank you for participating and you may now disconnect.