Q4 2021 Datadog Inc Earnings Call
Welcome to the Q4 2021 data Dog earnings Conference call. My name is John and I'll be your operator for today's call. At this time all lines are muted later, we will conduct a question and answer session during.
During the question and answer session. If you do have a question press Star then one on your Touchtone phone.
And I will now turn the call over to <unk> head of Investor Relations.
Thank you John Good morning, and thank you for joining us to review <unk> fourth quarter and fiscal year 2021 financial results, which we announced in our press release issued this morning.
Joining me on the call today are Olivier Flamel did it ops co founder and CEO and David <unk> <unk> CFO .
During this call we will make forward looking statements, including statements related to our future financial performance our outlook for the first quarter and the fiscal year 2022, a gross margins and operating margins, including investments in R&D and go to market, our strategy, our product capabilities and our ability to capitalize on market opportunities.
Words anticipate believe continue estimate expect intend will and similar expressions are intended to identify forward looking statements or similar indications of future expectations.
These statements reflect our views only as of today and are subject to a variety of risks and uncertainties that could cause actual results to differ materially.
For a discussion of the material risks and other important factors that could affect our actual results. Please refer to our Form 10-Q for the quarter ended September 32021.
Additional information will be made available in our upcoming Form 10-K for the year ended December 31, 2021 and other filings and reports that we may file with the SEC.
Filings are available on the Investor Relations section of our website along with a replay of this call. We will also discuss non-GAAP financial measures, which are reconciled to their most directly comparable GAAP financial measures in the tables in our earnings release, which is available at investors that data dog age to Dot com.
With that I'd like to turn the call over to Olivier.
Thank you John and thank you all for joining us this morning.
We are very pleased with our performance in Q4, where we showed I agree with that scale as well as strong business efficiencies.
Looking back at 2021, not only do we continue to see very strong demand environment. We also kept innovating at a rapid pace.
Our team executed extremely well to help our customers manage complexity into Colorado.
Let's start with a quick summary of Q4.
Revenue was $326 million, an increase of 84% year over year and above the high end of our guidance range.
We had about 18800 customers up from about 14200, Atlanta last year.
We ended the quarter with about 2010 customers, we are a $100000 or more.
From 1228 at the end of last year.
He's got emerging who waited about 83%.
Sure.
We had 216 customers with it.
Our a $1 million or more which was more than double the 101, we had at the end of last year.
The leverage and efficiency of our business model is coming through with free cash flow of $107 million.
And our dollar based net retention rates continued to be over water and 30% as customers increase their usage and adapted our newer products.
At a high level positive business trends in recent quarters continued in Q4.
You had growth from existing customers exceeded our expectations this quarter and we saw strong growth across all the products in our platform in all business segments.
We had a record new leboyer, our or in Q4, including some large new enterprise wins.
And churn remains low and in line with historical rates.
All these factors together led to another record quarter of Ey are added.
Next our platform strategy continues to resonate in the market.
As of the end of Q4, 78% of customers were using two or more product up from 72% a year ago.
53% of customers were using four or more products up from 22% a year ago.
And as a sign of further adoption of our platform. We saw it at 10% of our customers were using six or more products, which is up from 3% last year.
We saw strong growth across our platform in Q4.
Year over year growth of infrastructure monitoring a R. R has accelerated in Q4 compared to Q3.
In addition to that APM suite and loved management products continued to be in hyper growth mode and.
And we are very pleased to report that our newer products added about 100 million or into 2021.
These are the newer products, we launched it doesn't 19, which exclude core infrastructure core APM and log management.
Now, let's move on to products and R&D, where our teams have nothing slowing down and delivered another strong quarter of innovation.
We announced the general availability of sensitive that are scattered in December .
So I think he's got a scanner gives customers an easy and cost effective method to discover classify and protect sensitive information.
With modern applications that I move it across many important teams, making it difficult to know when services are storing sensitive data.
Particularly important point of prejudice regulated industries like health care or financial services.
Sensitive that is generally available today for log management and will be working to extend it into other areas the platform in 2022.
We also announced this morning, the acquisition of course screen the screen sharing platform that allows participants to interact with it don't workspace in real time.
Engineering is a team sport.
<unk> lets us bring individual work into a shared team environment.
And then like General purpose video are confronting tools, which are one too many and focus on presentation conversation co screens, many too many allowing multiple participants to share and collaborate in each of those windows as if they were local application.
We believe this will help our customers and in a number of use cases, such as incident response and aligns with our founding goal of breaking down silos between teams.
Now, let's take a moment to review our accomplishments in 2021.
We ended the year with 13 generally available products up from nine at the end of 2020.
We significantly extended the arbiter of ability capabilities in 2021.
And infrastructure monitoring what made it even easier to implement and monitor.
We don't over 18, new integrations, covering cloud CDN, where platforms auto bench wont automation platforms and more.
We now have over 500 integrations and continue to go deeper into cloud platforms, including AWS Azure and GTP.
We launched network device monitoring for physical network devices and appliances, we created new container centric views as our customers continue adopting kubernetes at massive scale.
On the severance accrual we have extended our coverage to include visibility into not only the functions customers develop but also the ecosystem of data security and routing services that surround them.
And we launched a beta of Universal service monitoring, which captured service level health and performance without needing to modify any application code.
Our APM suite was named a leader in the Gartner Magic quadrant in 2021, and we double down on innovation and a P M.
We expanded real user monitoring meaningfully, particularly for Android and iOS mobile devices.
We don't especially in replay database monitoring and automated tracking of 40 deployment with.
We extended synthetic monitoring with support of numerous new brothers and location.
And continuous profiler, we added support to profile, many new languages to test that met Ruby PSP Cc plus plus in logic.
We invested to get closer to developers Daryl did experience with synthetic testing and scale pipeline no detecting problems before they happen and production.
Racking know covering front end devices and vacuum services.
And source code integration is enabling developers to die productions to the right line of code.
And love management will continue to aggressively invest providing more sophisticated analytical and govs capabilities and giving our customers more flexibility with the rest of it in retention.
Our improvement unlock many sophisticated use cases for example in cyber security and business analysis.
We also announce online archives, a new long term data store for each can be locked at high volumes.
Now further extending our visibility to development workflows, we launched Ci visibility to have developers ship faster and more safely.
And going to Europe , the ability, we don't show a cloud security platform, including cloud team got security posture management and called workload security.
In addition to those or application security product is currently in beta.
And we're not very pleased with our early momentum in security as we have thousands of customers using our cloud security products today.
We also kept opening up better Doug as a platform with the release of data dog apps and finally, we'll continue to invest and innovate with watchdog paradox AI engine.
We're stuck and automatically detect and courted anomalies and we've been busy expanding watchdog to provide information in context to our platform.
I want to thank our engineering and product teams for their hard work and their relentless focus on our customers.
Now moving on to sales and marketing.
Earlier this month, we announced the promotion of John Walters to Chief revenue Officer.
This is a well deserved promotion for someone who has been an enterprise sales leader at <unk> for four years now and has shown excellence in building strong teams and delivering high productivity.
We've all been impressed with his performance over the past few quarters as well.
Sean has a deep experience in the field with over 20 years of increasing responsibilities in software sales and we're excited to see him build on these successes our CFO .
In addition to this we are pleased to have received a federal moderate authorization.
As a result, we can now sell to U S federal government agencies as well as the other public sector customers, who use headroom as an indicator of compliance and security.
We have been working to build our go to market team for the public sector, and we intend to expand into referred to aggressively.
We also announced a global strategic partnership with AWS.
This is a recognition of our success and growth because of the U S and our commitment to further invest to accelerate our joint opportunities.
One of the areas of further partnership we have already integrated better more tightly into the AWS marketplace. We are also working with AWS to build deeper integrations not only for observer beauty, but also for security use cases.
And we are also planning to extend our joint go to market activities.
Meanwhile, our sales teams continue to execute at a very high level.
So let's discuss some wins for Q4.
First we had a six year land deal with a major U S airline.
This customer has chosen better dog as the de facto monitoring solution for all new it projects and applications.
The plan to start with six products in the direct platform with an expectation to the extent things you can't leave with more teams in applications over time.
Next we had a seven figure upsell was a major European car company.
Prior to using data dog is customer had five disparate monitoring tools, which created false positive alerts, we're leaving gaps in coverage.
We've had a dog they were able to break down silos between teams and reduce the frequency and duration of outages.
Next we had an upsell to Ed figures or they are with a major financial infrastructure company.
This customer has consolidated multiple motivate monitoring tools and data dog, helping them ensure stability and support growth.
Some are estimate savings of 245% by migrating to that at all.
And the upsell it to include new products, such as cloud team Cal water security and cloud security personnel management.
And this customer now uses using standard product.
Next we had a seven figure upsell with a multinational beverage conglomerates.
This expansion makes that a dog that global observer standards with enterprise adoption across six international zones.
Thanks, Dara Douglas correlation what used to take three people an hour of log data gathering now takes one person less than 10 minutes.
And finally, we wanted to spend some time discussing our largest ever multimillion dollars land deal with a major media company.
This media conglomerates. These massive massive amounts of traffic, which is customer facing content.
And the most critical content such as live sports and entertainment requires highly optimized the deliverability.
This customer also decided to embark upon a significant digital transformation project, eliminating aesthetic centers over time in favor of cloud.
This operational overhaul hinged on proper end to end observe ability, but the customers existing monitoring solutions felt window that could be enough to support his growth and increasing complexity.
In addition for Lance and open source tooling was this trend on engineering resources.
Berdahl provided a single integrated cloud solution and the customer plans to replace eight different commercial notebooks was tools with a digital platform starting with five of our products.
So as you can see our go to market teams are successfully helping both new and existing customers can evaluate a paradox and I want to congratulate them for their incredible work this quarter.
Now looking ahead to 2022 and beyond we continue to see digital transformation and cloud migration as critical for our existing and prospective customers.
The cloud and other next Gen technologies.
Waiting complexity that customers need to understand and manage.
Meanwhile, security threats can occur anywhere in this broad and dynamic set of infrastructure and applications.
Identifying and their ability and attacks absolutely crucial.
So theres a lot of them out there for observer ability and security for the monies back.
As a result, we continue to feel that we are still very early with respect to our products no market opportunity.
And looking forward to 2022, we will make further progress in expanding the digital platform.
We have a lot to do and we're excited about what's in front of us.
On a final note.
We feel that 2021 was a very successful year for their dog, but we recognize that it's been a tough time for many others. This.
This is why we are happy to report that together with our employees better dubbed indicative of $3 million to nonprofit global organizations at the end of the year.
And we look forward to giving back more to our communities in 2022.
With that I will turn the call over to our CFO for a review of financial performance and guidance.
Good.
Thanks Olivier.
In summary, we had a very strong Q4 and fiscal year 2021.
Revenue was $326 million up 84% year over year and up 21% quarter over quarter.
Houston growth with our existing customers exceeded our expectations.
Customers are finding value from adopting more products on our platform.
And new logo AOR grew robustly in Q4.
Let's go into some more of the details.
First growth of existing customers was strong in Q4, and our dollar based net retention rate remained above 130% for the 18th consecutive quarter.
Usage growth was very strong.
Our customers expanded the usage of our largest products meaningfully infra.
Infrastructure monitoring year over year AOR growth accelerated from Q3 levels.
In the APM suite and log management products remain in hyper growth mode.
And our newer products are all growing very rapidly.
We also saw strong growth in each geographical region.
North America, EMEA and APAC, all accelerated on a year over year basis compared to Q3.
Our go to market teams delivered a strong quarter and new logos and new logo IRR.
We added 1300 customers sequentially, a new record for us.
Our new logo RR was also a record and included our largest a our land ever as Olivier discussed earlier.
Remember that given our usage based revenue model new logo wins generally do not immediately translate into meaningful revenue.
Our platform strategy strategy continues to resonate with customers with 78% of our customers using two or more products.
33%, using four or more products and 10% using six or more data that products as of the end of Q4.
Finally churn has remained low our dollar base gross retention rate has gradually improved over the years and is now in the mid to high 90, and it's similar across customer segments and major products.
Turning to billings billings were $408 million up 86% year over year.
Billings duration in Q4 was similar to the year ago quarter and within the range we've seen historically.
Remaining performance obligations or RPI.
<unk> $815 million up 88% year over year.
And contract duration was similar to the year ago quarter.
Current RPI growth was over 80% year over year.
We continue to believe revenue is a better indicator of our business trends and billings and our Po 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 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 $262 million, representing a gross margin of 80%.
This compares to a gross margin of 78% last quarter and also 78% in the year ago quarter.
As we discussed on last quarter's call, we saw efficiencies in cloud costs reflected in our cost of goods sold in the quarter.
In the medium to long term, we continue to expect gross margin to remain in the high Seventy's range.
Operating income was $71 million or 22% operating margin compared to an operating income of $18 million with a 10% margin in the year ago quarter.
We are experiencing significant business efficiencies on strong revenue growth.
This is <unk>.
Occurring despite continued aggressive investments in our long term opportunities, particularly in R&D and go to market.
Finally in Q4, we hosted our Das user conference virtually and has a strong presence at AWS re invent.
Turning to the balance sheet and cash flow statements. We ended the quarter with $1.6 billion in cash cash equivalents restricted cash and marketable securities.
And cash flow from operations was a strong $116 million in the quarter.
After taking into account.
Taking into consideration Capex and capitalized software free cash flow was $107 million with a free cash flow margin of 33%.
I want to briefly summarize our fiscal 2021 results.
Revenue was 1.03 billion.
Up 70% year over year.
We generated $165 million positive and operating income for a 16% operating margin compared to 64 billion with an 11% operating margin in 2020.
And we generated $251 million in free cash flow at a 24% margin in 2021 compared to $83 million at a 14% margin in 2020.
I want to thank all data dog employees for their hard work and strong execution throughout 2021.
Now for our outlook for the first quarter and fiscal year 2022.
We continue to believe we are in early days of our opportunity in the observer ability.
And we are at the very beginning of our potential in cloud security and developer focused observer ability.
At 18800 customers. We believe we are still very early in our penetration of potential customers worldwide, and we see opportunities broadly across industries and customer sizes.
As we look on to 2022, we believe companies have learned to manage around the potential business disruptions and remote work life of the past couple of years and.
And we believe that the need for companies to embark.
Upon digital transformation and cloud migration projects is higher than ever.
As in our strategic imperatives to drive competitive advantage.
So we are initiating our fiscal 2022 guidance, which includes continued high growth.
With our usual conservativism applied our outlook is as follows.
For the first quarter, we expect revenues to be in the range of $334 million to $339 million, which represents 70% year over year growth at the midpoint.
non-GAAP operating income is expected to be in the range of $36 million to $41 million and non-GAAP net income per share is expected to be in the 10 cent to 12 set range per share based on approximately 348 million weighted average diluted shares.
For the full year fiscal 2022, we expect revenues to be in the range of $1.51 billion to $153 billion, which represents 48% year over year growth at the midpoint.
non-GAAP operating income is expected to be in the range of $160 million to $180 million.
And non-GAAP net income per share is expected to be in the range of 45 to 51 per share.
At approximately 350 million weighted average diluted shares outstanding.
And now some notes on the guidance.
As usual when providing guidance, we use more conservative assumptions than we have seen in our historical results.
Our strategic focus remains to invest aggressively in R&D and go to market to optimize for our long term growth.
Next our model assumes greater expenses related to travel and in person events going forward.
But we remain flexible depending on further COVID-19 developments and our highest priority is protecting the health of our employees.
Finally, as it relates to our capital expenditures were catching up on office build outs and expect capex as a percent of sales to roughly doubled compared to 2021.
In conclusion, we are very pleased with our results in Q4 and 2021 week.
We continue to innovate rapidly and broadened our platform capabilities with many more products planned to be launched in 2022.
We have grown our go to market opportunities, including in the public sector with our fed ramp moderate authorization and deepening our relationships with our cloud partners.
And across the company, we are working hard to execute against our opportunities in 2022 and beyond.
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 Star then one on your Touchtone phone if you wish to be removed from the queue. Please press the pound sign or the hash key.
And our first question is from <unk> Lynch.
Chow from Barclays.
Thank you.
Now when you first got my name.
Hey, Congratulations I think was an amazing quarter.
You mentioned to higher usage.
In this quarter, what's driving that is that just kind of people standardizing as traffic declines getting better.
Because that's kind of a very very strong number.
Thank you.
I don't think there's one specific factor that's driving it I think it's in combination of.
Everyone's.
To drive digital transformation cloud migration still happening and happening with the I would say the historical rate we've seen through the through the nature of the company.
Is it that plus.
Us covering more and more surface because those customers being more product they can adopt that can grow into.
And so that's what we go through the quarter. We did see like this is a Q4 right. So we did see the same compression at the end of the quarter as we see every every year. It was also a bit more pronounced like it was last year, we've seen them to be a bit more pronounced COVID-19 .
Post Covid world.
But overall the quarter was very very strong and definitely stronger than last year.
Okay, and then one follow up on that one.
You talked about some of the very peak returns.
And how they are consolidating on you do you see that consolidation about more in house Bill tooling and open source tools or is it also consolidate D. Like some of the more established competitors in the space.
Opera APM logs areas et cetera.
It's a mix of both really it follows the distribution of tooling out there like you know whatever the whatever customers hobbies, what they end up concluding on this.
And you had this movement we are still early in this the consolidation movement.
We see it happen I would say maybe a.
A bit more often than we used to I mean, we are mentioning a couple in every earnings call at this point with the large ones are fairly.
Notable.
But we expect to see more of that into in the future, but not necessarily right away.
Okay, perfect congratulations with them.
Thank you.
Our next question is from Kash Rangan from Goldman Sachs.
Thank you so much what a superb quarter Olivia I'm curious to get your thoughts on a couple of things fondness says the proxy broadens out how are you thinking about the distribution or you're going to have more specialized distribution attacking say the dev ops market or the ASIC market in your core markets in APM and monitoring.
And I have a follow up question. Thank you so much.
So we shown a series we will open to whatever would work we still haven't made any changes to the way. We distribute we still have one sales force that sells everything we still land.
Largely with infrastructure and then expand from there.
And we actually see some proof points that we can we can get some very good wins that way I mean, I think we mentioned on the call.
The fact that one of our very large customers.
In finance Arab Tito security suites.
And that was done with a standard land and expand motion.
So we see that working in at least some cases.
Being said you know as we fully mature.
Our product, especially the <unk> product, we might have to have to get some as we go to market, but we're not there yet.
Got it and second title and thanks, so much for that as you look at the consumption model and trends are improving obviously.
That does this revenue outcomes can be.
As impressive as the ones that you have that as you become a larger company are you contemplating things do to minimize the volatility of these results and have a little bit more predictability on the other positive side and that would mean like like a snowflake because concessions to its customers as they keep making technology improvements they passed back some of these savings to alleviate any any.
Potential pushback as you become a more strategic vendor Oh, my God I'm spending so much of it is of great value, but at the same time can you elaborate a little bit on how you are.
Can think ahead and anticipate some of the things.
It can get underway that's it for me. Thank you so much and congrats.
Yes, so the way, we do with that is and again the backdrop berries, the explosion of data volumes and no. So if better volumes at our customers grow a lot faster than the top line you know at some point.
You can't grow would you charge for that linearly with the better volume.
We deal with that he would give them more and more options.
And those options are.
<unk> differentiated technologically so that we can keep developing new ways of storing deep data or different types of data in different ways for different periods of time and that customers can choose what they want to use out of that so that's what we're doing with <unk>.
Online Archives for example, which is which we announced last year.
And which is which is going in J D. Here.
We that's also why we invested in them.
We're investing in the absurdity pipeline. So there's a number of things we're doing to put customers in control and make sure that we deliver always always aligned with the <unk>.
However, what we charge always aligns with the value customer yet.
Thank you so much.
Our next question is from <unk> Singh from Morgan Stanley .
Thank you for taking the questions and my congrats on exceptional in 2021.
Olivia I wanted to talk a little bit about your comment about the early days of the opportunity.
Sort of two dimensions, if I look at some of the big software companies that we've seen whether it's sales force or Vmware or other large companies they'd have north of hundreds of thousands of customers right and you can sort of sitting at 18000 I was wondering in terms of your guide position.
<unk> data dog getting to those sort of customer count levels that sort of one other question on the other hand. It seems like you guys are doing better and better off market.
Despite this the larger stuff Atlanta win with media company do you start to feel that the large enterprise market is now moving more and more towards that sort of data data platform versus kind of this sort of hybrid cloud approach.
Did that sort of a valid as it did.
For the last couple of years any sort of views on traction in enterprise.
Sort of customer returns and get to longer term.
Yes. So on the first question, we definitely that we build a product and a company that serves the whole market. The whole gamut of potential customers, we think that developers that smaller companies behave, especially new Claudia to behave very much the same way as developers and very large enterprises. They have the same toolbox.
They work they work the same way largely and so we build a product that serves everyone. We do expect to have very large conquest customers, Indiana.
But to your second question. We also see right now a lot of the demand a lot of the growth is coming from mid market and not surprises to the higher end of the market.
And we feel good about that part of the market like we see it.
Basically standardize embedded erg, we see successfully land and expand with us.
I think we're growing faster.
But with the way an equivalent size and growing faster than anybody else in the market for that.
Specific part of the market.
We feel good about it.
That's a big part of what we do.
The next kind of sense and I guess my follow up question as it relates to security, which I understand you guys still.
Early days in.
The move into this area I wanted to I Wonder if you could talk about it too.
He says one selling security solutions to your core set of users how Cutler argue that youre going to see traction in that motion.
Sooner versus maybe selling security ops security.
Solutions to do the security operations team, which might may require.
More of a more of an investment more of a specialized go to market motion. If you could sort of how do we think through.
Traction on sort of part one of that selling to like Dev ops users versus versus this figure operations team.
So on the.
Construction is here, we see the traction right. So we mentioned on Newco will have thousands of customers on security product.
And so the adoption is there it's happening it's happening across our products. We have a number of products. We started charging for in Q4.
Such as cloud workload protection for example.
And those actually are off to a strong start so we're pretty impressed with was the numbers. We see there. So again, it's too early to pass judgment, we have to see them perform for a couple of quarters, we'll have to see what's.
What's working what's not working as customers get multiple quarters into the adoption of the product, but decided we see today are very positive in terms of the adoption in terms of the feet of those products in terms of the way our story makes sense.
For our customers.
It's still possible we have to make changes to the go to market motion and specialized teams and do it at another one of the things I would say it might come in a bit later.
When customers start embarking on the same standardization motion for security as they do right now with us Forbes ever BTT.
But today, we're very pleased with what we see in terms of the defeat of the adoption of this product. This is this is this is the.
This is happening according.
According to plan I would say somewhere.
We're very happy.
Very encouraging thank you love it.
Our next question is from Sterling Auty from J P. Morgan.
Yeah. Thanks, Hi, guys, maybe we'll switch over to the margin side. So David in particular I was.
I was impressed by your sales and marketing spend increased less this year quarter over quarter than it did last year, but the revenue incremental dollars that you added was much higher can you kind of go through is that all just because of the usage based and existing customer contribution in the quarter.
Yes.
And because of the usage and the cross sell and the efficiency of it and our frictionless adoption. So it's an indication of both the robots are some of the end market as well as the ability for clients to adopt more of the platform.
Got it and then maybe one quick follow up same thing on gross margins. It was a very big sequential bump.
What's contributing to it and is it durable at these levels or what should we be contemplating in terms of that trend.
Yes, as we said since we went public that we.
Our.
Focusing on gross margins in the <unk>.
Mid seventeens to touching 80.
That there will be periods of time that due to investment they will turn towards the middle to the middle or lower part of that range and then go up and in this case.
In this period of time, we were able to harvest efficiencies in our cloud costs and like in other periods of this fluctuation of the gross margin we've had 80.
As we're investing that we may.
Dip below that but as we said in my prepared remarks, we.
We feel confident that that will remain in the mid to upper parts of the 70% range.
As a reminder, we're shipping a cup cost management product next year, and we hope to be the first case study for that.
Mhm.
Understood. Thank you.
Okay.
Our next question is from Fatima <unk> from Citi.
Good morning, and thank you for taking my questions.
Maybe I'll start with you you've been very conservative with respect to some of your commentary around the traction you're seeing outside of your core wheelhouse of it started utility you know in the round the CIC D and really catering to the developer audience. So maybe just to take a step back with 13 generally available products.
What are some of the efforts that are being put in place to package certain modules that are in a similar family or addressed a similar buyer persona and sort of where are you on that journey to be able to attract more and more of these.
Different groups within the enterprise organization, and then I have a follow up for Covid.
<unk>.
Yeah, So we're actually very happy with those products. So there.
They are getting to market nicely. So we do see ICD products also started charging for fairly recently.
And we're very happy with the adoption, we see there similarly to what we said about security.
At some point will also comment on the on the numbers for that I would say the numbers are still small compared to the rest of the business, but that's more due to the fact that the rest of the business is a well north of a billion dollars and they are and growing.
Close 200 person over 100% of it and focus on parts of it.
Year over year.
Two we are at.
It's going to take more time for it to be meaningfully compared to all that but we do see a lot of potential in those products. We are very happy with the adoption in terms of the packaging, we always ask ourselves with the rush way direct ways to price and package was product we are big fans of unbundling.
Because it does align very precisely what customers pay with the value they get and it gives us a very strong signal on what works and what doesn't work at the product level.
So we always start with unbundled.
And then over time, we might find that there are some things that might need to be packaged differently or customers might want to buy together, that's when we decided to make things, but that's we always thought was unbundled Vista default motion for us.
I appreciate that detail on the day, David for you I think you were pretty categorical in your prepared remarks vis vis your guidance philosophy, but taking a step back and in the context of the million dollar deal volume, but.
You saw a double this year.
Or are you contemplating the incident frequency and volume of larger deals as you do start seeing some more repeat ability and patterns in the way customers are moving to the seven eight figure deal Mark any help or context as to how youre thinking of yes that was attributing it still green.
Yes. Thank you it's still a similar motion to what we've been experiencing which means for the most part are $100000 plus customers were started out lower than 100000 and $1 million customers started lower than $1 million were still largely the land and expand so.
So we see that motion continuing.
And in addition to that I think as we said in our prepared remarks, we're seeing in some cases, where a client has a significant cloud presence and consolidates or outsources or it goes to our system rather than open source, we would land and get to a <unk>.
Large amount earlier, which we've talked about in some of our.
Prepared comments, but for the most part it's still is that land and expand and evolve from lower deal sizes to the 100000 million dollars as we've been discussing.
Thank you.
Thank you.
Our next question is from Brent Thill from Jefferies.
Olivier.
In 2022 cloud migrations, there's been some concern given the consumption that we've seen the last two years that there could be some slowdown or digestion. It doesn't appear that that.
What youre seeing right now, but I'm curious if you could just share your.
Your thoughts on what happens this year and it seems like Theres, some really new pockets of of.
A movement, even in financial services and other Subsectors that we haven't seen.
What are you expecting and David if I can follow up with you just a quick question about shawn's new role historically, when we've seen changes in the sales team and other software companies we've seen.
A little bit of an air pocket. It seems like you expect that this to proceed smoothly and it's more of.
A tweaking of the go to market versus a major major change can you comment on on that as well. Thanks.
Sure Yeah. So.
In terms of the sort of the trends we've seen when we were forecasting.
<unk>.
From what we can tell there's no.
What we see is continuing to you that we seek to earn in 2021 Q. If you look at in squeaked in 2021 it took to us it looks a lot like 2019.
Would you tap looks a lot like 2018.
And with details you ease.
There were still early in our transformation and cloud migration and he's happening it seems to be happening with a certain rate within enterprises that we took and convert workloads and moving them to the cloud and we've seen that to be more or less two throughout the history of the company.
So from where we stand we don't see any particular acceleration in 2021 that is.
That would be a pull forward of 'twenty, two or anything like that so we see continuing team. That's what we see so we see a strong demand environment. Obviously, we can't forecast, what's going to happen next year. It is possible that we're feeling in troubled times and disposable where things happen, but we're very confident that if that's the case.
The setbacks will be temporary.
And that we're still very early in a very very broad transformation.
Due to the magnitude of which we know we still difficult to ease into that to them.
So that's on your first question.
So we're very confident on the environment and you're very confident in our place in it.
In terms of the sales team, we actually didn't make a very last one just has to do the CF team we update.
Continuing T and we promoted from within for Cielo spot.
We are with commodity Chung, who we think is the best person for the job really.
And we don't expect any big changes as part of that we expect to keep building, we expect to keep scaling.
We expect to maybe took a little bit I'll go to market in some areas with the new products to the <unk>.
Bold.
But mostly mostly with her to scale, what we have today.
Thank you.
Our next question is from Brad from <unk>.
Stifel.
Great. Thanks, very much Olivier last quarter, you talked about some recent product releases that could be easily consumed by nine non employees. So I'm just wondering how that's trending and then as we look forward should we think about that as a driver to 'twenty two or more.
'twenty three and beyond thanks.
Yes, so we have a few of those products and we mentioned some of the products that are <unk>.
More into to be necessary as a support area like new session replay afternoon, 96 things that I could add drug cost management.
There are some that are still not in NGA Dia those are still very early in the week, we ship them.
Last year, so I would say, it's definitely too early to share your data about them.
2022, and it's probably going to be too small to have a major impact on the numbers.
That's definitely a big area for growth for us in the future. So we invest now we go to those to those products and then to make meaningful contribution in the future and by the way that's what we've seen happen with other products too that I think we mentioned on the call that the smaller quota of quote unquote that we released.
Since 2019.
Collectively added more than $100 million in a arm of last year, which.
Which is very meaningful.
So we expect the same to happen was the products released last year.
Sure.
That's great thanks very much.
Our next question is from Michael <unk> from Keybanc.
Hey, Olivia and everybody congrats on the quarter.
I want to ask the competitive question, particularly important.
Given the two public comps that have less impressive results so very specifically.
Are you winning up market and how are you winning upmarket competitively in enterprise and also maybe down market, where you may be seeing more price competition on ingest.
So so first of all we don't actually see the competition all that much so we.
You don't wake up every morning, asking myself, what we're going to we know whether we're winning.
We mostly compete against.
Customers Bill.
Building it themselves or being under tool then.
Studying into cloud without a clear idea of what's going on.
We do see a few of replacement need replacements and every quarter. We've mentioned a few in the on the call.
When that's the case.
We I mean the ones. We've mentioned are typically the ones that are off market.
The reason why we win in those situations is we offer an integrated platforms with others with cloud native or others aren't and most importantly.
We have.
A lot more usage and adoption from the teams on the ground around our product.
So that's the.
You probably are aware used by everyone, saying that I repeat it every call that really is what makes us win in the end with customers and that applies a market that applies the market that applies everywhere.
And let me just add that.
We didn't have the APM and logs, we didn't have the breadth of the platform five years ago. So as we talked about there.
A number of customers, where we had landed with infrastructure and as they are consolidating on the platform, they're buying our products, whether it be enhancement, whether it would be.
Moving it from open source or whether it be replacement of the company's products that you're talking about.
And David asked on.
On the packaging of different products for different persona as well what about from a sales and go to market perspective.
Any any moves to either create specialized or overlay sales forces given.
Breadth and scope of what you are now offering.
Not yet we right.
Right now we were experimenting with a few things, obviously like where we're trying to see if it can make sense in some areas there.
It had been in security, but we haven't made any big changes to the way we sell and we also see some interesting proof points that.
We can be successful with.
Keeping the way to getting our sales team to weigh it. He is right now so we're we feel.
Beyond that we expect it to be an area of focus at some point during the next year.
But so far no changes and so far everything is looking good.
Great. Thanks.
Our next question is from Matt Hedberg from RBC capital markets.
Oh, Great Hey, Thanks, guys, Hey, Ali it's great to see you achieving federate moderate status.
Could you remind us about the success you've had thus far on the federal side and could that drive additional success there in 2022.
Although the.
Good it's really to be able to sell to really go to market on the federal side. The fed ramp below we had before we were limited in the number of agencies, we could target and Wilson were limited in number of use cases, we basically couldn't couldn't lead target infrastructure monitoring use cases, we couldn't send logs EPA and things like that.
With medium.
What we what we can do is we can sell all of our products and we can pretty much sell to every single civilian.
Agency difficult individually government as well as a number of other.
Government agencies that are that are.
Local agencies, but that take the same.
Or use fed ramp at the same guidelines for security and compliance. So it really opens up the market. We've seen some already some success to date, we already have you know as of last quarter.
Plus customer on the federal side.
On a fed ramp on our gift card offer.
So we're we're optimistic but we still have a lot of building to do on the on the go to market there like it's not necessarily exactly the same go to market that we used to.
Got it and then maybe just a quick one on the product side.
Excited to see sensitive data scanner launched it really feels like data governance.
As a whole is just becoming more important post COVID-19 world.
It sounds like it's working today with with application logs.
That product further.
I'm sort of curious on sort of what the scope of what data does provide from a governance data governance perspective.
Yes, so so that product is actually a great example of the power of our platform and all the various use cases, we can we can derive from it.
We start we started the business you've been asking are with log data, which is very straightforward and so something customers love it because it doesn't immediately without them antibiotics sensitive data what it should not.
Which is a hot button for them to sell.
But we can extend it to look at all of the data to that.
Ends up on the front end of an application through a real user monitoring we can extend it to look at all of the data does go through.
Due to various services and the back end of an application.
The APM, we can extend it to look at all of the data to go through the network to network monitoring. So it is a great example of who we can use the recollection, we already have.
To help our customers called hot hard problems, they couldn't sell or otherwise. It is also interesting because it's a product that.
It's pretty much halfway between observer BTT and security.
And you need to make a good case for it that you need to go to one or the other.
So it really shows like do the unified future ability to key integrity platform that that where we're building.
Super helpful. Congrats on the results guys.
Thank you.
Our next question is from Adam Tindle from Raymond James.
Okay. Thanks, Good morning, Olivier I, just wanted to start with a big picture question you Cross the $1 billion threshold. This year, a very strong year and that tends to be a milestone where software companies can start thinking about updates to either internal infrastructure our team to take them beyond that $1 billion level. So maybe you could just talk conceptually.
How youre thinking about what to put in place to scale data dog to a multibillion dollar company.
Well, that's what we do every every week, where ask ourselves who were going to keep scaling the company.
What we're missing what we need to add.
So in general.
We are scaling the company we are hiring along.
We're hiring at all levels.
We're bringing a set experience where we don't have it.
But I would say in addition to that we're also very very very careful to make sure. We can keep delivering and keep innovating I mean I've worked at much larger companies before I've seen how hard it can be to get things done in a very large organization and I want to make sure that we we.
<unk>.
We keep our team's extremely productive we minimize the number of red tape.
That prevented them from getting the work done while putting building enough fluids and enough controls. So we make sure that nothing weird happens.
So that's the that's the concern every single week for Us have data dog and that's pretty much my job my job is.
Understand maybe more near term follow up for David on guidance. This time last year, you were guiding to high <unk> year over year growth for 2021, you, obviously overachieve that but now we're sitting here guiding to high forty's year over year in 2022 on a bigger base number just wondering how you thought about the process of putting a target out now versus this time.
Last year in 2021, it seems bold, but you talked about user usual conservatism, so maybe take us through that.
Yes, I think yes, I think overall it is sort of the same ideology with us to take what we've seen in the in the.
In the usage and numbers and discount it I will say last year being in Covid and we.
Took and we said this on the call.
Bit more of a conservative approach, we had less we had more uncertainty last year. So I think we adopted the same approach, but applied a little more conservatism last year and when we gave our original guidance.
That's helpful. Thanks, and congrats again.
Thank you.
Our next question is from Gregg Moskowitz from Mizuho.
Okay. Thank you and I'll add my congratulations.
Olivia you released cloud Sim about 18 months ago, and it seemed to get off to a slower start than the typical new data to a product, but as you mentioned you now have thousands of customers that have deployed your security products. So what I'm wondering is what's the primary driver of this is it a.
A function of having more breath in security no such as sensitive data scanner cloud workload protection et cetera.
Is it because your sales force and channel has become more adept at selling security or is it something else that you would point to.
So first of all actually it's off to a very strong start so we.
We mentioned thousands of customers using it.
That's a lot of customers.
Especially for a product that is an expansion product that's not something that we need we've typically.
So so we're very happy with that there's still quite a bit of product work happening on the neckwear.
We're broadening it putting needs. So we can support more use cases, so it can be more end to end for everything our customers need to do with their cloud team, so theres quite a bit of investment.
That brought our debt remains so we are still early in the product development cycle there.
We expect at some point, maybe this year to share some numbers on the.
<unk>.
The revenues generated by those products, but we also are very happy with the growth there and those products are growing very very quickly before.
Much smaller base than the rest of our products, but.
We mentioned $100 million of added revenue from the auditor.
They are from the newer product.
The two bigger buckets in there our user experience monitoring and security.
We see that growing and we see that.
And your potential potential driver of future growth for us.
Okay. That's very helpful and then regarding the new.
Our global partnership with AWS or expanded partnership can you elaborate on how much tighter.
The product integration may be calm and then also how actively are are the two companies planning to engage in collaborative go to market.
Well.
It's so much a continuation of what we're doing with AWS I think where we've done a few things that were more implicit before in terms of what we're going to do from an integration perspective, what's exciting to us is that.
We've written them things that are that don't just concern observer beauty, but also reaching to security use cases.
So we're going to see Bureau integrations, there between the two products and we have.
We've also decided to together it'd be closer on some of the German joint go to market does.
There's not much more I can I can say on that we're still working on a number of other things.
But this is a.
I would say in line with what we're doing.
With other partners to really fully go to market with.
With the cloud providers customers.
Very helpful. Thank you.
Our next question is from Yun Kim from loop capital markets.
First just super congrats on a strong quarter.
Your growth is accelerating and you're already at a scale that's much larger than your competition. Obviously, you can't keep hiring at the current rate to support growth.
Can you just talk about what you are seeing in regards to sales productivity improvement and is it natural for you to just focus on larger deals to just keep driving higher sales productivity gains.
So so first of all our growth is not completely predicted predicated on sales productivity, because we have a largely frictionless model.
So the part of our growth is but he is not which is why you see the the revenue growth outpaced the.
Mucking growth or.
Core expenses growth by a wide margin.
We are focused for the year is more on scaling the team then on increasing productivity because productivity is already very high.
If you look at the cost of sale like in a way a web.
Probably the best if not close to the best in the market.
Oh boy it would be to keep scaling the team and keeps getting to product sets. So we can keep get more of the same economies of scope that we already see with our customers.
Okay, Great and then just a quick question for David.
Can you just at a high level talk about level of visibility you have and.
How that has trended over the past year, you mentioned that revenue recognition will lag the actual signing of the deals.
Just final sign larger deals are you seeing increasing revenue visibility of some of the new deals and expansion deals.
A bit longer to ramp.
A decline in size gets larger.
Now we have a we have very consistent performance on our cohorts are across the different types of customers the way they adopt the product and.
And ramp and that applies to larger deals as well as smaller so we have pretty good visibility a pretty good time series there hasn't been a change in that pattern of adoption and we monitor that all the time as we look at increasing our ability to predict the <unk>.
Revenue, we also I think are.
In some cases looking at developing a functionality and account management too.
To help our clients.
Adopt faster.
And that is sort of around the edges, but we have a pretty good idea of how our clients are adopting.
Okay, great. Thank you so much.
Our next question is from Mike She goes from Needham <unk> company.
Hi, guys. Thanks for taking my questions here.
Just coming back to the profitability guidance that we have for Q1 and for fiscal 'twenty. Two now for David I know that you had discussed I guess the expectation that we would see some of these travel and in person events kind of feathered back in I have to imagine that there's some incremental costs with these acquisitions that you guys have announced could you help I guess fine.
To set a little bit for us as far as what what's expected and how how that's expected to come into the year.
Yes in our guidance, we have assumed a resumption of normal TNA and marketing events.
We said previously that sort of in the 3% to 4% range we estimate.
We've had cost savings due to lower than average TNA and end marketing events. So we've incorporated that in our guidance.
We'll have to see how quickly that resumes as we said first priority is safety of our employees, but we've incorporated that.
We've also as we said have very aggressive hiring plans and we've incorporated that in but as we've said previously we think that number is sort of on average around three plus in terms of a COVID-19 savings relative to TNA and marketing events.
As a percentage of revenues.
Great. Thank you for that and then just I guess, a two part question here, but more housekeeping, but first I know in previous quarters, and maybe I missed it on this call here, but you guys have discussed how new logo wins are typically coming in with two plus products, 70% to 75% of the timings. So first question would be is that still the case.
And then the second question I know that you were talking about gross retention now improving to the mid to high 90 range.
It had been mid nineties I think before that it was mid to low 90. So can you just help us think of what are the investments or what is it you guys are doing to drive those gross retention rates up over time and congratulation on that effort as well.
Thank you on the first question, yes, the land.
Percentage of more than one product.
<unk> similar to what we said previously in the seventies no change in that motion in terms of.
The gross retention.
With the platform while expanding.
And the standardization one we see some more stickiness and as we always have but we're focusing on are both account management technical account management working with our clients over a long term, which we've done and continue.
To do and to close on that I mean, we deliver a great product. That's a must have for our customers that are extremely high adoption and usage across our customer base that delivers great value for them.
And we know it delivers great value it delivers great value, we're not surprised by anything because we have this unbundling approach that.
Really quickly understand.
With customers before it's basic part of our platform and then just where do you expect out of it too.
That's what makes the gross retention stab and go up all the time.
Terrific. Thank you very much guys.
Thank you I'd now like to turn the call over back over to Olivia Pope for closing remarks.
Alright. Thank you. Thank you all.
Clothing, I'll just repeat that we're very very pleased with our performance this quarter and I also want to thank all debt of dogs around the world for their hard work in 2021, and they're excited for what's in store in 2022, and so am I. So thank you all.
Thank you, ladies and gentlemen that concludes.
Thank you for participating and you may now disconnect.