Q3 2022 Datadog Inc Earnings Call
Okay.
Good day and thank you for standing by welcome to the Q3 2022 data Dog earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one.
On your telephone you will then hear an automated message advising your hand is raised.
Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your Speaker today, you've got Broderick, Vice President of Investor Relations and strategic Finance. Please go ahead.
Thank you Lauren.
Morning, and thank you for joining us to review data does third quarter 'twenty.
We announced that our press release issued this morning, joining me on the call today are Olivier the mill feed at Oz co founder and CEO and David <unk> CFO .
During the call we will make forward looking statements, including statements related to our future financial performance our outlook for the fourth quarter and fiscal year 2022 I guess.
And operating margins, our strategy, our product capabilities and our ability to capitalize on market opportunities.
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 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 June 32022, additional information will be made available in our upcoming Form 10-Q for the quarter ended September 32020, and other filings with the SEC. The information is also 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.
The most directly comparable GAAP financial measures in the tables in our earnings release, which is available at investors updated I'll gauge to dot com.
With that I'd like to turn the call over to Olivier.
Thank you Joe and thank you all for joining us this morning.
We are pleased to report strong results in Q3, as we continued to execute well have got confusion.
Let me start with a review of our financial performance.
In Q3 revenue was 437 million, an increase of 61% year over year and above the high end of our guidance range.
We had about 22002 hundred customers up from about 17000 apartments in the year ago quarter.
We ended the quarter it was about 2600 customers.
All of the $100000 or more.
Up from about 1800, but you Gotta go quarter.
He's got some rising rates at about 85% of all they are.
We generated free cash flow of 67 million.
That's the I'm, arguing about 15%.
And our dollar based net retention rates continued to be over 130% as customers increase their usage and add a bit more products.
Next our platform strategy continues to resonate in the market.
At the end of Q3, 80% of customers were using two or more products.
77% a year ago.
40% of customers, leaving or more products up from 31% a year ago.
And 16% of our customers were using six or more products up from 8% a year ago.
We continue to be pleased with this continued adoption of multiple products in our platform.
Indicates the additional value we are bringing to our customers.
We continue to see strong growth with our newer offerings.
And could you introduced in 2019, which exclude in pockets of monitoring and core APM and log management remained in hyper growth mode.
I also want to highlight a couple of our newer products database monitoring and CIBC.
We started charging for these products three in two quarters ago, respectively, and each has already exceeded eight figures are in more than 1000 business.
And as we are further developing them we are confident that these products will.
Meet a broader set of use cases for a larger set of customers over time.
Now moving onto this quarter's business drivers.
At a high level Q3 was overall very similar to Q2 with strong performance in Europe , and new product get past activities tempered by growth of use it from existing customers that although healthy.
Our long term historical averages.
This added up to sequential net are added that was similar to Q2.
To give a bit more color first on the UK strength.
As we said.
With overall solid, but consistent with Q2 trends.
From a product perspective.
Looking at industry verticals similar to last quarter, we continue to see a more pronounced effect in consumer discretionary and in particular with our customers that are cloud native and fully scaled in the public cloud.
Note that the consumer discretionary vertical represents low teens percent of what they are.
e-commerce, as well as food and delivery.
All that said we are pleased with our continued strong performance.
Revenue in Q3 grew 61% year over year, and 7% quarter over quarter with all of our products meaningfully outperforming the growth of the large cloud providers.
While the macroeconomic environment is likely to remain a headwind in the near term we continue to see positive trends underpinning our business and remain bullish about the long term opportunities aggressively our investment plan.
First we continue to see strong growth in new logo are including some large wins in traditional industries will talk about some of those.
Second our sales pipeline is strong heading into Q4 for both new logos and new products.
<unk> seen great opportunities across customer sizes geographies and industries.
Alongside of strengthening universe. They are it gives us confidence that digital transformation and cloud migration remain a top priority.
Perhaps even more critical in difficult times, when businesses need to be more agile and do more with us.
Remember that even though you could basically model Utica, we generally do not immediately translate into meaningful revenue, but they are very important to us as new customers expand their usage in specific quarters, it's taken years.
Third we are seeing continued expansion on our platform as indicated by customers adopting more of our products.
And finally churn remains low and Hasnt changed with gross revenue retention steady in the mid to high <unk>.
We believe these hog Australia attention is indicative of the business could you get it shipped adult for customers.
Now, let's move onto product and R&D.
Two weeks ago, we held our dash user conference, which was on location to showcase the extension of our products and the results of our R&D investments.
Let me go through some of these starting with the visibility before moving on to security developer experience and finally, the ability to take action and dialogue.
First we are doubling down on our investment in the visibility starting with two new products that are three monitoring and cloud cost management both.
Addressing growing needs and strong demand from our customers.
We also extended our APM suite to offer mobile App testing is a heat map and dynamic instrumentation.
On the network side, we added 70 trucks and network monitoring to our products.
On the logging side, we announced local wedding, which coupled with large archives and accessibility pipeline places us at the center of our customers' better management.
Responding to customer demand, we also extended our sensitive data scanner beyond love to identify sensitive data across APM and run.
And across the platform, we've announced extended support for bunker Dmitry PCI compliance, where if you haven't law HIPAA compliance across most of their dog.
Okay.
Second word.
We are extending our security platform.
And we announced cloud security management, which brings together a couple of quick security cloud security password management and rigorous catalog.
Fiction less reached and context aware cloud native application platform or sooner.
We don't see network protection propagation facility management to enable blocking attack in real time directly with embedded a platform and.
And we now provide greener ability monitoring to give our users a high fidelity picture of all applications production as well as the dependencies junior abilities and the adaptive phase.
Third we followed through with a retina entry and developer experience.
We announced continuous testing to facilitate end to end testing as soon as liquidity develops.
This increase quality and velocity at the same time.
And we showcased intelligent test center, using our rich APN and profiling data to automatically keep unmated test and drastically reduce time and money spent on CIC.
Fourth and last but not least we.
New product areas, but their core platform.
Moving to allowing our users take action in response or within that about.
We announced our asset management products.
All users to correlate and summarize Alex Evans and issue new variety of sources in order to get those problems directly from the data dog Agl's console.
We also announced that the workflows.
Which allows customers to get up and run automatically give up or security remediation is in a no code editor and there'll be more than 200 integrations to service in the ICU.
We announced limited availability for cross screen. The collaboration meeting tool that we acquired last year and that Louis real time screen sharing and collaborative problem solving within their dog.
And finally, we kept on exiting the full scope of our watchdog.
Jim.
Further automating the detection and getting the recognition that applications in industrial problems.
That's it for Dominion I think from that and as you can tell the team has been hard at work and I'm extremely proud of our innovation velocity and focus on our customers.
One last thing on products.
As announced in the press release issued this morning, we acquired Cracraft planning and design tool used by tens of thousands of cloud architects to create lots of that go to the bank processor, including real time health configuration and cocktail.
And we're very excited for that to become better at all.
Now moving on to sales and marketing, let's discuss some of our wins in Q3.
First we signed a seven figure land with a fortune 100 grocery chain.
This company was magazine to Azure, but was held back by their open source solution and.
And because these grocery chain has promising pet stores and even better controls around personally identifiable information.
Our safety better scanner, and a HIPAA compliance fill that gap and we're differentiators or data to really support.
Yeah.
Next.
We signed a seven figure land with a major multinational restaurant chain.
These companies had a legacy solution that wasn't able to scale with their vision of instability and several environment.
They also needed an end to end view of their customer journey and will now use <unk> products, including synthetic Enron to drive customer experience improvements.
Next we signed a seven figure land with a social networking apps.
This company was previously identified customer, but have moved several years ago to a competitor is going to get certain languages or APM product notes about well at the time.
Today, our APM not only magical abilities of their existing solution, but presented significant advantages in terms of ease of deployment alerting antibody detection.
And they also plan to take advantage of our new service catalog picking their adult at the center of the operations.
Next we had a seven figure upsell with a large Asia based.
Run rate.
If there's any as many business units include consumer electronic and Iot.
And the use of data is growing rapidly with the number of devices we are managing.
You have seen a number of benefits, including lowering the amount of book by 25% and maintenance regulation by 50%.
They have also seen a significant time savings in incident response activities that uncalled engineers from 20 hours 22 hours per week.
With this renewal is customer has now adopted <unk> got enough products.
Next we had an eight figure multiyear upsell with a large E Commerce company.
This customer had been using primarily infrastructure monitoring APM. We Gotta go and was also operating in open source logging tool.
Is embedded dog led to significant efficiency, including certain customary impacting incidents by close to two thirds and reducing the number of employee required to address each incident by one third.
With this renewal.
Better blood management, Enron, and consolidating multiple homegrown and cloud native tools as well as the commercial competitor.
That is for this quarter as customer highlights.
And I'd like to thank our go to market team for their hard work and for delivering another strong quarter.
Now, let me speak to our longer term outlook.
We recognize the macro environment remains uncertain.
We will continue to see no change to the multiyear trend towards digital transformation and cloud migration.
And we remain confident that we can help our customers with their efforts to seven costs drive greater engineering efficiency and take advantage of the benefits of cloud and other next Gen technology.
So we are continuing to invest in our strategic priority to capture long term opportunities.
And we remain laser focused on bringing value to our customers as they manage through a more challenging economic environment.
With that I will turn the call over to our CFO for a review of our financial performance and guidance David.
Thanks Olivier.
In Q3, we continued to execute well and support our customers.
Revenue was $437 million up 61% year over year and up 7% quarter over quarter.
To dive into some of the drivers.
First we experienced strong new logo growth.
And continued low churn.
Again this quarter.
We saw existing customer usage growth remain at levels similar to Q2 as COO.
Customers continue to be more cost conscious as they manage their businesses.
As Olivier noted we saw a roughly similar sequential growth in <unk> dollars added in Q2.
As in Q3 as in Q2.
And we saw a relatively homogenous usage growth amongst our major products during Q3.
As with Q2, we saw relatively more deceleration in the consumer discretionary vertical, particularly in e-commerce and food delivery.
And we saw similar growth across geographies.
As a reminder, we built all of our revenue in U S dollars and we do not price in local currencies.
Our dollar based net retention remained at strong levels above 130%.
For the 20th consecutive 20 <unk> consecutive quarter.
Our land and expand model aggressive product innovation and our customers most of them to the cloud continues to drive expansion opportunities with our existing customer base.
Overall, the customer usage growth, we're seeing remains higher than the trough growth we experienced at the beginning of Covid and 2020.
And we're pleased with our 61% year over year, and 7% quarter on quarter revenue growth this quarter.
Meanwhile, gross revenue retention was unchanged and steady in the mid to high Ninety's.
Regardless of the macroeconomic environment, our customers still need to serve their clients and moving to the cloud enables better servicing cost saving against people intensive or on Prem technology based offerings. We believe are high and steady gross retention indicates that data dog as COO.
Critical to our customers' ability to deliver services to their clients digitally.
And as already mentioned, our new logos. We saw continued strong new logo growth across geographies industries and company sizes.
And we have a strong pipeline of opportunities in Q4.
Finally, our platform strategy continues to resonate with customers with 80% of our customers using two or more products, 40% using four or more products and 16% using six or more products as of the end of Q3.
Moving on to our financial statements.
Billings were $467 million up 51% year over year.
Billings duration was slightly lower year over year.
Remaining performance obligations or our PEO was $941 million up 31% year over year.
Current RPI growth was in the mid forty's year over year.
As a reminder, we signed several large multi year renewals in Q3 2021.
Which may make current Rps are more useful indicator as it excludes the multiyear duration impact.
We also had a challenging comparables of that metric as Q3 of last year.
Current RPI growth was about 100%.
We continue to believe revenue is a better indication of our business trends and billings for <unk>.
So as those can fluctuate relative to revenue based on the timing of invoices and the duration of customer contracts.
Now, let's review some key income statement results unless otherwise noted all metrics are non-GAAP . We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release.
First gross profit in the quarter was $348 million, representing a gross margin of 80%.
This compares to a gross margin of 81% last quarter and 78% in the year ago quarter.
We continue to experience efficiencies and cloud costs reflected in our cost of goods sold this quarter.
In the medium to long term, we continue to expect gross margin to be in the high 70% range.
Our Q3, non-GAAP Opex grew 65% year over year as we continued to grow our head count in R&D and go to market.
Q3, operating income was $75 million or a 17% operating margin compared to an operating operating income up $44 million or 16% operating margin in the year ago quarter.
Then turning to the balance sheet and cash flow statements. We ended the quarter with $1 $8 billion in cash cash equivalents restricted cash and marketable securities.
Cash flow from operations was $84 million in the quarter.
After taking into consideration capital expenditures and capitalized software free cash flow was $67 million for free cash flow margin of 15%.
Now for our outlook for the fourth quarter and fiscal year 2022.
First informing our guidance, we continue to use conservative assumptions as to the organic growth of our customers.
And as usual we are basing our guidance on current economic conditions, which includes slower than historical growth in usage among existing customers as we had seen in Q2 and Q3.
For the fourth quarter, we expect revenue to be in the range of $445 million to $449 million, which represents 37% year over year growth at the midpoint.
non-GAAP operating income is expected to be in the range of $56 million to $60 million.
And non-GAAP net income per share is expected to be in the 18% to <unk> 20 per share range based on an approximate 347 million weighted average diluted shares outstanding.
For fiscal year 2022, we expect revenue to be in the range of 1.65 to $1 65, $4 billion, which represents 61% year over year growth at the midpoint.
And non-GAAP operating income is expected to be in the range of $300 million to $304 million with non-GAAP net income per share expected to be in the range of 90 to 92 per share again based on the approximate 346 million weighted average annual.
Diluted shares.
Now some notes on guidance.
As we discussed last quarter Q4 includes some large in person events, including our Dash user conference, which was held two weeks ago and AWS reinvent our largest trade show event of the year.
Cost of those events will result in a put an approximate 300 to 400 basis point effect marked effect on margins.
As it relates to our capital expenditures, we are adding more office space around the world as we continue to return to office, we expect capex of about $15 million in Q4.
In conclusion, while we recognize macroeconomic uncertainty continued into Q3, we see no change and the importance of cloud migration and digital transformation.
Which are critical to our customers competitive advantage.
We believe we are well positioned to help our customers embark on this journey and.
And we are investing aggressively into our long term opportunities, while maintaining our financial strength.
I want to thank data dogs worldwide for their participation in these efforts.
And with that we will open the call for questions operator, let's begin the Q&A.
Thank you as a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced please standby, while we compile the Q&A roster.
Okay.
Our first question comes from the line of Raimo <unk> with Barclays Raimo. Your line is live.
Thank you.
Congrats on a great Q3.
All of you like quick question from me the first one is on.
If you compare the current situation than the current.
Environment and what you saw in the pandemic. It back then the Hyperscale guys kind of talked about cost optimization and customers pulling back a little bit.
It does seem at slightly different now could you maybe talk a bit tough.
Some of the factors that you're seeing out there and I had one follow up for David.
Yeah. The titration study different now from what we saw customer and coated with this very brutal very broad.
Everyone was coming to save money as quickly as possible, which is not what we're seeing today, what we're seeing today.
So these are things actually first of all everything that is related to.
Direct transactions with customers, whether it's new logos on new products.
That is actually working great.
And then we can see there is as strong as we've seen it.
Sure.
When you look at the <unk>, we might see cost optimization I think there are two different stories there.
Customers are.
Lastly club, maybe even not really pretty scale on a tough environment for them into an.
On public cloud.
Definitely trying to save money and these are companies that in general also tend to have their own growth rates.
<unk> probably affected in the future by the macro trends. So thats why they are doing that.
But when you look at the other customers.
The one that are earlier in their cloud migration, they actually not slowing down and we see to the same urgency and eagerness for them too to keep scaling and keep moving into the into the cloud and that's also where the bulk of our opportunities.
When you compare us to the Hyperscale.
We are seeing some expenses this year.
And by the way should face, it's always hard to do to do a direct comparison between the number of the epic killers in OE.
<unk> numbers include a bunch of other things beyond infrastructure.
And we're also not just in public clouds also mitre quite a bit of a private environments as well.
But we're seeing some of what they're seeing.
Less sensitive to it because we.
Yeah.
We tend to because of what we do we tend to skew towards more critical environment and everything, but the hyperscale and overall.
All of our products meaningfully outperformed the growth of the.
The hyperscale.
Okay perfect. Thank you.
In these kind of uncertain times a lot of the time, you have negotiations or vendor ethical achievement customers around billings billings terms et cetera have you seen anything that is impacting you or that you can note. Thank you.
No, we really haven't seen any difference in billing terms or.
Or dsos for that matter so on that side given the mission critical nature of the product we haven't seen.
Any any material changes in that.
Again, that's different from Covid, and then Covid. It was really a cash crunch that those can be really worried about and really trying to.
Prevent money from going out the door right away.
Whereas in this case is more preparing for an environment, where they might want to watch a profit profitability a bit more.
And customary when they negotiate deals typically one of our fully scale.
One thing they look forward more optionality in terms of holding become exploring how much. It for me for long periods of time when.
When there, especially when they only need unsure of their own growth rates.
Okay perfect. Thank you congrats.
Yes.
Yeah.
Thank you one moment, while we.
Compile the next question.
Our next question comes from Fed Lee with Credit Suisse. Brad Your line is now open.
Hey, good morning, and thank you for taking my question.
I was wondering if you could comment a little bit on your traction in security.
What segments, you're seeing the most traction and also bigger picture.
What youre seeing in the rate of the silos breaking down between second Dev ops overall.
So bigger picture, we I mean everybody's talking about it.
The only ones to look it up.
We need to bring security to.
To give them up.
Have they been up there.
The responsibility in that.
So and we're confident that this is we see that developing in a way that's very similar to what we would give up about a decade ago.
So this gives us confidence.
In terms of our traction we're happy with where we are that we see we.
You mentioned earlier thousands of customers as an alternative product.
The customer base is growing fast revenue growth path for those products will also grow India Secretary Atlas products paper and what we feel is a lot of market pool of construction with it.
There's a lot of customers want us to be here and there is a lot of product investments we've tended to do.
Some of that in.
Dash and there's a lot more coming.
It's working as planned I would say at this point.
Thank you very good.
Thank you.
Okay.
Our next question comes from the line of Mark Murphy with J P. Morgan Mark Your line is open.
Thank you very much and I will add my congratulations on a nice performance.
Olivier many customers had said that your cloud cost management.
Solution is extremely well timed and theyre, saying that because they are seeing interest in cost optimization that didn't exist about six months ago I'm wondering if that aligns with your view and does that feel like a product that can't get off to a pretty fast start in this environment and then I have a quick follow up.
I mean youre right.
Cost management is on the health of people.
People's mind right now.
But I would say that was already the case six months ago, and even a year ago I think any company that is fully scaled into the cloud.
Cares about their efficiency and things.
Things that they have quite a bit of leverage.
In terms of.
Cost improve American network.
Got it the right way or is it right to them.
So we we think it's a part of that yes. It's about time that we think it's a product that's going to be that has the potential of being.
Widely adopted in various school for a very long time, even after we come out of this.
Challenging macro environment.
Okay understood.
And then David just as a quick follow up looking at the sequential growth in Q3 is around 7% and the way it appears and guidance for Q4, it just thinking about your cadence.
It would seem to compound out.
On a year over year growth rate around 30%.
Thinking forward.
Is that type of cadence a fair way to.
Try to conceptualize the glide path into next year, just figuring somewhere.
Somewhere around 30%, if we want to kind of Derisk. The models or do you think that Q3, and Q4 or maybe not so representative of where the puck is going to be heading here.
Yes, yes.
A reminder.
We provide guidance in a consistent way.
We essentially look at the environment and the performance.
And given the usage model, we put conservative assumptions on top of that we employ that we employed that for the guidance. We gave here in Q4.
For next year, we'll provide guidance when we report Q4 and plan to update everybody at that time.
Thank you.
Keep in mind, there's different aspects of that part of it is driven by the new logos, where we're getting some customary part of it is driven by the growth in these investment areas.
And the way to the data so we get to it.
It's tougher to grow customers very very fast.
Over the past three years and when customers are going to spending 80% year over year.
70% year over year for two years.
Michael related floor after that.
<unk> and <unk>.
Give us an easier compare for the future.
Yeah.
Thank you Olivier.
Thank you.
One moment please.
Our next question comes from the line of Sanjay Singh with Morgan Stanley . Your line is now open.
Sure.
Hey, Sanjay we can't hear you can you please get near to you Mike.
Sorry about that.
I appreciate you guys, taking my questions. My question is really around <unk>.
Competitive displacements and potentially observe ability consolidation within your customer base to what extent are you seeing customers either consolidated open source or other sort of commercial tools.
Standardize on data dog, not just to benefit from the the innovation that youre seeing from David our platform, but also to lower their overall observe ability monitoring spend as they go into next year.
While we do see a little bit of both I think it's consistent with what we've seen in the past.
There's no there's no new trend there.
We see that happening across our customers. We think also in the future.
Only become more compelling when customers also bring to us more up there.
Security use cases more of their user analytics use cases there'll be <unk> gave you because these so far have required different copies of their data to be sent to different vendors.
And these tend to be the most expensive part of the other ones are part of that.
Cost structure of that scale and that we can serve these vendors. So we think we will make a very compelling long term proposition that is get finished.
Does that contract sort of structured.
And how does that adoption sort of happened is it through some broader flexible sort of credit system or are they being are these products being <unk>.
Soldier priced individually if you just give us a sense for a customer that gets up to that level of adoption, how does sort of contracting work for that type of type of customer for.
So the majority of those contracts for launch customer and we love the product.
Amit on the.
Can we drill down into which is basically <unk>.
Setting the committed amount of credits that customers can use in relation to that they get a red card for all device skus are going to consume.
And those rate cards can also be negotiated.
Customers some customers use very large amounts of certain products. It can get a better rate of the PC products as well as the negotiate that I think that's where it gets really tailored to their specific use cases and business needs.
And Matt to add that's what we've been talking about the frictionless adoption, where the client is using the platform and given this a dropdown.
Hey, alleviate hey, David Thanks for taking the questions I, just kind of wanted to dig in here on the consumer discretionary and I. Appreciate all the comments you have the prepared remarks, but it was really kind of wondering you know how much of that vertical international you know just thinking about ethics and the potential effects of ethics or if the if the USD straight persist in the future. Thanks guys.
Yeah, so and effects.
And so a D V D <unk> getting you throw it out.
The charges and dollars everywhere. So we don't have any formal S X <unk>, we don't provide any adjusted numbers why effects and your <unk>.
We do however, that'll customers buy a product from Europe and from there you know Japan.
Ban their budgets off deal in 70 again or in euros.
And so we do think that the the strong dollar either headwind for us.
We don't see <unk>, you don't have to keep you from growth rates between Europe Americanized and.
<unk> so.
So we think we might see higher growth in APAC, a new up which I'll spell a box of our revenues and less mature.
If the if the.
The dollar was it would be here. It is conjecture, we don't actually.
Quantify that because we charged in dollars anywhere.
But that's something that we all around.
But in that in that just to add in that in that sector. We commented on the.
The predominant of that would be what's happening in their business and their sector rather damage here.
<unk> location.
Company and its customers.
Got it great guys. Thanks, so much for that and just one follow up if I may here on the cloud cloud Kraft acquisition, just any color on how big This company is the press release did say hundreds of thousands of engineer. So how does that equate to maybe customer overlap and it does this cloud craft opened the door to maybe new personas.
<unk> within organizations you know thanks, so much bye guys for taking my questions.
Yeah, so definitely the very interesting because it is so we're going to get product.
There are lots of opportunities in terms of integrity of product with ours.
I'll put you to go through with some part of his productivity stand alone.
Does the product that works very well for planning for Uhm currency cloud architects and Jeannie <unk> migration.
Uhm April so interesting for for us on the distribution perspective, because it has a lot of different users today is a very broad reach it's also very easy to embed on third party sites. So there are a number of opportunities very excited about the starcraft.
You'll see more as we as we integrate them as we proceed with a positive but we're very excited to see people you know we had been tracking for awhile.
Just to make sure it's clear it's.
It's a small company, it's an apple higher like we've done meaning we are bringing on board the <unk> the.
The engineers it does come with a customer base, it's an immaterial amount of revenues relative to our total and is Ali mentioned provides an.
An extension of the platform as well as <unk>.
Essentially some leads some lead generation and the customers <unk>.
Thanks for thanks, David Thanks, so much.
Thank you one moment for the next question.
Our next question comes from Matt Hedberg with RBC <unk>. Your line is now open.
Great. Thanks, guys Uhm, David for you you know left.
<unk> last quarter, you talked about a stronger July 1st is June I'm wondering if you could comment a little bit on how the linearity of the quarter played out and then maybe also yeah. How is how did October trend relative to September .
Yeah. So we for linearity it was very similar linearity, what we've had there was no uhm a difference and so we saw unlike last quarter or bet, we saw a pretty much of a pro rata type of quarter.
And we normally have a strong October in terms of the flow of our customers and what they're doing in the platform before.
Before code freezes, we're pleased with what we have seen so far but still recognize that October is usually a strong for us and and you know it's it's only at the beginning of the quarter or anything else you want to add.
Q what are you trying to get to.
Holy Trinity over time during the quarter, we exited the core pretty much where we entered it.
They're and again, it's designated we're happy with what we see you activate it will also usually happy to go through.
We have a bit more season 19 another quarters.
December tends to be it'll be weaker and a lot of our customers take time off and <unk> environment that ma'am. It's also been a little bit harder to forecast in recent years, depending making the behaviors that.
The vacation David <unk>.
So you will be careful with that and that's all incorporated in long Island.
And remind everybody what we said and the script was that the 223 performance was very similar in its drivers to Q too. So that's further evidence of his alley said, that's the conditions that we ended Q2 with continued throughout <unk> yep.
Thanks, Thanks for the color is appreciate it.
Thank you.
One moment for the next question.
Our next question comes from French style with Jeffrey Sprint. Your line is now open.
David question on investment philosophy going into the pandemic you didn't really pull the throttle back he had at 11.
Going into these times are are you thinking differently about your investment philosophy and in this cycle and can you talk about COVID-19 carrying reps in terms of.
Are are you at at on on pace to hire what you thought at the beginning year, you're pulling back a little bit given given some of the current macro genders.
Yeah, I think as we remind everybody we've always.
Live within our means and been limited more by our ability to integrate.
As possible way quota carrying rats or orange for that matter into our company and where we really have not made changes we had a a a suburb of prudent plan and continued as a reminder to everybody. We think is a very long term opportunity and.
We're investing behind that we are cognizant that there's more volatility in microeconomic conditions and we're looking at everything, but we didn't get out over our skis to begin with and our plan. So it allows us given our model and the way we run the company to continue that.
Investment in a systematic way.
To reset that.
So he didn't make changes we are investing in.
Orange perspective.
So early so much we want to do and we <unk>, we have <unk>, we keep investing there.
From your go to market perspective.
As I mentioned on Nicole we actually have a very strong pipeline and the <unk> <unk> new product and so there is value in growing and discuss it in the short term and long term value. There. So there will keep doing that.
And the last thing I'd say, even though it's a neighbor I keep repeating but we built on the $70 million from inception to <unk> more cash since then.
We have efficiency, that's one of the cold part of our culture. That's how we run the business that we built it and it's still the modem <unk> fiction extension vanilla from about products.
So we trust that we have the the.
The.
Delivers into wherewithal to use them to to make sure we have the right to <unk> as well.
And just a quick follow up on Crp's, David you mentioned safer focused on that is it is continuing to decelerate I guess is that just a function of the large comps are you seen larger enterprise customers you seem slower cadence of large deals come in can you give us.
Your take on that.
Yeah, I think we had the comps are very significant in this quarter in two three of last year and I think we said this at the time, we had some large multiyear deals. A reminder, we don't try to target multiyear deals we had from the client side. So.
Why the current probably has more overtime correlated. There's also moves are so if you look at the average of this it turns over a longer time to correlate with revenues, but there's a lot of noise. In this number so we steer everyone back to revenues and then the computation we'd given ever.
The body and how to convert revenues into a R. <unk> change again is you can get one big driver for for D. C.
Oh early customers with you because you're trying to get ahead of vigorous insecure better economics.
And in time incidentally like this one customers tend to wait and see more and sometimes they'd have plenty of <unk> and so this is why those numbers move quite <unk> and again the.
The best predictor.
What's gonna happen next is the the.
With a new <unk> everything up for.
Maybe tomorrow.
Started.
Thank you.
Okay.
Thank you one moment for the next question.
Our next question comes fan can meal with Williams.
<unk> Your line is open.
Thank you and congrats on the front quarter.
It sounds like the international and it has remained relatively unchanged from June was that consistent across regions and what do you think is unique about getting a dog, but it's a major sales in Europe more resilient than some of your peers.
Nuclear receive them in everywhere.
Everywhere.
We're going to keep on the right are these babies faster in Europe and in APAC, we are in the U S.
We're also going to change in in Latin America, which is doing very well for us.
So we.
Where we see we we see we.
Should've been everywhere, let me see.
Europe and Asia has escalated behind <unk> in terms of maturity tier of migration.
But they're scaling and it's happening they're the same way it's been this happened and.
From a competitive perspective, the situations by the same everywhere and it hasn't changed.
And a municipal way over the past year I would say so.
There's nothing nothing shock to stay there.
That's helpful and and if I could just follow up you called out some vendor displacement of your prepared remarks. He made me comments on how much of your new customer Windsor coming from competitive displacements versus greenfield opportunities in between the two are you are you seeing any different to the macro impact our companies are using competitors maybe revisit.
Alternative solutions to optimize pricing or or is the make shift.
It's still a small <unk> alright, it tends to be the only one of our very launch because customers already had something they already have enough to print and the need to migrate over so does <unk>, which is not to vast majority of the view the rest of my day activities gimmick.
<unk> and we'll go from there.
These are the ones we tend to mentioned because these are the ones that are the most interesting to look at some day one.
But if you give us more minority of what we do we also don't but we need <unk> to review <unk> to to learn as many.
Neither was a new product as possible and it's better for them to do 10 smaller ones than one large one.
<unk> so that's.
And timber.
<unk> <unk> <unk> <unk> <unk>.
That's helpful. Thanks again.
Thank you one moment for the next question.
Our next question comes from 13, other Lonnie with city. The teammate your line is now open.
Good morning, Thank you for taking my question.
I've got one for you and one for you David Uhm I'll need to your commentary on the usage moderation persisting in the consumer discretionary Verticom uhm, Okay I.
I know this is a hard question, but what are some of the signs are signals from not vertical that would lead you to suggest her lead you to conclude that maybe there was more moderation to calm and I'm thinking about this in the context.
<unk> right in the realm of digital advertising and not with a larger companies just beyond and outside of C. D. P. The C. D. T. Vertical so just any signals are signs that would lead you to conclude one way or the other you consider the worst of the moderation on on that platform expansion. It behind US and then a quick predated please.
Well it seems that the question is and it's mostly they receive the message and the customers that are fully in the cloud cloud.
Cloud.
And and they're basically the.
You should expect the the <unk> of of the top line Indian and so when the top line that <unk>, they're trying to slowly very extensive as well which is what we've seen.
I think the what would compel yet E weather data plan will.
We'll just slow down and <unk> and with Covid compressed I think it all depends on <unk> of any kind any downturn, we face if any.
Not really <unk>.
What we see <unk>, we got a pretty good idea of where they send because we see with their projected.
Stern Grove, even <unk> relates to the <unk> to go with their business.
Thank you and David last quarter, you started mentioned to us that a lot of customers and prospects are thinking about reduced commitment levels out the gate right. So I'm curious about how that's trending this quarter and what your expectations are.
With what you were seeing with new customers in terms of commitment levels out the gate and within this quarter how much of that austerity. If you will around <unk>, how much of that is scary austerity <unk> usage.
<unk> beyond the commitment level this quarter, just kind of give them strength in the corner. Thank you.
To clarify that that's.
Oh, that's that's not exactly correct.
So it is so essentially most of our customers are essentially land and expand and then come in and then grow their usage over time.
And that has been going on in the whole model. The company. What we said last time was and this is not related to their their their their cutting their commitment. This is related to when there are in oh in overage or on the man.
There is a.
<unk> managed or stay on on demand longer and to be able to get greater visibility. The combat from last quarter was really more about billing.
And the those match your extent about customer usage, we said that customer usage has been lower than historical trends, but not as low as it was in COVID-19. So that's another effect and what we talked about last quarter was more about the billing effects. So we continue.
<unk> to say that customers R. As we talked about cautious, but that really only has a marginal effect in the billing and actually when a client besides that in space on on demand. It has a positive effect on the revenue side and that microbes decision.
And I just had one thing to sit through with your prescription or <unk>.
Denver.
Part of the question is.
Holding you know things are going to get better or worse, you know in the in the.
The future.
We.
Mind, you that we have a user ship.
Four.
Delivering you and we didn't have to wait until the next with you to get the news from Kiss in Arizona.
But it is better or worse.
With a <unk> good or bad we get it early and.
And an example of that is that.
Well to.
<unk>.
Globally the world, we see Q3 D worse at the macro level. Thank you too as far as business is concerned Q3 is very very much in line. These Q too.
Wherever step function there was in terms of changing the growth rate for some customer has happened and Q2 already and didn't <unk>. So we're fairly confident that whatever happens <unk>.
Thank you.
One moment for our next question.
Our next question comes from a tiny kitchen with open <unk> <unk>. Your line is open. Thanks for your current congrats guys great quarter, David It just won't have one question for you on <unk> <unk> <unk> <unk>.
130.
But I was hoping to give a little bit more color on guard, specifically directionally did it go down a quarter over quarter and.
And perhaps is there a way for you to break down the Max existing solution expansion and that makes versus new solution adoption and I'm. Just wondering maybe not in absolute terms or perhaps on a relative basis, how that makes us change over the last two or three quarters.
Sure. So we don't give more <unk> met retention, but it is a fact that if the organic rate of expanding <unk> of customers is lower than it was in previous periods and we said that.
That the rate is lower than it was at the peak, but not as low as it was at the low in Covid in the middle that that would indicate that net pretension would be would be dumbing down mathematically, but we don't get more information than that S.
Far as the and I think he said a little bit about this in the past as far as the mix between expansion of the existing solutions and new as clients adopt more of the solution in their land, which we set is happening.
What what <unk>, what happens again mathematically is that the percentage of the network tension from existing products goes off.
Despite the fact that as we said we have very strong adoption of additional products, but we also have very strong momentum and clients landing with more products, which affects that number directionally if that makes sense.
Okay.
No. That's helpful. And then maybe I'll wait for you on the database monitoring seems like you're off for a <unk> a good start there.
Just from a <unk> standpoint does this expand.
The the personas that you're touching I mean, do you need to be engaged more replace it. Please.
Administrative <unk> in order to sell this product or or.
I'm just trying to think how might go to market standpoint, <unk>, what is needed to keep driving progress here.
What do you intend to <unk> the rest of it we deliver it extends nicely on top of the rest of the platform you're right, though that will reach into some of the more specialized function wrong a D D as in Zebra Linda.
And but we also have people who are not trying to Z Diaz service issues.
And.
C. D. S killed me away. So we <unk> I think today because of the the that'd be the support today.
It's not as pronounced as it might be in the future. When you start splitting there'll be just like for a quote for example, where.
The professional deviated Moore.
Formalized everything.
Very good thanks.
Thank you.
Our final question.
Will come from the line Ave Michael.
Michael trips with Keybanc, Michael your line in life.
Hey, guys too quick quantity of questions. I think you talked about the growth rates of number of hosts monitored last quarters.
Indication that you're really worth seeing any slowly.
To underline capacity of what needs to be monitoring it is that growth rates still the same.
It's if you if you look at the by product. This time, it's a bill or the equivalent of needs to be you know.
There's some variation quarter to quarter it loves about the same and growth right at the end of the better and furniture to be down there's nothing really meaningful there.
Some of the effects you might you might expect from what you're hoping to address today, we see maybe some of that any infrastructure, but it's extremely pronounced so that's why I live on the <unk>.
Okay, and David Capex that you called out that was having to do with headquarters 15 million extra I believe you said in this quarter. So.
And it just kind of you know, giving guns for next year, but is that one quarter of phenomenon multi quarter forever.
Longer term on Capex.
Yeah, that's just to clarify that wasn't extra that's just the total amount not the delta between the quarters. We haven't we haven't provided that type of guidance, we are expanding and building our offices and again when we provide guidance for next year will endeavour to provide.
Some guidance that'll help in the modeling thanks, Okay, great. Thank you very much.
Thank you.
At this time I would like to turn it back to Ya Olivier panel for any further comments.
Thank you. Thank you all for listening I also want to thank <unk> older dogs around the world for looking for hard before David another great quarter, and I want to thank our customers focusing is their business and joining us a dash of <unk>. So thank you Oh and it looks <unk>.
Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
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