Welcome to the Q1 2021 Datadog Earnings Conference Call. My name is Karen. I will be your operator for today's call. At this time, all participants I will now turn the call over to Yuka Broderick, Head of Investor Relations. Yuka, you may begin.
Are ready.
Thank you, Karen. Good afternoon and thank you for joining us today to review Datadog's Q1 2021 financial results, which we announced in our press release issued after the close of market today. Joining me on the call today are Olivier Pomel, Datadog's Co Founder and CEO are and David Ochsler, Datadog's CFO. During this call, we will make statements related to our business that are forward looking under federal securities laws and are made pursuant to the Safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements related to our future financial performance, including our outlook for the Q2 and for the full year of 2021, our strategy, the potential benefits of our products, partnerships and investments in R and D and go to market, are ready to capitalize on our market opportunity and the impact of the COVID-nineteen pandemic on digital transformation and cloud migration trends, as well as our ability to benefit from these trends. The words anticipate, believe, continue, estimate, expect, intend, will and similar expressions are intended to identify forward looking statements or similar indications of future expectations.
These statements reflect our views only as of today and not as of any subsequent date. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our annual report on Form 10 ks for the year ended December 31, 2020, filed with the SEC on March 1, 2021. Additional information will be made available in our quarterly report on Form 10 Q for the quarterly period ended March 31, are conducting a review of 2021 and other filings and reports that we may file from time to time with the SEC. Our filings with the SEC are available on the Investor Relations section of our website.
A replay of this call will also be available there for a limited time. Non GAAP financial measures will be discussed on this conference call. Please refer to the tables in our earnings release, which you can find on the Investor Relations portion of our website for a reconciliation of these measures to their most are directly comparable GAAP financial measures. With that, I'd like to turn the call over to Olivier.
Thanks, Yuka. Welcome to the team at Datadog, are And thank you all for joining us today. We had a strong start to the year and are very pleased with our performance in Q1, are very pleased with the progress we made in the quarter, which was strong across all parts of the business and again showed high growth at scale and demonstrated efficiencies. It has been a busy start of the year. We had 2 products become generated available, continuous profiler and incident management.
Are in the process of the acquisition of SCREEN and TIMBER, and we continue to release new features and innovations across our platform. In addition, we continue to hire and build our team at a very rapid pace. Now on to review the quarter. To summarize Q1 at a high level, revenue was $199,000,000 an increase of 51% year over year are above the high end of our guidance range. We ended the quarter with 1437 customers with an ARR are in the range of $100,000 or more, up from $960,000 last year.
These customers generate over 75% of our ARR. We have about 15,200 customers, up from about 11,500 in the year ago quarter. This means we added about 1,000 customers in the quarter, making it another strong quarter of adds and consistent with the last few quarters. Are We also continue to be capital efficient with free cash flow of $44,000,000 And finally, our dollar based net retention rate continues to be over 130% as customers increase their usage and adapt it on newer products. In addition to that, the positive business trends from recent quarters have continued in Q1.
Are 1st, usage growth from existing customers was stronger than expected and above historical levels. Among other factors, We are seeing the benefit of new logos signed in the back half of last year as they grow into their commitment. 2nd, new logo ARR was strong are in the same period in what is normally a seasonally slower quarter, showing our go to market investments are paying off. And third, churn continues to remain very low and in line with historical rates. Taking all these factors into account, we had a very strong quarter of ARR added.
Are In fact, we hit an important milestone as we added over 100,000,000 of ARR in a single quarter for the first time. Are ready to take questions. Next, our platform strategy continues to resonate and win in the market. As of the end of Q1, 75% of customers are using 2 or more products, which is up from 63% last year. Additionally, 25% of customers are using 4 or more products, are in the range of 10% a year ago.
And we also have hundreds of customers using 6 or more of our 9 generally available products. Are While it's still early, we think this is an interesting proof point that shows the continued sales opportunity in our customer base. And we had another quarter in which approximately 75% of new logos landed with 2 or more products. I'd like to provide an update on some of our more recent products, Network Performance Monitoring, Real User Monitoring and Synthetics. Are ready to take questions.
Both network performance monitoring and real user monitoring became generally available a bit more than a year ago. Are in the range of $1,000,000 and we are excited to share that both are at approximately 8 figures of ARR and are showing high growth. And Synthetics also continues to grow rapidly are increasingly important contributor to revenue. As a reminder, our newer products are often adopted first by self selecting customers at a small scale are ready to take our next step model enables greater adoption over time. And frictionless adoption from our single integrated platform is a key value proposition for our customers.
While we are very pleased with the performance of our newer products, I also want to spend some time on the core of our observability platform, are in the same store. All three added record amounts of ARR in the quarter, showing the strength of our platform. APM and logs have both reached large scale and remain in hyper growth, while infrastructure continues to grow at a healthy base. To give you a sense of scale, APM and LOX together added more ARR this quarter than the business as a whole did 1 year ago. So it is clear to us that these products are each strong enough to be best of breed solutions on their own.
And to that point, Datadog was recognized as a leader are in Gartner's 2021 Magic Quadrant for APM for the first time. And in fact, we were the only vendor in the leader quadrant that improved its position since the last report. Are Gartner specifically highlighted our strong history of product development and our ability to bring products to market rapidly. Are ready to take questions. As a reminder, we entered the APM market just 4 years ago and our APM product has a robust feature set, including end to end disability tracing with no sampling are in a similar correlation of traces with end to end observability.
The ability to triage problem was also highlighted as a strength are with our unified platform assisting a good cost analysis and reducing resolution time. And lastly, our transparent pricing, which is available on our website, are also recognized as helping to build customer trust. We also continue to make investments in Watchdog, which is the are playing behind AI based features across the Datadog platform. In Q1, we announced a few enhancements, including Watchdog Insights, are ready to take questions. Which is a recommendation engine that is always on and augments manual investigations by automatically detecting anomalies and outliers and allowing for faster time to resolution.
We also announced the beta of watchdog root cause analysis, which automatically identifies causal relationships between different issues across applications and infrastructure are
in the process of executing the right approach.
In addition, we continued innovating across our platform, releasing 38 features in Q1 and crossing 450 A few features to highlight include network performance monitoring for Microsoft Windows, are in the process of getting a new marketplace integration, including Oracle Cloud, as well as the official launch of our GovCloud instance, allowing us to onboard early customers in the government space. Lastly, on the product side, I want to briefly discuss our acquisition of Screen, which closed in early April. We founded Datadog to break down silos between Dev and Ops team. And as we've discussed previously, we are working to extend that to security teams as well. Screen is an application security solution that actively detects attacks and can track them down to the impacted function call.
It prevents application security exploits and enables response across development, security and ops teams. We are very excited at the combination of screen with our APM and security offerings, as we expect it to allow our customers to protect APM instrument are in the process of getting into the platform. And we will share updates as we progress with integrating it in our platform. Are Now let's switch gears and move on to sales and marketing. I am very proud of the continued productivity from our go to market team.
Are As we mentioned last quarter, we have been hiring at a rapid pace across our sales org and are seeing more teams and reps becoming productive. Now let's discuss some more wins this quarter. First, we had a 7 senior land with 1 of the world's largest consulting firms undergoing a multibillion dollar cloud migration. Are With Datadog, they have reduced their monitoring costs by more than 35% with greater visibility into every layer of their stack, including several functions. Are Next, we had a 6 figure or high 6 figure, I should say, land deal with a major transportation company.
The company is moving towards a dead of sculpture, but was hindered by a proliferation of siloed and underutilized monitoring tools. Are After implementing Datadog, engineers now have a single easy to use platform that facilitates mass adoption. Are ready to take questions. Next, we had a 6 giga land from a large CPRO market chain. The company has thousands of stores and is in the process of migrating from legacy IT are now open to an Azure based cloud.
Telenorx Unified platform helped enable this migration and reduced mean time to resolution by up to 50%. Next, I want to discuss the 7th Street Europe sales as an EBA online gaming company. Prior to Datadog, are spending too much time responding to incident and look for a single source of truth with visibility across all teams and systems. This company reduced its usage from 8 observability tools to 1 and Datadog is also used by executives all the way up to the CEO. Last, we had a 7 figure upsell to an existing $1,000,000 plus customer in financial services.
During COVID, this large enterprise accelerated its digital transformation journey as they enhanced their digital tools and online presence. Are And it continues to grow its Datadog as they migrate more, more closer to cloud and have adopted newer products like NPM and Synthetics. Are Moving on now to our longer term outlook. While the pandemic continues to impact the macro environment, are starting to turn to priorities in the post COVID world. Businesses must be digital first, which we expect will move forward digital transformation project.
Are Massive IT platforming is still in its early stages. We believe we are in a great position with our unified observability platform. Are While there is the possibility for more near term volatility caused by the macro environment, we are increasingly confident in our ability to execute are in a long term opportunity. Before giving the call to David, there are two changes to the management team I would like to bring to your attention. Are First, our Chief Revenue Officer, Dan Fougere, will transition out of the company this quarter to take some well deserved time off after a few decades of hard work.
We are very grateful to Dan for many quarters of growth and for developing a world class organization. We are confident that the team he has built will continue carrying the torch and we exceed expectations the Datadog way. Are we are also running a search for a new CRO and are evaluating both internal and external candidates. 2nd, are I'm pleased to announce that we will soon be joined by our first ever Chief Operating Officer, Adam Blitzer, who joins us after a successful tenure are an EVP and GM at Salesforce. Adam will help us scale as a SaaS platform company and will oversee a number of our front office functions.
Are open. With that, I would like to turn the call over to our Chief Financial Officer. David?
Thanks, Olivier. We had a very strong start to the year. Revenues was $198,500,000 up are 51% year over year against the challenging year ago comp. Usage trends were strong and showed broad based growth. Are now ready to begin.
New logo generation continues to be strong and customers continue to adopt more products across the platform. Are to provide some more context. 1st, growth of existing customers was robust again and our dollar based are in the range of customers, which indicates continued adoption of our platform and continued migration to the cloud even in the face of macro pressures. Are As Ali mentioned, usage growth was stronger than expected and above historical levels. And usage growth was broad based are in the range of $100,000 plus customers in the quarter.
Are Given our land and expand model, a majority of these ads were existing customers. In addition, We had a strong uptick in the quarter in $1,000,000 customers. Next, our new logo results were strong. Are in fact, it was our 2nd best new logo ARR quarter ever and a record for Q1. Contributions were strong across our enterprise and commercial sales channels.
Earlier, Olivier shared are available to several large new logo wins across more traditional industries, an encouraging sign as companies across a wide spectrum will start embracing digital transformation projects. Remember that given our usage based revenue model, are in the range of new logo wins generally do not immediately translate into meaningful revenue. Next, in the Q1, we saw continued strength, are As Olivier discussed in our platform strategy, with 75% of our customers using 2 or more products And 25% of our customers now using 4 or more products, up from only 12% a year ago. Next, churn was consistent with historical levels. This demonstrates the importance of our solution to our customers.
Our dollar based gross retention rate has remained largely unchanged in the mid-90s. And this was true across customer segments and in each of our infrastructure, APM and log products. Taken together, this resulted in a record quarter of ARR adds, over $100,000,000 are up significantly versus Q1 last year. Now turning to billings. Are subject to the company's financial results.
Billings were $220,000,000 up 59% year over year. There were no major pro form a impacts call out in the quarter. Remaining performance obligations or RPO was 464,000,000 are up 81% year over year. Contract duration continued to be at an increased level from the year ago period. Are ready to take questions.
RPO strength is driven by strong annual billings and commitments as well as a few large multiyear commits. Are it is important to note that those multiyear commits are billed annually, and we do not incentivize our sales force for multiyear deals are Given our high net retention. Current RPO growth was also strong in the high 60s percent. Are As a reminder, billings and RPO can fluctuate versus revenue based on the timing of invoicing are in the process of signing of customer contracts, while revenue incorporates customer usage. Now let's review the income statement in more detail.
Are
in the
range of $1,000,000,000 As a reminder,
unless otherwise noted, all metrics are non GAAP. We have provided a reconciliation of GAAP are subject to non GAAP financials in our earnings release. Gross profit in the quarter was $153,000,000 are representing a gross margin of 77%. This compares to a gross margin of 78% last quarter are in the range of 80% in the year ago period. The slight decrease in gross margin, as we've discussed before, is due to our investments in product are in the range
of $1,000,000 and platform innovation.
We expect gross margin to continue to be slightly down from last year and the remainder of the year as we build out new cloud data centers are ready to take questions and prioritize product development. R and D expense was $61,000,000 or 31% of revenue are expected to be in the year ago quarter. We continue to invest significantly in R and D, are participating in the Q1 of 2019. Thank you, Karen. I will be your operator for
today's call. At this time, all participants are participating in the Q1
of 2019.
Engineering headcount continues to grow slightly ahead of the pace of revenue growth,
are in the range of $1,000,000 and
we have been able to attract talent and are successfully executing on our hiring and onboarding plans despite COVID. Are Sales and marketing expense was $53,000,000 or 28% of revenues compared to 32% in the year ago period. Are now ready to begin. Similar to R and D, we continue to make substantial investments in sales and marketing, but the pace of the revenue growth are in the process of investing in our business. This was another quarter of no in person trade shows and marketing events.
Are in the range of $1,000,000,000 And while we have successfully redeployed much of the events budget to advertising and other lead generating activities, are in the same period. G and A expense was $16,000,000 or 8% of revenue, are slightly lower than the 9% in the year ago quarter. And operating income was $20,000,000 or a 10% operating margin are compared to an operating income of $16,000,000 or 12% in the year ago period. Non GAAP net income for the quarter was $20,000,000 or 0 point are subject to a share based on 344,000,000 weighted average diluted shares outstanding. Now turning to the balance sheet and cash flow.
Are ready to take questions. We ended the quarter with $1,600,000,000 in cash, cash equivalents, restricted cash and marketable securities. Are in the range of $2,000,000 in the quarter. After taking into consideration capital expenditures are in the range of $1,000,000 for a margin of 22%. Are ready to take questions.
Free cash flow was driven by strong collections stemming from our strong billings in Q4 and Q1. Are now ready to take questions. Now turning to our outlook for the Q2 and the full year 2021. We believe we can deliver high growth for the foreseeable future as we are addressing a very large greenfield market are executing well against that opportunity. We are optimistic about the long term opportunity And have seen an uptick in metrics driving our business growth.
Taking this into account, with our usual conservatism implied, are updating our guidance as follows. For the Q2, we expect are
in the
range of $211,000,000 to $213,000,000 which represents a year over year growth are at 51% at the midpoint. Non GAAP operating income is expected to be in the range of 9 are
in the range of $1,000,000 to $11,000,000
And non GAAP net income per share is expected to be in the 0 point 0 $3 are subject to $0.04 per range based on an approximate 344,000,000 weighted average diluted shares outstanding. Are expected to be in the range of $880,000,000 to 890,000,000 are in the range are subject to a range of $45,000,000 to $55,000,000 and non GAAP net income per share is expected to be in the range are of $0.13 to $0.16 per share based on 345,000,000 weighted average diluted shares. Now some notes on our guidance. Are well positioned to be in the range of $1,000,000 while usage growth was strong in Q1. When providing guidance as usual, we use more conservative assumptions.
Next, our strategic focus remains investing to optimize for the long term. Are ready
to take questions. Therefore, we are planning
to continue aggressive investments in R and D and go to market throughout 2021. Are ready to take questions. We believe the efficiencies of our business are evident, and we are confident in our ability to be a sizable and materially profitable company are in the range of $1,000,000 over the long term. Additionally, our model assumes a return to the office and a resumption of travel and in person events are in the second half of the year. We have limited visibility on these topics, but believe it's prudent to incorporate this in our outlook.
Are ready to begin. Finally, in early April, we closed our acquisition of SCREEN. We are pleased to welcome more than 50 members of the SCREEN team to Datadog. The acquisition has an immaterial impact on our income statement. And our cash flow statement in Q2 will reflect the $190,000,000 of cash that we paid for the acquisition.
Are now below the operating income line. We expect approximately $1,000,000 of Q2 non GAAP other income, are in the range of $1,000,000 which is net including the interest income on our cash and marketable securities less the interest expense on our convertible debt. Are in the call. We do not expect to be a federal taxpayer in 2021, but have a tax provision related to our international entity. Are subject to the tax provision to be approximately $700,000 in Q2 $3,000,000 for the full year.
Are now ready to begin. Now to summarize, we are very pleased with the results of the quarter. Customers continue to consume more Datadog, are in the range of $1,000,000 both in terms of usage and cross selling to newer products, and the execution remains strong. We believe the importance of our solutions will only be strengthened long term by the continued trend of cloud migration are in the process of taking the questions. Operator, let's begin the Q and A.
Are
ready to begin the question and answer session. If you wish to be removed from the queue, please press the pound sign or the hash key. There will be a delay before the first question is announced.
Are ready to take questions.
And we do have our first question from Raimo Lenschow from Barclays.
Hey, thanks and congrats on an amazing quarter. Olivier, can you you talked about the core Momentum you have around APM and the recognition you get from the industry experts. Can you talk a little bit about where we are in terms of APM adoption in your client base in terms of number of applications that are getting properly monitored. And what are you seeing in terms of where you are getting used where and maybe some of the traditional legacy guys are getting used for APM. Thank you.
Yes. So great question. I think we are seeing a probably had a bit of a longer fuse to it, but had a very long runway as more and more applications move to the cloud and more and more of them become critical. And that's what we see happen today. In terms of our penetration among customer application, If you do the ratio of the let's call it the instances of containers that are covered with ABM from the total instances of containers that we see for infrastructure monitoring, There's still quite a bit of runway there, but that ratio is already higher than the famous Gartner quote of 5% of applications being monitored.
So we think we're clearly targeting the right build applications into make gen cloud environments. We are starting to see from some of our larger enterprise customers Some of their on prem applications that are being instrumented with our APM as well, but I would say that's more of a Phase 2 of adoption
are thank you. And we do have our next question from Sanjit Singh from Morgan Stanley.
Thank you for taking the questions and congrats to the team on a really exceptional quarter, really great start to the year. To follow on Raimo's question, I think what's sort of impressing me is the multiproduct adoption and frankly in some of the newer categories. So you mentioned APM and logs, You also called out networking as well and some of the other new products. When you think about the networking opportunity, what's driving are that strong growth, is it just the maturity of the product sort of being a year 2 product? Or did you see some benefits from some of the competitors like SolarWinds post the sunburst attack.
How do we see the networking opportunity for Datadog relative to APM and some of the other products?
I think it's a combination of there's a lot of market need, because networking, especially in next generation cloud environment, Especially for companies that have 1 foot in the cloud and 1 foot on prem, is not something that is well covered in terms of monitoring and understanding. So there's a big need there. And the same part of that is, as you mentioned, the product maturity. I mean, that product is getting better and better. It covers more and more of the use cases, which means It goes from being great for a small number of customers to being great for a larger and larger fraction of our market and customer base.
One illustration of that is what we announced or we mentioned in the call today, which is the network performance monitoring today also works for Microsoft Windows. And as it turns out, it's slightly differentiated to have a cloud based network performance monitoring product that also works for Microsoft Windows. It helps a lot of those customers with very high grade deployments.
Makes a ton of sense, Olivier. And then as my follow-up question, are as we think about the new announcement with a great hire for the CEO position, can you sort of walk us through the thinking around why Now is the right time to bring the CEO on board. Is it about where the business is in terms of scale or is there certain new market segments that you want to target? What sort of the thinking behind bringing on a Chief Operating Officer into Dave's talk?
Well, the thinking is really to scale the team. Are If we fast forward a few years, we'll be a lot bigger. We're building a platform. There's a number of things that we'll need to do right and there's a number of there's going to be a number of problems to solve along the way. And it was always a given that we would need to grow The bandwidth of the senior management team.
And as we embarked on that, we also sought to bring into the company some experience with what later stages of scale and growth look like for SaaS companies and especially SaaS platform companies, Which explains to you the higher we're making here.
Makes total sense. Congrats again. Thank you.
And we do have our next question from Brent Hill from Jefferies.
Thanks. I just wanted to follow-up on the question around Adam. Obviously, a huge endorsement for you guys. But Adam is the founder of a company and effectively was running a lot of the outbound activity. And I'm curious, Most COOs, at least the definition of taking care of the inside of the company versus the outside.
Can you just talk His role on the outside and with customers and the interaction versus the folks on the inside, I think there's just some I'm trying to understand where he's going to be spending most of his time.
Yes, it's a great question. The focus is actually on a lot of the front office function. And these are going to have to do with servicing our customers and growing our customers. I won't go into too much detail, but I mean, look, our teams are We have a fairly idiosyncratic setup for who we go to market and who we serve customers that is aligned with our are expand low friction model, but Adam is going to lead a number of those teams.
Okay, great.
And if you could just
I'm just going to ask you to
ask me if I can answer any words.
Okay, that's great. A quick one for David. Just, you mentioned duration is up. Can you remind us what the duration is now versus what you saw a year ago? Yes.
The billings duration, we said it's in the 7 around 7 months And the contract duration, spread out towards more towards a year in the 9 plus months, And it's maintained that. So what we saw was over the last couple of quarters, given the multiyear contracts and the increase of annual billing, the contract duration increased. Okay. Thanks for the color.
Yes.
And we do have our next question from Matt Hedberg from RBC.
Yes. Thank you. This is actually Matt Swanson on for Matt. So thinking about the capabilities of Screen and the potential cross sell Opportunity could you give us a little color on what type of solution to customers currently have to address these needs? And if you think of this as a competitive environment within your customers or more of another greenfield opportunity?
Yes. So it's really more of a greenfield opportunity. Today, customers typically don't have anything or they have something, it's not really deployed. And the reason for that is that to inject application security inside the application, there's actually quite a bit of friction. Where the combination with
are Datadog and with our
APM makes sense is that we've already incurred that friction to are going to instrument the application with EPM, and the point of insertion is the same. And that's where we think The proverbial 1 +1 equals 3 happens by adding screen to Datadog. And I should say, it's only going to be the start, right? I mean, we there's a lot more we want to do in application security and the rest of security. The first step is really to plug this detection and protection directly at the APM level with green.
Well, and that kind of leads directly into what I wanted to go to for my second question, which is, Olivia, you guys really have a front row See the digital transformation and you obviously then get to also see some of the security challenges that arise from that. So what are some of those other areas of security that maybe you're seeing as pain points for your customers?
Well, there's many look there. It seems like every other month, there's a large scale attack that brings a new area of security into focus. But the way we see the world, the way it relates to us, we are focusing on applications in the cloud. And for that, we think there are important aspects of it that happen at the application level, which is what we're addressing with screen. There are important aspects of it are going to be in the infrastructure level, and we have a few different products that we started last year and that we're are still developing and shipping around that.
Then there's one big part of it that has to do with putting all this information together into an actionable system of record, In the on prem world would be a theme. We also have a product, a security monitoring product that is a precursor to a theme that we're building into a theme that's not there yet. So we really intend to cover that whole spectrum, specifically for applications of the cloud and specifically for are going to bring together dev, ops and security. In general, when you think of the problems companies have in this kind of environment, The first one is that the tooling is very bare bones. Most of it doesn't exist or it's too high friction it doesn't get developed, it doesn't get deployed.
But the other thing that happens in most of these capabilities is that it's really, really hard to operationalize security because it's hard to get dev and ops are in the same page and work together. And that's where I think we can make a big difference If we use our platform the right way and if we build out those products right.
Thank you.
Are And we do have our next question from Lavon Suri from William Blair.
Are Hey, thanks for taking my question and congrats on another well executed quarter. I want to touch on the partner network. You announced kind of the launch of the formal partner network in January, kind of expands, go to market, self-service are can you just talk about the early interest you're seeing there, the traction? Because you're not a heavy services company. There's not a lot of implementation or lift here.
So how is that playing out? And kind of how does that play into sort of more of a medium term, long term channel strategy? Is this really a growth driver? Is this sort of efficiency driver? How should we think about that?
So for us, it's really a growth driver, right? I think When you look at a better job, we have plenty of efficiency. And the way we think about everything is are How do we get the biggest part of that market, which we think is going to be gigantic? How do we build the products we need to get to all that? And how do we reach All the customers across all regions and all segments to get there.
So that's how we think about it. So when we look at our partner program, are We see it to that length, and we are very happy with the adoptions we've had there. There's a number of things we need to do still. I mean, it's still, I would say, very early. We have validating wins like we've talked about some of those in previous calls.
But there's a lot more we want to build over So next year, I would say. So no specific update in this quarter, but I do expect that we'll talk about it again.
Got you. Got you. Got you. And then I want to touch a little bit on sort of pricing and competition kind of combined. If I was to look at pricing in general, you're viewed as kind of having a really attractive price point in terms of the modern vendors.
But then as you get into enterprises, given the scale you're being deployed at, whether pricing is cheap or expensive is different, but it becomes a big number. And guys like New Relic, Sumo, Splunk have all made adjustments in pricing models in the last 12 months. In your last quarter, you said you were having a pricing model. But I'm just wondering, are you seeing any pushback at the enterprise level? Are you seeing customers' actual price concessions?
Anecdotally, Just some sense of the confidence you have that there is sort of a non issue around pricing at that enterprise level given the scale you're getting deployed. I'd love to understand how you think about that and What you're seeing competitively, those guys sort of use pricing as a fud or maybe even as a way to get into some accounts? Yes.
So first of all, on pricing and Look, we have customers that pay us more than $10,000,000 a year. Right. And it's reminding you that somebody is paying them $10,000,000 a year and he's not asking for a lower price, But look, at the end of the day, the way we think about it are This is very high leverage spend for our customers and this is a tiny compared to what they spend on their infrastructure and on their engineering team. And the way we think about pricing for all the data and everything that send us is that, as much as data are going to grow exponentially over time, are going to grow faster than this customer's top line for practical purposes. And so pricing will have to adapt How smart we are about getting interpreting that data or how we price and how we structure the model that these customers scale more and more with us.
I will say that we while we do have pricing conversion with customers, especially large ones, we don't see the kind of competitive cutthroat pressure you might imagine if you read the competition's marketing website. The best illustration of that would be, David mentioned in the call that we had gross retention in the mid-90s, are And this is stable across various segments of our customers and also stable across products. If you take each of our are in the same numbers. What this tells you is that there's very little that goes away. There's not a lot of room there for cutthroat price driven competition.
Got you. Super helpful.
And we do have our next question from Michael Turits from KeyBanc.
Hey, guys. First solid quarter, congratulations. So Continue on the competitive front relative to a couple of directions. 1, obviously, announcement from Splunk recently. Secondly, the impact of open source, open telemetry and third, whether or not there's any change from the cloud vendors, recent announcement or GA from AWS.
So I'll have the usual boring answer, which is that we don't really see any change in the competitive landscape. It's a bit early for me to comment on the stock announcements because I think they just did that yesterday. But from what we could see, It seems to be a formal announcement from the repackaging of the product they had been doing for the past few quarters and that we had seen in the market. So There's no big change or surprise. And on the other side, we don't see from anybody else, we don't see any big change that is impacting us much.
The biggest impact of competitive announcements I see is typically the day of the announcement where somebody has to are going to figure out what's going on and explain it, and that's about it. We don't we are not competition driven in our product development, and we're also not competition driven are
So Olivier, I'll just follow-up on that to maybe just drill down further. I brought up OpenTelemetry. Is there any sense that with those open telemetry that the agent is essentially commoditized? Is that and So is that forcing you in any way to focus even more so, let's call it, up the stack in terms of analytics or other value add?
So first of all, we're fully all in on the PoTELET MEETRI as well. And To us, it's not a change, right? Our agent was open sourced already. It was free for everybody, including our competition, are We've leaned on into open source format and Libraries to instrument our applications for a very long time and we support a large number of them. The way we see the problem is not like what matters is not What technology we use to get data from here to there?
What matters is to solve the end to end problem for our customers and to make it as easy as possible for them to just plug us in and everything just work, everything just shows up. We turned their mess, a gigantic mess with all these different technologies and applications and clouds and everything else. We That's what wins in the market in the end and that's what we see a lot of this. Are The various bits and pieces that appear in the middle like the formats and the libraries and everything else, It will change. It has changed.
It will change. This doesn't matter.
Olivier, thanks very much. Nice quarter.
Will have
our next question from Jack Andrews from Needham.
Good afternoon. Thanks for taking my question. I apologize, I've been jumping around calls, but I just had a broader question. Just when we think about just the proliferation of new products that you could just continue to introduce, how would you characterize where your sales force is in terms of just their knowledge and ability to really understand and appropriately sell all this functionality that you have to offer.
Well, so far it's working. I think Look, we do have a fairly differentiated go to market in the way we organize internally, which team, who we land, what we land with and how customers adopt our product and how they learn about those products. So we This doesn't rely on having every single sales rep understanding every single little feature we have in every part of the product. That wouldn't be are practical. So it is working.
We're very confident in that. I would say there's a point at which we might have to consider tweaking the way we go to market. And I think that we'll have to do more with when we start actively selling to what might be different buyers. And I think we've discussed Before, but I'm thinking more specifically of the security market. We're not there yet.
We're not actively pushing to the security buyers today with our product. Are but when that happens, we might have to make some tweaks. We're not there yet.
Okay, thanks. And just as a quick follow-up, could you maybe just talk about how much of your new business today is perhaps generated from partnerships with the public cloud vendors? I believe you now have strategic relationships with all 3 of the Big clouds entering the year here. So how should we be thinking about their relative contributions moving forward?
So we don't have any numbers to share around that. I will say that a lot of the historically, a lot of that has been are Informal, in that we work alongside the cloud provider, but there's no formal agreement of rev share and everything else. We started to put some of those in place more recently around the committed resources for going to market jointly and things like that, are But we don't have anything to share on that.
Okay, thanks. Congratulations on the result.
And we do have our next question from Andrew Nowinski from Davidson.
Customers, I think you had $97,000,000 in Q4 that spent over $1,000,000 in ARR. Can Just give us any more color around what you called a strong uptick in those customers this quarter? And then did you have any outsized deals in the quarter?
Let me just take that as a metric. We said we were going to announce that once a year and give some comment on flavor. So we're not going to Give the number, but it's a strong uptick. And as we talked about, it has a lot to do with the expansion of customers into that $1,000,000 range. As far as concentration in the quarter, nothing out of the ordinary.
We continue to have are Some very meaty lands, but given the land and expand model and the number of customers bring on, we don't have a concentration that produces a quarter.
Okay, great. And then maybe just a follow-up question on the gross margin side, maybe ticked down a little bit lower than expected. Was there anything abnormal on the gross margin side? Or do you expect that to come back up going forward?
So on the gross margin, so the way we think about it is this is due to us are having the product teams work on product development instead of working on optimizing. And we're still happy with gross margins where they are. They might still fluctuate. The product would fluctuate a bit lower than they were last year because we're very busy building product. But there's nothing fundamentally are changed around our margins.
And there's many other things we can do in the future to optimize if we so wish. So right now, the call we're making is we focus on product development. We focus on making sure that we grow the top line in the short and mid term. And then we if things get out of hand on the gross margin side, we'll spend some more time on optimization.
Got it. Thank you.
And we do have our next question from Chris Merlyn from Goldman Sachs.
All right. Thanks for taking my question. I wanted to ask about the CRO position. I think you mentioned in the prepared remarks, you're are looking for a new one. I mean, should we take that to mean that perhaps there's more even more of an enterprise focus as it relates to your go to market organization?
Just curious What type of person you're looking for? And what, if anything, we should read into as we think about any sort of evolution with the go to market motion
of the company? Thank you. Yes. There's really nothing to read into it. I think it's a continuation of what we have.
I would say right now, we have are very happy with the leadership we have in place. And we're are going to be looking for new CRO and we'll be looking at Canvas both internally and externally for that. But There's no willing desire to change course or anything fundamentally different from what we were.
Got it. Thank you. And apologies if this has been asked, but in terms of duration, I know that in prior quarters, it seems like that was coming in. Customers were looking have to do shorter deals. Anything changing on that front?
I mean, it seems like all the There's more tailwinds behind the business certainly as we get into a recovery here, usage is going higher. Just curious if you could comment on duration?
Yes, it pulled in and we talked about in Q3, as risk management happened. And then we said in Q4, both billings And contract duration pull back out basically in billings in the 7% to 8% and contract duration, 9%, 10% And we continue to have that same sort of duration in Q1 that we had in Q4. So it's Very similar to the trend we talked about last time, which is more duration on contracts year over year. But between Q4 and Q1, there really wasn't much change in the way clients approach the contracting.
Thanks very much.
And we do have our next question from Yoon Kim from Loop Capital.
Congrats on a strong quarter, Ali and David. You mentioned that strong usage trend driving strong results in the quarter. Is there any way to qualify whether that strength and usage came from existing deployments or relatively new deployments That just happened to ramp in the quarter. And then also on usage, I know it's only Q1, but how much of that strength in usage was already captured in the contract versus the usage that came in well above contract provision. So that caused customers to kind of renew at a higher contract volume?
Thank you.
Do you
want to take I'll start with that. So we had it was very broad based across industries. On new logos in the second half of the year and in Q1 begin to ramp because we are land and expand and customers that were already using us and have been using us for a year or more, increased their activities. We think it has a lot to do with the increase of activity on digital transformation and workloads. As in previous quarters, about 2 thirds of the increase of usage was from customers using more of the products they had purchased are in the previous period and about 1 third was cross sell or new and that continued in the quarter.
So it was a combination of new logos, increased usage of existing products and very robust cross selling and adoption of the platform.
Okay, great. So there wasn't any necessarily different trend that kind of drove the upside in the Usage trend in the quarter per se from previous quarters.
It was very it was broad. All three of those were positive in terms of both the scaling of new customers, The cross sell and the increase of usage of existing products.
Okay, great. And then just last question for me. Just talk about Any geographical trend that you're seeing out there, that you expect to see, for this year, especially in Europe?
Are Thanks. Europe, let me take that. Europe has been strong for us. We have not seen The slower vaccination, attract and, we have seen are going to be very good resumption of growth across all the geographies. We'll have to continue to watch it because There's variation in back to work and back to office.
But as it relates to Q1, and Q4, we saw are fairly uniform strength across the regions.
Okay, great. Thank you so much.
Are open. And we
do have our next question from Greg Mosinski from Mizuho.
Are open.
Okay. Thank you very much and really nice quarter guys. First question is on Datadog Continuous Profiler and now It's GA. What sort of trial and paid activity have you seen so far? It would seem like there would be a lot of interest in getting Ongoing visibility into code performance, but any early anecdotes would be helpful there.
Yes. So are Very happy with the product. It's been very strong out of the gate. We don't have any numbers to share. And there's still it's so early in each cycle that there's still a number of things that we need to do to the product for that.
It works well for everyone who wants to use it. But it's a product that is beloved by its user, let's put it this way. So It's got very strong plan to see any good I can give you.
Okay. That's great. And then you mentioned earlier that You saw an uptick in metrics. Would you say that your internal metrics are back to pre pandemic levels or not quite yet?
Well, I think it's at this point, I'm losing track of what we're comparing to back to pre pandemic level, so far back. But we look, we're very happy with what happened over the Q3, Q4 and Q1. We had a very, very strong Q1. We still think we don't know what the macro is going to impact us. We still think Because all our customers are having affected the same way at the same time, we just feel a bit more uncertain than it used to be.
But look, we feel good about the business, right? I think we just increased the guidance for the full year. I think It went from 38% or so growth to 47%. That should tell you that we feel great about where we are and about the business.
This concludes the question and answer portion. I will now turn the call over to Olivier Pammel for closing remarks.
Thank you. And in closing, I would just want to reiterate that we're very, very pleased with our performance to start the year. And then I am personally very proud of our execution, and I want to thank all of our employees, all Datadog for their continued hard work. Thank you all.