Datadog Inc at Berenberg Thematic Software Days Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : That's really helpful. So you mentioned APM and logging. You actually added more ARR last quarter in APM and logging than you did for the entire business 1 year ago. So can you talk about trends and competitive win rates in these segments, and if there's been recent acceleration?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : That's really helpful. So you've mentioned your APM solution, you've invested in it and it's grown on mature. In our view, a key reason that you've done well in the segment is also because of the natural extension from infrastructure monitoring, which has become more central to observability due to the shift to the cloud. Do you agree with this? And then just some more puts and takes on the momentum you're seeing in the APM space?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Great. Perfect. You mentioned Profiler as well. So the interesting part of Profiler, it lets you drill down to the code level. Could you talk about how much customers value this type of functionality? And then if we should expect to see more of this type of functionality moving forward?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : That's great. So we've talked a bit about the product. I would like to also think about the broader platform strategy. Your platform has expanded so quickly, and it's become quite impressive in scope. And you've always been well known for your ease of use. So how do you ensure that you maintain that ease of use while continuing to become more of a one-stop shop for all the customers and durabilities needs?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : That makes a ton of sense. It sounds like you have your own Datadog. Proves that answer as well, the pedigree.

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Great. Makes sense. So I would say the observability market could be viewed relatively crowded today. You're also expanding into security, which can be fragmented, has many players on it. How are you thinking about your ability to compete against the existing companies in the security space?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Sure. very smart.

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Right. Makes perfect sense. So we hear a lot about shift-left. You mentioned that today. How much of that then differentiates Datadog versus maybe some existing security competitors?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Great. So last one before we move on. You mentioned some of the dynamics in the durability space that it might not be as crowded as it may seem, just given who's really competing today. So how much do you expect consolidation at the vendor level in this space over the next few years, maybe including privates as well, we've seen that recently?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Great. That makes sense. Okay. So from a go-to-market perspective, just very broadly, you've also mentioned some things like technical account managers has been one way to augment your ease of use of the platform. So what have you learned over the past 1 to 2 years as you've moved up market about the kinds of specialized sales force you need?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Great. That makes perfect sense. Yes, so it sounds like you're saying that you don't need as much specialization. Yet today, you said just specifically on the security space, what's been interesting is so many of your peers, if they are moving into security or doing something there, they don't have a great sense of what they might need to change for go-to-market. So again, is it you probably -- primarily about hiring new sales or do you think that it might require some specialization? Or is it too early to tell?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Great. That's fair. So then just on the partner community, do you think that the security space would be a place to then use the partner community to generate more demand more so than the past?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Okay. That's helpful. Just broadly, as you've built out your network, anything key that you've learned in this process to take moving forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 14, 2021 / 3:00PM, DDOG.OQ - Datadog Inc at Berenberg Thematic Software Days Conference

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Right. And that's a great point about the ease of use and interesting interplay with the partner community. Just last one there was on the MSP segment. How mature do you think this segment is? It's a bit of a different model than maybe some of the other partners. And then how much we should expect to see more arrangements like that with Rackspace in the future?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Great. Okay. That makes sense. So I would like to touch a little bit on open source. Datadog has such a strong track record of being open source-friendly or the first open source your data collection agents. So there's a number of tools that sell for observability like Zipkin and Prometheus. When you see a customer using open source alongside Datadog, what opportunity do you have to help them use more Datadog perhaps in that situation?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Right. Yes, that's a great point that that's your primary competitor or do you see that most often. I mean how often do you see some mix of open source and Datadog in tech stacks? It sounds like most of the time.

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Right. So when you go up against open source and when you see open source, how similar is the go-to-market playbook compared to maybe displacing a legacy commercial competitor?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Great. So what we found is that as developer buying power has grown, software teams grow in general. More so in the past, some teams are looking at using open source compared to commercial software as a means of saving costs. So if and when a customer of yours is looking to do this, what is sort of your message to them or your strategy to help retaining gross spend?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Right. That makes sense. And maybe there's a customer that says, "We'd rather not buy from Boeing, we'd rather make the plane ourselves and then maybe sometimes we'll come back to you." How often do you see that kind of situation?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Right. Well, it's a great point that out of many of the commercial vendors that you're one of the best at partnering with the open source products.

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Great. So as we think about customers beginning to spend more with Datadog, maybe they move from $1,000 to $25,000 to $100,000, can you talk about how you shift these customers from piecemeal to more of a platform approach? And then how much of this is maybe an annual pool of funds approach?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Perfect. That makes sense. So this is actually an important question, I think. Datadog is so easy to use. Sometimes, in rare cases, customers can grow spend faster than they may have expected or are ready to spend. In these cases, how do you work with the customer to optimize, spend and partner, particularly those CFO and FP&A team to help them understand the ROI?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Right. Those are all great points. Yet, I think sometimes a CFO, Datadog may not be on their radar. And then they'll say, "What is this and how did this grow so quickly?" And then they understand it, but those are great points. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 14, 2021 / 3:00PM, DDOG.OQ - Datadog Inc at Berenberg Thematic Software Days Conference

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Right, right. So many tools in your toolbox you can use. So just let me see if we can fit in 1 or 2 more. Do you have any customers that you think are tapped out or nearly tapped out in terms of their Datadog spend? And then what insights we can gain from those?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : That makes sense. And then last one would just be, what are you most excited about over this next year?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Great. Exciting time. This has been such a treat having you, David. I think we're just about out of time.

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Okay. Thank you.