Notes from Datadog’s S-1

Below are my personal notes from reading Datadog S-1. All numbers and charts below are from the filing

What is Datadog?

I found these two graphs very descriptive of Datadog’s history and MO



These quotes from the filing showed that customers seem to enjoy what Datadog has to offer. Their list of customers includes some famous names as follows:

  • Coinbase
  • Comcast
  • Expedia
  • HSBC
  • News Corp UK & Ireland
  • Peloton
  • Starbucks
  • Twilio
  • Wabtec
  • Zendesk

We have seen increased traction with enterprise customers, a testament to our success and ability to grow. As of June 30, 2019, the average ARR of our enterprise customers, defined as having 5,000 or more employees, was approximately $200,000, which has increased from approximately $120,000 as of December 31, 2017. The average ARR of our mid-market customers, defined as having between 1,000 and 5,000 employees, was approximately $140,000, which has increased from approximately $70,000 as of December 31, 2017. No customer, including any group of customers under common control or customers that are affiliates of each other, represented more than 10% of our revenue in 2017 or 2018

Each cohort represents customers that made their initial purchase from us in a given year. For example, the 2014 cohort includes all customers as of the end of 2014. This cohort increased their ARR from $4.8 million as of December 31, 2014 to $19.2 million as of December 31, 2018, representing a multiple of 4.0x. Additionally, the ARR from our top 25 customers as of December 31, 2018 increased by a median multiple of 33.9x

As of June 30, 2019, approximately 40% of our customers were using more than one product, up from approximately 10% a year earlier. Additionally, in the six-month period ended June 30, 2019, approximately 60% of our new customers landed with more than one product, up from approximately 15% a year earlier.


Datadog admits to have quite a fearsome group of competitors across different product offerings

With respect to on-premise infrastructure monitoring, we compete with diversified technology companies and systems management vendors including IBM, Microsoft Corporation, Micro Focus International plc, BMC Software, Inc. and Computer Associates International, Inc. 
With respect to APM, we compete with Cisco Systems, Inc., New Relic, Inc. and Dynatrace Software Inc.
With respect to Log management, we compete with Splunk Inc. and Elastic N.V. 
With respect to Cloud monitoring, we compete with native solutions from cloud providers such as, Inc. (AWS), Alphabet Inc. (GCP) and Microsoft Corporation (Azure).

Operating Losses

Similar to many other SaaS technology companies, Datadog consistently registered operating losses in every quarter in the last three years, except for two quarters

Capital efficiency and Total Addressable Market

According to Gartner, enterprises will quadruple their use of APM due to increasingly digitalized business processes from 2018 through 2021 to reach 20% of all business applications. According to Gartner, only 5% of applications were monitored as of 2018.According to Gartner, enterprises will quadruple their use of APM due to increasingly digitalized business processes from 2018 through 2021 to reach 20% of all business applications.

Datadog S-1

Datadog raised a total of $92 million in capital and as of June 30, 2019, still had around $64 million in cash.

WeWork S-1

This week, WeWork, that famed coworking space startup, filed its paperwork to go public. Here are my takeaways

The Positive Stuff

WeWork grew dramatically in terms of revenue, workstation capacity, memberships, run rate revenue and committed revenue backlog which as of June 30, 2019 is approximately eight times that as of December 31, 2017.

Enterprise memberships which refer to companies with more than 500 employees make up of 40% of all memberships and new locations seem to be filled up quickly

Net Capex per WorkStation added has gotten smaller

The not-so-positive stuff

While revenue grew fast, so did losses. WeWork lost money as quickly and almost at the same rate as they generated revenue. And the company continued to lose money to the tune of approximately $1.7 billion last year and $1.3 billion in the first half of 2019.

The company is projected to continue losing money from its operations and keep investing in new leases and workstation. The contractual obligations run up to $47 billions in the future. It remains to be seen whether the company will start generating profit and honor such a sizable obligation. On top of that, the majority of WeWork’s revenue comes from the US and recently, the inverted yield yesterday which caused one of the worst drops in the stock market’s history is seen as a sign of upcoming recession in two years. One of the concerns about WeWork is whether they can operate in recessions with huge fixed costs in the form of long-term leases.

Additionally, what stood out from WeWork’s S-1 for me is the influence of the CEO and his wife. Here is what the S-1 has to say about the Neumanns

We have entered into a number of transactions with related parties, including our significant stockholders, directors and executive officers and other employees. For example, we have entered into several transactions with our Co-Founder and Chief Executive Officer, Adam Neumann, including leases with landlord entities in which Adam has or had a significant ownership interest. We have similarly entered into leases with landlord entities in which other members of our board of directors have a significant ownership interest, such as through ARK (as defined in “Business—Our Organizational Structure—ARK”).

In the event that Adam is permanently disabled or deceased during the ten-year period commencing upon the completion of this offering, a committee will be formed for the sole purpose of selecting a new Chief Executive Officer. The composition of this committee will be as follows:

Bruce Dunlevie and Steven Langman, who are currently members of our board of directors and members of our compensation and nominating committee, to the extent they are then serving as our directors, will serve on this selection committee with Rebekah Neumann (with the size of the committee fixed at two or three, as applicable); and

if neither Bruce nor Steven is then serving as one of our directors, Rebekah will choose one or two board members who are serving at the time to serve on this selection committee with Rebekah.
In the event that Rebekah is not able to serve as described above, the trustee then acting on behalf of Rebekah and Adam’s estate will serve in all such capacities and make all such determinations. In addition, Adam and our board of directors have a process in place to designate an interim CEO in order to give the selection committee time to select a long-term CEO. Any selection of an individual to serve as our Chief Executive Officer must be made with the unanimous approval of the selection committee.

The company entered into leases with some buildings as soon as Adam acquired ownership of those buildings

For one of these four properties, we entered into a lease agreement with the landlord/partnership entity within one year following Adam acquiring his ownership interest, and in the other three cases we entered into a lease agreement with the landlord/partnership entity on the same day that Adam acquired his ownership interest. During the years ended December 31, 2016, 2017 and 2018, we made cash payments totaling $3.1 million, $5.6 million and $8.0 million to the landlord/partnership entities under these leases. During the year ended December 31, 2018, we received payments from the landlord/partnership entities in the form of tenant improvement reimbursements of $11.6 million related to these leases. During the six months ended June 30, 2019, we made cash payments to the landlord/partnership entities totaling $4.2 million under these leases and received no tenant improvement reimbursements related to these leases. As of June 30, 2019, future undiscounted minimum lease payments under these leases were approximately $236.6 million, which represents 0.5% of the Company’s total lease commitments as of June 30, 2019.

The company paid almost $6 million for the We trademark which was owned by WE Holdings, which is controlled by its own directors

In July 2019, WE Holdings LLC assigned residual rights related to “we” family trademarks to the Company, which we desired to obtain following our rebranding in early 2019. In consideration of this contribution and in lieu of paying cash, the Company issued to WE Holdings LLC partnership interests in the We Company Partnership with a fair market value of approximately $5.9 million, which was determined pursuant to a third-party appraisal.

Even though he will function without an employment contract, Adam will have total control over the direction and decisions of WeWork due to his ownership of B and C class shares. His influence isn’t particularly reassuring given how much has been written about the chaos at WeWork. I had one here

The grand vision which sometimes seems closer to delusion than ambition to me is reflected within the first sentence of the S-1 form.

Mission: “We are a community company committed to maximum global impact. Our mission is to elevate the world’s consciousness”

I literally have no idea what “elevate the world’s consciousness” means and how a real estate company, not a tech one no matter how much they try to portray themselves so, can turn those words into actions and reality.

Notes from Uber’s earnings call

Uber released their 2019 Q2 results and earnings today. Below are a few things that are worth noting to me

Take rate

Uber defines take-rate as adjusted net revenue divided by Gross Bookings. Basically it is how much Uber takes out of your trip’s fare. Compared to Q2 2018, all take rates went down

Q2 2018Q2 2019
Ridesharing Take Rate21.86%18.99%
Uber Eats Take Rate12.4%9.95%
Total Core Platform Take Rate20.96%17.20%

Part of the reason for the drop in take-rate is the rise of Excessive Driver Incentives. For instance, Uber Eats’ Excessive Driver Incentive this quarter went to 43% of the revenue, compared to 36% in Q2 2018.

Source: Uber

Story of Growth?

It’s no secret that Uber is not profitable and likely won’t be for a while. Their story is one of growth, which is not the case in this quarter as far as I am concerned

Gross BookingsCore Platform Gross BookingsMonthly Active Platform Consumers
Q2 2019 YoY Growth29.67%30.44%30.26%
Q2 2018 YoY Growth48.64%47.92%33%

TripsAdjusted Net RevenueCore Platform Adjusted Net Rev
Q2 2019 YoY Growth35.02%12%7%
Q2 2018 YoY Growth39.71%58%54%

Every metric saw a smaller growth this quarter compared to last year. I do get the laws of big numbers, but when your story is one of growth, this may raise a few concerns.

Among important markets, Latin America saw a 24% decline this quarter despite Buenos Aires becoming the fifth largest city based on trips

Spectacular loss

Uber reported a $5.5 billion loss from Operations. If we take away the stock-based compensation, the loss is still $1.4 billion. While revenue grew by 31%, the operational loss increased by some 89%.


In my opinion, there is nothing in the earnings call from Uber that conveys something remotely close to a clear path to profitability. The story of growth is challenged in this quarter. Perhaps, this is just a bad quarter and the next ones will be better. Or worse. Who knows? Self-driving cars are years and years away, not even 5 years from now. Uber also faces heightened competition in food deliver like Post Mates or Door Dash, companies that attracts big private money as well.

Notes From Match Group’s Earning Call

You should be related to Match Group more than you think. If you are using Tinder, OK Cupid or Hinge, you are using one of Match Group’s services. The group is the parent company of some of the most popular dating apps on the market. It released its 2019 Q2 results yesterday and here are a few notable points that stood out for me

  • In the earning call, the CEO of Match Group cited a study by Prof. Michael Rosenfeld at Stanford, saying that nearly 40% of all relationships nowadays start online
  • Match Group invested in Harmonica, a Tinder-like app that services the Muslim community that makes up 24% of the world’s population
  • Subscriber base grew by 39% on a YoY basis
Source: Match Group

In the first two quarters, Match Group’s revenue reached $950 million. I have to admit that it is surprising since I didn’t think a subscription on dating apps and other add-on features could generate almost $1 billion in 6 months. Average Revenue Per User stays flat, which can be a positive sign as the company doesn’t grow user base by significant discount.

Compared to 2018 Q2, revenue increased by 18% while operating income grew by 15%. International revenue grew at a higher clip than domestic’s. Margin stays relatively flat at a healthy 35%.

Overall, I think that looks like a good quarter for Match. The consumer trend is there to help them and the company seems to be in good shape.

Notable notes from Disney’s earning call

Today, Disney released their 2019 Q3 result. Below are a few points that stood out for me

  • Hulu got 28 million paid subscribers while the figure for ESPN+ stood at 2.4 million
  • The integration of 21 Century Fox had negative impact on Disney’s earning, including the subpar performance of movies such as Dark Phoenix
  • Direct-to-Consumer & International segment expected to make $900 million loss in the next quarter, due to investment in the launch of Disney + and support for Hulu, ESPN+
  • Fantastic results for the studio as per Bob Iger

The studio has generated $8 billion in global Box Office in 2019, a new industry record. And we still have five months left in the calendar year with movies like Maleficent: Mistress of Evil, Frozen 2 and Star Wars: The Rise of Skywalker still to come. So far this year, we’ve released 5 of the top 6 movies including four that have generated more than $1 billion in global Box Office. Avengers: Endgame is now the highest grossing film in history with almost $2.8 billion worldwide. Captain Marvel, Aladdin and The Lion King have each surpassed $1 billion. And with more than $960 million in Box Office to date, Toy Story 4 will likely cross that threshold in the coming weeks. And all of these movies will be on Disney+ in the first year of launch.

  • The leadership behind the studio will manage the film strategy for 21 CF as well
  • Deadpool, Fantastic 4 and X-Men will be part of Marvel Studios
  • Come this November, users can have access to Disney+, Hulu (ads-supported) and ESPN+ as a bundle for $12.99 a month, well below the total sum of all threes, if subscribed separately
  • “Hotstar had more than 300 million average monthly users, served an unprecedented 100 million daily users and delivered a high-quality streaming experience to 25.3 million simultaneous users, which is a new world record”
  • Disney is discussing deals with Apple, Amazon and Google as distribution partners, deals that are expected to close
  • Focus on marketing for Disney+, per Bob Iger

Disney+ marketing is going to start to hit in later this month, later in August. We’re actually going to allow members of D23 to be the first to subscribe. I’m actually going through a comprehensive marketing plan with the team next week. Comprehensive probably is an understatement. It is going to be treated as the most important product that the company has launched in, I don’t know, certainly during my tenure in the job, which is quite a long time. And you will see marketing both in traditional and nontraditional directions basically digital and analog also significant amount of support within the company on basically company platforms. And then of course all of the touch points that the company has, whether it’s people staying in our hotels, people that have our co-branded credit card, people who are members of D23, annual passholders, I could go on and on. But the opportunities are tremendous to market this. And I feel good about some of the creative that I’ve already seen. But you won’t start to see it until later this month.


Quick Thoughts

I cannot wait to see the battle of the streamers and how well Disney+ will fare. As a student of business, I am fascinated to see the strategies and execution of Disney+ vs Netflix. Netflix has a huge subscriber base as advantage over Disney+, in addition to a household name (ever heard of “Netflix and chill”?) and some great original content. But Disney has its own strengths as well, including marketing expertise, household name, a great content library and additional revenue streams.

I am thrilled to see how fast Disney+ will be able to sign up folks. The emphasis on marketing, the aggressive pricing of the streaming service, the bundle and the focus on exclusive content in spite of loss from licensed deals show that Disney is dead serious. It will be interesting to see how viewers will react and whether there will be some market share loss by Netflix at the hands of Disney+ and other upcoming streamers.

I honestly don’t know how it will go. As a fan and a consumer, I cannot wait to see.

Disclaimer: I own Disney stocks in my portfolio.

Spotify Earnings

Spotify reported some good results earlier today for their 2Q 2019

Important metrics all improved YoY, including user base and financial growth. Gross Margin for Premium and Ad-Supported is 27.2% and 15.8% respectively. Average Revenue Per User is 4.86 euros. Compared to the previous 2nd quarters, here is where the current one stands

Every metric’s growth, except that of Premium Subscribers and Total MAUs, slowed compared to a year ago.

In terms of Gross Margin, while that of Premium stays relatively stable, Ad-Supported’s fluctuates quarterly.

QuarterPremium Gross Margin Ad-Supported Gross Margin
Q1 201714.00%-18.00%
Q2 201724.10%13.60%
Q3 201722.90%17.00%
Q4 201726.76%21.35%
Q1 201826.00%12.70%
Q2 201826.90%16.30%
Q3 201826.10%18.60%
Q4 201827.30%22.10%
Q1 201925.90%11.10%
Q2 201927.20%15.80%

Though Average Revenue Per User does fluctuate, this quarter’s is lower than that of the previous two 2Qs. I suspect that Spotify will pursue the Netflix’s playbook by growing their user base, whether it’s Premium or Free Trial. A large user base will help make each investment in content (podcast) relatively cheaper (a fixed cost is divided by a growing denominator). A sizable base will make Spotify more attractive as a partner to content producers and advertisers. Spotify differs from Netflix in a sense that they are already offering ads while the video streamer is still true to their focus on videos.

QuarterAverage Revenue Per User
Q1 20175.46
Q2 20175.69
Q3 20175.50
Q4 20175.69
Q1 20184.72
Q2 20184.89
Q3 20184.73
Q4 20184.89
Q1 20194.71
Q2 20194.86

Disclaimer: I have Spotify stocks in my personal portfolio

Amazon’s Quarterly Earnings

On that FY2019 Q2 earnings by Amazon…


In the last 90 days, Amazon recorded $63 billion, meaning that it took the company less than 36 hours to make $1billion. An extraordinary rate. Compared to last year’s Q2, revenue rose by 20% with Services (31%) outperforming Products (12.5%). Nonetheless, gross margin slipped as this quarter’s figure is at 4.8% compared to 5.6% last year.

Source: Amazon


Among Domestic, International and AWS categories, the latter continues to lead the way in terms of YoY growth. AWS’s revenue in the last 90 days is $8.3 billion, a rough equivalent of about $32 billion annually. It’s pretty impressive for just a segment of a company. Not many standalone companies can generate that much revenue in a quarter. It’s even more telling when we put AWS next to GCP. Google announced last week that GCP’s annual run rate is $8 billion, meaning that AWS is approximately 4 times bigger than its rival from Google.

Despite making up only 13% of Amazon’s revenue, AWS is responsible for about 69% of the company’s operating income.

At 37%, AWS’ YOY growth is the lowest recorded in a long time, but the law of big numbers should be taken in account here as the division is not as small as it used to be. If broken down into more strategic categories, AWS isn’t the segment with the biggest YoY growth (Excluding FX) in the company. It’s Subscriptions. Subscription memberships, especially Prime, play a crucial role in Amazon’s ecosystem. The fact that it notched the biggest growth, ahead of AWS, is very positive for the company.


As can be seen above, advertising slowed down significantly after a hot streak just 12-15 months ago. YoY growth decreased noticeably compared to the 3-digit growth just a while ago. Still, it contributed $3 billion to the company’s top line.

Free Cash Flow and Shipping Costs

Amazon’s free cash flow this quarter is truly insane with 65% YoY improvement in Operating Cash Flow and a 3-digit growth in Free Cash Flow.

Source: Amazon

Shipping costs continued to rise with 36% YoY difference compared to previous second quarter’s. It’s worth noting that none of the Online Stores, Physical Stores and 3rd Party Seller Services have the same growth (all grew at a slow pace than shipping costs)

Sometimes, it’s hard to believe that a company founded roughly 25 years ago can be this powerful and big. A segment responsible for only 13% of its revenue is the dream of so many and it continues to deliver at an impressive rate.