outside of it departments might not know what does this company do it's a little confusing
to kind of figure that out but essentially datadog is a software company that provides
it teams with real-time observability tools that help them to manage their full technology stack
so its tools are used by software developers i t operations teams and i t security teams to
make sure that the company's entire network is operating at full capacity so brian that might
all sound a little bit confusing but think of it this way if a company's technology in the cloud
is not working properly business comes grinding to a halt as companies are making the transition
from brick and mortar or on-premise solutions to the cloud it's really important that those
three different buckets security developers and operations all talk to one another historically
that has not been the case the company datadog has come out with all of these different tools
that allow those different departments to see the same problems as they arise and to work
together to fix them now all of that might sound theoretical but it might be difficult to know
what exactly that means so we just included a couple of screenshots here so you can see
the type of information that i t professionals can look at and they can communicate with one another
about in order to fix any problems that arise in the company's technology brian you and i aren't
i.t professionals so it's hard for us to suss out if this company's tools really are the best
but one shortcut is to look at the customers themselves and follow their wallet this chart
here shows the number of customers that are going to spend at least 100 000 on data dogs platform
in any given year look at the growth here it's been straight up and to the right
more importantly of those nearly 1600 data dog customers that are going to spend at least 100k
the average amongst them is going to spend 500 000 on datadecks technology stack incredible
and just as impressive if you look at the number of customers that are going to spend 1 million
or more that figure recently reached 145 companies there's no way this company could put up this kind
of growth unless they had an incredible product that it teams absolutely love all right brian
let's start taking it through the anti-fragile framework to find out if it's a good investment
what do you see for the company's mission statement now i will admit this was difficult
to find but the company's mission statement is to break down silos and to fight complexity for their
customers i like that as a mission statement me too simple inspirational optionable great let's
move on to moat do you think this company benefits from the network effect i do think
it benefits from the network effect albeit a very weak one and that's because datadog is developing
artificial intelligence or ai tools when you have that many customers that are paying about
five hundred thousand dollars to you every year that means that they are feeding a ton of data
into data dogs ai machine these tools are just getting started and they're primarily focused on
finding problems before they become huge within a company's software solutions but i think that
there is some benefit to that ai getting better because it's processing more data as more
customers come in i've seen a lot of companies make that argument so i'm personally not going
to give them any credit for the network effect but i understand why you are moving on do you
think datadog has switching costs working for it i think datadog is entirely reliant upon switching
costs and that is okay because as customers adopt more and more tools they are loath to switch and
if you just look just two years ago in 2019 barely any of their customers were using more than three
products and fast forward to today and the vast majority of them are using four different tools
out of the more than 10 that datadog offers nowhere is this more evident in the fact that
the company's dollar based net retention rate has been above 130 percent for four years that means
they're not only holding on to everybody but those customers are spending 30 percent more every year
that means it is part of the standard operating procedures within their customers daily dna i
totally agree and no number proves that switching costs to me like that dollar based net retention
rate how about low cost advantage does data dog benefit there i don't see data dog having any
advantage there i would agree with you there how about intangibles brand or patents i think that
the company does benefit for brands it's a little bit convoluted but here's my thinking on that
the company spends less in terms of how quickly you can pay back what it has to spend in sales
and marketing better than just about anyone else within its industry because of that the company
has more left over that it can spend on research and development than anyone left in the industry
so they're pulling in customers that aren't that expensive to acquire relative to how much they pay
and they're able to take that advantage and put it into r d fair enough and while i personally
believe that the name datadog likely resonates within the it developer community i'm not going
to give them credit for brand on my framework however i understand why you are how about counter
positioning i don't see datadog as having any real clear advantage with counter positioning today
fair enough moving on to optionality does datadog have the ability to create new products new
services that open up new revenue opportunities well let's tackle those first new products and new
services absolutely in 2021 alone they released more tools than they had developed in their entire
life as a company up until 2019. but are people adopting that well let's go back to the slide that
we already showed and the fact of the matter is is that they are adopting these new tools and mass
the company has clear optionality totally agree rolling out new products is one thing getting
customers to pay for those is another datadog is clearly doing both jobs extremely well moving
on to financial fortitude what do we see as of september 30th 2021 well the company has about
1.5 billion dollars in cash roughly 700 million dollars in debt and strong free cash flows of 160
million dollars over the last 12 months i'd love it if the debt wasn't there but that's still a net
cash position of about 700 million dollars with very strong and growing free cash flows like
you i wish the balance sheet was a little bit better but financially this company is in great
shape any customer concentration issues need to be aware of none right moving on to skin in the game
what do we see on glassdoor olivier pomelos gets great reviews from his employees as ceo and the
company as a whole scores very well with 4.2 stars wonderful to see how about the founders are they
still involved they are olivier pomell and alexis lacroix were both working at an ed tech company
one in operations one in development when they realized that those two departments simply weren't
communicating and working together to solve the company's problems that led them to create data
dogs so that didn't happen at other companies love to see that i love it when a founder
experiences a problem firsthand and sets out to create a solution that solves it for other people
in the same situation how about inside ownership do either these founders own a meaningful amount
of stock they certainly do and as ceo and cto they combine to own about 20 percent of the shares but
because of dual class structure they own roughly half of the company's voting rights so they still
control a large portion of what happens and if you take all insiders combined the value
of their stock holdings as of this taping is about 12 billion if that dog's stock goes down those two
co-founders are gonna feel the pain just like you would as a shareholder all right before we
get to our final score we wanted to give a shout out to our channel members thank you so much for
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brian let's start at the top what did you give the company for mission statement it's a great mission
statement should get two points but because it was so hard to find it gave them a point and
a half i think that's fair and a generous score how about moat so if you combine the
weak network effects the brand and those switching costs i gave them four points pretty good score
there how about optionality i gave them two and a half and the reason i went above two was because
when this company came public they were just focused on the developers and the operations the
fact that security has now been introduced as a new section that they're focusing on
shows me that they can branch out into different parts of their customers company great what'd you
give them for financial fortitude i gave them a full point the debt doesn't bother me with those
strong free cash flows concentration risk none glassdoor ratings plus one above a 4.0 founder
both are still involved in the c-suite plus one and inside ownership over twenty percent of the
company plus one brian you add all that together and you get a 12 that means data dog is well into
your anti-fragile category that's right it enters a rare company of being in that green section all
right it scored very well your framework let's see how it scored on mine on the financial front i
gave this company a 14 out of 17. i wasn't in love with the balance sheet and the returns on capital
are low but that's more about where the company is in its stage of growth development promote i
gave the company full credit on switching costs alone and i ignored the brand and the network
effect that you gave it credit for for potential i gave it a 16 out of an 18. i think this company
has a long long growth runway ahead of it for customer quality i gave the company a 7 out of 10.
i think that the customers are expensive to acquire however once they're on board their
spending is basically recession proof revenue quality i gave it a 10 out of 10. it's high margin
and recurring would love to see that management and culture i gave it a 13 out of 14 love what
i saw there the stock has done remarkably well on the market since coming public thrashing the
s p 500 return and the company has a history of beating down on wall street's estimates on the
gauntlet section i subtracted two points mostly because stock based compensation was high but
you add all that together and datadog scored an 86 on my score this is well into my high quality
business category and brian when you look at my framework the company scored above at or above a
12 which is really what i look for when i'm gonna buy a stock for my portfolio no surprise here it
is a stock that i owe all right brian this company scored extremely well on both of our frameworks
so it's time to hold ourselves accountable we're going to head on over to stockcar.io
and we're going to pull up the antifragile portfolio which is your investing portfolio we're
going to add this which is giving it a thumbs up we're going to type in the ticker which is ddog
we're going to do a buy decision today's date is monday today's date is monday november 22nd
this is a 192 stock so we're gonna buy five pretending we're making a one thousand dollar
investment and the score on your checklist was twelve i'm gonna push submit then i'm gonna head
over to my portfolio which is the brian for all the equality checklist and do the exact same thing
create your own portfolio by doing so you can hold yourself accountable while not necessarily needing
to put real money into the stock market and over time you can learn what works and what doesn't
if you register for stockcard.io and you want a discount enter the code anti-fragile all right
brian the data was clear datadog is both a highly investable company for both of us. Brian's out.