Datadog Inc (DDOG)

Cash conversion cycle

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Days of inventory on hand (DOH)	days	—	—	34.79	—	—
Days of sales outstanding (DSO)	days	81.44	87.34	87.06	95.38	98.81
Number of days of payables	days	76.27	78.10	24.71	39.38	59.83
Cash conversion cycle	days	5.16	9.24	97.15	56.00	38.97

December 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= — + 81.44 – 76.27
= 5.16

The data indicates that Datadog Inc's cash conversion cycle (CCC) has experienced notable fluctuations over the specified period. At the end of 2020, the CCC was approximately 38.97 days. This increased substantially in 2021 to 56.00 days, reflecting a lengthening of the period between cash outlays for inventory and receivables collection relative to payables. The upward trend continued into 2022, reaching approximately 97.15 days, which represents a significant extension of the cash conversion cycle. This suggests that during this period, the company was taking longer to convert investments in inventory and receivables into cash, possibly due to changes in operational efficiency or customer payment terms.

However, a sharp improvement occurred in 2023, with the CCC declining dramatically to approximately 9.24 days. This reduction indicates a much shorter cycle, implying enhanced operational efficiency, quicker collection of receivables, and/or extended payables. This trend continued into 2024, with the CCC further decreasing to approximately 5.16 days, reflecting an even more efficient cash conversion process.

Overall, the pattern shows a substantial elongation of the cash conversion cycle during 2021 and 2022, followed by a notable compression in subsequent years. The dramatic reduction in the CCC after 2022 could suggest operational improvements, better management of receivables and payables, or shifts in business practices aimed at optimizing cash flow.