DigitalOcean(DOCN)2024-08-08 20:30Customer Growth and Revenue - As of June 30, 2024, DigitalOcean had approximately 638,000 active customers categorized as Learners, Builders, and Scalers, with a significant increase in Builders and Scalers contributing to revenue growth[68]. - Average Revenue Per User (ARPU) increased from $90.84 in Q2 2023 to $99.45 in Q2 2024, indicating a strong ability to attract higher spending customers[68][78]. - Annual Run-Rate Revenue (ARR) reached $781 million as of June 30, 2024, up from $682 million in the same period of 2023, reflecting a growth of approximately 14.6% year-over-year[68][79]. - Revenue from Builders and Scalers accounted for 87% of total revenue in Q2 2024, up from 86% in Q2 2023, highlighting the importance of these customer segments[69]. - The number of Scalers increased to approximately 18,000 as of June 30, 2024, up from 16,000 in the previous year, while Builders rose to approximately 143,000 from 134,000[69]. Financial Performance - Revenue for the three months ended June 30, 2024, increased by $22.7 million, or 13%, to $192.5 million compared to $169.8 million for the same period in 2023, driven by a 9% increase in ARPU to $99.45[91]. - Revenue for the six months ended June 30, 2024, increased by $42.3 million, or 13%, to $377.2 million compared to $334.9 million for the same period in 2023[94]. - Net income attributable to common stockholders for the three months ended June 30, 2024, was $19.1 million, compared to a net loss of $0.7 million in the same period of 2023[88]. - GAAP net income attributable to common stockholders for the three months ended June 30, 2024, was $19,138 thousand, compared to a loss of $665 thousand for the same period in 2023[113]. - Non-GAAP net income for the six months ended June 30, 2024, was $90,352 thousand, an increase from $74,405 thousand for the same period in 2023, representing a growth of approximately 21.5%[113]. Cost and Expenses - Cost of revenue for the three months ended June 30, 2024, rose by $7.8 million, or 12%, to $75.1 million, primarily due to increased depreciation and amortization costs[91]. - Gross profit margin improved to 61% for the three months ended June 30, 2024, up from 60% in the same period of 2023, attributed to ongoing cost optimization efforts[91]. - Research and development expenses decreased by $4.5 million, or 12%, to $34.0 million for the three months ended June 30, 2024, mainly due to reduced personnel costs[92]. - Sales and marketing expenses increased by $4.0 million, or 25%, to $20.1 million for the three months ended June 30, 2024, driven by higher personnel and advertising costs[92]. - General and administrative expenses decreased by $8.0 million, or 16%, to $40.8 million for the three months ended June 30, 2024, largely due to a reduction in stock-based compensation[92]. Cash Flow and Investments - Net cash provided by operating activities was $138.0 million for the six months ended June 30, 2024, an increase from $100.4 million in 2023[99]. - Net cash provided by investing activities was $12.1 million for the six months ended June 30, 2024, a significant decrease from $243.7 million in 2023[100]. - Net cash used in financing activities was $24.2 million for the six months ended June 30, 2024, compared to $365.0 million in 2023, primarily due to stock repurchases[101]. - As of June 30, 2024, the company had $443.1 million in cash and cash equivalents, primarily consisting of cash and money market funds[97]. Tax and Other Financial Metrics - Income tax expense increased by $14.0 million, or 171%, for the six months ended June 30, 2024, due to U.S. pre-tax income creating a tax expense compared to a tax benefit in 2023[96]. - The company utilized a tax rate of 16% for the fiscal year 2024, compared to 17% for 2023, reflecting a strategic adjustment in tax planning[116]. - Stock-based compensation for the six months ended June 30, 2024, totaled $44,563 thousand, down from $64,023 thousand in the same period of 2023, indicating a reduction of approximately 30.5%[113]. - Non-GAAP diluted net income per share for the three months ended June 30, 2024, was $0.48, compared to $0.44 for the same period in 2023, reflecting an increase of 9.1%[114]. Strategic Initiatives - The company continues to invest in its platform and product offerings, particularly in IaaS, PaaS, SaaS, and AI/ML markets, to drive future growth[73]. - The company is actively pursuing strategies to attract more Builders and Scalers, including marketing initiatives and acquisitions like Cloudways and Paperspace, which enhance its service offerings[72]. - The company approved an additional repurchase program of up to $140 million of common stock through fiscal year 2025[97]. Market and Risk Assessment - Approximately 38% of revenue in Q2 2024 was generated from North America, with 28% from Europe, 23% from Asia, and 11% from the rest of the world, showcasing a diverse revenue base[68]. - There have been no material changes in market risk from the information provided in the Annual Report for the fiscal year ended December 31, 2023[117].