DigitalOcean(DOCN) - 2024 Q3 - Quarterly Report

Customer Metrics - As of September 30, 2024, DigitalOcean had approximately 638,000 active customers categorized as Learners, Builders, and Scalers[77]. - The number of Scalers increased to approximately 18,000 in Q3 2024, up from 16,000 in Q3 2023, while Builders grew to approximately 145,000 from 138,000[78]. Revenue Growth - Average Revenue Per User (ARPU) increased from $92.06 in Q3 2023 to $102.51 in Q3 2024[78]. - Annual Run-Rate Revenue (ARR) rose to $798 million as of September 30, 2024, up from $713 million in the same period last year[78]. - Revenue for the three months ended September 30, 2024, was $198,484 thousand, an increase of $21,422 thousand or 12% compared to $177,062 thousand for the same period in 2023[105]. - Revenue for the nine months ended September 30, 2024, was $575,690 thousand, an increase of $63,680 thousand or 12% compared to $512,010 thousand for the same period in 2023[111]. Revenue Sources - Revenue from Builders and Scalers increased by 7% and 19%, respectively, for the three months ended September 30, 2024, compared to the same period in 2023[78]. - For the three months ended September 30, 2024, 39% of revenue was generated from North America, 28% from Europe, 23% from Asia, and 10% from the rest of the world[78]. Profitability and Margins - Gross profit remained consistent at 60% for both the three months ended September 30, 2024, and 2023[105]. - Gross profit margin improved to 61% for the nine months ended September 30, 2024, up from 59% in the same period of 2023[112]. - The net income margin for Q3 2024 was 17%, compared to 11% in Q3 2023, showing a significant improvement[127]. - The adjusted EBITDA margin for Q3 2024 was 44%, slightly up from 43% in Q3 2023[127]. Expenses - DigitalOcean's sales and marketing expenses were approximately 9% of revenue for Q3 2024, down from 11% in Q3 2023[78]. - Research and development expenses increased by $4,750 thousand or 15% to $37,377 thousand for the three months ended September 30, 2024, compared to $32,627 thousand in 2023[107]. - General and administrative expenses increased by $20,358 thousand or 101% to $40,422 thousand for the three months ended September 30, 2024, compared to $20,064 thousand in 2023[107]. Cash Flow and Liquidity - Net cash provided by operating activities was $211.4 million for the nine months ended September 30, 2024, compared to $154.4 million in 2023[118]. - Net cash used in investing activities was $47.7 million for the nine months ended September 30, 2024, a significant decrease from $248.3 million in 2023[119]. - As of September 30, 2024, the company had $439.9 million in cash and cash equivalents, indicating strong liquidity[116]. Income and Earnings - GAAP net income attributable to common stockholders for Q3 2024 was $32,949,000, compared to $19,175,000 in Q3 2023, representing a 71% increase[127]. - Adjusted EBITDA for Q3 2024 was $86,720,000, up from $75,776,000 in Q3 2023, reflecting a 14% growth[127]. - Non-GAAP net income for the nine months ended September 30, 2024, was $142,026,000, compared to $117,996,000 for the same period in 2023, indicating a 20% increase[132]. Stock-Based Compensation - Stock-based compensation for Q3 2024 was $22,949,000, down from $28,731,000 in Q3 2023, a decrease of 20%[132]. - Acquisition-related compensation for Q3 2024 was $3,193,000, compared to $7,995,000 in Q3 2023, a reduction of 60%[132].